Surveillance: Traders Weigh A Fed Pause

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At what point does it either lean into banking crisis, credit contraction, some sort of significant lag versus this feeling, Perhaps we need to revisit the belief in that dreaded six handle are potentially much more restrictive rates something to worry about.

And if you want to worry, you can look at a bull market effort. Right now, we're seeing many houses just higher at the Morgan Stanley shop.

They are not.

Michael Wilson's CIO, chief US equity strategist at Morgan Stanley. And one of your themes, Mike Wilson is there's a complete misguess on the interstate game. As addressed by the Fed today and followed by your Ellen Zettner Wayley, there are black Rock says persistent inflation.

Is that a core reason for your caution in the equity market, No, it's actually not.

Tom.

In fact, our views and inflation is going to come down, and while that potentially is very good for bonds, it's not going to be it for stocks because that's where the earnings power has been coming from. Right This is really our Boombus thesis. The reason we were so bullish in twenty twenty and twenty twenty one is because we expected inflation to drive a profits boom, and now when inflation comes down, you're going to have a profits recession.

We look we already looking at going forward in terms of client responses, how they push back against the parishness that you've been expressing.

Yeah, look, I mean it's we're in a weird situation now because I feel like on the fundamental side, our earnings call has been spot on. So a year ago, just to kind of remind listeners, you know, we were calling for an earnings recession and we were somewhat dismissed,

So that's what the pushback is.

So in other words, you're saying that you got it right if you strip out some of the big tech names, and that there was an earnings recession that played out in lower valuations of some of these shares, and you're saying it's going to continue. Not necessarily talking about the headline level of the S and P as much as these particular stocks fighting against the idea of a broadening out of the AI rally.

Is that correct?

Well, actually, the technology stacks had the biggest earnings recession. I mean, you know, you look at the communication services and some of the technology stocks they had, they were their earnings were down significantly in the fourth quarter. That's why they sold off so sharply in the fourth quarter. So they had an earning's recession last year. And the presumption is is that's over and now that's going to reaccelerate.

If we get a center economy or ed Heiman moving down to three percent dare I say under three percent inflation? David Rosenberg up in Toronto clearly in that camp as well. I'm thinking of the partial differentials on the income statement to get to the Wilson earnings call, to get the thirty nine hundred or whatever on SPX, and to me, it's all at the revenue line, and that is the core of your call with your security analysts, that revenue growth will disappoint.

That's exactly right.

So last year, the earnings recession I just referred to was all a cost issue, right, These big tech companies over invested thinking the pandemic boom was going to continue at the same pace. Of course it did not, and that was a problem for discretionary consumer discretionary as well as some of the financial companies, et cetera. Companies that overinvested. Now what we're going to see is the top line disappointment. Okay, maybe it's not a recession, but like Ellen's forecast is

How do you allocate your do you participate in the market or is cash very.

Comfortable place to be both. So you know, and let's see that's strategy.

Yeah, on one hand. On the other hand, right, so I take my economist, but I mean, in all seriousness, I mean cash offers you a great risk adjusted return. We're overweight cash, Okay, it's nothing wrong with that. But we still are fully invested in equities too. We're just underweight our normal allocation and we've been that way for the last eighteen twenty four months.

I think this is misunderstood, Lisa. I think people look at will something go get out of the market, and this is hugely important.

Yeah, every time it comes on, he says, I'm fully invested. It's not a matter of just simply hiding under a mattress. My question is what happens if there's a recession and nobody cares. What happens if there's an earnings decline and people shrug it off and say, well, look to the future and there's going to be this incredible American exceptionalism and where else are you going to put your money?

Well, this is our story for twenty four and twenty five, right. This is why we're in a different difficult situation right now, where we see the near term risk reward as lousy. But if we look out twenty four to twenty five, and this is what people are getting excited about, capital expenditure boom for things like reshoring, green energy, traditional energy, retrofitting buildings, etc. And now of course AI, so this

What people are looking past it. I mean, this is sort of the frustration when people say that there's a divergence between bond markets and stock markets. They say, well, the bond market's looking at the now it says, look very good, and stock markets are looking to twenty four to twenty five. What's to make them look at now right? What's the catalyst to bring them down at a time when people can look past near term pain and see what you're seeing?

