tv Bloomberg Surveillance Bloomberg April 4, 2022 8:00am-9:00am EDT
>> this is the markets readjusting to a much faster pace of fed normalization. >> financial conditions are going to tighten, that is the point of fed hikes. >> do they wait long and they have to move higher and quicker? >> they have this blunt instrument they can't control where the demand retracts in the economy. >> recession risks are higher. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning everyone.
kailey leinz information abramowitz -- kailey leinz in for miss abramowitz. do we have the courage this morning to look at the images on the cover of the newspaper? jonathan: haunting was the word used by the european council president. deeply concerning, distressing. how does europe respond to it? will they fall short? most people conclude they will. tom: this is not a war from other centuries or even world war ii or vietnam. there is an immediacy here that not only affects the war outcome but affects the policy around it. jonathan: a moral question has dominant of the conversation for weeks. how do they back away from energy? they can talk about reducing dependency this has become much more urgent. this electorate wants to see
them do something immediately and you can see the pressure building right now. if they do that, you know what the price will be, almost a guaranteed recession. tom: i want to get to kaylee and the washington response let's go to that one headline. mr. demott -- mr. dimon demands a marshall plan for the eu energy security that has a new urgency this morning. jonathan: how does the united states assist the europeans? the biden administration has than a good job of not embarrassing their allies over the last month, allowing them time to embarrass themselves and this is an occasion where the europeans this week may start to embarrass themselves. the austrians this morning saying war crimes require consequences but saying very reluctant when it comes to gas sanctions. europeans once again embarrassing themselves and the united states has to outline a position of how they will assist the europeans to cut back drastically, their dependence on russian energy.
tom: kailey leinz, in this 44 page essay, a beautifully pieced together -- with a lot of interior data on j.p. morgan landscape. mr. dimon always touches on america and he talks about how we need to address or redress and what this comes down to is america right now adapting to europe. there has to be a new initiative from mr. biden starting this morning. kailey: jamie dimon taking quite a stance on political issues, calling for tougher sanctions on russia but warning of the potential growth impact could result from it, saying it will result in a slower economy and build inflationary pressure that makes it difficult for a federal reserve what he does not envy. this is the question for policymakers in the u.s. and europe. what do you do on the monetary and fiscal side with energy and -- with energy front and center? tom: one question, one
observation before we get to our data check and our first guest and that is the speed of change of yield. it is breathtaking. jonathan: it is, at we have curve inversion and we are one hike in. maybe a little bit of a crack in the armor if you look at what is happening with icm. tom: the vix lifted 22.3. the dow up 15 points. jonathan: futures up 2/10 of 1%. yields essentially unchanged. crude just over the last hour or so, kicking a little bit higher. $100 and $.80. tom: the focus of financial media is the sovereign yield.
looking even at the junk junk for invesco. are yields finally where they compete with dividends and share buybacks in the equity market? >> good morning. it took a while to get here and it was a brutal first quarter to be honest. total returns down very big but what we have always said is that investors want higher yields, they just don't like the path to get there and the path was pretty tough, but we are here, certainly at more elevated levels for entry, if you could close your eyes and look at yield, and think you would find them attractive if you didn't have to be on this path to get here. all of the yields look really attractive now versus dividends and other alternatives. jonathan: how do you think of that because spreads have been tighter over the last few weeks. how are you thinking about that in high yield? >> the spreads blew out in early
march and late february and i got to a point where we said we don't know what is going to happen with russia we don't know if the fed is going to push the u.s. into a recession but you are essentially pricing in the worst-case case scenario, maybe not quite but a lot of bad was priced into credit markets and we have come back significantly, so we have seen this big rally in high yields and corporate credit spreads but we are still kind of in the middle of the range, so i would say we went from -- i don't want to call in no-brainer but it was an area you had to get involved unless you feared the worst was going to happen and now you are in the neutral range. no longer getting a free option but it is still cheap, still 30 basis points wider in u.s. ic credit spreads. i would call them near-term cheap but long-term neutral. jonathan: jamie dimon said the stronger the recovery, the
higher the rates that follow. the stronger the quantitative tightening as well. a lot of people are worried about a replay of late 2018. we are never what happened in 2018. the primary market shut down in high yield. when you look at supply coming in, how does that stack up at the moment? matt: dimon said he did not envy the fed. i don't think he envies bond managers right now either. high yield is down roughly 75% year-over-year, a lot of yields getting done in the loan market and there is tremendous demand for bank loans and then the high-yield market, prices are really difficult i don't know the companies are looking to figure out where they would have to price versus the ig market where you just have $230 billion issued in the month of march, the second-most in history and to your point, credit spreads were actually able to tighten
from the back half of march. a lot of supply being issued. we are really flooding the market. i think it is a good sign that you are seeing a lot of issuance. the markets functioning, not sure where the fed is going to go and you are probably going to have higher yields, so you might as well issue now and get it out early and that is what a lot of corporations are doing. as long as the market is functioning and as long as the paper is getting taken down and concessions are minimal to decent, we think the market is functioning. if it starts to seize up like it did, that would be bad. kailey: to that point as we think about the path forward, when do you think financial conditions will actually start to tighten any material way considering they are just as easy now as they were at the end of february before the hikes? matt: that is a big question for 2022.
