Israel Attacked Fallout | Bloomberg Surveillance 04/15/2024

>> MIXED SIGNALS COMING FROMMARKETS. ACTIVE RISKS INCLUDING THEMIDDLE EAST AND ISRAEL RISK. >> THIS IS BOTH ANINTERNATIONAL AND DOMESTIC STORY, BUT ALSO A AND MARKETSTORY. >> ON THE 10 YEAR THE DOLLARAND OIL ARE SUPERCRITICAL. THE MACRO TRIO IS WHAT WILLDICTATE WHAT HAPPENS GOING FORWARD. >> THE MARKET DOES NOT CARE.THE MARKET HAS BEEN CONCERNED WITH EARNINGS.

>> WHEN THE DUST SETTLES ON2024 WILL BE TALKING ABOUT A SITUATION WHERE THE U.S.ECONOMY IS GROWING. >> THIS IS “BLOOMBERGSURVEILLANCE” WITH JONATHAN FERRO, LISAABRAMOWICZ, AND ANNMARIE HORDERN. JONATHAN:LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING.THIS IS “BLOOMBERG SURVEILLANCE.”LET'S TAKE THE TEMPERATURE IN THE MIDDLE EAST. FRUIT LOWER 1%.BRENT CRUDE DOWN ALMOST 1%. AN UNPRECEDENTED DIRECT ATTACKON ISRAEL OVER THE WEEKEND.

I RAN LIGHTING UP THE SKY ONSATURDAY NIGHT, LAUNCHING MORE THAN 300 DRONES AND MISSILES.NOBODY KILLED, LIMITED DAMAGE DONE. ONE WORD — CONTAINED. JONATHAN: DE-ESCALATION.WHAT EFFORTS WILL BE THERE BE TO DE-ESCALATE ON THE PART OFU.S. AND FRANCE AND GERMANY. TO ME THE MARKET WILL NOTPRICING A GEOPOLITICAL RISK THAT HAS YET TO TRANSPIRE.THIS IS A MARKET ON EDGE WITH THE NEW REDLINE CROSSED.IRAN HAS NEVER DIRECTLY ATTACKED ISRAEL.EVEN IF IT IS AN IMMEDIATE.

RETALIATION IT RAISES THETEMPERATURE. JONATHAN: THE CONSENSUS VIEW ON THESTREET. THIS FROM CITIGROUP, “IRAN'SATTACK UNLIKELY TO LEAD ESCALATION IN THE NEAR TERM.”WE EMPHASIZE THE NEAR TERM. ANNMARIE:IT IS THE NEAR TERM WHICH IS WHY YOU SEE THE OIL MARKETSTARTING TO RECALIBRATE THE RISK FRIDAY.WE SAW A BIG PRICE PREMIUM BUILDING INTO THE OIL MARKETAND THEN MONDAY MORNING YOU SOUGHT ISRAEL AND ITS ALLIESWERE ABLE TO STRIKE DOWN 99% OF.

THESE MORE THAN 300 MISSILESAND DRONES. THE BIGGEST TAKE AWAY FROM THISWEEKEND IS A RECALIBRATION OF THESE REDLINES.COMPLETELY ERASED IN TERMS OF DIRECT RESPONSE ON IRANIAN SOILTO ISRAEL. DOWN THE FUTURE WHEN YOU LOOKAT WHAT COULD BE RETALIATION FOR ANY MOVEMENTS IN THE MIDDLEEAST, THIS IS NOW AN OPTION IRAN MAY USE. JONATHAN: THE PRESIDENT FOCUSED ONDEFENSE. THE PRESIDENT CAME OUT AND SAIDDON'T, THEY DID.

ANNMARIE:THEY DID, NOW THE PRESIDENT IS TELLING ISRAEL TO SLOW DOWN.ISRAEL'S WAR CABINET HAS YET TO MAKE A DECISION, AND IF THEY DOTHEY PROBABLY WILL NOT TELL THE PRESS.FOR ISRAEL THIS IS EXISTENTIAL. IRANIANS SEND MORE THAN 300DRONES AND MISSILES, INCLUDING BALLISTIC MISSILES, DIRECTLY TOTHEIR AIRSPACE. AT SOME POINT ISRAEL WILL HAVETO RESPOND. IT IS A MATTER OF WHEN.JONATHAN: THE FIRST THING YOU WILL HAVE ALOOK AT WHEN YOU WAKE UP IS.

MARKETS.EQUITY FUTURES POSITIVE .5% ON THE S&P.THE BOND MARKET RELEASING SOME OF THAT HAVEN BID FROM FRIDAY.YIELDS HIGHER. THERE IS. CRUDE DOWN ALMOST 1%. LISA:CRISIS OVER. EVERYONE IS CALM. EVERYONE IS NOT COME.THIS IS THE QUESTION. HOW DO PEOPLE HAVE TO STARTGAMING OUT THE PRICE OF HIGHER OIL PRICES?THERE ARE THREE PRONGS COME ECONOMIC DATA, EARNINGS, ANDTHE FED SPEAK. WE HAVE LOGAN, WILLIAMS, DAILY,BOSTICK, GOOLSBY.

INTERESTING TO SEE HOW MUCHTHEY RECALIBRATE GIVEN WE ARE SEEING CONFIDENCE COMING IN ANDINFLATION EXPECTATIONS PICKING UP. WE HAVE GOLDMAN SACHS ANDMORGAN STANLEY TOMORROW AND TECH LATER IN THE WEEK.WE DO HAVE ECONOMIC DATA. WE HAVE THE IDEA OF RETAILSALES. LATER IN THE WEEK WE HAVE THEBEIGE BOOK AND JOBLESS CLAIMS. TO ME THE QUESTION WILL BE HOWDO YOU FILTER ALL OF THESE EVENTS THROUGH THE LENS OF THEPOTENTIAL FOR HIGHER QUANTITY PRICES.THAT WILL BE A RUNNING THEME.

BECAUSE OF THE GEOPOLITICALFRAMING. JONATHAN: GOLDMAN SACHS EARNINGS COMINGOUT. MICHAEL CATCHING UP WITH PRESIDENT WILLIAMS.COMING UP WILL CATCH UP WITH A FORMER SENIOR INTELLIGENCEOFFICIAL FOLLOWING IRAN'S ATTACK ON ISRAEL.THE ODDS IN COMMODITIES. IN INTO BOWLS OF PIMCO SAYINGU.S. GROWTH HAS HIT ITS PEAK. WE BEGIN WITH THE TOP STORY,IRAN'S EVER FIRST ATTACK ON ISRAEL FROM IRANIAN SOIL.THE WAR CABINET IS EXPECTED TO DECIDE ON A RESPONSE.THE FORMER SENIOR INTELLIGENCE.

OFFICIAL SAYING “THE U.S.WILL NOT PARTICIPATE IN A COUNTERATTACK BUT WILL INSISTISRAEL ADVISES OF THE ATTACK AD WILL LIKELY BRING IN U.S.PARTICIPATION IF ONLY FOR DEFENSE.” SERIOUS EVENTS.WE ARE TRY TO WORK OUT WHETHER THIS IS A NEW PHASE OR WHETHERWE JUST WITNESSED AS A HIGHLY CHOREOGRAPHED BILLION DOLLAREPISODE OF SKEET SHOOTING. WHICH IS IT? NORMAN: IT IS A NEW MIDDLE EAST WHEREISRAEL MUST WONDER WHETHER SOME ACTION MIGHT PROVOKE IRANIANMISSILE ATTACKS ON ISRAEL'S.

TERRITORY, AND IT IS A NEWMIDDLE EAST IN WHICH ISRAEL IS NOW IN THEORY OPEN TO DO THESAME AGAINST IRAN. UNITED STATES, EUROPE, ANDOTHERS WILL CERTAINLY NOT WANT THIS TO HAPPEN.BUT BY ALLOWING IRAN TO CONDUCT AN UNPRECEDENTED ATTACK WHICHWAS CERTAINLY NOT JUST SYMBOLIC YOU NOW HAVE THIS NEW WORLD.JONATHAN: THE PRESIDENT HAS TOLD THELEADER OF ISRAEL TO TAKE THE WIN. WHAT DID YOU MAKE OF THAT?NORMAN: THE PRESIDENT IS CORRECT INSAYING THE ISRAELIS HAVE.

ACHIEVED AN EXTRAORDINARYVICTORY OVER IRANIAN ARMS AND SHOULD PAUSE AND DEAL WITH THEPROBLEM OF GAZA, THE CHALLENGE OF LEBANON BEFORE DOINGSOMETHING THAT MIGHT ESCALATE THE REGION INTO A CONVENTIONALWAR. ALL THAT IS WELL AND GOOD. IF YOU ARE IN THE IS WORK ANDYOU HAVE A SERIOUS ISSUE. HOW DO YOU DETER IRAN FROMDOING THIS AGAIN? THAT CANNOT BE PUT OFF TOO LONG.THAT IS NOT SOMETHING YOU DO WITH THE DIPLOMATIC NOTE.ANNMARIE: IF THE ISRAELIS ARE LOOKING ATHOW TO DETER IRAN FROM.

SOMETHING LIKE THIS AGAIN, WHATKIND OF RETALIATION COULD WE SEE, THE SCALE OF THERETALIATION? NORMAN: ISRAELI RETALIATION WILL LIKELYBE PROPORTIONAL. IT WILL LIKELY BE LIMITED.IT'LL BE SOMETHING MEANT TO DEMONSTRATE WE CAN TOUCH YOU INWAYS THAT HURT. FOR THAT REGION I THINK ISRAELIS NOT LOOKING FOR A CONVENTIONAL WAR ITSELF.THIS TAKES TIME TO WORK OUT. WHAT YOU ARE LOOKING AT IS THEGOLDILOCKS POSITION. SOMETHING THAT DOES NOT START AWAR, SOMETHING THAT RESETS.

DETERRENCE, AND ALLOWS THEM TOFOCUS ON THE ISSUES THE BIDEN ADMINISTRATION CORRECTLYADDRESSES. ANNMARIE: THE BIDEN ADMINISTRATION WENTTO PAINS TO DELL CRAFT TO THE WORLD — TO TELEGRAPHED TO THEWORLD THAT THEY DO NOT WANT TO SEE EXPANSION OF THIS CONFLICTOR A WIDER WAR WITH IRAN. WHAT DID THE U.S.HAVE DONE TO DETER THIS ATTACK INSTEAD OF BEING IN A POSITIONOF DEFENSE? NORMAN: THE WHITE HOUSE IS CORRECT INDOING WHAT IT CAN TO CONTAIN A VERY FRAGILE AND TURBULENTSITUATION.

BASED ON PREVIOUS ACTIONS OFTHE UNITED STATES, IT COULD HAVE BEEN A DECISION TO MOVEU.S. MILITARY ASSETS CLOSER TO IRAN,NOT BECAUSE IT IS NECESSARILY NEEDED TO CONDUCT AN ATTACK,BUT TO DEMONSTRATE TO IRAN WE ARE PREPARED TO DO SOMETHING TODETER AN ATTACK. A LOT OF THIS HAS TO DO WITHIRAN'S ASSESSMENT OF THE U.S. WILLINGNESS TO ENGAGE IN SUCH ASTRIKE. WHETHER EUROPE WOULD JOIN US.I DO NOT THINK THE IRANIANS FEEL THE BIDEN ADMINISTRATIONIS SEEKING A CONFRONTATION.

LISA:THERE WERE A LOT OF PRECEDENT SET OVER THE WEEKEND, IT WASINTERESTING TO SEE THAT NOT ONLY THE U.S.BACKED ISRAEL WOULD THE U.K. AND JORDAN AND ALSO AREAS INTHE REGION WHO HATE IRAN MORE THAN THEY HATE ISRAEL.WHAT COULD TAKE PLACE IN TERMS OF PRESSURING THE REGION INTO APEACE AGREEMENT? NORMAN: THERE WERE A NUMBER OF FIRSTS. ISRAEL DEPLOYED THE FIRST NAVALIRON DOME, AND YOU SAW THIS UNOFFICIAL COALITION OF THEUNITED STATES AND UNITED.

KINGDOM BUT ALSO FRANCE,JORDAN, AND SAUDI ARABIA. THIS IS A VERY AD HOC GROUPINGAND IT TOOK A FAIR AMOUNT OF DIPLOMATIC WORK AND WE HAVE TOPRAISE THE BIDEN ADMINISTRATION FOR THEIR WORK IN BUILDING THEPARTNERSHIP. UNLESS THE ADMINISTRATIONBELIEVES THE UNITED STATES HAS THEIR BACK, THEY WILL NOT BEWILLING TO ENTER IN TO SUCH FORMAL ENTITIES. LISA:I WAS GOING TO PUSH THIS FORWARD TO THE IDEA OF FREEDOMOF THE SEAS. WE HAVE SEEN THE IDEA OF TRADECHALLENGED.

WE ARE NOT EVEN TALKING ABOUTTHE STRAITS OF HORMUZ AND THE FACT THAT IRAN WENT AFTER ASHIP IN THAT REGION AND WHAT THIS RAISES IN TERMS OFQUESTIONS ABOUT THE WILLINGNESS TO CURTAIL THAT TRANSPORTATION.HOW MUCH COULD THIS COALITION GO AFTER TO TRY TO RECLAIM SOMESORT OF FREEDOM OF THE SEAS? NORMAN:SUCH A COALITION WILL NOT BE EFFECTIVE UNLESS IT BELIEVESTHE UNITED STATES IS FULLY COMMITTED TO DETERRING AS WELLAS DEFENDING AGGRESSION IN THE REGION.THE RED SEA EXAMPLE SAYS THAT.

IS NOT THE CASE.THE UNITED STATES AND ITS PARTNERS HAVE DONE A SUPERB JOBDEFENDING INTEGRATING HOUTHI CASSIDY THERE IS NO EVIDENCE WEARE SEEKING TO PUSH THIS INTO YEMEN.UNLESS YOU TAKE THAT MODEL AND APPLIED ACROSS THE REGION COMEIF YOU A MEMBER OF THE REGION YOU ARE EXPOSING YOURSELF TORETALIATION BY IRAN AND ITS PROXIES. JONATHAN:WHAT IS THE BEST WAY OF INFLUENCING DECISION-MAKING?WHAT ARE WE DOING THAT WE SHOULD BE DOING? NORMAN:.

A MULTILATERAL APPROACHINVOLVING ECONOMIC AND POLITICAL ISOLATION OF IRANWITH PATIENTS AND A WILLINGNESS TO TAKE THEIR TEST OF OURFORTITUDE HAS TRADITIONALLY BEEN THE BEST APPROACH.WE DO NOT HAVE SUCH A COALITION AT PRESENT AND I DO NOT SEE ALOT OF EFFORTS TO BUILD ONE. JONATHAN:NORMAN ROULE, THANK YOU FOR YOUR INPUT.FORMER SENIOR INTELLIGENCE OFFICIAL.THE PRESIDENT SAID NO, THEY DID. U.S.AND ALLIES HAVE STRUGGLED TO.

PREVENT IRANIAN BACKED REBELSFROM DISRUPTING THE RED SEA. IT FEELS LIKE OVER THE LASTYEAR THE ABILITY TO INFLUENCE IRAN HAS DIMINISHED. LISA:WHEN WE TALK ABOUT ADDITIONAL SANCTIONS YOU HAVE TO WONDER,HAVE THE SANCTIONS THAT HAVE BEEN PLACED ON AND HAVEN'T HADANY AFFECT? THERE QUESTIONS GOING FORWARDIN TERMS OF HOW FAR IRAN WILL PUSH THIS CONSIDERING THEY DIDCROSS WHAT WAS BELIEVED TO BE A REDLINE. THE FOCUS IN THISADMINISTRATION HAS TO BE PREVENTING ESCALATION THATCOULD CAUSE OIL PRICES TO SPIKE.

AHEAD OF THE ELECTION. ANNMARIE:IT IS VERY DIFFICULT FOR THIS ADMINISTRATION AHEAD OF A U.S.ELECTION, WHICH IS WHY THEY HAVE A LACK ENFORCEMENT POLICYWHEN IT COMES TO IRANIAN POLICY. NORMAN GOT TO THAT.HIS ECONOMIC COALITION. AFTER PRESSURE CHINA TO STOPBUYING THE BARRELS CHINA HAS AN OIL OUTPUT.THIS IS WHERE IT COMES DOWN TO THE DETERRENCE FACTOR THE U.S.COULD HAVE BEEN TAKEN. JONATHAN: THERE IS A BELIEVE THINGS ARECONTAINED. YIELDS ARE HIGHER. THE COMMODITY MARKET IS LOWER.ON WTI, WE ARE -.8%.

LET'S GET YOU UPDATE ON STORIESELSEWHERE. LET'S GET YOU BLOOMBERG BRIEFWITH DANI BURGER. DANI: GERMAN CHANCELLOR OLAF SCHOLZHAS BEGUN HIS SECOND VISIT TO CHINA AND IS EXPECTED TO SAYBEIJING HAS NOT ACTED ON EUROPEAN WARNINGS TO ENDDISCRIMINATORY BILLING PRACTICES AND HE WANTS TOPERSUADE THE CHINESE PRESIDENT TO ACT AS SOON AS POSSIBLE TOAVOID TARIFFS MEANT TO REBALANCE THE TRADERELATIONSHIP. SCHULTZ IS ALSO EXPECTED TOQUESTION PRESIDENT XI ABOUT.

CHINA'S SUPPORT FOR RUSSIA'SWAR MACHINE. THE BIDEN ADMINISTRATION PLANSTO WORK SAMSUNG AS MUCH AS $6.4 BILLION IN GRANTS TO INCREASETO PRODUCTION IN TEXAS AS PART OF THE U.S.EFFORTS TO HELP DOMESTIC SEMICONDUCTOR MANUFACTURING ASIT HAS GROWN IN CHINA AND ELSEWHERE IN ASIA.THE MONEY WILL BE USED TO EXPAND SAMSUNG'S EXISTINGCHIPMAKING FACILITY IN AUSTIN. THE 128 BOSTON MARATHON KICKSOFF TODAY. THE CITY THINKS IT WILL GET A$200 MILLION ECONOMIC WINDFALL,.

WHICH WOULD BE THE LARGESTSINCE THE PANDEMIC. 300,000 RUNNERS WOULD BECOMPETING WITH A TITLE AND A $1.2 MILLION PRIZE AT STAKE.THAT IS YOUR BRIEF. JONATHAN: BEST OF LUCK TO ALL OF THERUNNERS. EARNINGS SEASON RAMPING UP. >> IF THE FED DOES NOT CUTRATES , YOU COULD HAVE PRESSURE ON VALUATIONS.HOW YOU OFFSET THAT PRESSURE? HIGHER TOPLINE GROWTH ANDHIGHER EARNINGS GROWTH. JONATHAN: RUDE -.8%.

— CRUDE -.8%.EQUITY FUTURES BOUNCING BACK .5% ON THE S&P 500 FOLLOWINGTHE BIGGEST WEEKLY LOSS OF THE YEAR SO FAR.EARNINGS SEASON RAMPING UP. >> THIS IS NOT JUST A ONEENGINE ECONOMY BUT MAY BE SEVERAL THINGS WORKING IN ITSFAVOR. THAT IS WHY WE LOOK TO THE U.S.TO HAVE SOME OF THE HIGHEST EARNINGS MOMENTUM BUT ALSOJAPAN. THAT IS WHY WE LOOK TO INDUSTRIALS AND MATERIALS TOHAVE SOME OF THAT UPWARDS EARNINGS MOMENTUM.IF THE FED DOES NOT CUT RATES.

YOU COULD HAVE A LITTLE BIT OFPRESSURE ON VALUATIONS. HOW DO YOU OFFSET THAT PRESSURE?HIGHER TOPLINE GROWTH AND HIGHER EARNINGS GROWTH.JONATHAN: EQUITY MARKETS REBOUNDING ONTHE HEELS OF A TURBULENT WEEKEND IN THE MIDDLE EAST.NORTHERN TRUST WRITING “EARNINGS WILL SUPPORT GLOBALEQUITIES BUT HIGHER BOND YIELDS COULD WEIGH ON ALREADY HIGHVALUATIONS UNDERPINNING OUR NEUTRAL STANCE WITH OUR MULTIASSETS PORTFOLIO. ” SHE IS WITH US AROUND THE TABLE.TO WHAT DEGREE ARE BONDS OR.

CHALLENGE IN THE EQUITY MARKET?YOU THINK WE ARE MOVING BACK TO THE NEW LENDING SCENARIO FOREQUITIES AND BONDS? >> FOR EQUITIES IT SEEMS LIKETHAT GIVEN HOW STRONG GROWTH HAS BEEN.FOR BONDS IT IS STILL VERY MUCH AN INFLATION STORY. IF YOU LOOK AT WHAT MOVED RATESTHIS YEAR, THAT WAS A REASONABLY SUBSTANTIAL MOVE INTHE 10 YEAR. IF YOU BREAK IT DOWN INTO WHATDROVE THAT MOVE UP, IT WAS STILL PREDOMINANTLY GROWTHBEING PRICED HIGHER AND SOME.

