tv Bloomberg Surveillance Bloomberg May 3, 2021 6:00am-7:01am EDT
this earnings season is the magnitude of the beast. >> the labor market will remain very strong for at least the next few quarters. >> a continuous economic cycle will continue to bear fruit. i do not think this is peak growth. >> is it a month, a year, 18 months? >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: let's get it started from new york city. good morning, good morning. this is bloomberg surveillance. i am jonathan ferro. futures positive, a third of 1%. tom: payrolls friday. i will say 900,000 is the talking number with those odd
numbers above a million. i know it is a boom economy we observed this weekend. jonathan: approaching one million is the estimate now. unemployment rates, 5.6%. a year ago, the federal reserve was forecasting the unemployment rate would come down to 5.5% at the end of 2022. we are talking about at this friday. tom: i would suggest that mr. kaplan in dallas got out front. talked about the earliest opportunity, and it is fascinating. a timeline from the dallas fed. jonathan: not just time for the fed to start thinking about monetary stimulus. lisa: this concern about financial excess. that is what the fed was talking
about. i do think that jay powell shrugged it off to say get with the program, stick with the narrative. when will that become a liability to the economic recovery? these excesses creates some sort of issue in the market and that could derail what the fed is trying to do. jonathan: let's start with the price action monday morning. after a big monthly gain through april on the s&p 500, equity futures climbing just a little bit. yields on the 10 year 162.59. tom: did you book capri this morning? out on social, i am seeing some of the hotels in europe i know opening up again.
after what they have been through. it is exciting to see they are making every effort to reopen. jonathan: i have no doubt you are doing your bit to support them. tom keene doing his bit. i am doing my bit. lisa: i will do my part next week. everybody needs a break. a sleepy market and we have the u.k. closed. markets in china are closed as well. in the u.s., the focus will be on data. at 10:00, expect more discussions about the chip shortages as well as slowdowns in some of these. i am looking at inventories. companies try to keep up with the incredible demand among consumers who are flush with cash. president biden will be taking a tour in virginia talking about
reopening schools and his plan for american families. i am curious the plan to reopen schools. i am very curious about this as well as other working parents. when does jay powell view this labor market as being fully recovered? how do we know we have reached the end? it is not just the unemployment number anymore. jonathan: it is going nowhere and it kicks off this morning. we have warren buffett over the weekend, almost a buying frenzy. tom: i did a calculation -- they are up 27%.
i will turn to pros like bruce cashman. jonathan: how difficult it is to forecast in this environment right now? bruce: it is difficult to tie down exactly how strong the economy is doing. we are in the midst of a boom here in the u.s. europe is about to join us. there will be broad-based strength in the global economy. tom: good morning. kasman economics is your 26-page must-read. you have a spectacular u.s. chart. when does service inflation
catch up? bruce: it will not fully catch up because there are supply shortages and goods prices will continue to rise rapidly. march was the first month we saw it start to take up -- tick up. tom: this is the absolute key metric with the jobs report. service inflation. jonathan: and wages. we have to talk about wages and whether wages will be useful for the next several months. how much longer will we have to look at the labor market? bruce: when you look at the big gains, you are seeing the rotation back to the service sector. as terms -- as far as inflation,
two very different stories. how much pressure are we getting as we get this growth and normalize? i think if you look at what is happening in the wage measures that are not distorted, we are still pretty low. as the fed has been doing, you want to look through some of the near term dynamics, which i think are going to be powerful. lisa: near-term dynamic is difficult to say when you talk about the intel ceo coming out and saying over the weekend that the chip shortage will go on for years. how do we decide this is transitory? bruce: i do not think it is going to be easy. quite frankly, i think what we are going to see is not going to
be very indicative of the trend. i do think if we are right and we can carry strong growth into next year, given where the labor market is, given what the fed is trying to do, i am a big buyer of the fact that we will have a trajectory of higher inflation. this year's move is not going to be particularly indicative of the magnitude of that acceleration. this is not what we have been living for the last 20 years on the underlying dynamics. lisa: we have stopped talking about a cagey recovery. -- a k shaped recovery. i am wondering if it will hamper the full employment metrics. bruce: we do have an economy in which some sections have not recovered. we are still not expecting jobs
to get back to her they were before the pandemic. at least until sometime early next year. there is still a lot of damage. the important point about scarring, this is scarring that will be painful to some parts of the economy but it is not hitting the financial sector, it is not reflecting an overhang of housing. this will not hurt the macroeconomy the way the scarring after the financial crisis did. it is not the same kind of macro driver. tom: i know you took a call from jamie dimon yesterday afternoon and he was thinking about -- do the wealthy escape higher taxes? if we get the tax policy, that the fancy people somehow escape the tax burden?
