Election Day | Bloomberg Surveillance 11/08/2022
There is some built in resilience that we start to see from the economies. The consumer has to savings buffer. The savings buffer is coming down. I don't think we're actually globalizing. I think we're just globalizing more slowly. If you look at that labor force participation rate, it's still stubborn and it retreated last month. That is an issue because that suggest a bit more permanent. This looks like a cycle that the Fed let
get out of control. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. Live from the nation's capital for our audience worldwide. Good morning. Good morning. This is Bloomberg Surveillance on TV and radio alongside Tom Keene and Lisa Abramowicz. Some Jonathan Ferro equity futures just about positive on the S&P. T.K.
America decides it's a midterm election. They're different than a presidential election. But the question is, is this one the same or different than four years ago, 2000, 18? I think that the key word here going into the night's broadcast with David Westin is uncertainty. There's never been such uncertainty over the polling, over the outcome, over whether we'll know tomorrow morning when we do this here in Washington. We can be certain.
One thing, Tom, we can be certain about this. One of the major issues over the last couple of months, in fact, the last year for that matter, has been inflation. Now, what's not clear to me at this point is who they will blame that on. Will it be the White House, the Federal Reserve or just global issues that have dominated the economy for the last two years? There's no question the inflation has been blamed on the president and even among Democrats as well. And I think with Bruce Kurzman coming on in a moment, the JP Morgan noted Friday was very solid about an ebbing inflation, clearly too late for this election. But even an inflation report Thursday, again, with massive uncertainty in the next year.
We've had a two day rally into this vote, bromo. And overwhelmingly the consensus view on the south side has been divided. Government good, divided government is good for this market. We've got a probe that went a little bit more, haven't we? For how long is it going right? Is it short term? Good. Is it long term good? If it's long term, how long does it stay? Long term good. If you don't have fiscal spending to
offset potential downturn to the point that you guys are talking about, who's going to claim credit? On the flip side or who is going to play? Who is going to take the blame or who is there? People are going to blame who is going to take the credit? If Republicans do win, right. Is it going to be Donald Trump sweeping to the next election cycle saying this is all me? Is it going to be somebody else saying, you know, whether it's McCarthy over in California saying, no, it's because of me? I mean, honestly, the credit game is going to be interesting to watch. Did you see the former president has a big announcement, his words, big announcement to make in the coming week. But he didn't want to take away from Teddy Vance's rally.
So he didn't want to suck the oxygen out to announce anything now. So he's going to wait for November 16th and then he's going to make. Well, I think he sucks some of the oxygen out of the conversation already Tom Keene around the midterms. The fact that a former president not quite looks set to get ready to make another run at this. Yeah, no question about it. He's gotten in the way and particularly for some Republicans and very, very close races.
I was shutting down the round robin bar last night at the Willard Hotel. And, you know, it's very strange, folks, for those of you internationally and even across this nation. It is strange for me always to be in Washington on an election day. It's sort of an out of body experiences. And you could describe the out of body experience as the show goes on. Okay. I'm going to wait for the price, actually do a case look like this? S&P 500 just about unchanged to positive up almost a tenth of 1 percent on the S&P and the bond market.
No action here, no real price action anyway. On a 10 year just short of full, just north of 420 at 2054 and Brahma Euro dollar head 99 92. We're down about a third of 1 percent. Yeah, although I really can't get a sense of direction from anything right now. I'm just it feels like sort of a hold on
weight clubbing up. Today we are going to watch Tom Keene out of body experiences. He is in Washington, D.C. and I should I'm just getting there. There's midterm elections. We're gonna be watching everything come out. I'm very curious to see how much the Republicans pick up both in the House.
All of the House seats are up, but there really is about 33 races that are toss ups. Twenty three are currently Democrats and 10 by Republicans. That's according to the Cook political numbers. Sixty one of 435.
I could be wrong in that, but I think it's about where you are. But I think that that's what people are assuming, that some of these races might be a lot closer than some people think. And I think that that is the balance of power and why they attacked us. You know, it's completely wrong. I think it was just absolute God, 1:00 p.m., this is just for you, because just have a full out of body experience. There is going to be an auction of 40
year for anybody in Washington. This is interesting. How much pressure are people going to feel for the Fed to back away from some of what they're doing in the face of the election? Yes, the cash room of the Treasury Department over there under Geraldton's statute in CPR. We'll go to the mint and the money. Honestly, this conversation is the same. Every single time Rameau mentions an auction, you start laughing and she said, but this one is interesting.
And let me tell you what's been interesting. Is anyone paying attention to this today? Let's find out who you are. Let us know. After market, we do get earnings. They are continuing today.
Disney, AMC and NewsCorp among the notable ones. Disney is going to be really interesting, especially after Netflix beat. Right. In terms of the subscribers, how much traction is Disney getting with their online offerings and or seek? That's great. I mean, to just wrap it up there, John. Thank you. Looking forward to AMC as well. A little bit later. Yes. Bruce CAC.