Well, typically it's price. Okay, So we were very disciplined on price, you know. You know, we always get kind of categorized as a perma bear. But I remember, you know, calling the low in October, we call the low in March of twenty twenty because of price, you know, so we're very disciplined. Most people are not disciplined because of FOMO and that's just the nature of markets. Markets are

What's the market bet right now?

Because I see a lot of indicators that say people are comfortable with Mike Wilson's calls. They're really a fight of this bull market and they're cautious. What is the bet that Morgan Stanley sees by the investment in public by the hedge funds, by long only by side institutions.

Well, I mean, I think our once again our view is that we're we're I'm in.

A position of luxury.

I don't have to put capital to work every day for MUNTHI performance. We have asset allocation, which is kind of measured on a longer term basis. So I have the luxury of time, right, So our asset owner clients had that advantage, and that's what we try to take advantage of. Folks who don't have the advantage of time have to kind of participate at the worst possible moment, and that, by the way, it also includes at the lows.

Right.

So the opportunity that was created in March of twenty twenty is because people were being forced to divest and we were happy to pick up those shares at cheap prices.

What do you think is the most overpriced aspect of the S ANDP right now?

Well, I think this is an interesting question because most people assume it's only ten stocks. That's actually not true. The media in multiple for the S and P five hundred today is the same as the market capvoid in multiple. It's close to nineteen times eighteen and a half nineteen times, so it's a very broad over evaluation. Now we say the sectors that are cheap, okay, the only ones that

Focus on energy. There you got twenty seconds of energy. There is that the place to.

Be well, I think energy at the stock level, there's there's definitely opportunities and in financials too, right so like the regional banking crisis created opportunity and individual financial services stocks. And I think that's what we're trying to do now, We're trying to find these one off opportunities as opposed to worry about the stock market overall.

Mike Wilson, thank you so much.

With Morgan Stanley here, what they called thirty nine hundred is where you are, not you want to make.

Some news here hundred year and yes, sir, we're still there. Okay, I'm gonna let us know if we'll change in the first car. That's Michae Wilson.

I'm Morgan Stanley here. Now we take a bigger, broader picture with Bruce Kasman of Chiefs of Economists and a head of Global economic research at JP Morgan and we do this with Columbia heritage of in the modern day, Jeffrey Sachs, Richard Clarita, and of course the foundational efforts of Robert Mundel Doctor Casman. I want to cut to the Chase here and talk of Jerome Powell, central Banker to the world. Your focus is on continental Europe.

What is drama for Europe.

Today and the decision making of Jerome Powell and the FED.

So, as you've already mentioned, it looks like the FED is going to pause. The ECB is also meeting this week and is likely to tighten and also single that they have more work to do. I think one of the big issues as we look at transmission here is about synchronization. There's obviously a lot of concern about a US recession. We don't think the US is falling into recession right now, but Europe is showing very strong divergence in performance. The service sector is doing well, the manufacturing

You and I Bruce have read Duley Garber, folkerts Landau and all the different macroeconomics coming out of David fulkerts Lando's work, and one of his great comments is there will be fiscal stimulus in Europe that will come to the rescue of Europe. It's a different fiscal calculation than Jerome Powell has. How does that play into what Europe will do off of this meeting today?

So, I mean, the simple point here is I think there's more work to do for the ECB. Personally, I think the FED will ultimately have more work to do here. It's taking a pause, but I don't think it's going to get inflation under control. And I think one of the things that people who are looking for an immediate recession are missing is that while Monte policy is tightened, a lot of fiscal policies moving in the other direction.

Titan materially Bruce, this is really interesting the idea that fiscal stimulus, on one hand, will force central bankers around the world to tighten much more than people currently expect. Is that what's going on? Do you think that people are misguided and thinking that the FED is done pretty much around here and is going to hold rates where they are because of the fiscal impulse.

I don't want to put too much weight on the stimulus. I think it's one factor among two or three which is promoting resiliency here. And I do think the most important factor in terms of what's going to drive more central bank tightening as we get it is the persistence of inflation, the underlying shift that's taken place in the inflation process, how that's plagued through in a world in which we still have damage done to labor supply and

Here.

I'm going to say something kind of sacrilegious. Let's say it's actually worse for risk markets right now if the FED doesn't hike further and keeps rates where they are for a very long time. Isn't that worse than potentially breaking something and then having to come in with rate cuts and sort of doing a full reversal, the sort of slow bleed, this sort of boiling of the frog that a lot of people are anticipating.