the economy is going to have to slow down. you can have oil prices where they are, you can't have food prices where they are not have that flow through. we are going to see that happen and the good thing for the economy and for corporations is that they are in such a goods -- such a good place. they have a good balance sheet and when it does slow and you start to see the back half of the year and the consumer starts to lighten up on purchases, you will at least been a decent enough spot that they will be able to weather the storm but they did fix their balance sheet in 2021 otherwise we would be talking about a lot more situations with corporations as well as the u.s. economy. jonathan: we had citi earlier on the program. do you think we have more chances of tiger woods playing this weekend than we have of
getting that from the fed? matt: i hope tiger plays. i think 450 is not going to happen. i think they will go two, possibly three and then they have to take a step back and see where this goes. better to see target -- better odds of seeing tiger this weekend. jonathan: i asked that because i wanted to talk about golf. after all these years, it is still not the same. tom: i saw a study of that two years ago, his influence on who watches is still sending. -- still stunning. jonathan: we need him this weekend. matt brill, thank you very much. the masters kicking off later this week. equities up on the s&p and nasdaq. some great notes out there but mike loosen coming out from morgan stanley, taking the
headlines once more, calling the recent squeeze in equities for the month of march a bear market rally, and he says over the weekend the bear market rally is over. tom: i go back to earnings. i've got anaheim and his team can get 9% earnings growth, others beneath that and then others even farther below. the bear market rally is over. jonathan: investors face multiple headwinds that will be harder to ignore. that is the second half your thinking about. tom: again, staggering into may 4 and future meetings as matt brill just told about. the uncertainty is off the chart. jonathan: futures up with tom keene and kailey leinz. this is bloomberg. ♪ ritika: keeping you up-to-date with new some around the world with the first word, i am ritika gupta. shares of twitter soaring after
billionaire elon musk announced he took a 9.2% passive stake in the company, a week after he hinted to his more than 80 million followers that he might shakeup the social media industry, saying he was giving serious thought to starting his own. growing reports of russian war crimes in ukraine. images show what experts say were unarmed civilians killed execution style. leaders around the world have condemned moscow and are considering more sanctions. the current one says many of those images are fake. jp morgan ceo jamie dimon is calling for more sanctions on russia and he worries federal debt may ultimately raise interest rates more than the market expects. he covered a multiple that she covered multiple issues in his letter. he says the world needs are liable and affordable energy. in hungary, prime minister orban
security fourth term with his two thirds majority parliament, overcoming criticism that he is backsliding on democracy and that he is too close to vladimir putin. -- says she will not run for a second term. a crackdown on democracy advocates. the chief ticket it will become -- will be elected by -- global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪
>> it is unacceptable that civilians are targeted and killed. it is also important that the international criminal court has opened an investigation into potential war crimes in ukraine, and that all facts are on the table and that those responsible are held accountable. jonathan: the nato secretary-general on cnn over the weekend following disturbing
images coming out of ukraine. the nasdaq 100 up a third of 1%. two-year yields come down three basis points. the curve still inverted. that spread negative about three basis points but off the low of this morning. crude reclaims at 101. tom: right now, we speak of the unspeakable. with us is daniel tennenbaum from oliver wyman. i want to go to the time i spent in london with john taylor of stanford, who was international treasury secretary. the weight on his shoulders, of explaining to america you had to grow up and figure out where the money came from. nothing has changed. your words suggest the gazillions of dollars of suspect
money made in russia is in america, in new york and we don't know where it came from and we are ignoring. daniel: private funds in the united states are not required to know their customers. tom: when is that going to change? daniel: it has been attempted multiple times over the last few years. one bill would expand coverage for aml requirements but right now -- tom: who is blocking this? i don't mean to interrupt but we have gazillions of dollars that we don't know where it came from. daniel: there has been a mix of interests that have tried to fight this covered financial institution definition of the last few years. other this is enough to really put that expansion over the line is unclear. there have been other issues in the past where this has not moved the needle from a lettuce lead of standpoint. tom: at $10,000 a slot to get money in, how does all of that