Joins us now, chief economist and head of global economic research at JP Morgan. Bruce, fantastic to catch up with you, sir. Is divided government the best outcome as far as you're concerned? You have any pushback against that whatsoever? Well, I think divided government means you're not going to get very strong action in terms of things like fiscal policy and in the context of how high our deficit is and how much we've already done. That's a good thing.
I think the concern is that if you have a need for action because of a recession or some other crisis, it's going to be hard to see government mobilized. Also, you have to worry that brinksmanship, things like debt ceiling crisis, government shutdowns, those are going to come back into the picture clearly as we move towards next year. First, we blame politicians for inflation. Can politicians cure high inflation? I think inflation is always an interaction between things happening in the global economy, which are not in the hands of politicians and also what the political economy. Not only the central banks do in response to that. And I think what we could say about the inflation spike of the last year and a half is it's not primarily a central bank phenomenon, not primarily a political phenomenon.
But how this is going to play out over the next couple of years is largely going to be a response by policy of how much they're committed to bringing it down. We think that inflation is moving down and it's going to move down in the core number this week. And I think it will continue, but it's not going to move down by it by enough to get us back to 2 percent. And that's going to require the Fed and
unfortunately probably at some point require a recession in the US to deliver that unwind. Bruce Lamb, look, components you watching with the inflation, trying to understand the pace of how much is coming down. Well, I think what we're going to see is really the big dynamic of goods prices moderating the energy story is going to pop up this month, but it's still on a broad downward trajectory.
But I think core goods fall both because supply side pressures around the pandemic are starting to ease as well as the dollar having moved up here. We see import prices falling for five straight months in the U.S. That's going to be magnified by what's happening in the auto sector where prices are coming down. There's also some help coming, I think, in health care prices in the CPI. That's a bit more of a technical issue. But rental shelter price inflation is going to be the factor that's going to keep things up here and prevent us from getting a more substantial fall in the next number of months. We think we're on track four point four this week. Point three is in the next three or four
months. That's a significant step down, but it's not bringing us back to where we need to be. Bruce, over the past few weeks, we've been talking extensively about whether a reopening in China, whether an acceleration in the Chinese economy would be a good thing or a bad thing. Right. And from a supply chain perspective, perhaps that would be a good thing for the U.S. economy and more broadly, because it eases some of those pressures that we're seeing, for example, with the iPhone 14 right now. But on the flip side, there is this
question of bidding up a lot of commodities and this question of competition and this question of, well, does that increase demand so much that the supplies can't keep pace? So how do you even begin to think about this? Well, I think the the the issue about the supply chain in China and normalizing in Asia more generally is a big disinflationary impulse and that is built into our forecast. I actually think the big story about China is how much is it slowing after a reopening bounce in the third quarter? The housing sector is problematic. There still is Covid problems. So we see China actually slowing quite sharply in the year and probably growing less than 5 percent, which for China is a relatively weak outcome. So from my point of view, the bigger issue in China is it's going to be a negative impulse on global demand.
Obviously, if it was strong, that would tilt in the other direction on the global inflation scene. Bruce, over the last 12 months or so, this administration a few times has floated some trial balloons around changing policy over the tariffs on China. The one thing that people agree on down here in Washington, D.C., is a strong, tough stance against the Chinese Communist Party.
Are you expecting that to change its own after these midterms? Not really. There may be some opportunity for relaxation on tariffs. It's not built into our forecast. If that would happen, it would help a little bit on the inflation scene. I don't think that's going to be the main story on U.S. inflation, and I don't think it's going to be the main story in U.S.
policy. Well, I think you're correct. I think in tact. I think in other areas, we're getting tougher. There's more of a decoupling taking place here and more, I think, contentious policy that's going to continue in U.S. China relations. Hey, Bruce, wonderful to hear from you, as always.
Bruce Katzman of J.P. Morgan Asset Management. Equity futures this morning up about a tenth of 1 percent on the S&P 500 to day rally Friday, Monday into these midterm elections and some criticism of the Federal Reserve. MAXINE Waters, Democrat. Yes. When? After the Federal Reserve on Friday and not the first and I assume won't be the last of the pressure is building in a much bigger way. It is. And what's interesting, there is a place
Ms. Waters, at 84 years old, is away from the Sanders war group. She's having much more authentic, glued, no doubt, to the London do Los Angeles mayoral race today, which has got to be front and center for her. But there's just no question it is
broadening out. And you've got to believe when the results are in and we go through a lame duck session, this is really going to get heated on both sides of the aisle. Yeah, I agree at least. Right. He's going to be fascinating to see how this criticism builds and how ultimately Chairman Pound response to it if he does it all. Because in that news conference last
week, I have to say, if that was a rebuttal, it's a pretty strong call to these particular politicians and not just a rebuttal. Also, his line is in order to have a stable and good labor market. You need to have some sort of stability in the prices, right. In in inflation and that sort of their argument. It's not reading through. If you take a look at what you're seeing
in the polls, you're seeing what it's taking a look at, happy black. You know, I just want to emphasize, John, the uncertainty today is extraordinary. It reminds me of 1994. It was just extraordinary just in the last 24 hours. We'll build on that in just a moment. Equity futures right now up around about a tenth of 1 percent in the next hour and a half of Wells Fargo on this equity market. Looking forward to that conversation from Washington, D.C., the nation's capital.