Ultimately it might be, but right now, I think if there's anything we should appreciate as economists and more generally, is that it's a lot it's very difficult to actually forecast exactly where we're going to be in six to nine months. There is a risk the economy is going to slide into the session. The fact that the FED is pausing, the fact that the FED is telling us it's going to be gradualist on inflation in terms of bringing it down is a constructive signal that promotes resiliency.

When you talk about the potential for inflation to come back or not come down all the way to where they'd like, is that driven by wages and some sort of wage price spiral that people are underappreciating.

I think it's a bit of a mistake to put it on tight labor markets, to focus particularly on what we call a Phillips curve relationship. I think what you've had happen here is two things. One is we've damaged supply in a way that it's not fully recovering, and particularly in the US and Western Europe, it's about labor markets in that regard. But I think the bigger issue here right now is that we've started to embed psychology in which wage and price gains are linked, which wasn't

Bruce, it's JP Morgan's fault.

I'm going to go to Richard Clara, the former vice chair, and of course all his work in Columbia and in an essay and the Economist. I'm going to say a month and a half ago, he really made a case that we're not going back to two percent, and this is a fad that has to find two point x percent. Whatever the number is going to be your Michael, change the debate single handedly. We're gonna blame Feroli by coming up with a potential GDP statistic that was well under two percent as well.

Do we have to adjust that.

Now, after all of this this imputed inflation into the system, what the Biden stimulus is wrought? Do you have to adjust the Ferole potential GDP up which makes it more comfortable to get to a clarity statistic.

So we've been running with a potential growth rate for the US of about one and a half really, as you as you're mentioning for almost a decade now, and I think you're raising a very important point, which is there's a lot of stuff going on here that could have an influence on potential growth going forward, and specifically productivity growth, which is a key to the to the inflation outlook. I'm agnostic here. There's a lot of cross currents.

I look, Verus, you know, let's bring it back to the festivities today at two pm. I hate the skip in the pause chat John bust My chops on it non stop, Bruce Chasmin. Are we just debating an asymmetric or symmetric outcome here? I'm clearly in the camp that it can be an asymmetric decision, are you well?

First of all, it's a divided decision. Keep in mind that probably close to half of this committee would vote for a rate hike, so it's going to be a pretty contentious debate. I also think it's hard to talk about a skip. It's possible, but it's not our view. I think the FED has six weeks to the next meeting. It is actually trying to take stock of what actually is happening in terms of banking sector stress, monetary transmission.

Bruce, do you think no cava equities of rallying.

I don't think the FED is very sensitive to equities rallying, But I do think the broadest picture here is that financial markets are showing very little stress. They've improved, risk appetite has increased, credit conditions have improved in the last two or three months, and is a significant offset to

Interesting, Bruce wanted for to get your perspectives looking for a divided pause. A little bit later on this afternoon, Bruce Camsman and JP Morgan whe us around a table Anastagia Amaroso chief and messment strategist over I Capital Anastagia.

Good to see you.

I remember you sitting around this table with Tom and I maybe several months ago, I think early April. I think it was good Friday, payrolls Friday, good memory, and you made the call that we would break out to the upside on the S and P five hundred. Do you forget everything had a really tight trading range up until that point. We've broken out. Everyone's on board with that move. Now seemingly, or at least slowly, they're capitulating.

I do think we're brought now, John, and I think we have been doing that for the last couple of weeks.

The simple question is is Apple under owned? But far more than that is your take at the institutional money. Typical fundamental buy hold for three year money has missed this market move, and there's a general statement under.

Owned, massively under owned. Tom and a lot of investors found themselves in chasing mode. And first it's kind of the high velocity money, the systematic traders, the hedge funds, and guess what they all piled into this market and that's what propped it up higher. But then you look at the bond and cash flows and what they have done versus the equity outflows. There's a massive amount of

Given that backdrop, if the FED does have a skip, hawkish whatever you want to call it, well that unleash unwarranted exuberance in risk assets in the US.

I mean it already has right sort of pre traded the pause, the skip, and you know, I think this exuberance is somewhat warranted. And by the way, if you go back in history and if you look at rate hikes, you know, the FED hikes rates, but it doesn't cause an imminent recession. There's typically a period of time before their session on sets and there is this exuberance face. I think some call it euphoria, or the market rallies for the twelve months after the Fed actually ends its

What's the tipping point? Let's say the FED does hold rates here for a long period of time. When does a tipping point come when perhaps the pain starts to get felt, when perhaps this exuberance starts to wear out.