INFLATION EXPECTATIONS ALSO.IT REMAINS A GROWTH STORY. AS MARKETS WE DO NOT SEE LABORMARKETS WEAKEN. I THINK EQUITIES DO ALL RIGHT.LISA: I HAVE SEEN A LOT OF CHALLENGESTO THIS RALLY. THEY DO NOT LIKE IT RIGHT NOW.THEY SEE EARNINGS BEING UNABLE TO FULFILL LOFTY EXPECTATIONSAND THE PROSPECT OF NO RATE CUTS IN THE FACE OF HIGHERCOMMODITY PRICES. ARE YOU IN THAT SAME CAMP WHEREYOU ARE SHIFTING TO A MORE NEGATIVE VIEW BECAUSE OF SOMEOF THESE OVERHANGS?.

>> HOW LONG CAN THE RATE RISEBE DIGESTED? AS LONG AS THAT GROWTH MOMENTUMSTAYS ALL RIGHT, MARKETS WILL BE OK WITH IT.WHAT IS SURPRISING IS HOW IT SEEMS TO DIGEST ANYGEOPOLITICAL TENSION. THAT IS U.S.EXCEPTIONALISM, SEEMS TO BE AN ISLAND THAT IS ISOLATED FROMMOST OF THE EVENTS. THE KEY IS TO WATCH WHATHAPPENS IN OIL AND IF OIL STAYS CONTAINED.THAT SEEPS INTO INFLATION EXPECTATION AND COMPLICATES THEPICTURE FOR THE FED AND THAT.

MAKES YOU WONDER WILL ANYFURTHER RATE HIKES BE DIGESTED. LISA:IS THAT A MORE IMPORTANT GAUGE TO WATCH EVEN AS THE INFLATIONDATA OR THE FED RHETORIC, OIL PRICES AND HOW MUCH THEYRESPOND TO THE GEOPOLITICS? >> OIL PRICES AND LABOR MARKET,TWO SIDES OF THE SPECTRUM. THE ONE TAIL RISK IS LABORMARKET START WEAKENING. THIS ENORMOUS 400 OR 500 BASISPOINTS OF TIGHTENING COMES TO BITE THE MARKETS.WE SEE RECESSION RISKS COMING TO THE FOREFRONT.THE OTHER IS OIL.

INFLATION EXPECTATIONS SEEPSINTO BROADER CPI NUMBERS AND THEN THE FED'S HANDS ARE TIED.TWO TAIL RISKS. FOR THE MOMENT WE ARE STAYINGTHE COURSE. VERY NEUTRAL. DO NOT WANT TO MISS OUT ON THESTRONG EQUITY MOMENTUM RALLY EITHER, BUT AT THE SAME TIMENOT A TIME TO LEARN ABOUT DURATION. ANNMARIE:WHEN YOU LOOK AT OIL. SAY YOU PARKED GEOPOLITICALRISK. WHAT DOES THE SUPPLY AND DEMANDPICTURE TELL YOU? RIGHT NOW THE WORLD SEEMS FLUSHWITH ENOUGH SUPPLY.

>> THERE ARE LOTS OF SANCTIONSAND IT IS HARD TO FIGURE OUT WHO IS BREAKING THOSE SANCTIONSAND WHERE THE OIL IS GOING. THE DEMAND PICTURE IS NOT A BADGROWTH PICTURE BECAUSE THE DEMAND PICTURE MEANS PEOPLEWANT OIL BECAUSE THE ECONOMIES ARE GROWING.EVEN ECONOMIES ACROSS THE GLOBE ARE LOOKING FOR OIL.THAT IS COMING THROUGH THE DEMAND SIDE.IT BECOMES NEGATIVE IF IT IS THROUGH SUPPLY DISRUPTIONS.ALL OF THE STOCKMARKETS SEEM TO HAVE DIGESTED PRE-WELL OVER THELAST SIX MONTHS OR SO. ANNMARIE:.

YOUR OTHER CONCERN IS THE LABORMARKET AND YOU TALK ABOUT IMMIGRATION.HOW DO YOU PREPARE FOR A 2025 OR 2026 LABOR MARKET OFIMMIGRATION POLICY COULD BE DIFFERENT? >> THAT IS THE WILDCARD.SO FAR THE LABOR MARKET HAS HAD A POSITIVE BOOST FROMIMMIGRATION. THAT IS BORNE OUT IN DATA ANDTHAT HAS KEPT WAGES CONTAINED. THEY ARE STILL AROUND 4%.THE FED WOULD LIKE THEM TO GO LOWER. SO FAR THAT HAS BEEN THESUPPORT.

ELECTIONS ARE POTENTIALLY AWILDCARD. WE DO NOT KNOW WHAT HAPPENSTHEN AND THAT IS NOT SOMETHING YOU CAN PREPARE FOR.I GO BACK TO SAYING STAY THE COURSE, STAY INVESTED, DO NOTPANIC ON MOMENTS LIKE THIS. JONATHAN:STAY THE COURSE APPEARS TO CHANGE IN TERMS OF WHETHER TOGO TO BONDS FOR RISK OR NOT. FRIDAY FELT LIKE THE CLASSICRISK OFF WITH A LAYER OF GEOPOLITICAL RISK INTO THEWEEKEND AND TREASURIES RALLY. THE RELATIONSHIP BETWEEN STOCKSAND BONDS HAS BEEN SO.

INCONSISTENT.WHAT IS YOUR UNDERSTANDING OF WHAT BONDS DO FOR YOU IN AMULTI-ASSET PORTFOLIO? >> THERE IS STILL A PERFECTHEDGE FOR A DAY LIKE FRIDAY WILL STOP YOU WANT TO HAVEDURATION. YOU DO NOT WANT TO BE OVERWEIGHT DURATION.WE ARE NOT OVERWEIGHT DURATION. WE HAVE DURATION.IF THERE IS GEOPOLITICAL RISK BECOMES REAL, OR THE FIRST TAILRISK I TALKED ABOUT, WHICH WAS RECESSION COMING BACK IN OF THEFOREFRONT, YOU WILL SEE TREASURIES GIVE YOU ENORMOUSPROTECTION. LISA:.

IT SEEMS LIKE A LOT OF PEOPLEARE SEEING — A LOT OF PEOPLE ARE SAYING THEY ARE HAMSTRUNG.SEBASTIAN PAGE SAID HE WAS AGGRESSIVELY NEUTRAL, THERE WASTHIS TREPIDATION OF WHAT YOU DO NOT KNOW.THERE WAS THIS RISK IF YOU LOOK AT OIL PRICES AND SAFE THEYCROSSED $95, I AM SURE YOU HAVE YOUR BOGEY, THEN WE DO HAVEAGGRESSIVE PROTECTION. >> I DO NOT ANCHOR ON A SINGLEPRICE NUMBER. IT IS ALL OF THE DATA THEY ARELOOKING AT. I LOVE THAT EXPRESSION,AGGRESSIVELY NEUTRAL.

I WOULD SAY THEY ARE PASSIVELYNEUTRAL, NOT VERY AGGRESSIVELY NEUTRAL.TO US A LOT HAS BEEN PRICED IN IN TERMS OF VALUATIONS IN THEEQUITY MARKETS AND WHAT I AM LOOKING FOR IS THE BROADENINGOF EQUITY MARKETS. THAT, WE HAVE NOT SEEN.THERE BEEN SPARKS OF IT IN MARCH.IT HAS NOT FOLLOWED THROUGH ACROSS ALL OF THE PORTFOLIOS.WE HAVE NOT SEEN CHINA RALLY MASSIVELY.WE HAVE NOT SEEN SMALL CAPS RALLY. IT IS STILL BEEN A U.S.LARGE-CAP GROWTH TRADE.

JONATHAN:SMALL CAPS GOT BATTERED LAST WEEK.GREAT TO GET YOUR THOUGHTS. BREAKING NEWS. A REPORT ON TESLA, THAT THEYWILL REDUCE GLOBAL HEADCOUNT BY 10%. ELON MUSK CITED AS SAYING DUPLICATION OF ROLES AND JOBFUNCTIONS IN CERTAIN AREAS IS THE REASON FOR CUTS.THAT IS BASED ON REPORTS THE STOCK IS DOWN .5%.IF YOU TAKE THE 10% AND ASSUME IT APPLIES COMPANYWIDE WE ARETALKED ABOUT 14,000 EMPLOYEES.

LISA:A LITTLE MORE COLOR IN TERMS OF THE EMAIL.”AS WE PREPARE THE COMPANY FOR OUR NEXT PHASE OF GROWTH IT ISIMPORTANT TO LOOK AT EVERY ASPECT OF THE COMPANY FOR COSTREDUCTIONS AND INCREASING PRODUCTIVITY.”THIS SOUNDS LIKE A CAR COMPANY, THIS DOES NOT SOUND LIKE A TECHCOMPANY. IT SOUNDS LIKE A COMPANY BESETWITH QUESTIONS ON HOW MANY DELIVERIES IT CAN MAKE TO CHINAGIVEN THE LOW COST OPTIONS AND GEOPOLITICAL PRESSURES.JONATHAN:.

WITHOUT A DOUBT THIS IS ACOMPANY CONFRONTING A TOUGH INDUSTRY IN THE INDUSTRY IS THEAUTO MARKET IN GENERAL AND MORE NARROWLY IS EB'S WHICH HAVESTRUGGLED. ANNMARIE:PIERCING THE EV MARKET SLOW DOWN IN TERMS OF SALES,PARTICULARLY WITH TESLA IN CHINA.CHINESE RIVALS CONTINUE TO CUT PRICES. ELON MUSK IS SAYING COSTREDUCTION. THEY ARE TRYING TO FIND WAYS TOTRIM ON THE MARGINS TO MAKE SURE THEY ARE PROFITABLE.JONATHAN:.

WE WILL LOOK FOR CONFIRMATIONFROM ELON MUSK. THE STOCK IS DOWN .6% IN THEPREMARKET. COMING UP, OIL SHRUGGING OFFTENSIONS IN THE LEAST. — TENSIONS IN THE MIDDLE EAST.WILL BE JOINED BY NADIA MARTIN WIGGAN. JONATHAN:IS THIS COMP — LISA: IS THIS CALM?IS THIS THE MARKET TAKING A SIGH OF RELIEF OR IS THIS THEMARKET SAYING THERE'S NOTHING WE CAN TRADE ON SO WE HAVE TOGO WITH WHAT WE SEE? IT IS NOT ESCALATING RIGHT NOW.JONATHAN:.

NOT GOING TO ATTEMPT TO READTHE EMOTIONS OF PEOPLE. THE BIG TAKEAWAY SEEMS TO BE ISCONTAINED FOR NOW. WE WAIT TO SEE WHAT ISRAEL'SREACTION WILL BE WHICH IS WHY WE ARE LOOKING FORWARD TOCATCHING UP WITH JOHN KIRBY LATER THIS MORNING.THAT CONVERSATION TWO HOURS AWAY. JONATHAN:WELCOME TO THE PROGRAM. EQUITY IS BOUNCING BACK JUSTATTACHED. THE NASDAQ UP. COMING BACK FROM THE BIGGESTWEEKLY LOSS OF THE YEAR SO FAR.

SMALL CAPS LAST WEEK,ABSOLUTELY PUNISHED. THE RELATIVE PERFORMANCE, THEBIG STORY VERSUS SMALL. LISA: SOMEHOW IT IS THOUGH CANENTERED BIG. GEOPOLITICAL CONCERNS ARESPIKING AT A TIME WHEN STOCKS ALREADY SEEM DO FOR A PULLBACK.THE ROTATION TRADE HAS JUST GOT A LOT MORE COMPLICATED.JONATHAN: DOUBLE DIGIT MOVES. SOME NEW LEVELS TO TALK ABOUT.I FOR THE YEAR. WE ARE JUST SHORT RIGHT NOW.LISA, THE FRONT END OF THE CURVE.

NOTE AFTER NOTE FROM MORGANSTANLEY. ALL TALKING ABOUT THE SAMETHING, THE CHALLENGE TO THE EQUITY MARKET. LISA:ALL THESE PEOPLE TALKING ABOUT THE FACT THAT POSSIBLY WE ARELOOKING AT BONDS NOT BEING HAVEN TRADE THAT THEY WERE.THIS QUESTION OF, CAN WE LOOK AT BONDS THE SAME WAY IN APORTFOLIO, IF WE SEE THIS POTENTIAL INFLATIONARY SHARKUNDERPINNING A SIGNIFICANT CONCERN ABOUT A COMMODITY SHARK?JONATHAN: LET'S GO TO THE COMMODITYMARKET. TALKING ABOUT CRUDE.

DOWN BY 0.9. ANNMARIE:THIS IS BECAUSE OF THE IMMEDIATE CONCERNS OF DAMAGEARE IN THE REARVIEW MIRROR. YOU CANNOT SAY THAT THEGEOPOLITICAL RISK HAS GONE AWAY. BUT AT THE MOMENT, IT HAS BEENCONTAINED. THIS WAS A GARAGE, A HUGEASSAULT ON ISRAEL. A BREATHER FROM WHAT WE SAW ONFRIDAY. JONATHAN: UNDER SURVEILLANCE THISMORNING, ISRAEL'S WAR CABINET IS GOOD TO DECIDE ON A RESPONSETO IRAN'S FIRST EVER DIRECT ATTACK ON THE COUNTRY.

THEY LAUNCHED HUNDREDS OFDRONES AGAINST ISRAEL THAT WERE INTERRUPTED BY ALLIED FORCES.THAT IS THE RISK AROUND SOME OF THESE STORIES. LISA: AS WE HEARD, THERE HAS BEEN ALOT OF UNPRECEDENTED MOMENTS OVER THE WEEKEND.THE FIRST TIME I MAN HAS ATTACKED ISRAEL ON DIRECTGROUND BUT ALSO A COALITION PUT TOGETHER.HERE IS THE KEY QUESTION. HOW DOES A MARKET PRICESOMETHING THAT IS SO AMBIGUOUS AND UNKNOWN? YOU DO NOT.

RIGHT NOW, IT IS HARD TO SAYTHAT THE MARKET IS REALLY DIGESTING.MAYBE THERE IS A NEW RISK PREMIUM UNDER THE PRICE.ANNMARIE: THE BIGGEST TAKE AWAY IS THERED LINE HAS EVAPORATED. YOU CANNOT PUT THAT BACKTOGETHER. THEY'D ATTACKED DIRECTLY ONTHEIR SOILS. JONATHAN: ESPECIALLY WHEN THE PRESIDENTIS SAYING, TAKE THE WHEEL. THE PRESIDENT OF THE U.S.IS SAYING TAKE THE WIN. ANNMARIE:THIS IS SOMETHING THAT ISRAEL.

IS DEBATING.THEY ARE SAYING, SLOWDOWN, TAKE THIS WIN AND LOOK AT THEFORTITUDE THAT WE SHOWED AND OTHERS ARE SAYING, IN ORDER TOCREATE DETERRENCE, THE LANDLORD MUST GO CRAZY.THIS IS WHAT WE ARE DEALING WITH . JONATHAN: TALKING ABOUT THE COMMODITYMARKET. I WANT TO SHIFT AND TALK ABOUTAPPLE CONTINUING TO FACE HEADWINDS IN CHINA. THIS MARKS THE STEEPEST CLIENTSIN'S COVID LOCKDOWN IN 2022.

FACING GROWING COMPETITION.THE STOCK IS DOWN. LISA:IT RELATES TO THE TESLA STORY AS WELL. IT IS SOMETHING THAT PETERSCHEER HAS BEEN TALKING ABOUT A LOT.CHINA IS NOT JUST PART OF THE SUPPLY CHAIN.THE KEY QUESTION IS HOW DOES A COUNTRY LIKE APPLE — COMPANYLIKE APPLE DIVERSIFY WITH RESPECT TO BUYING BUT ALSOPRODUCING SAID FOUNTAINS. FRANKLY, IT IS THE SAME. TESLA.JONATHAN:.

A REPORT COMING OUT SUGGESTINGTHAT TESLA IS READY TO CUT 10% OF ITS GLOBAL WORKFORCE.ELSEWHERE, REACTING TO NEW SANCTIONS. ALUMINUM SURGING. RESTRICTIONS PUT IN PLACE LATEFRIDAY ARE AIMED AT RUSSIAN METALS, INCLUDING COPPER. JOINING US TO DISCUSS, SAYING,TO ASSUME THE WAR IS NOW OVER IS PREMATURE. LET'S TALK ABOUT IT.POTENTIALLY A NEW FLOOR FOR CRUDE.HOW HIGH IS THAT CEILING NOW?.

>> IT IS GREAT TO JOIN THE SHOW.IT IS A FIRST TARGET. WE KNOW THAT THERE IS A LOT OFOPTION LENGTH, SO THAT IS THE NEXT QUESTION, WHETHER WE MEETTHAT PRICE IN THE COMING WEEKS. JONATHAN:CAN WE TALK ABOUT THE POTENTIAL FOR RETALIATION?WE KEEP HEARING THIS WORD AROUND THE TABLE, CONTAINED.HOW DO YOU THINK THE COMMODITY MARKET WOULD RESPOND IF WE SAWHEADLINES THAT ISRAEL IS READY TO RETALIATE? >> WE WOULD CHARACTERIZE IT INTHE GOLDILOCKS SCENARIO.

WE BELIEVE THAT IF THINGS WERETO OCCUR IN TERMS OF MORE TANGIBLES, THAT ISRAEL WOULD –HOW A COUNTER ATTACK, OR IF WE SAW ADDITIONAL TAX ON THESHIPPING INDUSTRY. THEY ARE STEPPING BACK.AS EARLY AS LAST WEEK, THERE WERE DISCUSSIONS ABOUT APERMANENT CEASE-FIRE. ANY SORT OF ATTACK, ESPECIALLYWITHIN THE STRAITS, THAT WOULD ABSOLUTELY IMPACT THE OILMARKET AND THE SHIPPING MARKET IMMEDIATELY. ANNMARIE:I KNOW CONGRESS AND HOUSE OF.

REPRESENTATIVES WANT TO BE ASTRICTER ENFORCEMENT ON IRANIAN BARRELS. HOW MUCH WOULD IT TAKE THE –TAKE THAT OFF THE MARKET? >> WE HAVE SEEN THIS SINCE 2019.EXPORTS HAVE RISEN. THE U.S. IS LARGELY TURNING A BLIND EYE. IT COULD BE SUPPLIED INSTEAD BYSAUDI ARABIA. IT WOULD ALSO IMPACT THE SHADOWSLEEP BECAUSE IT WOULD MEAN THAT CRUDE WOULD HAVE TO BECHANCE. BY THE SHIPS THAT ARE INVOLVED.THAT WOULD LEAD TO PRICE.

APPRECIATION AS WELL. ANNMARIE:WHEN YOU LOOK FOR A PLACE FOR OPEC TO STEP IN, AT WHAT PRICEPOINT D THINK IT WOULD BE WILLING TO ADD MORE SUPPLY? >> IN THE MID-90'S, UPPER 90'S,THEY WOULD ABSOLUTELY BE FORCED TO. THEY DO NOT WANT TO SEE $100OIL, ACCORDING TO THEMSELVES IN RECENT INTERVIEWS.THEY WOULD BE COMPELLED TO STEP IN.WE DID NOT SEE BALANCES BUILT OR INDUSTRY'S BUILT IN FIRSTQUARTER.

WE ARE AT A FIVE-YEAR LOW INTERMS OF OECD COMPANY STOCKS. THERE WILL BE A LOT OF PRESSURETO INCREASE PRODUCTION. IN EUROPE, THAT COMES IN JUNE.IT PROVIDES MORE CRUDE TO THE MARKET SO THAT THEY CAN RUN ANDSO WE SEE IT MUCH HIGHER THAN WHAT THEY PUT OUT ON FRIDAY.WE THINK IT IS CLOSER. THAT INCLUDES GROWTH. LISA:HOW MUCH POTENTIAL AMMUNITION DO THEY HAVE TO COUNTER THIS,GIVEN THE FACT THAT OIL PRICES — GASOLINE PRICES ARE THEHIGHEST GOING BACK TO OCTOBER? HEADING INTO AN ELECTION WHEREGAS PRICES WIN OR LOSE IT.

>> IT IS PREMATURE, STARTINGFOUR MONTHS BEFORE THE ELECTION. THEY REALLY WANT TO HOLD THAT ABILITY TO EASILY THROW IN,UNTIL THEY SEE A SUPPLY OUTAGE OR UNTIL WE ARE CLOSER TO THEELECTION. WE ARE SO MANY MONTHS AWAY WAYTHAT THEY DO NOT WANT TO USE UP THAT BULLET BEFORE WE ARE CLOSETO THE ELECTION. LISA:WE ARE PRICING IN GOLDILOCKS. CAN YOU IDENTIFY WHAT WOULD NOTBE THERE WHERE'S — WHERE PRICES WOULD BE LOWER?.

>> THERE IS SOME PRICED IN.THAT LENGTH RISES QUITE A LOT. THERE IS DEFINITELY SOME PRICEDIN. WE HAVE A BULLISH VIEW GOING INTO THE REST OF THE YEAR.IT MAKES THE SITUATION DIFFICULT TO SAY.MAYBE THEY ARE PUTTING IT ON A LITTLE EARLIER BECAUSE THEY SEEDEMAND COMING BUT RIGHT NOW THERE IS A HIGHER RISK. WE WOULD REALLY HAVE TO SEEPERMANENT CEASE-FIRE COME OUT OF THIS IN ORDER TO SEE PRICESTREND DOWN. WE SEE UP TO 1.3 MILLION.