This is pulling back. Keeping you up today with news from around the world with the first word. I'm Lisa Mateo. As millions of Americans prepare to vote
today, President Biden admits Democrats face a tougher challenge holding the House than the Senate in midterm elections. Republicans are favorite to take control of the House. The battle for the Senate is considered a dead heat.
Donald Trump has all but confirmed his widely anticipated third run for the White House. He told a rally in Ohio he would be making a, quote, very big announcement next Tuesday. It is a state in Florida. The former president is hoping to take advantage of good election results for Republicans.
Russia's heavy casualties in Ukraine reportedly have led to an unusual public outcry. That's according to The Washington Post. The newspaper reports surviving soldiers and family members of the recently drafted troops say their units were slaughtered in poorly planned operations. Russia's defense ministry downplayed the loss of life. The US, EU and Japan will announce a commitment to clean up methane emissions tied to the extraction and transport of oil and gas. It's also a follow up to a pledge they
made a year ago at the UN's climate change summit at this year's conference. About 40 countries will outline their plans for cutting methane emissions, and Nintendo has cut its fiscal year forecast first, which console sales by 10 percent to 19 million units. The Japanese company blames the shortfall in part on a prolonged chip shortage. Nintendo says it's now front loading production to maximize delivery in the holiday shopping season. Global news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Mateo. This is Bloomberg.
Remember, the power is in your hands. You're one of the reasons I've never been more optimistic about America's future. I see a great nation because I know we're a good people.
We just have to remember who the hell we are. Where are the United States of America? Election Day in America. The president of the United States. Life from Washington, D.C.. This is Bloomberg. And it's the price action, the equity
market. Look, in a little something like this on the S&P 500, positive, a little more than a tenth of 1 percent. You know, it's lower by about a basis point at a 10 year full 2033 on a 10 year yield. And then we go Parisi again on euro
dollar parity in yesterday's session, just about halted on this morning's euro dollar, some negative two tenths of one per cent, although no surprise. Dollar weakness here and somebody told me was back to the beginning of the pandemic, like two, three days in a row of dollar weakness. I didn't realize how unusual that it has been.
It's been a while. It's been that long. It's been that long. I will double check that. I did not double show that either. At least that's what I'm serving right
now. It still is notable, though, that you are seeing dollar weakness after everyone was saying there's no reason for there to be dollar weakness given the position globally. So how much is this technical or how much is serious reset where people are saying the dollar's kind of quickly or like Michael Shows said yesterday where he said you've got to have a weak dollar to make them go make it? I think what Michael Shell had to say about the equity market, America was for some people frightening. He said if you've bought the equity
market big tech at some point the last year, you're going to be remorseful for the next several years. We are in Washington. There's a midterm election, which means Annmarie Horden is front and center. A Bloomberg Washington correspondent starting early and will go this evening into our special coverage as well. I want to talk and worry about some of the vignettes out there. And one of them is in Ohio. Mr. Vance does better than Mr.
Ryan over the last number of days. And it's so delicate here about the the dynamic state to state that the Democrat Ryan has to haul out Dave Matthews on October 24th to get it done. Help me with that. Well, he just doesn't want anyone from the White House. Right. Or any big name Democrats coming to his
state because he doesn't think it's going to help. He is trying to get those voters in the middle, whether they're the middle, that lean left, the middle that can lean right. He wants them to vote for him. So he knows that for how Ohio this is likely a referendum on the Biden administration.
So he rather campaign with Dave Matthews, drag people out. It was more interesting about what's going on in Ohio is, of course, what happened last night at the JD Vance rally, which might as well have been a former president, Don Trump rally, and which he prompted. With, you know, we're amateurs at this. With your perspective, what is the play
of the former president? What John Countdown. November 15th. Something like that. Yeah. He said it yesterday, November 15th. He has a very big announcement at Mar a Lago. Did he get in the way of Mr. Vance's efforts? I don't know if he's gotten away of it, but he certainly, certainly drew more attention to himself than the individual he was going there to try to help promote, which this has tended to happen a few times, have gone off with.
Dave Matthews Band is a band that plays a Birch Mirror here, and that's not far and range. It's not. It's just not far. Plus firing. On my foot. No, that's cheap stuff. There's even there's a little bit after that. It's so easy to trick. Yeah, I'm sure I can tell. I know. Relax.