I think the Fed we'd need to go higher, and potentially much higher, to really crack this economy. And you know, I say that because if you look at this economy with five percent rates, yes, we're feeling strains here and there,

Within your macro view, does a sixty forty allocation work? I can't make the math work in my head. Are you a sixty forty type or do you have to go to a different mix.

Well, this year, anybody who's declared sixty forty to be dead obviously has been wrong. Sixty forty is one of the top performing things out Yeah, exactly. But if you look tom over the last three year, five year, ten or fifteen year period, and if we expand beyond the sixty forty, and if I brought that out to private market strategies like growth equity, like venture capital, like private equity, buy out, like private credit, all of those things have

Just to build on something you said about the labor market and how far fed funds would need to go, where does that leave the bond market? Never mind equities, let's put stocks to one side. What does that leave fixed income? Try to rease what does a ten year look like over the next twelve months.

Yeah, I mean, I think the ten year is supported around these current levels because you know, if the FED needs to go much higher, the front end of the curve rises, but the back end really doesn't because it's a function of the forward growth expectations. But if the FED continues to high grades, that means the recession probabilities likely rise. So I actually think the ten year offers

You think we're in that point now to make that move currently, I think you can.

You know, I don't think you have to imminently hedge a recession, but I think if you're buying some tenure treasuries into your portfolio, I think they can provide some stable value because again, the growth expectations are not likely to speke materially higher, inflation expectations are not likely to move materially higher. So I think that's going to keep the tenure anchored.

Anastasia awesome coal on the equity market for the US so far, thank you, and at stage Amoso there the last drill.

And I talk about Disney quickly, please talk about this.

So Schoemaker's like is on the edge of the seats is little mermaidery.

When companies start throwing out dates like twenty thirty, twenty thirty one, drug usc it's amazing. The third installment of Avatar is going to come out December twenty twenty five instead of December twenty twenty four. Here we got tom The two other avat Pass sequel was pushed back by three years. They'll come out in twenty twenty nine and twenty thirty one. Doesn't that feel like a lifetime away? Twenty thirty one. Aren't we all going to be flying?

Then?

Exactly?

What in augmented reality? Although did you see the Way of Water? I mean it was pretty technologically amazing. It was very cool, right, so imagine that they have to then add on to that.

But yeah, it seems like Avengers Movies the layed a year to May of twenty six from May and May of twenty seven. Star Wars pushback a year twenty twenty six. It's all getting pushed back at what's Bob I ger up to for at Disney. Can you imagine being in the theater business and you hear this in the last twenty four as you want those movies like now.

Well this is is it the writer's strike?

No, it's got to be something bigger, like budgeting or just the complexity.

How much is content no longer king and you don't necessarily have the same kind of budget and throw at it the same kind of way.

Michael Schumacher saying, did I sign up for this?

Michael Schumacher joins us in our global head of macro Strategy at Wells Fargo.

We're not going to look for a little Mermaid review from him. Michael.

I want to talk about the challenge of Jerome Powell and the way I do it is what Michael Rosenberg invented with his team at Bloomberg, which is the Bloomberg Financial Conditions Index.

It is eleven ratios.

It is so wonderfully complex and it shows an accommodation.

I'm not going to go to the math now, folks, but.

All you got to know is a positive number is accommodative.

And a negative is a tilt towards restriction.

Is the stock market hindering Jerome Powell's choice set, his degrees of freedom, have we become accommodative? Is seen by the BFCI at I think it's a point zero seven nine that he has fewer choices that he can make, fewer options that he can make today.

Sure, it's a tightening cycle. I mean, these conditions are supposed to tighten. And you look at the stock market up what thirteen percent really since March.

Granted, I know regional banks, et.

Cetera bad news, but still equities have ripped, corporate credits doing really well. This flies the face of banking credit conditions tightening. That doesn't really seem to add up. So I think Jerome Powell, you're right, Tom, he's got less flexibility. Yes, he somehow has to convey to the market this is bad. But how does he do that?

Tough? The only way he can do it.

Mike Schumacher, based on Myriada history, is to delay, pretended, and delay. So we're going to go through today. He's going to read all sorts of statements. They're going to be you know, the answers are going to be written out in advance. Is this a meeting in preparation for July hoping the facts change for Jerome Powell.