BARRELS A DAY BEING IMPACTED BYTHE FACT THAT THESE DRONES HAVE 12 SUCCESSFUL STRIKES.RIGHT NOW THE MARKET IS ASSUMING THAT EVERYTHING IS UPAND RUNNING PERFECTLY. WHAT IF THAT TAKES LONGERBECAUSE WESTERN COMPANIES ARE NOT INVOLVED IN REFINERYMAINTENANCE IN RUSSIA? THAT IS ANOTHER ELEMENT THATALL IS NOT AT EASE THERE. THAT IS POLITICAL RISK THAT ITHINK IS A LITTLE BIT UNDERAPPRECIATED RIGHT NOWBECAUSE THE FOCUS IS ON THE MIDDLE EAST. JONATHAN:BIG ASSUMPTIONS OUT THERE.

CRUDE IS DOWN.A QUICK CORRECTION. ALUMINUM. MY BRITISH FRIENDS REACHED OUT.I HOPE WE ARE DOWN. ANNMARIE: ALUMINUM. LISA:WE WILL CALL THE WHOLE THING OFF. JONATHAN:LET'S GET TO YOUR BLOOMBERG BRIEF. >> DONALD TRUMP IS SET TO BETHE FIRST FORMER U.S. PRESIDENT TO FACE A TRIAL.HIS HUSH MONEY TRIAL STARTS TODAY.JURY SELECTION BEGINS TODAY. HE IS REQUIRED TO BE IN COURTEVERY DAY.

THE CHARGES DO NOT BAR HIM FROMBECOMING PRESIDENT. SINGAPORE'S PRIME MINISTER ISSET TO STEP DOWN. THE DEPUTY PRIME MINISTER WILLBECOME THE FOURTH PREMIER THE SAME DAY.SCOTTIE SHEFFLER HAS CLAIMED HIS SECOND GREEN JACKET IN ONLYHIS FIFTH START IN AUGUSTINE. THE FOURTH YOUNGEST TO WINMULTIPLE MASTERS. FOR TIGER WOODS, HIS SCORE, ITWAS THE WORST EVER. JONATHAN:GETTING ANOTHER MATCH FROM TESLA.TESLA BUT A CUT OVER 10% OF THE.

WORKFORCE.THAT STORY LATER THIS MORNING. UP NEXT ON THE PROGRAM, THE FEDOFFICIALS ARE URGING PATIENTS. >> I DO NOT SEE URGENCY AND ISEE A LOT OF REASONS FOR PATIENTS. MY EXPECTATION IS THAT WE WILLEASE AND THAT OVER THE LONGER, INFLATION INTEREST RATE WILL BEAT LOWER LEVELS. JONATHAN: WE WILL CATCH UP.THAT CONVERSATION IS AROUND THE CORNER. JONATHAN: UP 0.5%.TAKING A SMALL BITE OUT OF.

LOSSES.WE HAD MORE WEIGHT TO THAT. UNDER SURVEILLANCE THISMORNING, FED OFFICIALS URGING PATIENTS. >> OVER THE LONGER-TERM, MYEXPECTATION IS THAT WE WILL EASE AND OVER LONGER-TERM,INTEREST RATES WILL BE AT LOWER LEVELS.WE WOULD START TO EASE LATER THIS YEAR.IT IS LIKELY LATER THAN WHAT I HAVE BEEN THINKING. JONATHAN: WHY FED SPEAK LATER TODAY.8:30 EASTERN TIME.

WILLIAMS — REACTING TO DATA.WE BELIEVE THAT U.S. GROWTH HAS LIKELY PEAKED ANDWILL GRADUALLY DECELERATE. THEY CONTINUE TO SUPPORT THEECONOMY FOR LONGER. LET'S GET STRAIGHT TO IT. WHAT IS BEHIND THAT DIVERGENCE,THAT EXCEPTIONALISM? >> PART OF IT IS THE FISCALPOLICY CONTINUING TO PROVIDE A SUPPORTING ROLE.PART OF IT COMES FROM THE INVESTMENT AROUND AI.I THINK THAT HAS BEEN A POSITIVE FACTOR AS WELL.IT CONTINUES TO BE HIRED IN THE.

POST-COVID ENVIRONMENT TOFIGURE OUT EXACTLY WHERE WE WILL SHAKE OUT.THERE HAS BEEN LESS IMPACT FROM THE MONETARY POLICY TIGHTENING. THAT IS COMPARED WITH INTERESTRATE SENSITIVE MARKETS WHERE MORTGAGES — A COMBINATION OFTHESE FACTORS, BUT IT DOES LOOK LIKE YOU HAVE THIS U.S.EXCEPTIONALISM, COMPARED WITH THE REST OF THE WORLD.RECENT DATA SUGGESTS THAT CONTINUES INTO THIS YEAR.JONATHAN: IS THAT FISCAL IMPULSE A REASONTO AVOID DURATION?.

>>OVERALL, THE LEVEL OF INTEREST RATES NOW LOOK A CUT — LOOKATTRACTIVE. FIXED INCOME YEAR LOOKSATTRACTIVE IN THE U.S.. FROM OUR POINT OF VIEW, NON-USDURATION LOOKS LIKE A REALLY GOOD COMPLEMENT. EUROPE, AUSTRALIA, CANADA, THEPLACES WHERE YOU CAN HAVE A LITTLE MORE CONFIDENCE THAT THESLOWDOWN HAS ALREADY HAPPENED. IT CAN GIVE YOU A LITTLE BITMORE CONFIDENCE IN TERMS OF THE INFLATION PATH.THE STRENGTH REMAINS AN ISSUE.

THEY NEED TO CEASE SLOWING DOWNTO BE CONFIDENT IN TERMS OF THE INFLATION PATH.IT LOOKS PRETTY GOOD, BUT COMPLEMENTING THIS WITH THEREST OF THE WORLD MAKES A LOT OF SENSE, AND TERMS OF THEBALANCE OF RISKS. MAYBE THERE WILL BE MOREONGOING U.S. EXCEPTIONALISM. LISA:A COUPLE WEEKS AGO, YOU ARE QUOTED SAYING YOU ARE LOOKINGBECAUSE OF THE CONCERN ABOUT STICKY INFLATION.ARE YOU SAYING THAT GIVEN THE RISE THAT WE HAVE SEEN, THAT ITIS FAIR VALUE AND YOU WOULD BE.

A BUYER? >> THE FIRST THING, THE YIELDSLOOKS ATTRACTIVE. IT LOOKS GOOD TO HAVE THATPOSITIONING, BUT I THINK THE LEVEL OF INCOME LOOKS PRETTYATTRACTIVE. THERE IS A NUANCE. YOU LIKE THE REST OF THE WORLDAS A DIVERSIFIER. THE SECOND THING AS YOU ALLUDEDTO, WE PUT ON SOME OF THESE POSITIONS THAT THE TRADE HASBEEN MOVING IN OUR DIRECTION. IT WAS INTERESTING WITH SOME OFTHE BE PRICING IN TERMS OF POLICY EXPECTATIONS FOR THE ECB.IT HAS BEEN MOVING IN OUR.

DIRECTION, BUT IN THE GLOBAL PORTFOLIOS, I MANAGE THE WAY –IT CONTINUES TO MAKE SENSE, BUT AS U.S.YIELDS CREEP HIGHER, WE WILL NEED TO REASSESS. LISA: AT SOME POINT, THE FEDERALRESERVE WILL HAVE TO START THINKING ABOUT RATE HIKES. HOW ARE YOU THINKING ABOUT THAT?>> I THINK THAT IS A LOW PROBABILITY. THE FEDERAL RESERVE CLEARLYEXPECTS TO BE EASING POLICY,.

THE SECOND HALF OF THIS YEAR,CHAIRMAN POWELL HAS BEEN QUITE CLEAR ON THAT. BUT THE MARKET HAS BEEN PRICINGOUT EXPECTATIONS IN TERMS OF RATE CUTS.THERE IS A LOT PRICED IN AT THE START OF THE YEAR GIVEN WHATHAS HAPPENED. I THINK IT IS A LOW PROBABILITY.AS THEY REDUCE EXPECTATIONS IN TERMS OF CUTTING, WE HAVE TOBECOME LARGER IN TERMS OF HOW YOU THINK ABOUT IT, BUT IT ISAN IMPORTANT DISTINCTION. YOU HAVE HAD THE PRICING OUTRATE CUT EXPECTATIONS IN THE.

U.S. THAT HAS GONE ALONG WITH PERFECTLY GOOD ASSETS.IT WOULD BE MORE OF A SURPRISE OR MARKET EVENT, WERE YOU TOHAVE A SHIFT TO EXPECTATIONS HIKING.MARKET PRICING LOOKS BROADLY FAIR FOR THE U.S. LISA: — LISA:THE ECB INDICATED THAT THEY WERE LAYING THE GROUNDWORK. HOW FAR CANNOT GO GIVEN SOME OFTHE — >> THAT IS AN IMPORTANT POINT.I DO NOT THINK THERE IS A DEAL TO STOP THE BANK OF ENGLAND ANDOTHERS FROM USING POLICY.

YOU ARE SEEING DIFFERENTIATIONIN TERMS OF THE GDP AND INFLATION DATA.THESE COUNTRIES HAVE GONE THROUGH SIGNIFICANT SLOWDOWNSAND TECHNICAL RECESSION. I THINK THERE IS NOT A GREATDEAL TO STOP THEM MOVING AHEAD. I DO NOT THINK IT WILL BE ACONCERN FOR THE ECB. IT IS DIFFERENTTHAT THEY HAVE EXPRESSED CONCERNS. NOT THE LEVEL ONLY BUT THEREHAVE BEEN CONCERNS. IT IS NOT AT ALL OBVIOUS.

JAWBONING IN JAPAN.KEEP AN EYE ON THAT. I DO NOT REALLY SEE ANYTHINGSIGNIFICANT IN TERMS OF CURRENCY MARKETS THAT WILL HOLDTHEM BACK. BUT I THINK GREATERDIFFERENTIATION ACROSS COUNTRIES , IT MAKES SENSE FORUS TO POSITION FOR THAT IN FX MARKETS AND RATE MARKETS.JONATHAN: DOES THAT MEAN ADDITIONALDOLLAR STRENGTH? >> GIVEN THE PATH FOR THE ECBAND GIVEN VALUATION, SOMETHING LIKE AUSTRALIA AND CANADA, THEYEXPRESSED THEIR DIFFERENTIATION.

USING INTEREST-RATE MY.IN THE CASE OF EUROPE, BASELINE IS NOT QUITE AS ATTRACTIVE BUTTHE POSITION WITH CURRENCIES LIKE THE EURO, THE SWISS FRANC– A BROAD EUROPEAN CURRENCY IS A GOOD WAY TO POSITION FOR THERISK OF ONGOING. THE BASELINE, THEY SHOULD SLOWDOWN THE SECOND HALF OF THE YEAR AND DELIVER PRETTY MUCHWHAT IS PRICED IN, IN TERMS OF USING. THE FX POSITIONING IS ANOTHERWAY TO PREPARE FOR THAT. JONATHAN: THIS WAS BRILLIANT.IT MAY BE OF THAT THROUGH.

THE FX MARKET IS LOOKING FOR ASTRONGER DOLLAR. TIME TO DIVERGE. COMING UP SHORTLY, MARILYNWATSON OF BLACK ROCK. THE SECOND HOUR OF BLOOMBERGSURVEILLANCE IS UP NEXT. >> YOU HAVE MIXED SIGNALSCOMING FROM THE MARKET, INCLUDING THE MIDDLE EAST. >>THIS IS AN INTERNATIONAL AND DOMESTIC STORY BUT ALSO AMARKETS TOY. >> THEY ARE SUPERCRITICAL.IT WILL DICTATE WHAT HAPPENS GOING FORWARD.

>> THE MARKET DOES NOT CARE.THEY DO NOT CARE ABOUT EARNINGS. >> WE WILL BE TALKING ABOUT ASITUATION WHERE THE ECONOMY IS GROWING. JONATHAN: GOOD MORNING.THE SECOND HOUR OF BLOOMBERG SURVEILLANCE BEGINS NOW. U.S. RETAIL SALES AND DO NOT MISSTHIS. SITTING DOWN WITH THE U.S. FED PRESIDENT. DOWN ON BRENT. THE PRICES ON THE BOARD. LISA:IT COULD HAVE BEEN WORSE. A WEEKEND OF FIREWORKS.

THIS RAISES THE QUESTION OFWHAT IS NEXT? CROSSING IS REALLY AIRSPACE ATA TIME WHERE A LOT OF CONFLICTS ARE BREWING. JONATHAN:THIS IS A NEW MIDDLE EAST. WE ARE STILL WAITING TO FIND OUTIF THEY SEE IT THE SAME WAY. ANNMARIE:I DO NOT THINK THEY SEE AT THE SAME WAY BECAUSE THEY WILL HAVETO RESPOND TO THIS LINE THAT WAS ERASED WITH DRUMS ANDMISSILES SENT OVER. NATIONAL SECURITY ADVISOR SAIDTHIS.

IT WAS A WORST-CASE SCENARIOBUT A BEST CASE IN TERMS OF OUTCOME.THAT IS BY THE MARKET IS TAKING A BREATHER, BUT THIS MAY NOTLAST. JONATHAN: THE PRESIDENT OF THE U.S.TOLD THE ISRAELI LEADER TO TAKE THE WIN. LISA: THERE IS SO MUCH THAT CANHAPPEN. IT IS DIFFICULT TO KNOW HOW TOPRICE THIS. WHAT IS THE RISK PREMIUM BEINGBAKED INTO MARKETS? THERE ARE A HOST OF ISSUES.HOW DO WE FACTOR THAT IN GIVEN.

THAT WE ARE SEEING INFLATIONTAKE UP. IT CREATES AN UNSETTLINGBACKDROP FREE MARKET THAT ALREADY WANTS TO PULL BACK.JONATHAN: TRYING TO WORK OUT HOW HIGH THENEW CEILING MIGHT BE. JUST A PROGRAMMING NOTE.THE COORDINATOR JOINING US AT ABOUT 8:20 EASTERN TIME.JUST TO GET YOU STARTED. YIELDS A LITTLE BIT HIGHERTHERE IS YOU MOVE IN THE CRUDE MARKET.COMING UP, WE WILL CATCH UP WITH PETER ON MANAGING RISK.

BLACKROCK ON THE PROSPECT OFMUCH HIGHER FOR MUCH LONGER. MARKETS ARE STUDY WITH LITTLERISK OF TENSIONS IN THE MIDDLE EAST. STAYING NEUTRAL ON RATES,BEARISH ON EQUITIES AND LOOKING FOR A PULLBACK IN CREDIT.PETE, GOOD MORNING TO YOU. YOU BETTER ABOUT THE DIFFICULTYOF PRICING IN GEOPOLITICAL FACTORS.HOW DIFFICULT IS THIS MOMENT? >> IT IS SO DIFFICULT. TALKING ABOUT THE DIRECTATTACK, LET US NOT PRETEND THAT THEY HAVE NOT BEEN HELPINGTHOMAS.

IT IS A NEW EVOLUTION AND ITHINK IT WILL GET WORSE BEFORE IT GETS BETTER. JONATHAN:WHAT WERE THEY TELLING YOU IN REAL TIME AND HOW DID DAVIS RUNTO? >> IT WAS A FAMILY TELEGRAPHEDATTACK. SO MANY NATIONS HELPED TO SHOOTDOWN THE MISSILES AND DRONES. IT IS THAT THEY ARE STILL MAYBEA LITTLE BIT ISOLATED IN THEIR ATTACKS.THAT HAS TO WAY ON HOW A THANKS, GOING FORWARD.

I THINK IT IS VERY DEPRESSING.ATTEMPTED MURDER IS STILL ATTEMPTED MURDER. ANNMARIE: WHEN YOU LOOK AT THE MIDDLEEAST WAKING UP THIS MORNING, NO SUPPLIES HAVE BEEN HIT.OIL CONTINUES TO FLOW. HOW CONCERNED ARE WE? >> WE BELIEVE THAT WE ARE THEONES WHO CAN CONTROL THE STREETS.WE THINK WE HAVE THE CAPABILITY TO DEFEND IT AND STOP IT.THEY'RE NOT TOO CONCERNED ABOUT THAT.EVERYONE REALIZES THAT IRAN IS.

SHIPPING MISSILES TO RUSSIA.SOME OF THOSE ARE COMING OFF OF SANCTIONS AND WILL BE ALLOWED.IT IS NOT SOMETHING THAT HAS BEEN EASILY BE ENFORCEABLE.IT HAS NOT BEEN STOPPED AND IT IS INTERESTING WHEN YOU LOOK ATTHE GLOBE. IT SEEMS LIKE THERE ARE NICEDISRUPTING CLOSE AND MORE DISRUPTING WESTERN POTENTIALFLOWS. THAT IS A RISK THAT WE ARESTARTING TO FACE AND I THINK IT GETS WORSE. ANNMARIE:SO PRICES WOULD GO HIGH AND.

RUSSIA WOULD HAVE A HIGHERPREMIUM TO BRING IN MORE DOLLARS.HOW DO YOU VIEW WHAT THE U.S. MIGHT POTENTIALLY DO? >> I THINK WE ARE HOPING NOT TOFORCE SANCTIONS? SO THERE IS A LOT BEING PLAYEDOUT IN THE OIL MARKETS. GOING BACK TO STRATEGIC OILRESERVES, WE HAVE LESS TOOLS AT OUR DISPOSAL TO DO THIS. EVERY INCUMBENT IS WORRIEDABOUT THIS. THE ONE POSITIVE SIDE IS THATAS DATA CENTERS GET BUILT UP,.

YOU LOOK AT THE SUCCESS THATINDIA IS HAVING. IT IS BECOMING A BIGGERCOMMODITY. THERE ARE A LOT THAT I DO NOTTHINK ARTFULLY PRICED IN UNIT. LISA: HOW IS IT? >> IT HAS BEEN TRICKY.THEY HAVE EXPERIENCE IN THE REGION.THEY KNOW WHAT THEY WOULD HAVE DONE.WE GET A PRETTY GOOD READ ON WHAT IS GOING ON.THERE IS STILL A LOT OF RANGE. IT IS HARD TO FIGURE OUT HOWTHE VARIOUS COUNTRIES WILL.

RESPOND.WE NEVER QUITE SO DIRECTLY TOLD ISRAEL WHAT WE WANT THEM TO DO. LISA: THAT HAS BEEN ALMOST NOCONSISTENT PATTERN BETWEEN MAIDS AND STOCKS. HALITE YOU SHIFTING YOURUNDERSTANDING GIVEN THAT EARNINGS ARE INCONSISTENT? >> PULLING UP THE TOP STORIES ON BLOOMBERG, GOING BACK, SUPPRESSED SALES OF BRANDS. SOMETHING THAT WE ARE NOTFACING IS EARNINGS PRESSURE.

I KEEP COMING BACK TO IT.I NEVER KNEW WHAT IT WAS THREE YEARS AGO.NOW IT IS THIS EV COMPANY. YOU SEE THIS KIND OF PRESSINGACROSS THE GLOBE. WHAT DO WE DO AS WE FACECOMPETITION FROM CHINESE BRANDS? IT IS STARTING TO FILTER INTOTHE MARKET AND IT WILL PUT PRESSURE ON THE — ON STOCKS.JONATHAN: WHAT IS THE HAVEN RIGHT NOW,WITH THAT IN MIND? >> I THINK IT IS A GROWING USE. AT — EVEN AS WE BUILD DATACENTERS, GETTING ACCESS TO THE.

POWER IS ONE OF THE BIGGESTPROBLEMS THEY ARE FACING. WHERE DO YOU PUT THESE?IT WILL BE A DOMESTIC PHENOMENA. MORE COMPANIES REALIZE THAT IFTHEY ARE GOING TO BE USING AIA, YOU WANT TO BE DOING IT ONDOMESTIC SOIL WITH DOMESTIC PEOPLE.IT DOES REDUCE THAT, SO THAT IS A GROWTH AREA.I DO NOT THINK WE ARE SEEING ANYWAY YEAR WHAT WAS HAPPENING. JONATHAN:YOU HAVE QUITE THE VIEW ON THIS. A REASON NOT TO LIKE TREASURIES.CAN YOU BUILD THAT UP A LITTLE.

BIT? >> I THINK THIS TIME WILL BEVERY DIFFERENT. EVERYWHERE THESE HOT SPOTS ARE,IT WILL AFFECT OIL PRICES, POTENTIALLY DRAMATICALLY.FEWER THINGS TO COMBAT THAT THE NEAR TERM.I THINK PEOPLE WILL REALIZE THAT WE ALL NEED TO SPEND MOREON DEFENSE. THE CONVERSATION IS, THIS WILLBE BAD FOR GLOBAL TRADE, WHICH IS ALREADY DETERIORATING.OIL PRICES GOING HIGHER AND EVERYONE WILL RUN BIGGER BUDGETDEFICITS.