money get into america? daniel: it is coming in through certain offshore financial institutions and the bigger issue is even when it comes from domestic financial institutions, the funds holding these assets only have to ask so many questions to satisfy their own risk but less around what the law is actually obliging others. tom: i sat in a hotel with john taylor in 2005 and the weight on his shoulders, people did not want to grow up and actually find out where the money came from and nothing has changed. jonathan: we have to fold in china to this conversation. talk to us about sink -- secondary sanctions and how china fits in. daniel: secondary sanctions were used successfully related to iran. they affect actually essentially force foreign countries to choose between doing business with the united states and its allies or the target of sanctions but not both. those helped to drive iran to the negotiating table to form the iran deal.
secondary sanctions would focus on trying to ban other countries from purchasing russian energy products among other things, but secondary sanctions here are only as effective as the eu is on board because the last thing the u.s. and other allies want is to penalize the west for really trying to fall out of line with what has been pretty multilateral global approach. jonathan: every single bank has an army of lawyers and legal experts telling them what they should and should not do right now. do you think it is inevitable that further down the road, but he has made his -- made a mistake and that will come with a monster fine? daniel: i don't. most of the larger fines we have seen have been tied to egregious issues, banks that were intentionally violating the law. given the pace of change that we have seen over the last six or seven weeks, it is easy for financial institutions and other companies to make mistakes. it is those that are really
intentionally doing this, those are the ones who will find themselves on the receiving end of a monetary penalty. those that are just trying to find their way through an evolution of risk appetite and might have made the wrong call may be a little more mild. kailey: we are waiting to see what the response from the european union is going to be and they said there will be a response in retaliation against what they are calling or crimes on the part of russia when it comes to cities like ukraine and -- cities like bucha in ukraine. let the whinny already taking unilateral action on that front. what kind of hold does a potentially piecemeal strategy where each country is acting unilaterally rather than as a group when the european union -- what loopholes will that leave? daniel: you will not see the eu be able to move forward with any sort of material energy sanctions program until they have more alignment across the
members. with the winnie announced over the weekend that they are going to ban the import of russian energy but then you add slovakia over the weekend and they will give to russian demands and pay for the energy in rubles. until there is more multilateral alignment across the eu block. jonathan: i want to squeeze this in because i know it is something you want to talk about. china and auditing rules and whether we may finally come to an agreement, a big breakthrough on that front. daniel: i used to be with a public accounting firm and i worked extensively in china with some of our audit clients and that is a big deal. some of those information requests, you would not even breathe that request of needing certain information to come across the u.s. for a variety of reasons and that is a fairly significant olive branch on the part of china, to really
understand that they face a significant delisting risk if they were to continue on their current track. jonathan: dan tennenbaum of oliver wyman. do your member taking off -- taking your father's suit out of the closet and trying it on when you were five? that is now a style, to take your fathers shoot is at -- fathers suit as a child and put it on. tom: he had a gray suit on, double-breasted. jonathan: like 50 sizes too big. kailey: and a pink beanie. jonathan: that's right. tom: did i get what?
jonathan: live on tv and radio, this is bloomberg surveillance. price action shaping up. the s&p up 0.2%, the nasdaq of 0.33%. for the month of february, looking back. later this week, the minutes to watch according to chairman powell. he told us if you want ideas, clarity, detail on balance sheet reduction, look to the minutes on wednesday. tom: help me why the matter. jonathan: apparently, we get detail on balance sheet duction. that is what chairman powell said.