Well, they could change the one big thing between now and the July meeting. Granted, the economic data flow pretty light, but you think about regional bank earnings, they start to report the regionals. This is I think July nineteenth is the first big day and the next FED meetings of twenty sixth, So it's possible you get lots of noise, let's say, in the week or so the ahead of the July meeting. But that seems like a long time away. I mean, heck of Disney is delaying Star Wars three years.

A stretch, especially because perhaps their budget is a little bit less than the Avatar sequels. I am curious, Mike, how much we have a little?

Just a little.

We've priced out rate cuts. That's what we've been doing over the past couple of months, since the rate cuts priced in during the banking crisis that happened for a half a second in March. I'm now wondering, do you expect the market to start pricing in materially higher rates, as one person after another on surveillance this morning have come out and said there is more work to do and the dynamism of this economy is not going to crack under five percent rates.

We think lie.

So it's really been interesting. You make a great point when you look at the degree to which rate cuts have been priced out for twenty twenty three. It's amazing. So early May there was something like ninety basis points and cuts priced for this year. Now it's fifteen or twenty, give or take. If I look at twenty twenty four, it's about one hundred and thirty basis points and cuts. We think that number goes down. Does it go to zero, No,

Well, perhaps they've got that wrong, but based on what people are expecting from the Fed, they're only going to confirm that if they're going to skip now, I mean, will that necessarily feed into some of the optimism and as we were hearing earlier from Bruce Casmen, the exuberance in risk markets.

Yeah, the action today, Lisa, I would say, is going to be all in the press conference and not in the statement. If you look at really the period of the last year, So go through the last eight FED meetings very very consistently. Whatever the market does from what we would call the statement period, so call it two o'clock to two twenty five or what have you, it

That's my recommendation and looking forward to it. Great recommendation as well. Mike Schumacher of wels FAG Mike, thank you for that.

Let's get to a three trillion dollar question. We do that with Tom for the expert at Senior Research Analysis at DA Davidson. He got an ATARI place that years ago and now he's turned it into a Mac pro and a study of Apple Apple Apple, Tom, we need an update here on the vector of Apple up forty x percent off the January beginning of the year. There's a persistency to the trend. What's your target as a trend continues, do they blow through a three trillion dollar valuation?

Yeah, so maybe the word of the day is pop. Yes, So I think Apple shares are going to take a pause here. I think the good news from the new product launch, the Vision Pro, which is the most significant new product launch since the iPhone in two thousand and seven, is priced into the stock. The stock's trading in a premium on an enterprise valued EBITDA basis, on a PE basis, and on a sales EBITDA basis. So I think the good news is priced into the stock. I'm looking for shares to take a breather.

The core unit thing is the iPhone. I believe there's a new iPhone language coming out, maybe a new iPhone chip. Can they keep innovating the iPhone to keep the unit sale persistency going?

The answer is yes, But on a near term basis, what does success look like for Apple? And it looks like low single digit sales growth, definitely not double digit sales growth. So you have a stock trading in a premium multiple relative to its history. The iPhone's doing amazingly well in a challenging macroeconomic environment, taking advantage of the networks, leveraging their five G networks of Verizon and such, and helping consumers buy the phones, subsidizing them, Apple offering buy now,

Into the side.

Tom Well, Apple use artificial intelligence and chat GPT type of technology to make serri better and to make it a more sort of intertwined aspect of the iPhone.

The answer is yes, And I think that when we started the discussion of artificial intelligence. So I've published twenty five papers on the convergence of tech and retail. One a couple of years back was on the power of artificial intelligence. Apple, I think appropriately discussed that it was a horizontal technology, not a vertical one, and makes all of its products better.

Hopefully it'll make sery better.

We're also talking about augmented reality, and you talked about the vision pro, the thirty five one hundred dollar goggles that people can put on and experience a new and improved world.

What is the future of this?

Is this the future of computing? Everyone talks about how this is revolutionizing things in a way that the iPhone did, but we're not really understanding the implications. Can you give us the sort of market case who wins and who loses?

So I'd like to think about it in the view of the metaverse, and our view is the metaverse will be a thing, not the thing. So ten years from now, consumers will be accessing the Internet in many different ways. They could have implanted chips, which is something Elon Musk is working on. ARVR will be one of many ways that consumers will access the Internet.

But we don't think it will be the dominant way.