GIVEN POSITIONING ON WHERE WEHAVE BEEN WITH YIELDS, I THINK WE CAN GO HIGHER.IT IS HARD TO BE POUNDING THE TABLE, BUT THERE IS MUCH MORERISK. JONATHAN: PETER OVER SECURITIES. WE ARE -0.7% REAGAN LET'S GETAN UPDATE ON STORIES ELSEWHERE. DANI:TESLA IS SET TO CUT PART OF THEIR WORKFORCE.THOSE CUTS WOULD BE MORE THAN 14,000 EMPLOYEES. IN A LETTER, ELON MUSK CITES ADUPLICATION OF ROLES AND JOB.

FUNCTIONS IN CERTAIN AREAS.REVIVING PLANS FOR AN IPO IN AMSTERDAM.INVESTORS IN A LISTING THAT POTENTIALLY PAVES THE WAY FOROTHER FIRMS TO GO PUBLIC. THE BIDEN ADMINISTRATION ASMORE — INCREASING CHIP ACTION. IT IS ALL PART OF THE BESTEFFORT. THE MONEY WILL BE USED TOEXPAND STEM SON'S EXISTING FACILITY IN TEXAS. THAT IS YOUR BLOOMBERG BRIEF.JONATHAN: UP NEXT, TRUMP SLIGHT –SLAMMING DIED IN ON ISRAEL.

MR. TRUMP:WE WERE RESPECTED ALL OVER THE WORLD AND TODAY WE ARE CANHEARD A JOKE. UKRAINE WOULD HAVE NEVERHAPPENED. ISRAEL WOULD HAVE NEVERHAPPENED. JONATHAN: GOOD MORNING. JONATHAN:LET'S GET YOU OVER TO THE PRICE ACTION. YIELDS BOUNCING BACK.CRUDE A LITTLE BIT LOWER. UNDER SURVEILLANCE THISMORNING, TRUMP SLAMMING BIDEN ON ISRAEL. MR. TRUMP:.

I WANT TO SAY GOD BLESS ISRAEL. THAT IS BECAUSE — IT WOULD NOTHAVE HAPPENED IF WE WERE IN OFFICE. EVERYBODY KNOWS THAT.WE WERE RESPECTED ALL OVER THE WORLD AND TODAY WE HARKENSENTERED A JOKE. UKRAINE WOULD HAVE NEVERHAPPENED. ISRAEL ATTACKED OCTOBER 7 ANDTODAY. IT WOULD HAVE NEVER HAPPENED.JONATHAN: CLAIMING THAT THE EVENTS WOULDNOT HAVE HAPPENED IF HE HAD STILL BEEN IN THE WHITE HOUSE.KAILEY LEINZ JOINS US NOW WITH.

MORE. KAYLEE: THE FIRST TIME A FORMERPRESIDENT WILL BE IN A TRIAL LIKE THIS. CHARGED WITH 34 FELONY COUNTSOF FALSIFYING BUSINESS RECORDS. SAYING THAT HE ILLEGALLYCONCEALED PAYMENTS TO STORMY DANIELS.WE COULD ACTUALLY SEE HIM TESTIFYING, TAKING THE STANDHIMSELF. WE EXPECT TESTIMONY FROM STORMYDANIELS HERSELF. ALL OF THAT WILL COME LATER.WHAT STARTS NOW IS JURY.

SELECTION. OF COURSE, HIGH NAMERECOGNITION — RECOGNITION. THEY WILL BE ASKING QUESTIONSAS TO WHETHER THEY HAVE EVER AT — EVER ATTENDED A TRUMP RALLY.IT IS A PROCESS THAT COULD TAKE SOME TIME. ANNMARIE:WHAT ARE THE POLITICAL IMPLICATIONS FOR TODAY.THEY SAY THAT THEY LIKE TRUMP BUT THEY ARE POTENTIALLY SOURON HIM BECAUSE OF THE LEGAL ISSUES. >> WE HAVE SEEN THAT IN JANUARY.IN THE STATES THAT ARE LIKELY.

TO DECIDE THE ELECTION, MORETHAN HALF OF VOTERS SAID THEY WOULD NOT VOTE FOR TRUMP IF YOUARE CONVICTED OF A CRIME. BEING CONVICTED DOES NOTPREVENT HIM FROM RUNNING OR OBTAINING THE PRESIDENCY, BUTIT COULD CHANGE THE MINDS OF VOTERS.DONALD TRUMP WILL BE HERE TODAY. HE HAS TO BE IN THE ROOM EVERYDAY OF THE TRIAL. THAT WILL TAKE HIM OFF THECAMPAIGN TRAIL AND COST HIM A LOT OF MONEY.WHAT WE HAVE SEEN HISTORICALLY IS THAT TRUMP USES COURTAPPEARANCE IS — APPEARANCES TO.

GALVANIZE HIS BASE AND USE ITTO OBTAIN FREE MEDIA. HE FEELS THAT IT IS AIMED ATKEEPING HIM OFF THE CAMPAIGN TRAIL.THIS IS A STRATEGY THAT HAS WORKED FOR HIM SO FAR, BUT WEWILL SEE IF THINGS CHANGE AS WE POTENTIALLY SEE HIM ULTIMATELYBE CONVICTED OF A FELONY. JONATHAN: TERRY, COMPARE AND CONTRAST.HOW IS THIS PLAYING OUT WITH THE ELECTORATE? >> IT IS NOT A GOOD LOOK FORTRUMP.

HE IS STRUGGLING TO UNITE THEPARTY. MY PREDICTION IS THAT HE WILLNOT AND CANNOT. HE IS ALREADY UNDERWATER WITHINDEPENDENT VOTERS. HE NEEDS A MAJORITY TO WIN.I THINK THIS DRIVES PEOPLE AWAY. AT THE SAME TIME, BIDEN HAS ATERRIFIC OPPORTUNITY AND A POLITICAL SENSE, TO COME OUT,NOT ONLY LOOKING LIKE A LEADER BUT TO BE A LEADER. UNIFYING HIS PARTY, ATTRACTINGINDEPENDENT VOTERS BY SHOWING A LOT ENERGY.WE WILL SEE IF THAT HAPPENS.

ANNMARIE: WE KNOW — LISA:WE KNOW THEY HAVE BEEN TALKING ABOUT NEXT STEPS WHEN IT COMESTO PROVIDING FINANCIAL AID TO ISRAEL OR UKRAINE.DO YOU KNOW WHAT THAT INFLUENCE DOES TO THE LIKELIHOOD OFGETTING SOMETHING THROUGH THIS WEEK? >> ALL IT DOES IS — LET MESTART HERE. WHAT THE HOUSE WILL DO IS VERYMUCH IN THE AIR. THEY ARE VERY FOCUSED ON ISRAEL.A VAST MAJORITY OF MEMBERS IN THE HOUSE WANT UKRAINE AID.

USE OF THE CURRENT MEMBER –YOU SAW THE CURRENT MEMBER GOING OUT SAYING THAT NOW ISTHE TIME TO UNIFY AROUND DOING SOMETHING ON UKRAINE. I THINK WHAT IS HAPPENING ISTHAT TRUMP PROBABLY HAS JOHNSON'S BACK ON THEALTERNATIVE WAYS TO FUND THINGS WITH FORGIVABLE LOANS AND OTHERTHINGS THAT HAVE BEEN BANDING AROUND. IT PUTS THE OPPONENTS OF THAT,THE GREENS OF THE WORLD, ON THE BACK FOOT. LISA:.

WHAT DO YOU MAKE OF THE FACTTHAT THE U.S. WAS SO QUICK TO SAY THAT THEYWOULD NOT SUPPORT ISRAEL THAT THEY RETALIATED IN ANY WAYAGAINST IRAN? >> YOUR WORD IS CONTAINED, MINEIS CONSTRAINED. I THINK THAT IS A RESTRAINT.I THINK IT WOULD BE NAIVE TO EXPECT ISRAEL TO MAKE NORESPONSE TO THIS. BUT IT WILL BE PROPORTIONAL INTHE WESTERN SENSE OF HOW WE UNDERSTAND THAT.I'VE BEEN'S RESPONSE WAS NOT PROPORTIONAL.

I THINK WHAT YOU HAVE IS A VERYAD HOC COALITION. IT WILL TAKE THINGS MORE ORLESS ON A CASE-BY-CASE BASIS. THERE IS A LOT OF ENCOURAGEMENT.NOT LEAST AMONG THOSE WAS HOW THEY STEPPED UP TO DEFEND THEIROWN AEROSPACE AND TO SEND A MESSAGE THAT THEY HAVE GREATERINTERESTS THAN IRAN AND THEY WILL DEFEND THOSE INTERESTS ASWELL. ANNMARIE: YOU SAY THE PRESIDENT COULDMAKE A WIN OF THIS DOMESTICALLY, TALKING ABOUTBEING A STRONG LEADER. BIDEN TOLD IRAN DO NOT, BUTTHEY DID.

AND THEN THEY ARE TELLINGISRAEL TO TAKE THE WIN. HOW DOES THAT EXUDE CONFIDENCEAND STRENGTH? >> I DO NOT THINK IT DOES.I WENT STRONGLY ON THAT POINT YESTERDAY.THIS IS NOT A ADMINISTRATION THAT HAS BEEN DEFINED BY –THEY WOULD BE BETTER OFF NOT STRADDLING AND BETTER OFFTALKING ABOUT WHAT THEY ARE FOR, HOW THEY ARE FOR AND WHATTHEY ARE TRYING TO DO. IT WILL NOT ONLY GET STRONGERSUPPORT FROM THE AMERICAN PUBLIC BUT EVEN THOSE WHODISAGREE WILL RESPECT THE IDEA.

THAT THEY ARE PUSHING IN APARTICULAR DIRECTION AND DOING THINGS IN A PARTICULAR WAY.YOU CANNOT HAVE THIS ALWAYS. THESE ARE FRESH EXAMPLES OFTHAT. ANNMARIE: WHY DO YOU THINK THAT THEPRESIDENT LEFT FOR DELAWARE BEFORE THE STRIKES?I WANT TO KNOW WHAT THIS ADMINISTRATION IS LEARNING ORNOT LEARNING. WHY CONTINUE TO LEAVE THE WHITEHOUSE WHEN YOU ARE TRYING TO PROJECT AN IMAGE OF STRENGTH? >> THAT IS A BETTER QUESTIONFOR ADMIRAL KIRBY AND FOR ME.

I THINK THEY ARE TRYING TOPROTECT THAT THINGS ARE NORMAL UNTIL THEY ARE NOT.THEY ARE TRYING TO PROJECT THE IMAGE OF NORMALITY. THE PRESIDENT IS PLUGGED INFROM ANYWHERE IN THE WORLD. BUT THE VISUAL IS THAT IT ISMORE DRAMATIC AND SHOWS HIM ENERGETIC AND ON TOP OF THINGS. JONATHAN:WE WILL CATCH UP WITH JOHN KIRBY IN ABOUT AN HOUR.IN ABOUT SIX MINUTES TIME, WE WILL CATCH UP ON BANKS AND 8 –BANK EARNINGS.

BIG BANK EARNINGS KICKING OFFON FRIDAY AND THEN TOMORROW, I THINK WE GET MORGAN STANLEY.LISA: THE EXPECTATIONS ARE HIGHER FORGOLDMAN SACHS. THAT IS SIMPLY BECAUSE BANKINGREVENUES CAME IN SIGNIFICANTLY HIGHER. THERE IS THIS IDEA OF DEBTISSUANCE COMING IN HIGHER. JONATHAN:WHAT DID YOU THINK ABOUT THAT? THE GLOBAL LANDSCAPE ISUNSETTLING. TERRIBLE WARS AND VIOLENCECAUSING TENSIONS TO GROW.

SOME COMMENTS IN THE MIXTURE ASWELL ON QUANTITIVE TIGHTENING. WE DO NOT KNOW HOW THESEFACTORS WILL PLAY OUT. LISA: THIS IS A BANK MAKINGINCREDIBLE REVENUES. MARGINS DID NOT EXACTLY ALLOWTHE BUDDY, BUT THEY ARE LOOKING AT COMPANIES TRYING TO STRADDLESOME REALLY CHALLENGING MOMENTS. I THINK THAT RIGHT NOW, THAT ISWHAT WE ARE GOING TO HEAR FROM A LOT OF EXECUTIVES. ANNMARIE:I WAS A SLIGHT CYNIC. AND — JONATHAN:WE ARE FOCUSED ON THE NUMBERS. 4.32 AGAINST AN ESTIMATE OF3.64.

THAT IS A TIDY UPSIDE SURPRISE. WE WILL GET INTO THAT BE IN AMOMENT. WE WILL CATCH UP WITH SONALIBASAK. JONATHAN:GOLDMAN SACHS LOOKING PRETTY GOOD THIS MORNING.THE MARKET ACTUALLY LOOKS LIKE THIS. INVESTMENT BANKING, ADVISORY –SONALI BASAK, IT IS HARD TO FIND A MISS IN THIS REPORT. >> THERE ARE ALMOST NO MISSESTHIS REPORT.

THEY CAME AT NEARLY 15%.YOU LOOK AT FIXED INCOME TRADING , AND IT MORE THANDOUBLED FROM THE PRIOR QUARTER. COMING IN ABOVE WHERE MORGANSTANLEY IS EXPECTED TOMORROW, THEY NOT ONLY EAT EXPECTATIONSBUT THEY SET THE BAR HIGHER. REMEMBER, THEY WERE TRADING ATA LOWER PRICE. OF COURSE, THERE IS CITIGROUP.JONATHAN: 4.3 2 BILLION. IS THE PIE GETTING BIGGER ORHAVE THEY JUST TAKEN SOMEONE ELSE'S SLICE THIS QUARTER? >> REMEMBER THAT GOLDMAN ISSENDING OUT A CALLING CARD.

WILLING TO LEAD WITH THEBALANCE SHEET. NOT JUST THE IDEA OF VOLATILEMARKETS BUT FINANCING. THEY HAD SIX FINANCING AND THESECOND LARGEST QUARTER IN EQUITIES FINANCING.YOU ARE LOOKING AT GOLDMAN MEETING IN MORE ON THOSETRADITIONAL BUSINESSES AND BANG, REMEMBER THAT CONSUMERFORAY AN WE ARE ALMOST DONE WITH IT.A LOT OF THOSE MESSY FIGURES THAT YOU USED TO SEE?THAT IS ALMOST GONE. THEY ARE CLEANING UP THEIR ACTAND THEY ARE LEANING ON THE.

BUSINESSES. LISA:BASICALLY GOING BACK TO THE BREAD AND BUTTER.CAN YOU GIVE US A SENSE, AS WE TRY TO PUT THIS INTO SCALE?WHAT PART OF THE REBOOT IS THIS FOR DAVID SOLOMON AS HE TRIESTO REFOCUS? >> THERE IS ONE BIG QUESTION.THERE IS ONE SLIGHT MISS. AS THEY SHIFT THE FIRM ANDFOCUS ON INVESTMENT BANKING AND TRADING, THEY ARE TRYING TOSHOW THAT THEY ARE ALMOST A $3 TRILLION ASSET MANAGER AS WELL.HOW DO THEY KEEP SETTING THE BAR HIGHER?THE MISS IS VERY MUCH.

ATTRIBUTABLE TO THE CHANGES YOUARE SEEING. THE SUSTAINABILITY OF THEBUSINESS IS GOING TO HELP IT TRIED TO GET THAT MORGANSTANLEY PREMIUM. JONATHAN: YOU HAVE MENTIONED MORGANSTANLEY A FEW TIMES. >> THE BAR IS VERY HIGH FOREQUITIES TRAINING. THAT WAS HIS BUSINESS.WHAT I AM HEARING ON THE GROUND IS THAT HE HAS BEEN PRETTYAGGRESSIVE THERE AND TRYING TO TAKE BACK THE SHARE THATGOLDMAN GAINED THE LAST FEW MONTHS. JONATHAN:.

LOOKING AT MORGAN STANLEY, THESTOP — STOCK IS UP. WITH THIS AROUND THE TABLE,TOM, YOU HAVE HAD A FEW MINUTES TO GO OVER THIS ONE. TOM:IT IS A FEW THINGS. ONE IS IT IS WHAT IS HAPPENINGIN THE INDUSTRY. INVESTMENT BANKING WAS ON AREAL DOWNTURN OVER THE LAST 12 MONTHS.WHAT YOU SEE AT GOLDMAN IS NOT EVEN FULL POWER. WE THINK THE INDUSTRY ISOPERATING AROUND 70% OF WHAT WE WOULD THINK IS TYPICAL.

AS IPOS PICK UP, ESPECIALLY IFWE GET LOWER GRADES, WE THINK THE BUSINESS HAS EVEN FURTHERTO GO. I THINK IT IS A BIG MOMENT INTHE GOLDMAN REBOOT. THEY SOLD GREEN SKY, WHICH ISPUTTING SOME OF THE CONSUMER EFFORTS BEHIND THEM.THEY WILL FOCUS ON WHAT HAS BEEN THE CORE OF THE COMPANYOVER THE LONG TERM. WE HAVE BEEN POSITIVE ON THESHARES. WE WILL CONTINUE TO RECOMMENDIT EVEN AFTER THE MOVE. IT IS A SIGNAL THAT THEY ARESTARTING FROM A VERY HEALTHY.

POINT WITH THIS REBOOT. LISA:SOMETHING THAT STANDS OUT, IT SEEMS LIKE A LOT OF BANKS AREIMPLYING THE SAME THING IN THEIR NUMBERS.USING THE BALANCE SHEETS MORE AGGRESSIVELY.IS THIS THE NEW MODEL, GOING BACK TO THE OLD ONE AS THEY TRYTO COMPETE WITH PRIVATE ASSET MANAGERS?THEY FIND WAYS TO DO IT EVEN WITH ALL THE REGULATORY? TOM:I THINK THAT WILL BE KEY. I PERSONALLY BELIEVE IN A 5%YIELD WORLD WITH A FLAT OR INVERTED YIELD CURVE.IT WILL BE HARDER TO GET.

FINANCING WHEN MONEY WAS FREEDURING COVID. HAVING ACCESS TO RADON SHEETTHAT IS RELIABLE WILL BE MORE IMPORTANT TO BANK'S CLIENTS.IT COULD HELP REGAIN SOME SHARE FROM THAT MOMENT IN TIME. LISA:THERE WERE YEARS WHEN THEY WERE SAYING THAT THEY COULD NOT DOTHIS, THAT THEIR HANDS WERE TIED BECAUSE OF FINANCIALREGULATIONS. WHAT CHANGED? TOM: I DO NOT THINK ANY BANK ISGOING TO STEP OUT OF THE REGULATIONS.I THINK IT IS ABOUT HAVING RELIABLE ACTS.THE OTHER MARKETS ARE NOT AS.

EASY. IT WAS VERY EASY TO NOT RAISEFINANCING TO BE ABLE TO ENTER THE MARKET. I THINK THAT IS WHAT HASCHANGED. I THINK IT IS THE OTHER ITEMSAND CONDITIONS. ANNMARIE: TALKING ABOUT HOW THE WHOLEBUSINESS HAS BEEN ABOUT TRADING AND POTENTIALLY BEATING THROUGHMORGAN STANLEY TOMORROW. WHAT ELSE DO YOU LIKE? TOM: WE LIKE TRUEST. THEY SOLD THEIRINSURANCE BROKER FOR A WHOPPING.

PRICE RECENTLY.WHAT YOU DO NOT SEE NOW IS THAT THEY HAVE THEM PUT IT — THESTOCK IS TRADING AT A LOW VALUATION FOR ONE OF THE BESTBANKS IN THE NATION. THE NEXT TIME THAT DIVIDENDCHANGES, IT IS GOING UP, NOT DOWN. A BANK THAT HAS ONE OF THE BESTFRANCHISES IN THE COUNTRY, THAT IS PROBABLY OUR LARGEST BANKIDEA AT THE MOMENT. THEY ARE ALSO DOING ARESTRUCTURE. WE THINK THAT THE NEWMANAGEMENT TEAM IS FOCUSED ON.

FIXING THINGS. ANNMARIE:YOU TALK ABOUT THE SEASONALITY OF IT. TOM: LOANS HAVE BEEN A LITTLE BITLOWER THAN A ACTED. WE HAVE HAD THREE COMING OUTFOR BANKS REPORTING. WE HAVE A LONG WAY TO GO, BUT ITHINK DELAY IN THE PIVOT. THE CASE, WE ARE PRETTYBALANCED, BUT WE ARE GOING TO GET A ACCELERATION INTOEARNINGS GOING INTO 2025 TO THE EXTENT THAT WE GET LESS RATECUTS AND GROWTH. IT PROBABLY PUSHES IT BACK ALITTLE BIT. JONATHAN:.

HOW ALIGNED ARE YOU?WHAT DID YOU MAKE OF IT? ON FRIDAY, THESE KIND OFCHANGED, SO WHAT DO YOU MAKE OF THAT? TOM: THERE ARE STILL MACRO RISKS.IT IS ALMOST LIKE I FEEL LIKE I AM HAVING A CREDIT ANALYSTDISCUSSION. THEY ARE VERY FOCUSED ON THEIROWN BALANCE SHEET. I THINK STRENGTH AND STABILITYSEEMS TO BE A BIGGER PRESENT IN THE BOARDROOM ROOM OF THESEBANKS. THEY ARE BUILDING TO MAKE SURETHAT THEY CAN WITHSTAND ANY.