bruce: taxes need to go up if we are going to be financing this infrastructure bill. i do think we should understand that against the backdrop of what we are seeing in terms of wealth gains and the economy overall, that is not going to be a near-term drag on the economy. we could have a long debate on whether the optimal level of taxation is, but i do not think on the side or the household side that tax increases will be a drag for this economy. jonathan: bruce, always good to catch up. setting you up for the week ahead with payrolls just around the corner. 978,000 on payrolls in america for the month of april. morgan stanley, 1.2 5 million is
there estimate. unemployment will drop from 6% to 5.6%. tom: it is replacement of what we saw. you see a healing economy. i see it in baseball stadiums. lisa mentioned the k shaped recovery. jonathan: 11 minutes to mention gareth. tom: he said the hetrick was pretty impressive -- hat trick was pretty impressive. does it count as a real game if they count sheffield? jonathan: i will tell you what i really think during the
commercial break about the situation. tom: you are ignoring the question. jonathan: yields unchanged. tom: it is a transitory conversation. jonathan: lisa, you escaped that one. rightly so. lisa did not come down to soho to see what tom keene was up to. we have a fantastic week of coverage for you. looking forward to it on tv and radio, this is bloomberg surveillance. ♪ >> india, another sign of the backlash with the way the prime minister is handling the coronavirus outbreak. the number of deaths in india
blamed on the virus set a daily record yesterday. another sign of a return to normalcy in your. the european commission has -- the new laws would replace a blanket ban for non-essential travel to the eu for residents of all but a handful of countries. the dragon capsule splashing down in the gulf of mexico. that is the first spacex regular crew mission to the international space station. the anchor at the american --
the number one thing we need to do is to invest in ourselves, infrastructure, innovation, manufacturing, in our people. jonathan: that was jake sullivan. from new york city this morning, i am jonathan ferro. equity market, s&p 500, futures advancing 15 points. yields on 10 year, 162.59, down almost a basis point. mild moves, no drama. the european commission, europeans pushing forward to try to reopen travel to vaccinated individuals perhaps worldwide. the easiest place to die in asset prices is trying to be
short a bubble to early -- too early. tom: no question about that. the dow at 33,000, good to see the dow. amazon not in the dow. jonathan: are you just trying to wind me up on monday? tom: marty, two years ago, republicans were trying to get out in front of the democratic juggernaut. this is on the shores of illinois. she retired. it is trump territory as well. this is the calculus of the stuff we talk about. how do democrats respond in this
legislation that they may lose the house? marty: that could lose -- they could lose the house. that has been the traditional bounce back for the opposition party in the midterms. how the economy is behaving, how the markets are behaving two years from now is what will tell. tom: republican leadership with a certain theme. how much weight to give to that? this disparity between mitch mcconnell and his constituency in kentucky. marty: there is a battle between the trump part of the party and the more traditional pieces of the party. how they come together is how they will tell how unified they are. lisa: biden has taken a page. he will be in virginia today and
he is trying to appeal directly to the electorate. i am wondering if this will get broken up into smaller bills. how realistic is this? marty: one part that is realistic is the traditional infrastructure plans, a much smaller version. republicans have said they are willing to come up with their own infrastructure plan. they will talk about it this week. i think it is quite possible we may get a skinny infrastructure plan passed through congress. lisa: naysayers were saying that biden would not want to do that. how much are democrats talking about this would be giving away the store in order to get something done? marty: you will get that from the progressive wing of the
party that already feels the biden proposal is not big enough. you may see internal struggles in the democratic party come to the forefront if they go for a slimmed-down infrastructure bill. i think joe biden really believes that this country needs such a bill and he is going to prove it. tom: do you think they can get it through congress? what we heard last week, this is going to be a battle. they just line up the votes, the vice president votes, and on we go. marty: if you believe what susan collins is saying, she is looking for a counter proposal from joe biden. if you could get republicans in the senate to vote on an infrastructure bill -- i think it is a real possibility. tom: thank you so much. thrilled you could join us.
i want to make very clear, 9.5% per year, 10 year track record 13.4%. in all of the hoopla and ukulele playing, there is no talk about the math. jonathan: we have to talk about handing over the baton. warren buffett saying -- this is what mr. buffett had to say. heaven forbid anything happen to greg tonight. the hierarchy of things for the years to come here and we have no idea when he steps down. tom: i look at the cash bill and i go, what are we doing?