I do think the winner on the thirty four to ninety nine vision pro is Meta Platforms, which is offering a device for four ninety nine. So to the extent that Apple gets people excited about ARVR, I think Meta platform stands the benefit with a much lower price point item.

We had on Abby Joseph Cohen from Columbia University, formerly a partner of gomet SAX yesterday and she said she's been talking to computer scientists and her sense is that perhaps people are overly optimistic about the future of artificial intelligence and what some of these chat GPT technologies can actually achieve reliably. Do you agree with that? Do you feel like it's been sort of overplayed at least to this point.

So my concern about it is, you know, as a consumer who grew up with skynet, But my primary concern is what happens to all the displaced workers if we truly become a fully automated or much more automated society. So what's going to happen to the economy if twenty five percent of the workforce is displaced by automation. So, yes, I think that there's way too much hype on what it can mean. I simply think of, you know, machine learning as the ability to cipher what is a cat,

It may always be flawed.

So I think artificial intelligence is a very important technology responsibly, but I think there's going to be a lot of challenges, including an increase in automation and the displaced workforce.

Thirty four ninety nine makes it sound cheap. Thirty four nine three and a half thousand dollars, Tom, how are people going to pay for this?

Three point five large? How about that? John?

So basically, if you look backwards, we could see why Apple's done the credit card, buy now, pay later, things of that nature. I'm of the belief in the future Apple offer will offer you a pure subscription for two hundred fifty dollars a month.

You get Apple. What does that mean?

You might get a vision pro headset, you might get the latest iPhone.

And then if you're paying two fifty.

A month or whatever it is monthly, you may not think about the two grand you're paying for the iPhone, the three point five K, you're paying for the Vision pro. So Apple as a monthly bill, it'll be a big bill. But then I think it'll be easier for them to sell some of these higher price products.

Tell I got to squeeze it in that's been developing with the handset already. What does that mean for the valuation of the Case company as you start to get more recur and revenue in that fashion.

Well, and that's higher multiple.

So the beauty of Tim Cook's leadership has been the higher multiple he's achieved by adding services to a strong base of hardware. The question is will they be able to compliment future hardware and services offerings to massively increase the sales base and then on a higher multiple, increase the stock.

And right now we're taking away and see attitude.

Being guy some Thank you some for f I Davidson at the end there.

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Former President Trump calls it a day that will go down in infamy after pleading not guilty to federal charges.

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Good morning, I'm Nathan Hager and I'm Amy Morris. Here are the stories we're following today.

We begin with the major story in politics this morning, the arraignment of former President Donald Trump. The Republican front runner, pleaded not guilty to thirty seven federal counts accusing him of willfully retaining top secret documents. After court, he flew from Miami to Bedminster, New Jersey, where he told supporters he had every right to keep those records.

Threatening me with four hundred years in prison for possessing my own presidential papers, which just about every other president has done, is one of the most outrageous and vicious legal theories ever put forward in an American court of law.

The former president spoke at a fundraiser that was planned before the indictment.

And it was a historic day, making Trump the first ex president to face federal charges. It all started at a courthouse in Miami. That's where we find Bloomberg's at Kaylee Lines.

There were hundreds of pro Trump supporters that were at the courthouse. Police that I spoke with indicated that there had been no violent incidents that they were aware of, and President Trump, after leaving the courthouse, went to a popular Cuban restaurant here in Miami, Cafe Verside, to speak with some of the reporters. As for where the legal proceedings go from here, this case will move from Miami to West Palm Beach, Florida, where Judge Eileen Cannon, a

Names Okay Kaylee, thank you know.

Legal analysts say drawing out the case could have benefits for the former president. We caught up with Palm Beach County State Attorney Dave Ehrenberg.

The one advantage for Trump is that it gives him a chance to delay matters further.

You can challenge the ruling down here, but he's not.

Going to succeed.

But in a way, he wins by losing, because by losing in court, he's going to have those delays that he loves because it can push this case beyond the twenty twenty four election.

Palm Beach State Attorney Dave Ahrenberg spoke with Joe Matthew on Bloomberg's Sound On. You can catch the program at one pm Eastern on Bloomberg Radio or listen on demand wherever you get your podcasts.

We'll have more on Donald Trump's case in just a few minutes. But now it's turned to Wall Street traders looking to today's policy decision from the Federal Reserve. The majority of economists expect the Fed to pause and not raise rates for the first time since March of last year. Let's get those details from Bloomberg's Michael McKee.