CHALLENGE. >> MORGAN STANLEY IS DOWN.DOESN'T DESERVE THAT? ARE THESE KIND OF BUSINESSESJUST SOMETHING THAT PEOPLE DO NOT WANT TO PICK UP ON IN THISENVIRONMENT? TOM: I THINK IT IS A PREFERENCE.WE HAVE PULLED BACK. IT IS JUST THE DYNAMICS OFEARNINGS AT THE MOMENT. WE JUST THINK THERE IS MOREUPSIDE BECAUSE THERE IS MORE COMING.THEY CAN DO MORE IMPROVEMENT, SO WE LIKE IT MORE.WE THINK THE DYNAMICS DO NOT.

HAVE AS MUCH TO THEM. JONATHAN: LOOKING THROUGH THE NUMBERS,HOW WOULD YOU FRAME IT ANY OTHER WAY. >> MORGAN STANLEY AT 1.5.IT SETS THE BAR SUPERHIGH FOR ITS MILD.THERE IS A BIG CLOUD WITH A LOT OF QUESTIONS ABOUTINVESTIGATIONS. THE EARNINGS ARE ONE THING BUTTHEN THE STORY IS ALSO EQUALLY IMPORTANT. JONATHAN:IT IS POSITIVE OFF THE BACK OF.

WHAT YOU ARE SEEING FROMGOLDMAN SACHS. WE TALKED BRIEFLY ABOUT THENATURE OF THE SURPRISE. A LONGER. THE ESTIMATE, 3.64. THAT IS A SOLID BEAT. LISA:THEY ARE TAKING THINGS DOWN IN MARKET THAT MIGHT LOOK LIQUID.BUT IT ALSO RAISES THE QUESTION OF HOW MUCH THEY ARE TAKINGSHARE FROM SOME OF THESE OTHER COUNTRIES IN TERMS OF PRIVATEASSET MANAGERS. TOM: WE DO NOT HAVE CREDIT SUITESANYMORE.

IT DISAPPEARED OVERNIGHT.WHEN YOU LOOK AT THE STATISTICS, THAT MARKET SHAREIS PRETTY MUCH CAPTURED BY MANY OF THE OTHER BANKS.ON A YEAR-OVER-YEAR BASIS, THAT HAD BEEN SOMETHING. JONATHAN:IS THE PIE GETTING BIGGER OR DID THEY TAKE SOMEONE ELSE'SSLICE. TOM: I THINK MORGAN STANLEY WILLBENEFIT FROM THE MARKET BEING BETTER. BELIEVE ME, AS SOMEONE WHOOPERATES, I PAY ATTENTION TO MARKET SHARE, BELIEVE ME.THE BIGGEST FIRMS HAVE PICKED.

UP THE MOST SHARE, AND A FEWFIRMS HAVE DONE THAT. MORGAN STANLEY AND GOLDMANWOULD BE IN THAT BUCKET. LISA: SOME OF THE OTHERS THAT ARESMALLER REGIONAL BANKS, HOW MUCH IS THE GAIN OF BIG BANKSAND THE LOSS OF REGIONALS? TOM: THEY TEND TO DO DIFFERENTTHINGS. THE WORLD THAT THEY LIVE IN ISSIMILAR. AS WE GET AWAY, THEY WILL BEMORE ATTUNED TO WHAT IS HAPPENING IN THE INTEREST RATEENVIRONMENT. SIX MONTHS AGO, WE WOULD HAVEBEEN TALKING ABOUT THE QUANTITY.

OF DEPOSIT.THE NICE THING IS THAT THE PRESSURE HAS EASE AND YOU AREALREADY SEEING IT IN THE NUMBERS. WE ARE WAITING FOR THE FED TOTAKE SOME MAY HE OFF. WE NEED THE U.S.TREASURY MADE TO BACK OFF A LITTLE BIT TO DO A LITTLE BITBETTER. IT IS ABOUT DEPOSITS MORE THANLOANS. JONATHAN: WE ARE WAITING FOR THEM TO PASSON HIGHER INTEREST RATE. TOM: ONLINE. IT IS EASY TO DO.JONATHAN:.

POSITIVE BY SOMETHING LIKE 3%.HERE IS YOUR BLOOMBERG BRIEF WITH DANI BURGER. DANI:OLAF SCHOLZ HAS BEGUN A SECOND VISIT TO CHINA.SAYING THAT BEIJING HAS NOT ACTED ON WARNINGS ANDDISCRIMINATORY BUSINESS PRACTICES. THEY CLAIM THAT FRED'S FOURTHHAVING. THE AMOUNT WILL BE CUT IN HALF.IT USUALLY SUPPORTS PRICES. AND IT IS THE 128 BOSTONMARATHON KICKING OFF TODAY. SEEING AN ECONOMIC WINDFALLTHAT WOULD BE THE BIGGEST SINCE.

THE PANDEMIC. SENT TO WELCOME 30 THOUSANDMINERS, COMPETING FOR A TITLE AND A PRIZE.THAT IS YOUR BLOOMBERG BRIEF. JONATHAN:IS DAVID RUNNING THIS MORNING? LISA: I'M NOT SURE.BUT I AM THINKING HE HAS RUN AT LEAST NINE. JONATHAN: GOOD LUCK.PUSHING BACK. >> I THINK THAT THE FEDERALRESERVE IS CLEARLY EXPECTING TO BE EASING POLICY THE SECONDHALF OF THIS YEAR. I THINK IT IS A LOW PROBABILITYTHAT THE NEXT MOVE IS HIGHER.

JONATHAN: THAT DEBATE, UP NEXT. JONATHAN:GOLDMAN SACHS IS DOING BETTER. ACROSS MORGAN STANLEY, LOOKINGFOR MORE OF THE SAME TOMORROW MORNING. LISA:IT IS INTERESTING THAT BANK OF AMERICA HAS YET TO REPORTEARNINGS. IT SPEAKS TO THE DOMINANCE OFTHE INDUSTRY, BUT THIS IS SORT OF THE REVIVAL THAT PEOPLE HAVEBEEN WAITING FOR. THE EXPECTATION IMPLIED IN THEMARKET ACTION. JONATHAN:.

SMILE, THE FOCUS WILL BETURNING. IF YOU ARE JUST JOINING US,THIS IS THE SET UP. POSITIVE BY 0.55%.EQUITY IS PUSHING HIGHER. YIELDS PUSHING HIGHER AS WELL.A RISK AVERSION. YIELD TO LOWER.WE WINDING SOME OF THIS PRICE ACTION.IN SYMPATHY WITH SOME OF THAT, WE ARE SEEING THE MOVE WITHCRUDE MOVING. SOME RISK AVERSION.WE ARE DOWN ON COULD THIS MORNING. LISA:IT COULD HAVE BEEN A LOT WORSE.

A LOT OF PEOPLE WERE LOOKINGFOR THE POTENTIAL OF FURTHER ESCALATION AND NOW IT IS ALLBUT CONTAINED AT HE POINT TO THE QUESTION OF THE TREASURYRESPONSE AND WHETHER FRIDAY WAS A READ THROUGH.IT IS A GOOD QUESTION THAT IS STILL OUT THERE. JONATHAN: WE WILL GET YOU THE RETAILSALES. IMMEDIATELY AFTER, AND EXCLUSIVE CONVERSATION WITH THENEW YORK FED PRESIDENT SITTING DOWN WITH BLOOMBERG'S MIKEMCKEE. MAY CUT EXPECTATIONS. >> I THINK THAT THE FEDERALRESERVE EXPECTS TO BE EASING.

POLICY THE SECOND HALF OF THISYEAR. THE MARKET HAS BEEN PRICING OUTEXPECTATIONS, IN TERMS OF RATE CUT.WE THINK THERE IS A LOT PRICED IN AT THE START OF THIS YEAR,GIVEN WHAT HAS HAPPENING WITH THE DATA. I THINK IT IS A LOW PROBABILITYTHAT THE NEXT MOVE IS HIGHER. JONATHAN:THE LATEST RETAIL SALES DATA COMING IN.INFLATION CONTINUES TO RUN HOT. INVESTORS BETTING ON TWO RATECUTS IN SEPTEMBER.

WE HAD EXPECTED THIS TO ACERTAIN EXTENT. LOOKING VERY AGGRESSIVE AT THESTART OF THE YEAR. WE BELIEVE IT IS POSSIBLE THATTHE FED MAY BEGIN TO CUT PRICES IN JUNE.MARILYN JOINS US TO TALK ABOUT THIS A LITTLE BIT MORE.LET'S TALK ABOUT THE BIG CHANGES.LEGO FROM JUNE ALL THE WAY TO THE BACK END OF THE YEAR.WHY HAVEN'T THE EXPECTATIONS CHANGED AS MUCH RELATIVESUCCUMBING INFORMATION? >> GOOD MORNING.THIS YEAR, THERE WERE VERY.

AGGRESSIVE RATE CUTS PRICED IN.ALMOST SEVEN AT THE BEGINNING OF THE YEAR AND NOW THE MARKETIS PRICING IN THE FUTURES. WE THINK IT IS REASONABLE TOEXPECT A COUPLE THIS YEAR, BUT THERE IS A LOT OF DATA TO COME.IT IS POSSIBLE THAT THEY COULD CUT IN JUNE.I THINK THE FED HAS BEEN EMPHASIZING ITS COMMUNICATIONOVER AND OVER AGAIN THAT THEY WANT TO SEE MORE DATA AND THATTHEY ARE DATA DEPENDENT. WHEN YOU LOOK AT THE ECONOMICDATA THAT HAS BEEN COMING THROUGH, IT HAS BEEN VERYRESILIENT IN TERMS OF ECONOMIC.

ACTIVITY AND THE LABOR MARKETCOOLING. IT REMAINS THIS — EVERY MEANSSURPRISINGLY STRONG. WHEN YOU LOOK AT THE INFLATION DATA, ACTUALLY, IT HAS REMAINEDABOVE EXPECTATIONS. YOU TAKE THE CPI DATA LAST WEEKAND WHEN YOU LOOK AT THE COMPONENT OF THE INFLATION, THECOMPONENT THAT IS ACTUALLY SUPPORTING AND KEEPINGINFLATION HIGHER THAN EXPECTED. I THINK WE EXPECT TO SEE RATESHIGHER FOR LONGER. DO SOMETHING IS HIGHLY LIKELY.

THAT THERE WILL BE SOME CUT ITHINK TWO IS PROBABLY REASONABLE AT THIS POINT.ANNMARIE: BASED ON THE FACT THAT A LOT OFTHE TENSION GOES INTO HIGHER PRICES FOR COMMODITIES, HOWMUCH DO THEY SERVE AS A HAVEN PLAY AS THEY HAVE IN THE PAST? >> THAT IS AN INTERESTING POINTBECAUSE WE HAVE SEEN TREASURIES TO A CERTAIN DEGREE, IMENTIONED LAST WEEK, MAYBE FRIDAY ACTING A LITTLE BIT LIKEA SAFE HAVEN. I DO NOT THINK THAT THEY AREASKING THE SAME WAY WE WOULD.

HAVE BEEN IN PREVIOUS ORSIMILAR EVENTS AT RISK. OR IN PREVIOUS CYCLES AS WELL. AT THE MOMENT, I THINK THEY DONOT KNOW WHAT TO EXPECT. AT THE MOMENT, LOOKING THROUGHWHAT IS HAPPENING IN THE MIDDLE EAST AGAIN AND FOCUSING ON WHATTHEY THINK IN TERMS OF THE ECONOMIC SITUATION IN THE U.S.BUT ALSO IN EUROPE AND ELSEWHERE. MORE ENCOURAGING DATA OUT OFEUROPE TODAY IN TERMS OF PRODUCTION.I THINK THE MARKET DOES NOT.

KNOW HOW. JUST AGAIN, FOCUSING ON THEDATA AND THE MARKET AS THEY SEE IT AT THE MOMENT. LISA:ABOUT THE DIVERGENCE BETWEEN THE ECB AND THE FEDERALRESERVE, THE ABILITY TO CUT RATE .THEY HAVE BEEN ON THEIR OWN PLANET. I WONDER HOW MUCH YOU ARE ONTHE SAME PAGE, WHERE YOU ARE AVOIDING FIXED INCOME BUT YOUARE TRYING TO DIVERSIFY TO.

AREAS THAT ARE ON A PATH TO CUTRATES MORE AGGRESSIVELY THIS YEAR. >> WE DO HAVE A DIVERSIFIEDPOSITIONING. WE DO CONTINUE TO LIKE U.S.INVESTMENT GRADE, IN PARTICULAR. WE ARE GETTING SOME VERY DECENTCARRY WHERE THERE IS NOT THAT MUCH INTEREST RATE RISK, BUTPARTICULARLY A LOT OF THE CORPORATE SCUM YOU GET SOMEATTRACTIVE CARRY. WE ARE VERY DIVERSIFIED FROM USTHAT HAVE EUROPEAN INVESTMENT GRADE, PARTICULARLY IN TERMS OFVALUATION, THEY ARE VERY.

ATTRACTIVE.WE HAVE POSITIONS IN ASIA AS WELL.ALSO, SECURITIZED ASSET AND A VARIETY OF THOSE. I THINK IN THIS ENVIRONMENT,GIVEN THE DIVERGENCE WE HAVE ALREADY SEEN AND THE PRICINGACROSS THE FIXED INCOME MARKET, WE CAN ALSO SEE A LOT MOREATTRACTIVE OPPORTUNITIES IN THAT PERSPECTIVE.THERE IS A BIG PRICE DIFFERENTIAL THAT WE DID NOTHAVE A COUPLE YEARS AGO COME IN TERMS OF SOME OF THE CORPORATE.THEY HAVE VERY DIFFERENT.

UNDERLYING FUNDAMENTALS. AT THEMOMENT, THERE IS A LOT MORE IN TERMS OF INCOME MANAGERS ASWELL AS LOOKING ACROSS MARKETS. COMPARED TO SOME INVESTMENTGRADE BONDS. NOW, WE HAVE BEEN THINKINGABOUT THE PERSPECTIVE BUT ALSO MAKING SURE THAT WE AREMANAGING LIQUIDITY AND RISK, AND UNDERSTANDING THAT IN THISENVIRONMENT, THERE IS A GREAT DEAL OF UNCERTAINTY IN TERMS OFCENTRAL-BANK. WE WANT TO BEING ABLE AND WEWANT TO REALLY UNDERSTAND WHERE.

THE INCOME IS COMING FROM INOUR PORTFOLIOS. JONATHAN: WONDERFUL PERSPECTIVE.IT ALWAYS IS. LISA TALKING ABOUT THE EXTENTOF CENTRAL-BANK DIVERGENCE THAT WE CAN EXPECT. THE LIMITS OF IT.WE HEARD ABOUT THIS LAST WEEK. COMMENTS FROM PRESIDENT LAGARDESAYING WE ARE NOT FED DEPENDENT. THE PRESIDENT OF GREECE SAYING,NOW IT IS THE TIME TO DIVERGE. DEEMING 100 BASIS POINTS IN THEFED DOES ABSOLUTELY NOTHING FOR THE REST OF THE YEAR?THEY ARE DIFFERENT STORIES. IF YOU ARE GOING TO PUSH THISTHROUGH THE MARKET, ARE WE.

TAKING THE EURO-DOLLAR TO 105? DOES THAT HAPPEN WITH CRUDERALLYING ANOTHER 5%? I THINK IT IS TOO SIMPLISTIC TOSAY THAT YOU CAN DIVERGE AND THEN TALK ABOUT THE EXTENT OFTHE DIVERGENCE WITHOUT UNDERSTANDING A HOST OF ISSUES.LISA: VERY WELL SAID, ESPECIALLY INTERMS OF PRICES. IT IS NOT THAT BIG OF A PROBLEMUNLESS YOU GET A SURGE IN OIL PRICES.BECOME SOMEWHAT MORE DIFFICULT. JONATHAN:A DOUBLE WHAMMY OF CRUDE.

HOW MANY ARE WE GOING TO HEARABOUT IN FRANKFURT, GERMANY? I THINK THAT MIGHT CHANGEPRETTY QUICKLY. WE'LL CATCH UP WITH CAMERON.WE SPEAK TO THE NATIONAL SECURITY COORDINATOR.JOHN WILLIAMS JOINING US, SPEAKING TO MICHAEL MCKEE,EXCLUSIVELY, FOLLOWING U.S. RETAIL SALES.WE WILL BREAK DOWN THAT NUMBER. IF YOU ARE JUST JOINING US,EQUITY FUTURES POINT 5%. YIELDS ARE HIGHER AS WELL.UP SIX BASIS POINTS. FROM NEW YORK, THIS ISBLOOMBERG. ♪.

>> NEW GONVARRI MIXED SIGNALSCOMING FROM MARKETS, ACTIVE RISKS AND PARTS OF THE WORLDINCLUDING THE MIDDLE EAST. >> THIS IS BOTH AN INTERNATIONALAND DOMESTIC STORY BUT ALSO VERY MUCH A MARKETS STORY. >> THAT MACRO TRIO IS WHAT ISREALLY GOING TO DICTATE WHAT HAPPENS GOING FORWARD. >> ALL OF THESE TALKS ABOUTRATE CUTS AND THE MARKET DOESN'T CARE.THE MARKET IS CONCERNED WITH EARNINGS.

>> WE WILL STILL BE TALKINGABOUT A SITUATION WHERE THE U.S. ECONOMY IS STILL GROWING. >> THIS IS BLOOMBERGSURVEILLANCE WITH JONATHAN FERRO, LISA ABRAMOWICZ, ANDANNMARIE HORDERN. JONATHAN: GOOD MORNING.THE THIRD HOUR OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW.30 MINUTES AWAY, U.S. RETAIL SALES, THEN AN INCLUSIVECONVERSATION WITH NEW YORK FED PRESIDENT JOHN WILLIAMS SITTINGDOWN WITH MIKE MCKEE AS A LOOK AT AN AGGRESSIVE REPRICING OFFED EXPECTATIONS OVER THE LAST.

WEEK. LISA:WE ARE HEARING SOME PUSHBACK. THEY MAY HAVE TO BE TWO RATECUTS INSTEAD OF THREE. HOW DOES OIL CHANGE THATPERIMETER? DOES THEIR HAND GET FORCED BYTHE FACT THAT COMMODITY PRICES ARE RALLYING FOR THE RIGHTREASONS, SOME FOR THE WRONG REASONS? JONATHAN:BRENT CRUDE IS NEGATIVE BY 0.9%, DOWN BY A ALMOST 1%.ANNMARIE: WE'VE BEEN TALKING ALL MORNINGABOUT THE IDEA OF WHAT THE CONTAINMENT MIGHT HAVE BEEN.IT WAS A WORST-CASE SCENARIO IN.

WHAT IRAN LAUNCHED, BUT BESTCASE IN TERMS OF OUTCOME. THAT IS WHY YOU ARE SEEINGTHOSE DRIVERS IN THE OIL MARKETS TAKING THAT EDGE OFF.JONATHAN: I LOVE HOW YOU TALK ABOUTPEOPLE PRESSING GEOPOLITICAL RISK. LISA:EVERY TIME I TRY TO HEDGE, I GET MY FACE RIPPED OFF, SO WHATDO I DO? THAT IS HOW I VIEW TODAY'SREACTION IN MARKETS. IT IS NOT LIKE THINGS ARECOOLING OFF TO A DRAMATIC DEGREE BUT PEOPLE CAN TAKE ASIGH OF RELIEF.

THAT IS WHAT MARKETS ARE SAYINGFOR NOW. JONATHAN: I KNOW THIS IS A STORY YOU AREON TOP OF. TYPICALLY, THE PREFERRED HAVENIS DEFINED BY THE NATURE OF THE DOMINANT RISK, BUT THE RISK ISCHANGING FROM DAY TO DAY. BONDS ON WEDNESDAY WERE THEREAT THE CENTER OF RISK. FRIDAY, THEY RECEIVED SOMEDEMAND. WORK THAT OUT FOR ME PLEASE.LISA: I CAN'T. PEOPLE ARE LOOKING ATTREASURIES AND SAYING AT WHAT PRICE DO THEY ACT AS AN HAVEN?MAY BE 4.6 ON THE 10 YEAR THEY.

ARE STARTING TO LOOK MOREATTRACTIVE, BUT IF YOU LISTEN TO PETER TCHIR, THAT WILL BETHE HAVEN. . ULTIMATELY THE HAVEN OF YORE ISNOT THE HAVEN OF NOW. JONATHAN: GOLD APPARENTLY KEEPS SITTINGALL-TIME HIGHS WEEK AFTER WEEK. GOLDMAN SACHS IN THE PREMARKETPOSITIVE BY 3.66%. BEATS ACROSS THE BOARD,ADVISORY, SALES AND TRADING REVENUE.MORGAN STANLEY REPORTING TOMORROW MORNING.THAT STOCK IS UP 1.35%. LISA:FIXED INCOME CURRENCIES AND.