Let's talk about this race. Inflation is top of mind. We talked about that a million times. Is it clear that everybody blames the president for it? Because if we were to have a nuanced conversation around this table with a group of economists, we talk about our fiscal package in early 2021. We'd also talk about central bank policy and we talk about supply constraints around the world. Who do they blame it on? Depends who you ask.
So the Republicans clearly blame it on the Biden administration and they'll bring it back to things like the American rescue package. Why were you giving out checks to individuals? If you talk to economists, they say that's marginal and the impact on the final inflation number. And then you talk to Democrats and they say this is a global issue. And if you look at where the United States stands versus inflation around the world, actually the U.S.
is in a much better shape. We're seeing countries in Europe that have double digit inflation and they point to Putin's invasion of Ukraine. They point to supply chain bottlenecks coming out of the pandemic. I love what Hugh Hendry called it to you, Jonathan. An elephant moving through the body of a snake. That's how he views inflation right now. There's one moment in history.
But the issue is most voters like myself, have never actually experienced this kind of price pressure. And you might not realize if your neighbor gets a job the way you would feel when unemployment rates going up, but everyone feels the cost of things going higher, rent, food, and then over the summer, gasoline. So that's the blame story. I'm curious about the credit story because it's widely expected to be a red sweep or a red wave. Right. This idea of Republicans winning, who gets the credit for that? Is this Donald Trump going to take credit for that on November 15th? Is this some specific candidates who are arguing some sort of true policy to counter inflation? I think we need to see how it shakes out. I think Trump will get credit if his candidates get through, if Blake Masters gets through.
If J.D. Vance gets through. If Amendment ISE gets through. If Herschel Walker gets through. Anna Edwards, these are individuals that the minority leader in the Senate, Mitch McConnell, questioned the caliber of these candidates.
Right. If these individuals get through, I think you can really paint this midterm election as another 20 20 presidential election, the sense of the characters of Joe Biden versus Donald Trump. And just quickly, how was a southern governor in Florida feeling this morning after that announcement yesterday evening? Well, he's probably feeling, like you said the other day, what woke up the worst man in America? Feeling like the worst man of the unhappiest. Yeah, but happy as well. Donald Trump gave him a nickname the other day. And now remember when it was sanctimonious, sanctimonious, Jihye Lee, sort of after all the way he talks about me.
But it came after an ad that Governor DeSantis put out that really was talking a lot about God and how he was created by God. And you and your sources feel that we are going to have debates of 8, 9, 10 candidates or we're going to get right to two candidates in both parties. Quick. No. I think it's going to be killing 90 can be a done. You ready? Look at the Republican map.
It's not just Donald Trump. It's Mike Pompeo. It's oh, Mike Pence, who, by the way, November 15th is starting his nationwide book tour. So that was a little dig to his former vice president, I would say, from the former president. And then, of course, you have Ron DeSantis, where all the major Wall Street money is going towards the announcement for an announcement that we just said I was cool about you guys. That announcement, I'm going to do so
much better. You think I mean, do you think based on the events in the UK for the last couple of months, I'm not sure how many people agree with the idea that we do it so much sensitive to the U.K. election is six weeks long. The United States election is seven
years, maybe four years. Two days is what it is. I've covered both six weeks. You can handle it. I think it's start already. Oh, never mind.
Just go tomorrow. Mr. Biden, when we hear from Mr. Biden, whatever the results, the preannouncement after the midterm elections.
But obviously, he's been dangling it. He was asked yesterday on a radio show about his age. And what would the 80 year old Joe tell the 50 year old Joe? And he said, I feel like I'm still 50 equity futures. This is money. I hope I'm two tenths of one percent. AMH. Thank you. You kidding me this morning?
Yields it's down a face. Find a 10 year for 1970. From Washington, D.C., this is Bloomberg. Live from Washington, here's the price action for you going into the midterms here in America. Going into the open in about three hours away, equities up by two tenths of 1 percent on the S&P left the gain on the NASDAQ two day winning streak on the S&P Friday into Monday.
Can we continue the rally going into the midterms in a bond market, we shape up as follows. Taylor Riggs Tans and 30s, your two year holding onto 470, your 10 year just south of 420. Your dollar over the last few days has been a whole lot weaker. Tom, here's the stat you once said euro dollar over the last three days, positive, two point six per cent. That's the biggest three day pop biggest move over the last three days since March 2020.
All right. Right now, just in and around Paris. Thank you for confirming that. That's great. Can I ask you a question? You can really start a market lift getting in front of the inflation report on Thursday, or is that above the election today? 1. I don't know, but 2, if you want to break it down just briefly. Consensus view is that we get divided government and that's what's good. It wants to see no tax increases. And this is really about.