Fed officials went into their two day meeting divided over whether inflation remains so stubborn that additional rate increases are necessary. Tuesday's benign CPI report likely tips the balance of the argument to those who would put a further move on hold. The central Bank has raised the nation's benchmark borrowing rate by more than five percentage points and inflation is coming down.

Okay, Mike, thanks to join us for live coverage of the FED decision on a special edition of Bloomberg Surveillance. It starts at one thirty pm Eastern on Bloomberg Radio and Television. Plus stay tuned for another reading on inflation. We get that latest Street on US producer prices at eight thirty this morning.

And turning overseas, the economy is also in focus in the UK today. Growth in Britain bounced back in April. Bloombergs up Uwan Pots joins us from London. With the details. Good morning Ewan, Good morning Amy and Nathan. A strong start to the second quarter for the UK economy. GDP grew by zero point two percent in April, following a negative reading in the previous month. The positive data, in line with estimates, means the British economy dodges the risk

In London, I'm you in pot'spoon bag day break.

Okay you and thanks. Let's stay in Europe, where big oil is making news. This morning.

Shell says it will increase its dividend by fifteen percent. It's also pivoting back to oil and gas. It's part of Shell's pivot to expand the most profitable parts of its business, even if they are carbon intensive.

And oil demand is set to slow dramatically. That's the word from the International Energy Agency. The IEA says consumption in twenty twenty four will grow at half the rate scene in the prior two years. The agency says high prices and Russia's invasion of Ukraine will speed up the transition away from far feels.

Okay, Amy. Thanks.

Back here in the US, Microsoft is in the spotlight. The company's acquisition of Activision Blizzard has been temporarily blocked by a federal judge, and we get the story from Bloomberg's John Tucker.

The judge issued a temporary restraining order to maintain what he called the status quo while the Federal Trade Commission challenges the deal. The FTC itself filed an emergency motion to halt the merger on Monday. This ruling holds the two companies apart until five days after the court rules on a more permanent pause in the deal, and evidentiary hearing of the longer term in junction is set to be held in San Francisco later this month. US authorities

Time now to take a look at some of the other stories making news in New York and around the world. For that, we're joined by Bloomberg's Michael Barr. Good morning, Michael, Good morning, Nathan. President Vladimir Putin acknowledged that Russian forces fighting in Ukraine lacks efficient advanced weapons. Despite a trip of arms output, Kieves forces pressed the counter offensive. However, regional authorities say Russian forces fired cruise missiles at the

For your leadership, for your strong personal commitment to the Transatlantic Bond, to Europe and North American standing together. And then may also thank the US Congress and the people of America for the strong support to Ukraine.

Monday's scheduled meeting with Stoltenberg was postponed to Tuesday because the President had to get treatment for a root canal. A federal judge is once again weighing a takeover of New York City's t troubled Rikers Island Jail Complex. Judge Laura Taylor described her faith in its leadership as shaken following recent reports of violence, grewsome injuries, and a lack

There is a white hot demand for travel, and travelers saw the lowest prices for airline tickets and rental cars since March of twenty twenty one. Prices in May fell thirteen percent year over year. Prices for rental cars and trucks sank twelve percent, the most since May of twenty twenty, when the pandemic drastically curtailed travel. United CEO Scott Kirby says flight costs are now comparable to what consumers paid a decade ago. He says, we're just coming back to

Republicans passed legislation to preemptively block future attempts to restrict gas stoves after overcoming a revolt by the party's conservative members. The bill would prohibit the independent Consumer Product Safety Commission from using federal funds to ban the appliances as hazardous products. Global News twenty four hours a day, powered by more than twenty seven hundred journalists, nanalysts, and over one hundred twenty countries. I'm Michael Barren. This is Bloomberg Nathan.

Thanks Michael.

Time out for the Bloomberg Sports Update FRONTI by Trice Date Outy.

Here's John Stanshauer.

All right, Nathan Wild started the Subway series. The second batter was John Carlos Stanton his twenty fourth home run at City Field. That's ten more than any other opposing player. Luis Severino's second pitch was a Brandon Nimo homer. Sever Reno gave up two runs in the first and name two more in the second, an other than the third, but the Yankees with five runs in the fourth off Max schurz Or, who got booed by the Cityfield crowd

First Stanley Cup championship in Golden Knight's history comes in their sixth season. The Silver State is home to their greatest silver trophy at all of sports.