jonathan: who am i to question warren buffett after decades of success? lisa: $145 billion. other companies have also very large cash bills. warren buffett is 90 years old. he has made -- i do not want to say bad bets. but he has missed on a couple of things. there is a question about the new direction of a company in a time that is different than the time he grew up in. jonathan: the federal reserve, isn't that the major difference? lisa: the idea here is, what is value? what are the fundamentals? warren buffett was talking about inflation. janet yellen saying it is not going to be a problem.
this is really the debate. warren buffett does not have an advantage over anyone else. this is an unknown in the market. jonathan: i thought that was the interesting comment that came out of the weekend. the range of businesses, different sectors and industries, almost a buying frenzy. that has been the issue over the last couple of weeks of earnings. tom: larry mcdonald saying commodities is the summary. i have to say, the internet news over the weekend is breathtaking. the level, the articulation of gloom. jonathan: things are so bullish. tom: i look at the depth of gloom.
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jonathan: from new york city, here is the price action. london closed, much of europe closed for may date. -- mayday. off the back of the biggest monthly gain on the s&p. really nice so far. let's get to the airlines stock. europe pushing to reopen travel. will the u.s. reciprocate? the former fda commissioner saying the travel restrictions in america makes no sense. we advance just a little bit. bond markets -- we had three
straight weeks of gains for treasury than a week of losses. just short -- going into a very big payroll report. looking for something around one million. tom: over the last number of weeks. right now, this is really important conversation. he has written a note that you need. on digital differentiation. i love the idea, trying to figure out which of these tech monsters will win and others will fall by the wayside. how do you make that distinction? >> we have split a big basket of
u.s. large-cap tech stocks. quite often, they sustain the momentum. microsoft, amazon was already growing nicely. the steadiness is one part. the second is acceleration. we include the chip guys. a lot of companies have done incredibly well through this pandemic. the activity does benefit from physical presence. tom: i get the idea.
buy on the rumor and sell on the news. how do you frame it now? what is the timeline out six months on big tech? hugo: the sustainer's in that category. apple fits in there. definitely a degree of sell the news. a complete blowout. but then, we think these are companies -- they will continue to dominate. they will continue to grow. the other two areas -- the accelerators.
the fork in the middle -- you hold it as a balance in the middle. jonathan: what is the argument to stay that busy? 97% of the s&p 500 members climbed above the 200 day moving average on a single day. many people have made -- to stay busy, stay nimble, stay agile. hugo: that is staggering. it is possible it will continue for a while.
that equity for us over the last few weeks, there has been a bit of a headwind. we have been aggressively positioned. once it has recovered, it is the anti-rotation created the last three or four weeks, but we think it picks back up again. a lopsided portfolio will help you in the near future. you can see the rally in 10-year bond yields. jonathan: april 21, 97% of s&p members posted above the 200-day moving average. lisa: if you take a look at the
flows and what will bring them back into the market. hugo, are you actively buying stocks? the fear that people have that perhaps they are missing something and things are too good, that that is misguided and it is actually a good time to be adding to the positions you're talking about right now? hugo: yes. that is part of playing into the narrative of be cautious. we can see -- we have described this recovery is coming through in waves. buffett is not wrong when he is talking about the u.s. booming.
the roaring consumption they are seeing. we are filling the gap because there is so much money sloshing around in people's pockets. this is a huge amount of money sitting on both private and commercial -- lisa: the reason why they are being cautious is they see the valuations. in the potential risks, people are talking about higher taxes. that could hit the big tech companies more than others. how much has that been priced in? hugo: it is a key risk. corporate tax rates going up.
we think the number comes in a little bit lower. and then you have where those taxes are actually focused. yes, it will had the international and tech companies. we still think the wave of growth will be so strong that it will drown out -- we see that as a bump in the road rather than something that will derail this aggressive cycle. tom: is cash and asset for you -- an asset for you?
hugo: afraid not, tom. what does it give you? the treasury has got too much cash. the thing it provides you is liquidity. jonathan: was it early 2018, cash is trash? 2018, i think it was. you need some type of balance, what is it? hugo: the most important thing is liquidity. equities are still very liquid.
you have a negative real rate of 78 basis points. cash is even more painful. it is coercion. jonathan: good to catch up, as always. hugo rogers, chief investment officer. we will catch up -- jonathan making some headlines. price target lifted for 4300 240 600 year end on the s&p. -- 4300 to 4600 year and on the s&p. tom: apple and the dow --
2.55% of the dow. i do not know if that is record wide. it shows the distortion of what people pickup from the media every day. it shows the distortion. jonathan: i do not want to talk about stock splits. stock splits do not change anything. tom: you cannot extrapolate the call to 4600. it doesn't work that way. on the street, i would take that point. jonathan: i am glad we settled
that. tom: when people wake up in america, they consider the dow. jonathan: i think people are little more sophisticated these days. i think we owe them that. should we leave it there? we are done. we have been doing this for years. i have no doubt it will continue. tom: i do not want to see hugo rogers on again. he crushed me. jonathan: we will save it for your day off. this is bloomberg. ♪ >> it is a question that has berkshire hathaway all year and now warren buffett has answered. buffett says greg able would take over if buffett were to step down.