I would go one step further than that. No fresh unfunded spending cuts would complicate the effort. The Fed reserve, the difficulty I have with the consensus view around divided government being overwhelmingly positive. I understand that might be in the near-term. I think Lisa and I have both been talking about this over the last couple of days. I wonder if that holds true in about six to nine months time from now when we have an economic downturn and there is no buffer coming from anywhere from monetary policy, Lisa? Well, from fiscal policy, for that matter as well, I would agree with that. And to put a narrative to the recent
price action, I would just say this is a range bound market with a complete lack of conviction. To give any narrative to it at all is ridiculous, simply because I will say this, that you're seeing earnings come in weaker than expected, you seeing downward revisions, you're having a hawkish fed. OK, you might get gridlock, but this has all been known for a long time. So what exactly has changed to create this rally? Maybe technical. I'm absolutely convinced that that sound Lisa wakes up in the morning. Bram, I just sort of sits up, looks forward and those words come out.
It is that things that shocked the S&P, it's up or something and it's just like this. This monologue and everyone's waking up in constant drama is just like to specify. Kailey Leinz is. Facebook in Washington for two days and then cuts us off and get to a good guests here in Washington for two days here for the elections today. And of course, we'll be with you tomorrow morning with some interesting results, to say the least.
And part of that, as I was learning at the Willard Hotel, the round robin bar last night. Is this about oil country? Oil country is Oklahoma and Texas for Stephen Schork, president, the short group. It's not about Texas. It's not about Oklahoma. It's about heating oil in New York Harbor. We're going to go narrow here, Stephen, because it matters to so many of global Wall Street.
Would you explain the why? Why is everybody talking about heating oil in New York in the Northeast? Yeah, absolutely. First and foremost, Tom, in the northeast, it's because 70 percent of the heating oil markets, our homes are located in the northeast. So a significant amount of homes are going into winter and we simply don't have any supply. Why is New York Harbor important? Well, this is because were you making take delivery on the night diesel contract, heating oil contract. And right now we're looking at inventories that are well below normal. In fact, the Pennsylvania Turnpike. Tom yesterday up in Allentown had a post that they're fueling station on a turnpike was closed because Allentown was out of diesel fuel.
We're out of diesel fuel and we haven't even come close to the story. The heating season right now, if that is the case, can we say it's not in my backyard, a distillate refinery matter or is it because the oil went to Ukraine? No, absolutely. It's the NIMBY crowd. We have not built the refinery in the United States since the 1970s here in Philly.
We had a refinery time that refined 330000 barrels of crude oil a day that was operating just three years ago. That is no longer there. So we've cut our refinery capacity here on the East Coast by more than half that. Oil has to come from somewhere. Now it comes from Euston. It comes up through the pipelines or comes up through very expensive barges. So if we don't have Steve, Steve, Steve,
it comes up from Houston because they won the World Series container. All right. Fair enough. But you know what, Tom? Every time a Philadelphia baseball club, I just read this. I think I was in USA Today the other day. I read Tom, a Philly club, either the A's or the Phillies won the series. The United States went into recession. So maybe the Phillies did us a favor here, there and we're not going to go into recession. But with distillate, diesel fuel, the
problem here is we don't have the refineries because of the NIMBY crowd. Gasoline is your biggest margin. So what other refiners we do have existing are maximizing their gasoline output at the expense of diesel fuel. So now we're going into winter. We don't have the diesel fuel. Normally, Tom, where we'd make up that difference is a bargaining it over, taking it over from Antwerp, from the refinery epicenter there in northern Europe. But of course, that's not happening because the Ukraine. So now we're in a situation where we
simply don't have enough refineries and we don't have enough diesel fuel. But, Stephen, a lot of people are saying this is partly because of the political backdrop, because people are not investing and there isn't a consistent policy on rewarding fossil fuel companies for investing in refineries. Other people, like Regina, mayor of KPMG, saying it's because of Wall Street, while she doesn't want to see these investments, they are not rewarding companies for building new refineries. And that's going to keep prices higher for longer. What's your view? Well, I partly in agreement with Ali. So and again. We haven't built a refinery in the 19th
since 1970. So I'm not going to go down that road saying, oh, we're not building our. Finders today because of the Wall Street crowd. That's just a fact of where the market's been for my entire life here. But with regard to your other point, it's well taken. Absolutely. My smaller producer clients, their bankers are telling them go find financing. You know what?
We'll stick by you now. But in five years, we're only going to stick with the big guys. So this is a very fragmented market right now. And that the haves and the have nots are going separate over the next five years. And you are correct.