JK GK the call Game five and a Cup Final, a blowout win for Vegas nine to three over Florida. Though the game was only two to one midway through the second period, the next thing you knew, it was seven to one. Hat trick for Vegas captain Mark Stone. Jonathan marsh So won the Consul Mike Trophy and playoff MVP and the surprising run by the Panthers as the eighth seed comes to an end. They had to play

From coast to coast, from New York to San Francisco, Boston to Washington, DC, nationwide on SYRIASXAM, the Bloomberg Business app in Bloomberg dot Com. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager.

He is calling it a day that will go down in infamy, but rather than a sneak attack, former President Donald Trump is going after the Justice Department head on, hinting at his defense after pleading not guilty yesterday to federal charges over his handling of classified documents at mar Lago.

For more, we are joined live this morning.

By Greg Valiere, the chief US policy strategist at AGF Investments.

Greg. Good morning.

It's not every day that you see a defendant in a criminal trial of speaking out as forcefully as former President Trump did last night at Bedminster.

But of course this is no ordinary criminal defendant.

Yeah, good morning, Nathan. I make two quick points. Initially, first of all, good editorial lead editorial in this morning's Wall Street Journal talking about how Trump is his own worst enemy, saying and doing reckless things that come back to bite him. And then I think you've got to say I watched the whole talk he gave last night from Dedminster. He didn't say anything new. I mean, it's the same old stuff, like my detractors are deranged.

There on and on and on.

All of these words that he uses against his detractors, I think have lost a lot of their potency.

But some of the words that he also used sounded like he was reading directly from the Presidential Records Act, which says you allude to he's talked about before. That would potentially be his defense if he does go to trial here. What does that say about how the former president is going to be pursuing this and the potential political impact.

Yeah, very very aggressively, but at the same time, not in any great rush. I think he'd loved to see this coincide with the election campaign of next year. Even though people like Bill Barr, the former Attorney General, has said that this is outrageous. Even Nikki Haley said that it endangers national security. Trump's conviction in Florida is not certain. I mean, you've got a state where it's going to be difficult to get a jury where everybody agrees that Trump did something wrong.

Does this put an onus on the Justice Department or even President Biden to put out more of a public response since the former president is coming out so publicly like this, that's.

A really interesting angle, Nathan. All of a sudden, there's focus on why the Biden Whitehouse has been so passive instructing Democrats not to go after Trump, not inciting him, not leading to suspicion that there's a collusion between the White House and the Justice Department. But there are a lot of Democrats in this town who I think will very soon begin to really rip into tru for what he's done.

Interesting, are you thinking of any names in particular? I wouldn't think that President Biden would be coming out, at least in the short term, more forcefully than he has.

Yeah, I don't see Joe Biden. Actually, Jill Biden last night had a fairly critical comment about Trump. But I do think there will be other Democrats, Democrats would like to run for president in four years who start to talk pretty aggressively.

Okay, what about the former president's primary opponents who started to see a little bit of a shift for them as well, particularly Nikki Haley and Tim Scott, both out of South Carolina, getting a little bit more forceful in their rhetoric.

Do you see that continuing?

But maybe I think a lot of these politicians will carefully read the polls, and the poll show, at least initially, the American public, not just Republicans, feel that this is a political you know, they're ganging up on Donald Trump. I think the key politician to watch, obviously is Ron Desantus. If Desantas starts to move away, and their signs that he might, that would be significant.

Now it goes back to the point I guess that you were making earlier about the former president's words sort of losing their luster a little bit as he continues to hammer out a lot of the same forceful points he has before. How do you see the long term effects of this case playing out as it does get closer to a November twenty twenty four election, and potentially the case bleeding even after election day.

Yeah, you got to sustain the momentum. How many times can you call someone a deranged lunatic before it starts to lose its impact? And I do think that while Trump will maintain his base, there's no question in my mind on that. I just don't see Donald Trump having enough support among moderates to win in a general election.

Does this case sustain itself even with some of the other legal pressure that the former president is facing in potential further charges not just from this Special Council, but from Georgia as well.

A good point. There are still two huge cases to go. I think Georgia may be in the news by later in the summer. It looks like that case will be brought, And of course the big one of all is January sixth. And I do think that Trump is quite vulnerable because of an extensive record that shows that he encouraged the riots and did nothing to stop them.

This is Bloomberg Daybreak Today, your morning brief on the stories making news from Wall Street to Washington and beyond.

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