buffett is 90 years old. the u.s. denies that it is close to a deal with iran to revise a nuclear agreement. world powers are trying to broker a u.s.-iranian deal. u.s. treasury secretary janet yellen says president biden's economic plan is unlikely to create inflation pressure. demand will be spread over a decade. if inflation does become an issue, she says there are tools to handle it. the sale is an effort by dell to reduce the size of the personal
the country would susceptible populations. controlling measures for people to prevent gathering. >> that was the world health organization's chief scientists. a stark reminder of the situation in india. from new york city this morning, good morning. here is the price action this monday money. we had some weight to the rally last month. the s&p 500, north of 5%. those gains the biggest since november of last year. crude firmer. fx market, euro-dollar 150.24.
we begin a new wave, perhaps we can travel in the european union. this is dave wilson. dave: berkshire hathaway certainly moving in early trade, shares up about 1%. you had the comments warren buffett made over the weekend. you have -- the company came out with first quarter results and earnings and sales beat the average estimate. berkshire has a quarter of hundred 45 billion dollars -- some positives in terms of their results. on top of that, we had his comments earlier this morning. talking about vice-chairman greg able, his likely successor if anything were to happen to him or if you were to step down. the level of certainty we have
not had before. that is something that shareholders have been wondering for years, who would take over if buffett were not in charge. we have a better indication of that now. we move on to a couple of deals. one that is in the works and the other looks like it has happened. the first is verizon. the shares are not moving a whole lot in early trade. the phone company is nearing a deal to sell media assets. they may sell for as much as $5 million. verizon got into those businesses before the ceo took charge two years ago. verizon is making a major commitment to go -- to the wireless business.
they committed $45 billion to 5g wireless, the highest price tag for any company participating in the sale. dell technologies, shares are up half a percent. the computer maker agree to sell the software maker to francisco partners. it helps companies integrate cloud computing services. orders of magnitude better -- bigger than this booming transaction. it is part of a bigger picture. jonathan: always great to catch up. dave wilson, are stocks editor -- our stocks editor. we are also looking at the airline stocks with this conversation between europe and the u.s. on reopening travel.
tom: this is important, america needs to come to the rescue. i was riveted by the essay on the society of india. how do we help a society that seems to be so disparate across the subcontinent? >> it is really just a terrible tragedy, what is happening. it is not affecting all of india the same. delhi is getting crushed by the virus. other parts of the country are not. the response has to be different.
we expect different responses. lisa: how good is our surveillance of potential variants developing as the virus rages across india? >> it is not -- you can look at what is the most prevalent variant causing the problems. you can find the variants, but understanding them requires additional data which may be hard to come by when things are so chaotic. it is really important to have a global surveillance network so we can understand not just that there are variants but how they behave and the implications for vaccine. jonathan: vaccinations are the key to addressing this. do you have an idea of the
efficacy of these vaccines? >> much lower than if you were not vaccinated. your absolute risk -- somebody who never comes across the virus will have 0% chance of getting sick. if you are going out to the bars and other places, it is possible to get sick. if you are vaccinated and take precautions, the risk is very low. there is every reason to get vaccinated. jonathan: joshua, thank you. always good to catch up. we need to do a better job in the weeks to come about their own risk tolerance around some of these events.
i do not think we have done enough of that. lisa: am i going to die from this virus? can i go back to my normal life? those are two different questions. the second question is the key thing. the cdc coming out to say you do not wear a mask when you are outside. jonathan: it is a double-edged sword. we talk about this all the time, the reluctance to tell people what to do once they have been vaccinated. tom: we are living what every pandemic looks like. rounding third base. every society is the same. the number one thing is to get vaccinated, like francine lacqua did this weekend. jonathan: well said, tom.
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♪ >> this economy is very resilient. now it is working with the private sector and the public sector. >> the only real surprise for me this earnings season is the magnitude of the beats. >> whether you are growing at 9% or 6%, to labor market i think is going to remain very strong for at least the next few quarters. >> we are in the third inning of a continuous economic cycle that will continue to bear fruit, so i don't think this is growth -- is peak growth. >> the question is how long is transitory. it is certainly not long-term. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: getting back to work. from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. equity futures up 0.5% on the s&p 500.