That is the signal being sent from Wall Street, from the banks to the producers. And it's a very scary situation here because we're simply not investing in the infrastructure that we need to fossil fuel demand is not going away, people. So we not and we're not investing in our ability to save this demand. We could legislate as much as we want. The demands are not going away and the CapEx isn't there. And therefore, we are in a long term bull market when it comes to fossil fuels. They just quickly is the biggest refiner
in America, still owned by Aramco. Is it still MTV? Oh, yes. It was a joint venture between the TVA and Saudi Aramco and shallow. And when they built it a number of years ago, Saudi has a full ownership of it. And that is the largest and most probably productive refinery that the United States has right now. You know, where I'm going with this is the reason I ask that what you make of this relationship breakdown between this government, this White House, and react over the last few months. You mean this government and that pariah
state over in Riyadh? I think the White House has tipped its hand while on the campaign trail that they were trying they were going to cast Saudi Arabia to the side. And now, I don't know if we saw that that Twitter the other day. No, I haven't had any new drilling in my administration.
And yet we're going to a pariah oil producer to ask them to increase production. Has he stepped foot President Biden in the state of Texas to appeal to those producers? I don't think so. Right. Steve, not in my backyard. Is it a political issue or is it like China where Republicans, Democrats and independents, they all believe in, not in my backyard. So it's really divorced from the election, which is it? Oh, it's absolute divorce from election. This is this is not a Democratic only NIMBY crowd on the planet NIMBYs.
I mean, on the republic side. This is a human nature. This is agreed. This is I don't want in my backyard. I want to preserve my investment, my home, my community, my neighbor and so forth. So this no, this is not a Democratic
rant or anything. No, this is just a typical look. I love the fact. I used to love the fact I'm here in Delaware County in Philadelphia. That refinery was on this on the southern part of the county. I live in the northern part of the county, not my backyard. So I have to be honest with ourselves. But at the same time, that refinery had been there for 100 years.
We sure wish we had it now just a couple of years later. Steven, on the Election Day in America, we are looking at the likelihood that Republicans will possibly increase the ability for the U.S. to export natural gas to Europe. How much is that on your radar? And the whole NIMBY idea being, we want this in our backyard. We don't care what happens in that backyard.
It's a great question. And I'll put I'll answer it this way, Lisa. Now, I think in western Pennsylvania, the epicenter of the steel industry implosion in the country in the 1970s, the 80s, shell built in ethylene cracker and minus just north of Philly, where the Jane L. Steel Mill employed decades and decades of steelworkers. Now that area, menacing Aliquippa and so
forth, is a skeleton of itself. Shell built this ethylene cracker and it's now bringing life back to that area. It's keeping its young people, it's bringing in engineers, it's bringing in employment. So this is a source of economic growth. And that source of economic growth goes from Pennsylvania, the natural gas epicenter of North America, all the way down to the petrochemical epicenter down in Houston. So, yes, that is clearly on the horizon about on our radar. And in fact, five years ago, when
natural gas couldn't break above 20 dollars equivalent barrel oil, we thought the industry thought we were building too many LNG export facilities. Now, with natural gas in Europe trading almost 600 dollar barrel oil equivalent, we're saying, oh, my goodness, we haven't built enough. So, yes, absolutely, we're investing in this. And this is something that this is the maturation of the natural gas market. It used to be people a market that I produced it in this area. I put it on a pipeline and I consumed it at the end of that pipeline.
That's no longer the market. I'm going to produce it, putting out a number of pipelines. Maybe we'll go to that consumption area, maybe we'll go to the export market. And that is what's attracting the real investment in this industry. And that is the future of the energy market for the next two, three generations.
Stephen Schork, the short group. Stephen, thank you. As always, you have your so many Western governments are guilty of what Stephen is talking about. I can look to the U.K. and across Europe where there is a reluctance to embrace fracking, but they want to embrace the energy that comes from fracking abroad.
Yeah, if you go back 20 months as the example in the United States, remember company Glasgow comparing Cup in Glasgow to the G 20 in Rome where the T Tennesee they were calling for impact to come for, they were talking about ending fossil fuels. Try to square that circle. It's a difficult policy to get, especially if you don't have a clear message on how much fossil fuels are needed in the short term. Julie Norman is going to join us shortly, the co-director of the UCLA Center on U.S. Politics from Washington, D.C.. On Election Day, with futures up a third
of 1 percent, this is Bloomberg. Keeping you up to date with news from around the world with the first word. I'm Lisa Matteo. The US votes today in elections that will decide which party controls Congress. Millions cast their ballots in advance. Republicans feel good about their chances to capture both chambers.
President Biden admits it will be tougher for Democrats to retain the House than the Senate. Close races mean it could be days before the final result is determined. Donald Trump says he wants nothing to distract from the importance of today's midterm elections. So he's holding off until next week before making what he calls a very big announcement. The former president is expected to declare he'll make a third bid for the White House in China.