COMMODITIES, SALES COMING IN AT$4.3 BILLION VERSUS THE EXPECTATION OF 3.6.PEOPLE ARE SEEING A REVIVAL OF THE TRADING INDUSTRY, BANKINGINDUSTRY ESPECIALLY WITH THE BALANCE SHEET BEHIND THAT. ARE THEY JUST TAKING SHARE FROMOTHER PLACES, TAKING SHARE BACK FOR SOME OF THE PRIVATE ASSETMANAGERS WHO ARE FACING HIGHER CAUSE TO RAISE MONEY? JONATHAN:PRETTY INCREDIBLE EXECUTION FROM GOLDMAN SACHS THIS MORNING.WE WILL CATCH UP WITH NATIONAL SECURITY COUNCIL COORDINATORJOHN KIRBY.

WE WILL SPEAK TO NEW YORK FEDPRESIDENT JOHN WILLIAMS AS MARKETS PRICE OUT FED CUTS.AND TOM PORCELLI REACTING TO RETAIL SALES DUE IN ABOUT 45MINUTES TIME. RETAIL SALES DATA 30 MINUTESAWAY. CAMERON DAWSON RECENTLY SAYING,CPI AND PPI AND A SHORT MOVE IN BONDS I LET THE REALITY THATTHE FED AND THE BOND MARKET STICK AND THEY CALLED THE ALLCLEAR ON INFLATION IN THE FOURTH QUARTER OF 2023 AND MADETHE ASSUMPTION THAT POLICY WAS TIGHT ENOUGH TO JUSTIFY CUTS.THE FED CANNOT CUT AS MUCH AS.

THEY WOULD LIKE. ARE WE DECIDING THEY AREINSUFFICIENTLY RESTRICTIVE AFTER TELLING US THAT THEY ARESUFFICIENTLY RESTRICTIVE? CAMERON:THE EMPIRICAL EVIDENCE WHAT SUPPORT THEY ARE NOT THATRESTRICTIVE BASED ON THE BACKDROP OF THE AGGREGATEBALANCE SHEET OF THIS ECONOMY. MEANING YOU HAVE TURNED UP SOMUCH DEBT, THE DIFFUSION OF FED POLICY HAS NOT BEEN AS SHARP ASIT HAS BEEN IN THE PAST, WHICH IS WHY THE ENTIRE TIME THE FEDHAS BEEN TECHNICALLY.

RESTRICTIVE WITH THE REAL RIGHTPOSITIVE, THE U.S. ECONOMY HAS GROWN ABOVE TREND.JONATHAN: ARE WE AT RISK OF A 2022 MARKET?HOW MUCH OF A THREAT IS BONDS TO U.S. EQUITIES? CAMERON:2022 WASN'T JUST ABOUT RISING YIELDS, IT WAS ABOUT FALLENGROWTH EXPECTATIONS. THE ECONOMY AND THE MARKET.THAT IF THE FED RAISES RATES, GROWTH WOULD PLUMMET.THE GOOD THING IS IT DIDN'T PLUMMET. THE BULL MARKET OF 23 AND INTO24 HAS BEEN ABOUT RISING GROWTH.

EXPECTATIONS.IF THE FED STAYS HIGHER FOR LONGER, DO WE HAVE TO STARTCUTTING GDP FORECAST FOR 24 INTO 25?THAT COULD MOVE THE MARKET INTO RISK OFF.WITHOUT THAT, RISK ON CAN CONTINUE. LISA:ARE BONDS THE SAME KIND OF HAVEN THEY HAVE BEEN IN THEPAST, IF YOU BELIEVE THE FED IS COMMITTED TO GETTING DOWN TO2%, IF THEY HOLD HIGHER FOR LONGER, PRESUMABLY YOU'LL SEE ABID. CAMERON: IT SPEAKS TO A HAVEN AGAINSTWHAT KIND OF RISK?.

THE RISKS WE'VE BEEN DEALINGWITH WHAT THE PAST TWO DECADES HAVE BEEN DEFLATIONARY INNATURE, CREDIT CRISIS IN NATURE. 2022 WAS THE SHARP AWAKENING TOTHE FACT THAT IF IT IS AN INFLATIONARY ISSUE, BONDS ARENOT THAT SAFE HAVEN TRADE, WHICH IS WHY IF YOU WANT TO PUTSAFE HAVENS AND PORTFOLIOS, IT IS NOT JUST BONDS, IT'S ALSOCOMMODITIES, ENERGY STOCKS, IN ORDER TO HAVE SOME PROTECTIONAGAINST AN INFLATIONARY STOCK. LISA:HOW MUCH HAVE YOU SHIFTED THAT HAVEN BUCKET AWAY FROMTREASURIES TO, SAY, GOLD,.

BITCOIN, MAYBE NOT, TO OTHERCOMMODITIES? CAMERON: WE HAVE NOT MATERIALLY.OVER THE LONG-TERM, WHEN LOOKING AT COMMODITIES, WE KEEPA 5% OR SO ALLOCATION BECAUSE THEY DON'T NECESSARILY TREND.YOU HAVE COMMODITY SUPER CYCLES. NOT THAT WE HAVE SEEN AS BACKUPHIGHER IN YIELDS, WE ARE HAVING THE CONVERSATION ON LET'S GETREADY TO BUY. ONCE WE GET TO THAT 4.75, 5%RANGE, YOU WOULD HAVE TO SEE AN UPTICK IN YIELDS TO OFFSET THEBASE INCOME YOU ARE RECEIVING WHICH JUST MEANS YOU WANT TO BEBUYING INTO WEAKNESS, NOT.

SELLING INTO IT. JONATHAN:THIS HAS BEEN A DIFFICULT MARKET.GOLD HAS CLIMBED WITH YIELDS. HIGH YIELD DIDN'T HURT TECH.TECH OUTPERFORMED LAST WEEK AND SMALL-CAP GOT HAMMERED.THE BIG POSITIONING THAT EVERYONE WAS TAKING GOT UNDONEIN THE MARKETS. WASN'T THAT THE RECIPE FOR THEMTO DO WELL, FOR THE BANKS TO DO WELL? CAMERON:IT IS ALL ABOUT THE BALANCE SHEETS.BIG TECH HAS GREAT BALANCE SHEETS WITH A LOT OF CASH ANDLITTLE DEBT.

IF YOU HAVE A HIGHER FOR LONGERENVIRONMENT, YOU KEEP WAKING IN THAT INTEREST RATE AND YOURCOSTS ARE NOT GOING UP. SMALL CAPS DON'T HAVE NEARLY ASMUCH CASH, FLOATING DEBT, HIGHER FOR LONGER IS BACK FORTHEM. THE DRIVER FOR UPSIDE IS ABOUTTHE BALANCE SHEET. THE FED BACKDROP MEANS THATHIGHER FOR LONGER IS BAD FOR LOWER QUALITY BALANCE SHEETS.ANNMARIE: SO WHEN DOES THE ROTATION TAKEPLACE IN EARNEST? CAMERON: I THINK AT THE BEGINNING OF ANECONOMIC AND MARKET CYCLE,.

MEANING YOU ARE SEEING THESEBLIPS OF OUTPERFORMANCE, SHORT-LIVED, BUT THEY CANNOTSUSTAIN BECAUSE WE THINK WE ARE STILL FUNDAMENTALLY LATE CYCLE.THERE ARE PARTS OF THE ECONOMY THAT ARE EARLY CYCLE, PARTS OFMANUFACTURING DOING BETTER, WHICH IS WHY HIGH QUALITYCYCLICAL COMPANIES CAN STILL BE A PART OF THE ROTATION.BUT LOWER QUALITY NAMES TYPICALLY ONLY DO BEST EARLYCYCLE WHEN THE FED IS FLOODING THE MARKET WITH LIQUIDITY. LISA:IF I THINK ABOUT BIG TECH IN PARTICULAR, I'M STRUCK THEM HEGOT NEWS OVERNIGHT ABOUT.

APPLE'S SHIPMENTS COMING IN ATSOME OF THE LOWEST LEVELS SINCE THE HEIGHT OF THE SUPPLY CHAINTROUBLES. TESLA IS REPORTEDLY LAYING OUT10% OF THEIR WORKFORCE IN PART BECAUSE OF WEAK SALES IN CHINA.AT WHAT POINT DOES THIS TECH TRADE GET CHALLENGED? CAMERON:SUCH AN IMPORTANT POINT. THE CUSTOMERS A BIG TECHCOMPANIES ARE THE REST OF THE ECONOMY.THEY CAN ONLY LIVE ON AN ISLAND FOR SO LONG.META IS 98% ADVERTISING. IF YOU SEE SMALL BUSINESSISSUES, WHAT HAPPENED TO THE.

TRAJECTORY OF THAT SALES GROWTH?AMAZON STILL BEING A CONSUMER COMPANY.YOU CANNOT HAVE TECH BE THE ONLY THING THAT DOES WELL IFYOU ARE STUNNED TO SEE ECONOMIC WEAKNESS IN OTHER PLACES.WHEN YOU THINK ABOUT THE NAMES LIKE APPLE, IT'S GOOD TOREMEMBER, TRADING AT 25 TIMES EARNINGS. THAT IS NOT NEARLY ASMAGNIFICENT AS WHAT YOU'RE GETTING FROM META, AMAZON,GOOGLE AND THE LIKE. LISA: MEANWHILE, TALKING ABOUT THEPOTENTIAL FOR A SELLOFF. GEOPOLITICAL CONCERNS ARESPIKING AT A TIME WHEN STOCKS.

ALREADY SEEM TO FOR A PULLBACK.DO YOU BUY INTO THE IDEA OR DO YOU THINK THERE IS ENOUGH CASHWAITING TO GET IN THAT IT CANNOT HAPPEN BUT YOU CANNOTGET TO BEARISH? CAMERON: IF YOU WERE TO SEE A SLIGHTSHIFT IN NARRATIVE, YOU MIGHT SEE PEOPLE STAND BACK A LITTLEBIT TO SEE WHAT IS GOING ON. I THINK WE'VE SEEN ADETERIORATION IN MOMENTUM OVER THE LAST MONTH OR SO. YOU HAVE SEEN BREADTH WEAKEN ALITTLE BIT BUT NOT TO THE POINT WHERE WE ARE OVERSOLD.WE COULD JUST BE IN THIS.

TURNING ENVIRONMENT.YOU ARE JUST SHIFTING POSITIONING AROUND. LISA:90 MINUTES AWAY FROM RETAIL SALES AT A TIME WHEN THE DATAHAS MADE AN IMPACT ON PEOPLE'S PERCEPTION, THAT POLICY.HOW IMPORTANT IS THE NUMBER, HOW MUCH OF A SENSE ARE YOULOOKING FOR HOW DURABLE THIS ECONOMY IS? CAMERON:WE HAVE BEEN IN THIS DEBATE AS TO WHETHER OR NOT WE CAN TRUSTTHE EMPLOYMENT DATA. THE WAY WE CAN JUDGE THE DATAUNDER THE SURFACE IS HOW MUCH CONSUMERS CAN SPEND.IF RETAIL SALES ARE STRONG, IT.

MEANS EMPLOYMENT DATA ISHOLDING IN BETTER THAN THE BEARS ARE EXPECTING.THE RATIO WE WOULD WATCH CLOSELY IS THE EQUAL WEIGHTDISCRETIONARY VERSUS STABLE STOCKS.IF THAT BREAKS DOWN, THAT TELLS YOU THERE COULD BE TROUBLEWITHIN THE CONSUMER. IF IT HOLDS UP, THAT SAYS THECONSUMER IS FINE, SUPPORTING GDP ESTIMATES. JONATHAN:THIS WAS GREAT, GREAT TO SEE YOU. CAMERON DAWSON FROM NEWEDGEWEALTH. A MUST WATCH CONVERSATION WITHNEW YORK FED PRESIDENT JOHN.

WILLIAMS AND MICHAEL MCKEE.LET'S GET AN UPDATE ON STORIES ELSEWHERE. DANI:TESLA IS SET TO CUT MORE THAN 10% OF ITS GLOBAL WORKFORCE.THE CARMAKER IS GRAPPLING WITH A SLOWDOWN IN EV DEMAND.CUTS WOULD AMOUNT TO MORE THAN 14,000 EMPLOYEES.IN A LETTER TO EMPLOYEES, ELON MUSK CITED A DUPLICATION OFROLES AND JOB FUNCTIONS IN CERTAIN AREAS.OIL PRICES ARE USING AFTER IRAN'S ATTACK ON ISRAEL. AXIOS REPORTING THE WHITE HOUSEWOULD NOT SUPPORT AN ISRAELI.

RESPONSE.SOME SAY THE MARKETS ARE UNDERPRICING ESCALATION RISK. >> I THINK IT STILL IS.WE ACTUALLY INCREASED OUR AUNTS OF A MATERIAL DISRUPTION FROMARABIAN OIL AND GAS FLOWS FROM 30% TO 40%. DANI:YOU CAN WATCH THE BRIEF EVERY MORNING.SCOTTIE SHEFFLER HAS CLAIMED HIS SECOND GREEN JACKET AND ONHIS FIFTH START AT AUGUSTA. HE WON BY FOUR STROKES.TIGER WOODS' SCORE WAS HIS WORST EVER. JONATHAN:I THINK THE FACT THAT TIGER.

MADE THE CUT WAS PHENOMENALGIVEN THE FACT THAT HE HAS HARDLY PLAYED.IRAN'S UNPRECEDENTED ATTACK ON ISRAEL. >> IT IS A NEW MIDDLE EAST, AMIDDLE EAST WHERE ISRAEL MUST WONDER WHETHER SOME ACTION MAYPROVOKE AN IRANIAN MISSILE OR DRONE ATTACK. JONATHAN:THE LATEST ON THAT STORY. WE WILL CATCH UP WITH NICK JONATHAN:EQUITIES ON THE S&P 500 POSITIVE BY 0.6%.JUST A LITTLE BOUNCE AFTER LAST.

WEEK'S LOSSES. GOING INTO U.S.RETAIL SALES 14 MINUTES AWAY. YIELDS HIGHER BY SIX BASISPOINTS ON THE 10 YEAR. 4.58. UNDER SURVEILLANCE THISMORNING, IRAN'S UNPRECEDENTED ATTACK ON ISRAEL. >> IT IS A NEW MIDDLE EAST, AMIDDLE EAST IN WHICH ISRAEL MUST WONDER EVERY DAY IF SOMEACTION MIGHT PROVOKE AN IRANIAN MISSILE OR DRONE ATTACK ONISRAEL'S TERRITORY DIRECT, AND ALSO A NEW MIDDLE EAST IN WHICHISRAEL IS NOW IN THEORY OPEN TO DO THE SAME AGAINST IRAN.BY ALLOWING IRAN TO CONDUCT AN.

UNPRECEDENTED ATTACK WHICH WASNOT SYMBOLIC YOU HAVE THIS NEW WORLD. JONATHAN:PRESIDENT BIDEN AND YOU SEVEN LEADERS URGING CALM AFTERIRAN'S FIRST EVER DIRECT ATTACK ON ISRAEL.PRESIDENT BIDEN SPEAKING TO PRIME MINISTER NETANYAHU, TAKETHE WIN, CALM DOWN. NICK WADHAMS JOINS US NOW FORMORE. WHAT DO WE KNOW? NICK:THE BIG QUESTION FOR ME IS TWO FOLD.WHAT WILL THE ISRAELI RESPONSE BE?THE MESSAGING WE ARE HEARING IS.

REVENGE IS A DISH BEST SERVEDCOLD, WHICH SUGGESTS THEY MAY WAIT TO RESPOND, BUT A RESPONSEIS A CERTAINTY. THE OTHER QUESTION IS WHATLEVERAGE DOES PRESIDENT BIDEN ACTUALLY HAVE TO SHAPE OUTCOMESHERE? AS YOU MENTIONED, THE U.S. HAS BEEN VERY CLEAR, THINGSTHAT ISRAEL SHOULD TAKE THE WIN AND NOT RESPOND, BUT THERE WILLBE A LOT OF PRESSURE PUT ON PRIME MINISTER BENJAMINNETANYAHU. ON THE OTHER HAND HE SAYS HE ISDETERMINED TO GO AHEAD. WE WILL SEE THE LIMITS OF U.S.INFLUENCE ON ISRAEL IN THE.

WEEKS AHEAD. ANNMARIE:DOES THIS MEAN THERE IS NO LONGER A REDLINE?HAVE THEY COMPLETELY EVAPORATED? NICK:THAT IS THE GREAT QUESTION, ANOTHER THING WE ARE TRYING TOFIGURE OUT. THIS DOES CHANGE THE EQUATIONSIGNIFICANTLY WHEN YOU HAVE IRAN LAUNCHING A DIRECT ATTACKON ISRAEL. THE ISSUE IS THIS PROXY WAR HASBEEN GOING ON FOR SO LONG, ISRAEL HAS TAKEN PRETTYAGGRESSIVE STRIKES AGAINST IRANIAN OFFICIALS, TAKEN OUTIRANIAN NUCLEAR SCIENTISTS ON.

IRANIAN TERRITORY BEFORE.THERE IS A LOT THAT HAS HAPPENED THAT HAS SEEMEDEXPLICIT BUT NOT ACKNOWLEDGED. NOW THAT THIS IS SO OUT IN THEOPEN, YOU WOULD THINK, IN SOME WAYS, AT LEAST THEY ARE SAYING,ISRAEL WILL BE PROVOKED TO RESPOND.CERTAINLY IT FEELS LIKE ALL THE GUIDELINES AND RULES OF THEROAD, SUCH AS THEY ARE IN A CONFLICT LIKE THIS, HAVE NOTBEEN PUT ASIDE. JONATHAN: NICK WADHAMS OF BLOOMBERG DOWNTHERE IN WASHINGTON, D.C. JOINING US NOW IS NATIONALSECURITY COUNCIL ADVISOR JOHN.

KIRBY.BUSY WEEK AND I'M SURE FOR YOU AND THE ADMINISTRATION.WE HAVE HEARD FROM IRAN, INDICATED THE MATTER CAN BEDEEMED CONCLUDED. WE ALL WANT TO KNOW, ADMIRALKIRBY, WHETHER ISRAEL HAS INDICATED THE SAME THING JOHN:I WILL NOT SPEAK FOR THE ISRAELIS, YOU CAN UNDERSTANDTHAT. THE WAR CABINET IS STILL MAKINGTHEIR DECISIONS. THE PRESIDENT HAD A GOODCONVERSATION WITH THE PRIME MINISTER TOWARD THE END OF THEATTACKS SATURDAY NIGHT.

THE PRESIDENT WAS VERY DIRECTTHAT THIS WAS A HUGE SUCCESS, THAT ISRAEL CAN BE PROUD THATIT DOES NOT STAND ALONE, HAS SUPERIOR MINUTES LARRY –MILITARY CAPABILITY. IRAN UTTERLY FAILED AND WHATTHEY WERE TRYING TO ACHIEVE. THAT SENDS A MESSAGE TO THEREGION ABOUT ISRAEL'S PLACE THERE. JONATHAN:CAN WE DEFINE SUCCESS? HOW CAN WE DEFINE THE ACTIONSOF THE WEEKEND AS A SUCCESS, DIRECT STRIKES ON ISRAEL? JOHN:LET'S TALK ABOUT WHAT DIDN'T HAPPEN. HARDLY ANY DAMAGE.

THE ONLY IMPACTS WERE TO ANAIRBASE IN CENTRAL ISRAEL. NO REAL CASUALTIES EXCEPT SADLYA YOUNG CIVILIAN GIRL WHO WAS CRITICALLY INJURED. THE VAST MAJORITY, AS THE IDFSAID, 99% OF WHAT IRAN THREW UP IN THE AIR, DRONES OR MISSILES,NEVER LANDED, EITHER FAILED OR GOT SHOT DOWN.WHAT DID HAPPEN, ISRAEL PROVED IT HAS SUPERIOR MILITARYCAPABILITY. CRITICALLY, THEY DON'T STANDALONE. THE U.S. STANDS WITH THEM.I THINK MAYBE PEOPLE ARE NOT.

COGNIZANT OF THE FACT THAT THEPRESIDENT PUT U.S. FORCES IN HARM'S WAY TO HELPDEFEND ISRAEL. FOR THE FIRST TIME, AMERICANFIGHTER PILOTS IN THE AIR SHOOTING THINGS DOWN THINGSHEADING FOR ISRAEL. AND THEY WERE EXTRAORDINARILYSUCCESSFUL IN DOING SO. JONATHAN:YOU ARE TALKING ABOUT A SUCCESSFUL DEFENSE.A LOT OF PEOPLE ALSO FOCUS ON THE UNSUCCESSFUL DETERRENT.THE PRESIDENT SAID DON'T, AND THEY DID.WE ARE TRYING TO WORK OUT IN.