the ecb has accounts that the last meeting. whatever that means. that would give you the ecb account. tom: they need the bramo- account. jonathan: i would love it. a really interesting research note. you say, the recession math does not work. there is not a recession out there. you have got the back end of the equation. i am passionate and -- fastened by this trade, less imports. can that pushed us into some form of recession? >> the thing is this giant pivot towards u.s. manufacturing, but at the end of the day, it is just going to take time.
when we look to the gdp capping in the first order, the trading deficit to gap record levels. adding a positive growth number four this quarter is going to be a challenge. it is going to make both feel stagnant. tom: lynn works into currency dynamic is well. do you need to fold the currency dynamic unity recession analysis? lara: when the fed embraces rates, the rates dynamic is driving fast right now. these big rates moves, but the dollar is strengthening. that is another form of policy tightening. at the end of the day, you are going to be watching the dollar against our major partners. it allowed itself to stay
strong. but china starts to weaken its currency. that is another front on policy tightening for the u.s. economy. kailey: let us talk about the dates. the inverted yield curve, the fed seems to pay it no mind. should they? lara: absolutely. there is a reason why the earliest stages of the rate hike cycle, people start wondering about the end and what the economy looks like trying to bloat the economy down is tricky. we have got a lot momentum. the fed is going to have to be aggressive. it is too early to sound an alarm bell on a recession over the next year, but you look three years out and the yield curve is a strong signal we are facing a significant slowdown. when you look locally, i have
been saying for some time that i think the u.s. yield curve reflects global dynamics to a larger degree than in the last 40 years. it is a global growth story and it is slowing down. kailey: how inflated or not is the u.s. economy to what we are seeing in europe? lara: on the economic side, we are pretty insulated, but with it comes to financial conditions, that is the clear vulnerability. at a time when the fed is starting this quantitative tightening and we do not have good examples of prior episodes of quantitative tightening, and the one we have did not end well . this is a time where markets have a lot of uncertainty. quantitative tightening is going to later on to that, especially when we are seeing so much volatility in benchmark yields, that stands to cramp up more
over the summer. tom: -- the savings rate and what it signals about recession. i do not by the diminished savings rate fault us into recession. lara: i am with you, tom. that is not my primary indicator. when we look at the savings rate, it is clear that we have had so many wealth gains across the economy that are not factored in to the savings rate. for that reason, households still have a lot of momentum. we have the jobs picture, which is positive. it is important not to get too pessimistic about the economy. the same time, the fourth pandemic is already leading the world on fire. we are headed back to this 2% rate of growth, but i do not
think it comes from the household. tom: do you overlay inflation on top of it? where is the tip quite on nominal gdp that can nudge as towards whether it is a recession or something like that. is it an under 6% nominal gdp when the bells go off? lara: to me, what you started with was earnings. i the of nominal gdp and pull it into earnings and revenue growth when we look at the economy and it is relatively solid and markets, which are challenged, experiencing volatility, the connective tissue there is the fact that every hike cycle are damaging to multiples. we are looking back historically. we have not seen a fed rate hike when we have had multiple expansion in the first year. it means you have got inflation
winners and losers, but if you get in there, you have got solid earnings growth. you just cannot capture it. the top-flight industries like you used to be able to. you need to dig into credit. kailey: the profitability has increased on the ability to pass costs on to consumers. when do we reach the point at which consumers no longer tolerate higher prices? lara: this is the unique thing. please have been able to pass along price hikes for the first time. in 2010, companies could not pass energy price hikes along. margins are going to grow somewhat, but they are so generous right now. some companies, when they experience higher input costs, that means higher revenue. inflation also makes the investment cycle go faster. we are going to see companies
rewarded for investing, not punished. it is a different reaction to inflation. we are going to see companies investing around cost cutting be rewarded. kailey: mike wilson at morgan stanley raised the wage issue and that that is going to put in margin pressure. for wages, we sara 5.6% in the data for march. what is your expectation whether we have reached the spiral portion? lara: that is the number one thing that the fed is watching. we'll wages continue to increase, but as long as that is known as donning the lower income cohort, the fed is going to focus on whether or not that cohort is keeping up with inflation. when we get the lower end services job, inflation in double-digit and staying there, that is when the fed starts
getting concerned, but they are watching the dispersion more closely. jonathan: thank you. a lot ahead for the federal reserve. -- saying the eu must do more to stop the atrocities in ukraine, must stop the pressure on russia, went on to say that on sanctions, nothing is off the table. he was also saying we are expecting a slowdown, not a recession. tom: ims teachers. you mentioned something an hour and a half ago -- the talk of europe. i go back to the military effort, where russia has moved away from certain geographies, no doubt to pick up strength in other geography and what is the response of ukraine. that is more important than
jobhunting. jonathan: we are having the same conversation each and every time and each and every time, the europeans fall short of doing something on energy. you hear out of europe that there is not much left apart from energy. kailey: you contain existing sections when it comes to swift, but not any blowout sanctions that could have some impact. when we hear him saying we expect a slowdown, not a recession, is energy what makes that difference? that is what we heard from the deutsche bank ceo earlier, saying if you see that for germany, that means a recession. jonathan: the pace of energy going higher. this out of saudi arabia, the european customers, the u.s. customers, prices are raised. all oil prices in the u.s. and europe.