Hopes are fading that authorities will lift a lockdown of the area surrounding the world's largest iPhone factory. Kobe cases have more than doubled in the city of John Joe, a seven day locked out of the area that houses Apple global iPhone production base expires on Wednesday. The local government may extend the curbs and Japan is reportedly delaying plans to revise how it taxes carbon. That's according to the NIKKEI newspaper. The move potentially slows efforts to
wean Japan off fossil fuels. And it comes as world leaders gather in Egypt for the UN's annual climate change summit. Shares of Lift are falling in premarket after the company reported weaker than expected ridership growth in the third quarter, suggesting it's losing ground to Uber. The news comes after Lyft said it would cut 13 percent of its workforce, nearly 700 people in its second round of layoffs this year. Last week, Uber said its ride hailing customers had rebounded to pre pandemic levels. Global news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Matteo.
This is Bloomberg. Inflation should come down. But don't expect its drop to be immediate or predictable. We've been through multiple shocks, as I
discussed, and significant shocks simply take time to dampen. That was Tom Parker, the Richmond Fed president, live from Washington, D.C. Another leg higher in this equity market on the S&P 500 up by, let's call it, a third of 1 percent. Now, T.K., two day winning streak Friday, Monday, this Tuesday morning, pushing higher once again, yields low by basis point RTS for 1970 euro dollar. Look at that, T.K., just for you.
Euro dollar negative two tenths 1 0 0 0 0 Joel Weber. Thirty to four digits. That's the way we do it on Bloomberg Surveillance. Somebody else about there.
Sometimes with currencies like young, you go to two digits and the convention is often to go to four digits as well. We do that for look. Of course we do. We do that question mark for you and for Wall Street and for. Did anyone actually ask you that? Yeah, we were talking about. Yes, Wall Street. Kerry. Oh, yeah.
Well, you know, we only go into it right now. But, you know, the way you heard foreign exchange is a huge deal. And he was having the world body moment it. Yeah, exactly. He was on a trip about decimal points
and. Yeah, way Julie normally looks at currency, as you know, Sterling down at 114 is not where it was at 130. She joins us now from UCL University College of London Center in U.S.
politics, of course, expert in this world of terrorism, but also a student of the American moment, Professor Norman. Thank you so much for joining us. And you are focused in on the shifting democracy of America. I'm going to use Arizona on the border with Mexico. Is the test tube of all this right now? How important is what we learn to day and to morrow morning to the democratic process of the first Tuesday of November in two years? Yeah, Tom, I do think it is going to be crucial for this election cycle to go somewhat smoothly for Americans to just have trust in the system again.
And that's on both the right and the left. Obviously coming out 20 2020, but going into 2024 as well, we know that there's over 300 election deniers on the ballot today in both state and federal offices. We know that many will be in office tomorrow. There might be some challenges. And I think many of us are just watching that closely. Obviously, buying the Democrats have been trying to hammer this home. I'm not sure that messaging has stopped.
And obviously other issues are a bit more at the forefront for many voters like inflation in the economy. But I think both things can be true that inflation is driving the votes. But we still have these broader concerns about what this means for the system. And if we can restore that faith in these institutions, again, witness selective court cases, including one, I believe, in Arizona literally in the last 48 hours. Do you suggest judiciary to the rescue as we move out two years? Well, I think we start in 2020. The judiciary was really one of the main guardrails and ball works against some of these attempts to exploit the system.
So I do think we can see that again. Again, everyone has the right to challenge results. But if there's no evidence there, that's where the courts come in and push back on those allegations.
I think also I and others are hoping that the reforms for the Electoral Count Act go through Congress. There has been bipartisan support for this in the Senate. I think will be important to get that over the line before January, because that will also close some of the loopholes, namely at the federal level. But some at the state level, too. And I think that with anything else will be a strong outcome from a lot we've heard this year about January 6th and all the aftermath in 2020. We today appointed me to an article this morning that I thought was really salient, Julia, about how European nations are kind of sleepwalking to the midterm elections in the US. So they're not really fully
comprehending what could be potentially the withdrawal of some Ukraine aid if Republicans do get the majority in the House and the Senate and some potential fissures, uncertain trade policies. What's your perspective over from Europe's vantage point of how important this election is? You Well, it's interesting you ask that because here I do feel people are asking that a lot. What is this going to mean for U.S. foreign policy? What is it going to mean for Ukraine in particular? You know, we've heard a lot from some on the right and some parts of the Republican Party about not wanting to have this blank check for Ukraine, trying to have some limits to that.
In reality, I think that's still a smaller part of the Republican Party. We still have key leaders like Mitch McConnell very much on board with Ukraine aid. You're 70 percent of the U.S. population very much on board with that. So I don't see it shifting dramatically in the short term. With that said, I do think there will probably be some increased pressure. As for accountability on that aid, Republican attempts to tie that to some of their other priorities, to get it passed by it and get some of their agenda items through as well.