WHAT WAY THE PRESIDENT IS ABLETO INFLUENCE IRANIAN BEHAVIOR? JOHN: THE PRESIDENT REPOSITIONEDMILITARY FORCES IN THE REGION ALLOWING THAT DEFENSE.THE PRESIDENT MET WITH G7 LEADERS YESTERDAY TO TALK ABOUTA UNIFIED DIPLOMATIC RESPONSE, COULD CONSIDER OTHER OPTIONSAND ALTERNATIVES TO HOLD IRAN ACCOUNTABLE FOR WHAT IT DID ONSATURDAY NIGHT. IRAN IS INCREASINGLY ISOLATEDIN THE WORLD, CERTAINLY IN THE REGION. ISRAEL HAS PROVEN IT HASFRIENDS. ANNMARIE:IF ISRAEL DOESN'T RESPOND, IS.

THE NEW STATUS QUO THAT IRANCAN STRIKE ISRAEL FROM ITS OWN SOIL AND THERE WILL NOT BERETALIATION? JOHN: I CANNOT SPEAK TO THAT.THAT IS UP TO THE PRIME MINISTER AND THE WAR CABINET TOMAKE THOSE DECISIONS. WE RESPECT IT IS A SOVEREIGNNATION, THEY HAVE TO MAKE THOSE DECISIONS. ANNMARIE:A LOT OF REPORTING THAT THE BIDEN ADMINISTRATION DOES NOTSUPPORT A COUNTERSTRIKE. ISN'T THAT IN A SENSE TAKINGONE OF THOSE TOOLS OUT OF THE TOOLBOX AND BRANDISHING IT TOTHE WORLD? JOHN:.

THE TOOLS THAT WE TOOK OUT OFTHE TOOLBOX WERE PRETTY SIGNIFICANT ON SATURDAY NIGHT.BALLISTIC MISSILE DESTROYERS SHOOTING DOWN BALLISTICMISSILES, FIGHTER AIRCRAFT IN THE AIR, OTHER PARTNERSPARTICIPATING. THERE WERE A LOT OF TOOLS INTHE TOOLBOX THAT NO QUESTION IRAN RECOGNIZES THE COALITIONTHAT WAS PUT TOGETHER TO HELP ISRAEL DEFEND ITSELF.I CANNOT SPEAK FOR WHAT EITHER SIDE WILL DO GOING FORWARD.ALL I CAN DO IS SPEAK FOR PRESIDENT BIDEN AS COMMANDER INCHIEF.

HE HAS, SINCE OCTOBER 7, ANDWILL CONTINUE GOING FORWARD, MAKE SURE WE ARE MEETING OURCOMMITMENTS TO ISRAEL, BUT JUST AS IMPORTANTLY, MEETING OURSECURITY COULDN'T SUE OTHER ALLIES IN THE REGION, AND THEMISSIONS THAT WE ARE CONDUCTING IN THE MIDDLE EAST. ANNMARIE:60 TONS OF ARSENAL FIRED ON ISRAEL DIRECTLY FROM IRAN. 16 MONTHS OF IRANIAN-BACKEDHOUTHIS DISRUPTING GLOBAL TRADE. WE ALSO HAD AN UPTICK OFURANIUM ENRICHMENT BY IRAN. TO GET TO THIS DETERRENCE, WHATIS THE U.S. WILLING TO DO?.

WE HAVE SANCTIONS IN PLACE, ISTHE U.S. WILLING TO ENFORCE THEM? JOHN:WE HAVE BEEN ENFORCING SANCTIONS.IN THE PAST THREE AND A HALF YEARS OF THIS ADMINISTRATION,WE HAVE TARGETED MORE THAN 500 ENTITIES AND INDIVIDUALS.AGAIN, I WILL NOT PREVIEW COMING SANCTIONS OR ANYTHINGLIKE THAT BUT I CAN TELL YOU ADDITIONAL SANCTIONS ARECERTAINLY NOT OFF THE TABLE IN TERMS OF HOLDING IRANACCOUNTABLE. TAKE A LOOK AT THE ADDITIONALMILITARY RESOURCES PRESIDENT.

BIDEN HAS ADDED EVEN BEFOREOCTOBER 7. THIS IS SOMETHING HE HAS BEENKEENLY FOCUSED ON. AS WE SAW SATURDAY NIGHT, IRANIS INCREASINGLY ISOLATED ON THE WORLD STAGE, INCREASINGLYMAKING IT HARDER FOR ANYONE IN THE INTERNATIONAL COMMUNITY TOBE SYMPATHETIC TO ANY OF THEIR INTERESTS THERE.WE WILL CONTINUE TO LOOK AT OUR OPTIONS GOING FORWARD.I SUSPECT THAT WE WILL CONTINUE TO HOLD IRAN PROPERLYACCOUNTABLE. ANNMARIE: HOW ARE THEY ISOLATED?THEY HAD A CALL WITH THE.

SAUDI'S, THEY ARE SENDING THEIROIL TO CHINA, DRONES TO RUSSIA. OIL OUTPUT HIT A FIVE-YEAR HIGH.WHERE IS THE ENFORCEMENT? JOHN: THIS IS ONE OF THE MOST HEAVILYSANCTIONED COUNTRIES IN THE WORLD.WE WILL HOLD THEM PROPERLY ACCOUNTABLE AND SANCTIONS ARENOT OFF THE TABLE. NEITHER IS MAKING SURE THAT WEHAVE THE CAPABILITIES IN THE REGION , AND WE DO COMEINTOTHWART SOME OF THEIR DESTABILIZING ACTIVITY.YOU TALKED ABOUT URANIUM ENRICHMENT. WHEN THE PREVIOUSADMINISTRATION PULLED OUT OF.

THE DEAL, THAT INCREASED THERATE THAT THEY COULD SPIN UP SOME CENTRIFUGES AND GET CLOSERTO BREAKOUT CAPABILITY. IRAN WAS NOT NEGOTIATING INGOOD FAITH TO GET BACK INTO THAT DEAL BUT THE PRESIDENTALSO MADE CLEAR WE WILL NOT ALLOW IRAN TO ACHIEVE NUCLEARWEAPONS GIVE ABILITY. WE WOULD RATHER ACHIEVE THATTHROUGH DIPLOMACY BUT THERE ARE OTHER OPTIONS. ANNMARIE:THE ARMENIAN ENVOY IS STILL UNDER INVESTIGATION.HIS LEADING THESE DOUBLE MEDIC EFFORTS? JOHN:THE DIPLOMATIC EFFORTS ARE NO.

LONGER BEING PURSUED BECAUSEIRAN WAS NOT NEGOTIATING IN GOOD FAITH WHICH IS WHY WE WILLMAKE SURE WE HAVE OTHER OPTIONS AVAILABLE TO US TO PREVENT THEMFROM ACHIEVING THE GROUP WEAPONS GIVE ABILITY. LISA: ONE QUESTION AROUND WHAT THERESPONSE COULD BE TO IRAN SEIZING A VESSEL IN THE STRAITOF HORMUZ. THE IDEA OF FREEDOM OF THE SEAS.WHAT IS THE U.S. RESPONSE TO THAT GIVEN THE FACTTHAT COMPANIES HAVE STARTED TO REJIGGER THEIR TRADE ROUTES,BAKE IN EXTRA COST AS A RESULT?.

JOHN:I HAD SOME TROUBLE HEARING YOU BUT I THINK I GOT THE GIST OFTHE QUESTION. WE CERTAINLY CONDEMN THISMARITIME ATTACK, A TACTIC THE IRANIANS HAVE USED IN THE PAST.WE HAVE, WHEN ABLE, AND ABLE TO INTERDICT, THWART OTHER SUCHMARITIME ATTACKS, NOT ALL OF THEM OF COURSE.ALSO MAKING A CONCERTED EFFORT OVER TIME, BEEN SUCCESSFULINTERCEPTING GOODS THAT THE IRANIANS HAVE BEEN TRYING TOSHIP BY SEA TO SOME OF THEIR PROXIES. LISA:ONE THING THAT A LOT OF.

COMPANIES AND EXECUTIVES ARESAYING IS THAT THEY HAVE TO MAKE CONTINGENCY PLANS BECAUSETHEY ARE NOT SURE THERE CAN BE SUCH SAFETY. IS IT APPROPRIATE FOR THE U.S.,FOR ISRAEL TO MORE DIRECTLY RESPOND TO IRAN AT SOME POINT,JUST NOT NOW? JOHN: AGAIN, I CANNOT SPECULATE ABOUTFUTURE OPERATIONS OR DECISIONS THAT WE MIGHT HAVE TO MAKE.THE PRESIDENT HAS BEEN CLEAR. WE WILL HOLD IRAN ACCOUNTABLEFOR THEIR DESTABILIZING ACTIVITIES.HE'S ALSO BEEN CLEAR THAT WE.

ARE NOT LOOKING FOR ANOTHER WARIN THE MIDDLE EAST. WE SEE THE CONFLICT ARE ONLY UNDERWAY INGAZA. WE DON'T WANT THAT DEEP ACROSSTHE REGION. WE WILL SEE HOW THINGS UNFOLDIN THE COMING DAYS HERE BUT WE DON'T WANT A WAR WITH IRAN.EVERYTHING THE PRESIDENT HAS BEEN DOING SINCE THE SEVENTH OFOCTOBER HAVE BEEN DESIGNED TO BRING THE TENSIONS DOWN, MAKESURE THE UNITED STATES IS BEST OSTRICH TO DEFEND OUR INTERESTSIN THE REGION. JONATHAN: YOU ARE IN A FIGHT WITH ALAWNMOWER, SO WE WILL LET YOU.

GO. WE APPRECIATE YOUR TIME. FAR TOO DISRUPTIVE.SOME SERIOUS POINTS. HOW THEY DEFINE SUCCESS OVERTHE WEEKEND, I THINK THERE WILL BE A CAMP THAT WILL NOT DEFINETHAT AS SUCCESS. IF YOU VIEW SUCCESS AS EXCESSWILL DEFENSE, SUCCESS. LIMITED DAMAGE, NO CASUALTIES.IF YOU DEFINE SUCCESS THROUGH DETERRENT, DIFFICULT TO DO THATBASED ON HOW THIS HAS ESCALATED. ANNMARIE:THERE HAS NOT BEEN DETERRENCE. WHEN IT COME TO THE MORE THAN300 MISSILES AND DRONES FIRED.

FROM IRANIAN SOIL TO ISRAEL,ALSO WHAT'S BEEN GOING ON IN THE RED SEA FOR THE PAST SIXMONTHS. THE HOW MANY TIMES HAVE WE HEARDADMIRAL KIRBY SAY WE DO NOT WANT WAR, DON'T WANT ESCALATION?SOME SAY YOU HAVE TO PUT THAT ON A TABLE TO NOT GET MORE.JONATHAN: A FORMER U.S. SENIOR INTELLIGENCE OFFICIALSSAYING, WHATEVER YOU THINK ABOUT THE WEEKEND EVENTS, WEHAVE A NEW MIDDLE EAST. EQUITY FUTURES ON THE S&P 500 POSITIVEBY 0.6%. GOING INTO U.S. RETAIL SALES, A LITTLE BIT OF ABOUNCE IN THE EQUITY MARKET.

UP BY 0.7% ON THE NASDAQ 100.LATE OCTOBER WAS WHEN THIS EQUITY MARKET RALLIED.IN THE BOND MARKET, YIELDS HIGHER THROUGH LAST WEEK BYDOUBLE DIGITS. THE TWO-YEAR REACHING BRIEFLY5%. THIS MORNING, 4.9596. JUST TO ROUND THINGS OUT,FOREIGN-EXCHANGE, U.S. RETAIL SALES, THE EURO AT THEMOMENT, 1.0646. RETAIL SALES, UPSIDE SURPRISE,ADVANCING MONTH ON MONTH, 0.7%. THE ESTIMATE WAS 0.4.STRIP OUT AUTOS AND GAS, 0.3. THE INPUT INTO U.S.GDP, UPSIDE SURPRISE AS WELL,.

1.1% AGAINST AN ESTIMATE OF 0.4.THE PRICE ACTION LOOKS LIKE THIS, HOLDING ONTO THE GAINS INTHE EQUITY MARKET OF HALF OF 1% ON THE S&P 500.IN THE BOND MARKET, SHOOTING HIGHER AGAIN.ON THE TWO-YEAR, HIGHER BY NINE BASIS POINTS. 4.99. THE 10 YEAR, 4.6158.THAT IS A HOTTER THAN EXPECTED RETAIL SALES REPORT. LISA:REVISIONS FROM THE PRIOR MONTH ARE ALL UPSIDE REVISIONS.IF YOU ARE LOOKING FOR A DAMPENING EFFECT, YOU DON'T GETIT.

IT GOES TO WHAT CAMERON DAWSONSAID. IF YOU SEE A STRONG RETAIL NUMBER, THAT CONFIRMS THESTRONG EMPLOYMENT NUMBER. PEOPLE HAVE JOBS, THEY ARESPENDING REGARDLESS OF INFLATION. JONATHAN:YIELDS ARE UP, EQUITIES ARE JUST ABOUT GONE.THE 10 YEAR AT4.62. JOINING US NOW IS MICHAELMCKEE, SITTING DOWN FOR AN INCLUSIVE CONVERSATION WITH NEWYORK THEN-PRESIDENT JOHN WILLIAMS. MIKE:GOOD MORNING, EVERYBODY. WE WANT TO THANK JOHN WILLIAMSFOR JOINING US ON BLOOMBERG.

RADIO AND TELEVISION WORLDWIDE.THE NUMBERS CAME OUT. PRETTY AMAZING.ARE YOU CONTINUALLY SURPRISED BY THE AMERICAN CONSUMER? JOHN:FIRST OF ALL, WELCOME TO THE NEW YORK FED, WE ARECELEBRATING OUR 100 ANNIVERSARY HERE.CONSUMER SPENDING IS STRONG, DRIVEN BY STRONG FUNDAMENTALS.JOB GROWTH HAS BEEN SOLID, REAL WAGE GRAINS. — GAINS.THAT IS A PART OF THE STORY. WHAT WE REALIZE IS WE AREGETTING A NICE TAILWIND FROM THE SUPPLY SIDE OF THE ECONOMY.GO TO LABOR FORCE GROWTH,.

STRONG PRODUCTIVITY, GOOD REALWAGE GAINS. WITH THAT, CONSUMERS ARESPENDING. MIKE: WHAT IS THE THINKING AMONG YOURCOLLEAGUE, DOES THIS LAST, IS THIS A SURPRISE THAT GO AWAY ATANY MINUTE? JOHN: ONE THING THAT MAKES IT HARD TOFORECAST AS WE ARE STILL FEELING THE EFFECTS OF THEPANDEMIC, RUSSIA'S WAR IN UKRAINE, EVERYTHING HAPPENINGIN BETWEEN. WE ARE STILL SEEING ANADJUSTMENT PROCESS BY THE CONSUMER IN THE ECONOMY OVERALL.OVERALL, I THINK THE ECONOMY.

WILL CONTINUE TO GROW AT ASOLID RATE THIS YEAR, PROBABLY NOT AS HIGH AS A 3.1 WE SAWLAST YEAR, BUT WE ARE STILL IN A GOOD PLACE.JUST NOT RAPID AS GROWTH AS WE SAW LAST YEAR. MIKE:SPEAKING OF INTERNATIONAL EVENTS, I HAVE TO ASK YOU ABOUTTHE MIDDLE EAST RIGHT NOW. HOW DO YOU THINK ABOUT ECONOMICAND POLICY IMPLICATIONS OF THESE EVENTS? JOHN: BE ASLEEP — OBVIOUSLY, WE AREWATCHING THIS CLOSELY. FIRST, THROUGH COMMODITY PRICES.SECOND, WHAT WE THINK OF AS A.

FLIGHT TO SAFETY.INVESTORS, WHEN THEY SEE RISKS IN THE GLOBAL ECONOMY, THEYTEND TO BRING MONEY TO THE U.S. DOLLAR, AND THAT TENDS TO PUSHYIELDS DOWN. RIGHT NOW, MARKETS ARE PRETTYSTABLE, NOT SEEING BIG MOVEMENTS IN THAT WAY.GENERALLY THAT IS WHAT I WOULD EXPECT TO SEE WHEN YOU SEEHEIGHTENED GEOPOLITICAL TENSIONS. MIKE:WHEN YOU THINK ABOUT WHAT THE MARKETS ARE REACTING TO, WHATCOULD COME OUT OF THIS, IS THIS MORE OF AN INFLATION WORRY ORGROWTH CONCERN? JOHN:.

REALLY HARD TO SAY.IT DEPENDS ON HOW THE SITUATION EVOLVES.RIGHT NOW, I DON'T THINK OF THIS — MAYBE IN THE NEAR TERMCOULD AFFECT FINANCIAL CONDITIONS AND COMMODITY PRICES.I DON'T SEE THIS AS A MAJOR DRIVER IN THE OVERALL FORECASTOR OUTLOOK FOR ECONOMIC GROWTH OR FOR INFLATION. MIKE:SPEAKING OF INFLATION, CPI CAME IN MUCH HOTTER THAN EXPECTED,SORT OF FREAKED EVERYONE OUT ON WALL STREET.MARKETS TOOK THAT AS A TURNING POINT IN FED POLICY.YOU SEE IT THAT WAY? JOHN:.

I DON'T SEE IT AS A TURNINGPOINT. WE SAW INFLATION COME DOWNMAYBE QUICKER THAN EXPECTED, WE SAW LOWER READINGS IN INFLATIONTHE FINAL SIX MONTHS. I NEVER THOUGHT IT WAS GOING TOSTAY THAT LOW. THAT WAS UNUSUALLY LOW.WE ARE NOW SEEING SOME UNUSUALLY HIGH READINGS.OVERALL, I THINK THE PICTURE IS ONE THAT THE ECONOMY IS GETTINGIN BETTER BALANCE. WE STILL HAVE A STRONG LABORMARKET AND WE ARE SEEING INFLATION GRADUALLY COME DOWN.FOR ME, WHAT DO I SEE IN THE.

DATA? YOU POINTED OUT RETAIL SALESTODAY, BUT MORE BROADLY, THE ECONOMY CONTINUES TO BE STRONG.I THINK WE ARE BEING HELPED BY STRONG DEMAND AND SUPPLY,HELPING GROWTH. WE ARE SEEING INFLATION COMEDOWN SLOWER THAN EXPECTED. MARKETS ARE TAKING ALL OF THATINFORMATION INTO ACCOUNT, HOW THEY EXPECT POLICY TO BE. FOR ME, I AM DATA-DEPENDENT ASALWAYS, TAKE THE TOTALITY OF THE DATA, THINK ABOUT WHAT ITMEANS FOR ACHIEVING MAXIMUM.

EMPLOYMENT AND PRICE STABILITYGOALS. I THINK IT'S IMPORTANT INFORMATION THAT WILL CLEARLYAFFECT MY THINKING AND MY FORECAST. MIKE:EVEN THOSE THAT HAVE THOUGHT ABOUT WHAT PCE MIGHT BE AFTERPPI, CPI, INFLATION IS NOT COMING DOWN RAPIDLY ANYMORE,BUT YOU HAVE STRONG GROWTH, VERY LOW UNEMPLOYMENT.WHY CUT RATES IF THE ECONOMY IS DOING FINE AT THIS LEVEL? JOHN: FIRST OF ALL, MONETARY POLICYIS WORKING AT THE RATES THAT WE HAVE NOW.MONETARY POLICY IS IN A GOOD.

PLACE OVER THE PAST 18 MONTHS,WE HAVE SEEN IT PRETTY MUCH ALL THE MEASURES OF IMBALANCES INTHE LABOR MARKET AND ECONOMY RECEIPT, MANY OF THEM BACK TOLEVELS THAT WE SAW IN 2018, 2019. WE ARE SEEING A SLOW DECLINE ININFLATION. I DO THINK MONETARY POLICYRIGHT NOW IS IN A GOOD PLACE. I AM NOT FIXATED ON WHERE RATESNEED TO GO OVER THE NEXT YEAR. WHAT I'M FOCUSED ON IS HOW WEBEST ACHIEVE OUR MAXIMUM EMPLOYMENT AND PRICE STABILITYGOALS.

THE DATA WE ARE SEEING SHOWSTHE ECONOMY IS STRONG, LABOR MARKET IS STRONG.AT THE SAME TIME WE ARE GETTING BETTER BALANCE, SOME DECLINE INOVERALL INFLATION. TO ME, IT'S ABOUT GETTING THATRIGHT, AND THEN WHATEVER WE NEED TO DO TO ADJUST MONETARYPOLICY WE CAN DO TO BEST CONTINUE OUR POLICY TOWARD OURGOALS. THAT IS HOW I AM THINKING ABOUTIT. WE JUST HAVE TO KEEP WATCHINGTHE DATA AND MAKE OUR DECISIONS BASED ON THOSE GOALS. MIKE:IS YOUR BASE CASE THAT YOU WILL.

CUT RATES THIS YEAR? JOHN: MY OWN VIEW WITH INFLATIONCONTINUALLY, GRADUALLY COMING DOWN — GRADUALLY BEING THEOPERATIVE WORD, THE ECONOMY REMAINING STRONG — GIVEN WHERERATES ARE, REAL INTEREST RATES ARE NOW CONSIDERABLY HIGHERTHAN BEFORE BECAUSE INFLATION HAS COME TO QUITE A BIT, SO WEWILL NEED TO START A PROCESS AT SOME POINT TO BRING INTERESTRATES BACK TO MORE NORMAL LEVELS.MY OWN VIEW IS THAT PROCESS WILL LIKELY START THIS YEAR.