tom: what else is it going to be? germany with food up as well. you wonder what it could be. look at the new outline on lithuania -- new headline out of lithuania. jonathan: in difficult of back half of the year. jamie dimon on volatility. should we be talking about higher rates? higher energy prices, as well. when does that faith? tom: you said the fact cap of the year. i am thinking the back half of april. jonathan: q2 starts, futures up 0.1% on the s&p. this is bloomberg.
ritika: leaders from around the world condemning moscow over multiple reports that russian troops have committed war crimes. russia could face more sanctions. images of people they say are unarmed civilians killed execution style. the kremlin claims the images are fake. the lenski mate a surprised tape appearance at last night grammy award. he told the music industry that they wear -- that somebody wear body armor instead of text leaders. as by asking congress to act on gun related issues after a shooting in sacramento. at least two shooters open fire early sunday. six killed, 12 others wounded. in china -- about a hundred
billion dollars for potential investors, including general atlantic. hitting the hundred billion dollar market would make it the most valuable in the world. first glance of 65,000 electric vehicles over the next five years. renters are curious about ev's and eager to drive brands other than tesla. global news 24 hours a day on-air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. ♪ tom: right now, a chart on the
story of the day. mr. muska passively looking at twitter. kriti: even a suggested he wanted to create his own social media platform. we are looking at twitter shares relative to other social media stocks. if you look at what shares are doing, not just today, but since the start of the year, as the line goes up from the start of the year, there is out performing social media peers. a lot of this has to do with the war and the idea that twitter is being used for updates. bloomberg intelligence pointing to new product launches, including twitter blue that could help them exceed their revenue target of some .5
billion dollars in 2023. tom: thank you so much. it is a joint right now to speak to one of the lightning rod of international relations and that is john bolton, ambassador bolton with so many tours of duty and always somebody looking at the force and power of russia. give us a measure of the force and power of this tribute. amb. bolton: he suffered some severe setbacks in almost six weeks of work in ukraine. the russians miscalculated the extent of ukraine's resistance, which has been heroic. they mistake it is the capability of their own military, which has had one failure after another. all that sent, they still control a considerable amount of
ukrainian territory. it looks like they are trying to regroup, pursue more sensible objectives. i will have a piece up on 1945.com later this morning that says they are going to go after areas of southern and eastern ukraine. when we come to negotiations, which we are not in seriously yet, at least more land russia holds, the harder it is going to be get them to give it up. tom: we talk to the admiral as well about what has been underreported, which is the landgrab along the black sea. what should be the american response to the territory taken down to odesa? amb. bolton: this is a central part of putin's objectives. putin wants the entire north
coast of the black sea. he wants odesa, all that territory because it will land lock ukraine. either things that have been coming through odesa will have to pass through russian polls or they will have to switch trading routes through poland, hungary, and other countries that will give putin strategic coverage. why he did not go after it first, i do not understand. tom: you cannot fdl, worked with david keene, worked with a republican party that was not afraid to project. that you work for donald, who had his isolationist tendencies. describe the new american
isolationism, describe the new gop isolationism. amb. bolton: there has always been a strand of isolationism in the republican party. it is actually better in the democratic party. they think the world is going to be saved by organizations like the u.n. that is delusional, but the republican delusion is that none of this in ukraine has anything to do with us. it has everything to do with us. our way of life depends on everything all over the world. the isolationist in the republican party do not see anything worth defending. i am actually hopeful. i think the isolationist rent in the republican party has struck almost to historic low levels. biden's catastrophic withdrawal from afghanistan last summer was a major factor. if you look at republican views on assistance to ukraine, you
can almost see those events pushing at party back to its reaganite foundation. kailey: what would be an appropriate response from the u.s. or europe for allegedly were crimes in bucha and other cities in ukraine? amb. bolton: there is little doubt based on the evidence we have of barbarity on the part of russians. it is nothing new. we should not have been surprised, but none of this intimidates vladimir putin or the men in power around him. these are the heartland of history. you can threaten them with war crimes, prosecutions per it is not going to slow them down. i have written on this extensively. these international terminal court type operations do not deter these things from happening. they are rarely able to administer punishment.