BUT AGAIN, RIVEN BY THE DATA –DRIVEN BY THE DATA AND ACHIEVING OUR GOALS. MIKE:SO IT'S POSSIBLE THAT YOU DON'T DO ANYTHING THIS YEAR. JOHN:YOU ARE ASKING ME TO SPECULATE. [LAUGHTER]RIGHT NOW, MONETARY POLICY IS IN A GOOD PLACE.WE ARE SEEING PROGRESS. IT'S A BUMPY ROAD ON THEINFLATION FRONT. WE HAVE TO FIGURE OUT HOW TO JADJUST POLICIES AS NEEDED. MIKE: IS POLICY TIGHT RIGHT NOW? JOHN:I THINK WE HAVE A STRICT OF MONETARY POLICY.SO WHAT DO I LOOK FOR?.

THE ECONOMY IS GROWING OVER 3%,WE ARE ADDING ABOUT 275 THOUSAND JOBS OVER THE FIRSTTHREE MONTHS. THAT SEEMED LIKE AN ECONOMYTHAT IS STRONG, NOT HELD BACK BY MONETARY POLICY.IF YOU TAKE A STEP BACK, ALL OF THESE MEASURES OF IMBALANCES INTHE MARKET, JOB OPENINGS, QUIT RATES, ALL THE OTHER INDICATORSARE MOVING FROM BEING VERY TIGHT TO LESS TIGHT, MOST OFTHEM BACK TO A STRONG LABOR MARKET OR GETTING CLOSER.JOB OPENINGS ARE STILL HIGH, WAGE GROWTH IS A BIT HIGH, BUTMOVING IN THE RIGHT DIRECTION.

MONETARY POLICY IS HELPING TOBRING INFLATION DOWN TO 2%. MIKE: IS THAT SOMETHING YOU CANAFFECT OR ARE THESE NOT INTEREST-RATE RESPONSIVESECTORS? JOHN: MONETARY POLICY CAN AFFECTTHROUGH MULTIPLE CHANNELS. MAYBE SOME SECTORS THAT ARE NOTAS INTEREST-RATE SENSITIVE THE ECONOMY IS.WE HAVE SEEN OVER THE PAST COUPLE OF YEARS, MOVING FROMACCOMMODATIVE POLICY TO RESTRICTIVE POLICY. MONETARY POLICY IS WORKING, ICONTINUE TO EXPECTED TO WORK TO.

BRING INFLATION DOWN.YOU WILL SEE IT SHOW UP IN DIFFERENT PARTS, GOODS ANDSERVICES, BUT OVER THE PAST YEAR AND A HALF WE HAVE SEEN ABROAD-BASED DECLINE IN INFLATION IN ALL OF THESECATEGORIES. WE JUST NEED TO KEEP POLICY INTHE RIGHT PLACE TO ACHIEVE THAT 2% GOAL. MIKE:A QUESTION I ALWAYS ASK IS WHAT ARE CEOS OF COMPANIES TELLINGYOU ABOUT THEIR HIRING PLANS, WHAT THEY HAVE TO PAY,INFLATION, WHETHER THEY HAVE TO PAY HIGHER PRICES? JOHN:IF YOU WERE TO ASK ME THIS.

QUESTION TO YEARS AGO, THAT ISALL THEY WOULD TALK ABOUT, PRICE INCREASES, THE CHALLENGESOF HIRING EMPLOYEES. TODAY, THOSE COMMENTS ARE STILLOUT THERE A LITTLE BIT BUT FAR LESS THAN BEFORE.WE ARE HEARING THAT IT IS EASIER TO FILL POSITIONS THATUSED TO BE. WAGE COMPENSATION PRESSURES ARELESS. PRICE PRESSURES ARE LESS. THAT IS WHAT IS CONSISTENT,WHAT WE ARE SEEING IN THE DATA. ANNMARIE:HAS POTENTIAL GROWTH MOVED UP? JOHN:I AM GETTING MORE OPTIMISTIC.

ABOUT POTENTIAL GROWTH IN THEECONOMY FOR A COUPLE OF REASONS. THROUGH THE PANDEMIC,EVERYTHING THAT HAPPENED AFTER THAT, I, LIKE MOST PEOPLE, HAVECONCERNS THAT THE ECONOMY HAD SUFFERED.THE LABOR FORCE PARTICIPATION. AS WE HAVE WATCHED THE DATAOVER THE PAST FEW YEARS, WE HAVE SEEN AN INCREASE IN LABORFORCE PARTICIPATION, INCREASE IN LABOR FORCE GROWTH, ANDINCREASING PRODUCTIVITY. I'M NOT SAYING THAT WE ARE IN ANEW HIGH-GROWTH WORLD BUT I DO THINK POTENTIAL GROWTH ISPROBABLY CLOSER TO 2% OR HIGHER.

WHICH IS WELL ABOVE ESTIMATESOF THE PAST FEW YEARS. THAT'S A VERY POSITIVE SIGN FORU.S. REAL INCOMES, FOR THE ECONOMY,HONESTLY, FOR HELPING TO GET INFLATION DOWN. MIKE:A QUESTION FOR OUR FRIENDS AROUND TRADING DESKS.YOU HAD A BRIEFING ON QT FROM FED STAFF.MEMBERS GENERALLY AGREED IT SHOULD START SOON.DOES THAT MEAN MAY, JUNE? JOHN: I THINK WE SAID FAIRLY SOON.THE REASONING FOR SLOWING THE PACE OF REDUCTION OF OURBALANCE SHEET MAKES A LOT OF.

SENSE, PRUDENT COURSE OF ACTION.WE ARE INDEED INCREASING THE BALANCE SHEET QUITE RAPIDLY.BY SLOWING THAT, WE WILL BE ABLE TO ASSESS AND ANALYZE ASWE ESSENTIALLY GET TO AN AMPLE RESERVES KIND OF WORLD THAT WEARE AIMING FOR. EVERYTHING IS GOING AS PLANNED,THINGS ARE GOING WELL. WHEN WE DECIDE TO SLOW THE PACEOF THE BALANCE SHEET, THAT IS A DECISION OF THE COMMITTEE.WE WILL GET TOGETHER SOON AND DISCUSS THIS MATTER FURTHER.TO ME THIS IS A SIGN OF SUCCESS OF THE PLANS WE LAID OUT TWOYEARS AGO TO REDUCE THE BALANCE.

SHEET. VERY LITTLE DISRUPTION INMARKETS. IT HAS WORKED EXACTLY ASPLANNED. WE ARE JUST EXECUTING ON THATPLAN. MIKE: SO QT COULD COME BEFORE RATEMOVES? JOHN: THESE ARE SEPARATE ISSUES.WE ARE FOCUSING ON GETTING TO AMPLE RESERVES.ON MONETARY POLICY, WE ARE FOCUSED ON ACHIEVING OUR PRICESTABILITY AND EMPLOYMENT GOALS. MIKE:JOHN WILLIAMS, THANK YOU VERY MUCH, PRESIDENT OF THE NEW YORKFEDERAL RESERVE. JONATHAN:.

ABSOLUTELY BRILLIANT EXCHANGE.THANK YOU. APPRECIATE IT. SITTING WITH ONE OF THE TOPTHREE OF THE FOMC FOLLOWING A HOT RETAIL REPORT.SOMETIMES IN AN ATTEMPT TO SAY NOTHING, YOU SAY SOMETHING, ANDTHAT SOMETHING IS THIS. I THINK MONETARY POLICY IS IN AGOOD PLACE, MONETARY POLICY IS TIGHT.THAT IS MEANINGFUL GIVEN THAT WE HAVE HAD THREE SO-CALLEDBUMPS IN INFLATION, AND THAT CONVERSATION FOLLOWS A HOTRETAIL PRINT IN AMERICA, REPRESSING IN THE BOND MARKETTHAT LOOKS LIKE THIS.

WE CAN START WITH FIXED INCOME.BIG READJUSTMENT IN TREASURY YIELDS, UP SEVEN BASIS POINTS.THE 10 YEAR UPDATE BASIS POINTS. CONVERSATIONS WE HAVE HAD EVERSINCE WE GOT THAT HOT PRINT LAST WEEK, R.O.E.SUFFICIENTLY RESTRICTIVE? WHAT YOU HEAR FROM A SENIOROFFICIAL AT THE FEDERAL RESERVE, THEY BELIEVE MONETARYPOLICY IS STILL TIGHT EVEN WITH THIS DATA. LISA:THEY ARE WILLING TO WATCH THE DATA, THE IDEA THAT I'M NOTCONCERNED WHERE RATES ARE GOING. THE REST OF WALL STREET IS.THE QUESTION IS HOW MUCH DO.

THEY LOOK AT THIS DATA AND SAYIT PREVENTS THEM FROM CUTTING RATES AGAIN?HE DIDN'T ANSWER THE QUESTION DIRECTLY.HE TRIED TO MOVE AROUND IT BUT THE OBLIGATION WAS NOTHING HASREALLY CHANGED. HE SAID THAT POINT-BLANK.THAT DATA POINT DOESN'T CHANGE OUR VIEW, NEITHER DOES RETAILSALES. WHAT WILL IT TAKE GIVEN THATWALL STREET THINKS THAT SOMETHING HAS SHIFTED? JONATHAN:1.54 DOLLAR-YEN MOMENTS AGO. YIELDS UP FOR THE RIGHT REASONS.RETAILS COMING IN HOT, EQUITIES.

HOLDING ON. UP 1% ON THE S&P. COMING UP SHORTLY, WE WILLCATCH UP WITH TOM PORCELLI, REACTING TO THE UPSIDE SURPRISEON RETAIL SALES. WE WILL GET INTO THATCONVERSATION WITH NEW YORK FED PRESIDENT WILLIAMS. THIS ISTHIS IS BLOOMBERG. JONATHAN:FAIRLY INTERESTING 20 MINUTES. RETAIL SALES COMING IN HOT.EQUITIES HOLDING UP, POSITIVE BY .75 PERCENT ON THE S&P 500. UPDATE BASIS POINTS ON THE 10YEAR. UP SEVEN ON THE TWO-YEAR.

GETTING CLOSER TO 5%.STRONGER DOLLAR AGAINST THE EURO. 1.0640. LISA: WE WERE TALKING ABOUT THEREDLINE WHICH WAS 1.52. THAT GOT BLOWN OUT BY THE IDEAOF HOTTER PRINCE. THIS GO TO THE QUESTION OFDIVERGENCE. HOW PARKING OTHER CENTRAL BANKSDIVERGE WHEN THE CURRENCY CHANNEL IS GETTING INCREASINGLYCHALLENGED? JONATHAN: RETAIL SALES IN AMERICA COMINGIN AT 1.1%, THE ESTIMATE, 0.4%. THAT IS THE KIND OF UPSIDESURPRISE.

THE VIEW REMAINS THE SAME.PRESIDENT JOHN WILLIAM CHANGING EXPECTATIONS FOLLOWING A HOTRETAIL SALES PRINT, NOT CHANGING ON INFLATIONEVENTUALLY COMING DOWN. TOM PORCELLI JOINS US NOW.THAT'S GET INTO THESE COMMENTS FROM JOHN WILLIAMS ON THE BACKOF THAT RETAIL SALES DATA. MONETARY POLICY IS IN GET AGOOD PLACE, MONETARY POLICY IS TIGHT. DO YOU AGREE? TOM:IT'S BEEN REALLY INTERESTING. WE HAVE HAD THIS STRING OFREALLY STRONG DATA, YET THE FED DOESN'T SEEM TO BE CHANGINGBARITONE ALL THAT MUCH AS IT.

RELATES TO CUTS.SOME PEOPLE ARE PUSHING CUTS OUT THAT THEY STILL SEEM TO CUT.JOHN WILLIAMS LITERALLY SAID THOSE WORDS.I CHERRY PICKED ONE OF HIS COMMENTS.WE WILL NEED TO START THE PROCESS AT SOME POINT OFNORMALIZING POLICY. MY OWN VIEW IS THAT LIKELYSTARTS THIS YEAR. THAT WAS HIS OWN QUOTE.THIS IS A FED THAT WANTS TO PUSH AHEAD. IT'S BECOMING FAIRLYCHALLENGING TO DO IT IN THE NEAR TERM.WE SHOULD TALK ABOUT THAT.

BUT THIS IS A FED THAT CLEARLYHAS A VIEW THAT THEY WANT TO CUT. I THINK THEY ARE GOING TO.JONATHAN: LET'S GET TO THAT, THAT YOUPICKED UP ON. WE NEED TO START THE PROCESS ATSOME POINT. SAYS WHO? TOM: [LAUGHTER]SAYS THEM, THE WAY THAT THEY VIEW HOW RESTRICT THE POLICY IS.THERE ARE 10 OFFICIALS WHO THINK THEY SHOULD CUT THREETIMES THIS YEAR, AT LEAST THAT WAS THE CASE BEFORE CPI. THEY ARE ARRIVING AT THECONCLUSION, BECAUSE I THINK.

MONETARY POLICY IS RATHERRESTRICTIVE. OUR OWN VIEW IS THAT IF YOULOOK AT THEIR LONG-RUN ESTIMATE, WE THINK THE ESTIMATEIS WAY LOW. WE THINK IT WILL COME UP PRETTYMEANINGFULLY. IN FACT, WE WOULD ARGUE THAT ITSHOULD HAVE COME UP MEANINGFULLY ALREADY.YOU HAVE FOLKS LIKE PRESIDENT WILLIAMS WHO BELIEVE THATPOLICY IS RESTRICTIVE ENOUGH FOR THEM TO START THE PROCESSOF CUTTING. LISA: WHAT STRUCK ME IS HE ALSO SAIDI'M NOT OVERLY CONCERNED ABOUT.

WHERE RATES ARE GOING, SPEAKINGTO THE TERMINAL RATE. IT IS UNIQUE THAT THE FED ISNOT WORRIED ABOUT THAT, EVERYONE ELSE IS.WHY IS IT IMPORTANT TO WORRY ABOUT THAT? TOM:IT GOES EXACTLY TO THIS IDEA THAT WE WERE TALKING ABOUT, HOWRESTRICTIVE ARE YOU GOING TO BE? YOU COULD EASILY MAKE THEARGUMENT, IF YOU LOOK AT NOMINAL, LONG-RUN RATES, THEYSHOULD BE CLOSER TO 3.5%, NOT 2.5% THAT THE FED IS PUTTING IN.I THINK IT IS SORT OF NICE TO SAY WE ARE NOT SO WORRIED ABOUTWHAT WILL HAPPEN DOWN THE ROAD.

BUT THE MARKET IS.10-YEAR YIELD'S ARE SUPPOSED TO BE A REFLECTION OF WHAT YOUTHINK THE FED FUND AVERAGE WILL BE.THE MARKET IS TRYING TO FIGURE THAT OUT.THIS IS SUBBING THAT WE HAVE TALKED ABOUT OVER THE MONTHS.THE MARKET IS STILL VERY MUCH IN PRICE DISCOVERY MODE.THE MOVE THAT WE HAVE SEEN OVER THE LAST WEEK OR SO, THE MARKETIS TRYING TO GAUGE WHERE THIS WILL SHAKE OUT.AGAIN, I WOULD ARGUE, IF YOU WANT TO PUT A PIN IN A NUMBER,4.50 LOOKS RIGHT ON 10'S.

JUST AS A STARTING POINT FORTHE CONVERSATION. THAT, TO ME, IS AN INSTRUCTIVEWAY OF FRAMING PRESIDENT WILLIAMS' COMMENTS. LISA:HE ALSO SET TO TAKE EACH DATA POINT AS THEY COME.WE HAVE SEEN HOT DATA POINTS. IS THIS A FLAWED PROCESS, THEIDEA OF COMING WITHOUT A THESIS, COMING FROM BACKWARDLOOKING DATA POINTS, PUSHING THEM FORWARD, WE WILL REVISETHEM ANYWAY, COULD BE PROBLEMATIC? TOM: I DO. SEEMINGLY THE WAY THAT WE HAVEDEFINED DATA DEPENDENCY, WHICH.

IS ALLOWING THE MARKET AND EVENFED OFFICIALS TO SHIFT THEIR VIEWS ON EVERY SINGLE DATAPOINT, I DON'T THINK THAT IS THE RIGHT WAY OF CRAFTINGMONETARY POLICY. I THINK IT LENDS ITSELF TO ALOT OF VOLATILITY. I THINK ABOUT THE CPI REPORT.I GET IT, THE FED IS NOT CUTTING IN JUNE ANYMORE, BUT ITIS WORTH UNDERSTANDING WHAT DID A LOT OF DAMAGE IN THAT CPIREPORT. THERE ARE TWO THINGS THAT THEFED CANNOT CONTROL IN THAT, AUTO INSURANCE AND HEALTH CARE.

IF YOU ARE GOING TO BE HANGINGYOUR HAT ON EVERY SINGULAR DATA POINT, THEN I THINK YOU HAVE TOGO THROUGH THE PROCESS OF DISSECTING EVERY SIGNAL DATAPOINT, TO MAKE SURE THE REASON IS A LEGITIMATE REASON,SOMETHING THAT POLICY CAN AFFECT.I WOULD ARGUE THAT THE RECENT CPI IS NOT SOME THING THATPOLICY CAN ALTER. LISA: HOW IS THE FED GOING TO RESPONDIF WE GET A SPIKE IN OIL PRICES, BUT ALSO BROUGHT THE AMORE STRUCTURAL BID TO THE COMMODITY SECTOR?SHOULD WE BE THINKING ABOUT IT.

MORE OF A LONG-TERM STORYBECAUSE OF ALL THE INFRASTRUCTURE SPEND, ALL THEDIFFERENT FEATURES GOING TO GIVE A BID INTO PRECIOUS METALSAND BEYOND? TOM: THE WAY THE FED WILL THINKABOUT THAT, THE CLASSIC CHANNELS, THROUGH THE LENS OFINFLATION EXPECTATIONS. YOU GET A LIFT IN COMMODITYPRICES. HOW DOES THAT ALTER PEOPLE'SEXPECTATIONS OF INFLATION THROUGH THAT CHANNEL?IF YOU SEE EXPECTATION START TO DRIFT — AND THEY HAVEN'T –THAT IS WHAT THE FED WILL.

RESPOND TO IN THE END. JONATHAN:I JUST WANT TO FINISH WITH ONE QUESTION.I'M ON YOUR BEST GUESS. WE SAW SOME BIG REVISIONS LASTWEEK. BANK OF AMERICA. WHERE ARE YOU AT NOW? TOM:I HAVE BECOME BIMODAL IN SOME WAYS.YOU WERE EITHER GETTING TO ZERO OR A LOT OF CUTS.I THINK JULY WILL BE VERY COMPLICATED. YOU HAVE TO GET A STRING OFREALLY PALATABLE INFLATION.

REPORT BETWEEN NOW AND THEN,AND YOU GET THREE BETWEEN NOW AND THE JULY MEETING.JULY IS ON THE TABLE. IF YOU DON'T GET JULY, THEY ARENOT GOING IN SEPTEMBER OR NOVEMBER.I KNOW THE FED LIKES TO SAY WE HAVE ADJUSTED POLICY AROUNDELECTIONS, BUT THEY HAVE ONLY DONE THAT WHEN POLICY HASUNQUESTIONABLY NEEDED AN ADJUSTMENT.IF THEY DON'T GO IN SEPTEMBER OR NOVEMBER — IF THEY DON'T GOIN JULY, THAT LEADS ALL THE WAY TO DECEMBER.IF THE FED GETS ONE IN THIS.

YEAR, MAYBE TWO, THE CALENDARIS WORKING AGAINST THEM. JONATHAN: INTERESTING.TOM PORCELLI OF PGIM. WE HAVE HEARD THAT IN THE LASTFEW WEEKS, THE LAST PRE-ELECTION OPTION ON THEWINDOW IS JULY. ONCE YOU GET INTO JULY COME YOUSTART CREEPING TOWARD DECEMBER. LISA:WHO WAS IT AGAIN THAT CAME ON THE SHOW AND BASICALLY WASTALKING ABOUT DECEMBER? WE ALSO YOU ARE CRAZY.HE SEEMS TO BE ON A PAGE THAT EVERYONE IS COMING TOWARD.REMEMBER HOW CRAZY HE THOUGHT.

HE WAS AT THE TIME? NOT CRAZY.JONATHAN: NOT MENTAL, BUT OUT THERE.NOT BRAMO CRAZY. INTERESTING BECAUSE OUT THEREAT THE MOMENT. AT THE MOMENT, YOU LOOK ATGLOBAL GROWTH, FRONT AND CENTER, U.S. EXCEPTIONALISM.WE SAW THAT A LOT COMING INTO THIS WEEK. THE U.S.VERSUS THE REST OF THE WORLD. THE MAN WHO WROTE THE ARTICLEON THAT WILL JOIN US TOMORROW MORNING.MOHAMED EL-ERIAN ALONGSIDE THE PGIM CEO DAVID HUNT. WEI LI.

THAT CONVERSATION COMING UPTOMORROW MORNING. THE OPENING BELL, 34 MINUTESAWAY. EQUITIES LOOKING OK.

Sharing is caring!