this will have to come when russians get control of their government again and take action against the people who committed the crimes. kailey: if vladimir putin has shown he is not that deterrence tactics have not worked, what will he responded to? does he need to be on the table? countries like the uk thang they do not want to escalate. what would escalation look like? amb. bolton: patent would have responded to adequate deterrence, that there is a lot of nattering by leaders of nato countries thought how united alliances. yet, the cannot get the leader of the free world to agree to a transfer of polish makes. he said it would be worth three, which it is not. the west failed.
tom: john, that was rude and undiplomatic view you, as you have been called before. what now? are you advocating that the secretary of state needs to take the bolton route and undiplomatic, and be more assertive? or can we have a grace to our diplomacy as we force like america once? amb. bolton: we have been plenty graceful with our allies and are still not eating them to do enough. we are not doing enough either. if you listen to the british, they say we are being dragged along by europeans urging us to do more or pressure from both the house and the senate. as putin retains territory, he has won. his effort to reestablish
russian hegemony and maybe sovereignty in the space of the former soviet union -- tom: i do not mean to cut you off, but this is a new domino theory moving from a west. are you suggesting there could be a domino theory if he takes part of ukraine? amb. bolton: he already has some after the 20 invasion. he is going to try and get more. he has got plenty of other targets. if you ask polls, lithuania, they are deeply afraid that they are high on the russian target list. the feckless western response will simply encourage them. kailey: what about to its border with china? what role do you think china is playing? amb. bolton: i wrote in the wall street journal i think russia
and china have an entente. china has rushes back and they will expect russia's back they launch actions against taiwan or elsewhere along their periphery. right now, i think what the chinese are doing is making their financial institutions available to sanction russian banks and others. although china already purchases significant amounts of russian oil and gas, they will be happy to purchase more if we had an effective embargo. these kinds of relationships do not require military assistance from china. economic assistance is important. other countries like india quadrupled its purchases of russian oil in february. tom: you mentioned we should not
worry of world war iii and perhaps we should not worry of putin and his nuclear abilities. how do we develop a confidence that we will not find some form of world war? amb. bolton: i am not think we should not worry, but we failed to deter putin, and he is deterring us. if he can get what he wants without an effective allied response, he is going to be encouraged to do more. providing the polish makes is a small piece. we are now in a gracious of time with -- in a race of time with the russians. we should be doing more. options we had our off the table. biden gave them away when he took american force of the table. we are constrained, but if we allow russia to get a major part
of its objectives in ukraine, we have suffered a significant defeat. tom: john bolton, always something thoughtful and controversial to say. talk of diplomacy is great, but what a shock to commit the images we saw. kailey: human tragedy on display. what is the west response? europe has valid retaliation. what form will that take? headlines from ursula von der leyen calling for a global response, but anything short of sanctions and an embargo on russian fossil fuel, where does that leave europe? tom: we can look at oil on sunday, up 2%, brent crude back to $107. wheat this morning with a 2% move. please stay with us through the
>> everything you need for the start of u.s. trading. this is a bloomberg: the open with jonathan ferro. live from new york city, and yield curve inversion. >> the guilt curve inversion. >> the inversion of the yield curve raises the risk of recession. >> it is a more challenging environment for equities. >> it is telling us the economy is a strong today but may not be in the future. >> it is telling us that defense policy reaction function has moved toward fighting inflation. >>