And quite honestly, I expect that probably not only in the U.S. but across Europe as well, they will start buying these domestic pressures to try and figure out what's what's the best way to manage its aid going forward. And I also think. Julie, you mentioned Mitch McConnell. Also, we're watching for Donald Trump's
potential announcement next week on Tuesday when he has a big announcement that we expect to be launching his 2024 campaign. Why are we looking at President Biden and former President Trump as the potential frontrunners for 2024? All of these people who have been in politics for a long time, even as the rest of the world has moved on and the leader of these parties is less clear now than it was two years ago. Yeah, it's so true. Lisa and I think both parties, some are at least hankering for a bit of a shift in the generational leadership right now. BIDEN You know, I think he has to, at
least right now, project that he is going to run for re-election, whether he actually does that or not. And I think after today, he'll have a bit better sense and Democrats will have a better sense of how much they're going to lean into that or maybe start to start pressuring him otherwise. Trump, you know, just still has this grip over the party, still does polls so strongly that he just cannot be cannot be ignored. And I think that his momentum and energy will push him forward as well.
But we are seeing even his lead chip away a bit. De Santos and others are making a stronger case and a stronger run than we would have seen six to 12 months ago. So we are still twelve months out, 24 months out from 2024. So I think a lot can change then. But right now, our focus still is on these two individuals and I think we can see today as a bit of a referendum on both of them. Judy, we've heard a lot from the Democrats about a threat to democracy, about election denials, about voter suppression. Can you reconcile any of that with the turnout and engagement that we're seeing in American elections? Yeah, well, this is one of the catch 22, I think, because the public will is still very strong right now for democracy. People are more engaged than ever in the
U.S. were breaking voter turnout records. And I think there is the sense of everyone wants to defend democracy, whether it's from the right in terms of voters election security or from the left in terms of voter access. I think each side thinks that they are the ones leading the charge to preserve democracy, somewhat ironically. I think the danger is when you have individuals like Trump, some of his allies who kind of exploit that passion for democracy, to push lies about a widespread election fraud and push massive misinformation on these things because it is such a galvanizing and motivating thing for most Americans. Judy Norman of the UCLA Center on U.S. Politics.
Judy, fantastic as always. Brando in certain aspects, both sides speaking past each other on the same issue. Well, that's kind of an evergreen statement here.
I would say that that's not just a particularly this issue. Did you see that over over the past couple of days? There's one Russian operative came out and conceded election interference by Russia in some of the online kind of communications. I'm wondering how much that's fueling. Forget the side, but fueling the speaking past each other, an increased sort of partisanship and animosity feel in a lot of the rhetoric. Is that conversation likely to continue? Coming up shortly, Honohan of Wells Fargo on this equity market. Two day rally Friday. Monday continues this Tuesday morning.
Up four tenths of one percent on the S&P. Life from Washington, D.C.. Heard on radio. Seen on TV. This is Bloomberg. There is some built in resilience that we start to see from the economies, the consumer has to savings buffer, the savings buffer is coming down. I don't think we're actually globalizing. I think we're just globalizing more slowly.
If you look at that labor force participation rate, it's still stubborn and it retreated last month. That is an issue because that suggests a bit more permanent. This looks like a cycle that the Fed let's get out of control. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. It is election day in the United States of America.
Live from the nation's capital for our audience worldwide. Good morning. Good morning. This is Bloomberg Surveillance on TV and radio alongside Tom Keene and Lisa Abramowicz Jonathan Ferro. T.K., a rally into this one two day
winning streak. Friday, Monday, this Tuesday morning, four tenths of 1 per cent rally under a genre like your idea from earlier that is done about the inflation report or maybe disinflation is. Bruce CAC alludes to a J.P. Morgan, but it is about the good news of
gridlock. Maybe it means no tax lift. Maybe it means some not plan, but some lack of damage from fiscal spending or maybe even no more spending. And I think that's the point. It's something that divided government and why this market is so bullish. Is this a one day event or could this take another four weeks, particularly specifically if we get a run up, like to wait another month? My reading of the last 24 hours is this is possible.
I'm not going to predicted that we're going to roll in the next week or into December. But you've got to believe with 435 House seats, I've got to work a number of 60. I believe it's one that are this way or that way or the other. Yeah. The math is there where you're going to have a couple hung seats in the House and maybe even in the Senate at least is going to go through the numbers in just a moment. No, I don't think we should park CPI because once we get past this very quickly, we'll be focused on CPI first. Dani Burger. Yeah, but I don't know if anyone on Wall
Street is focused on that right now because they're all betting on the election outcome and they're not going to stop. So maybe that's the reason why everything is retailer ball game. I get it straight. They're always like and at one point
nine billion. Yeah. And they're heading higher. But, you know, I think both tickets know and aren't going to be with us. She's the queen has done the work on
Powerball. I think that what the quants will tell me was it's not worth playing, perhaps, really, you know, just in terms of probability of you winning, some continue to waste the money. Please continue to get this. I appreciate that. I was waiting for that all morning. I do wonder, though, going forward, once
we get past this, whether there starts to be a little bit more of a reality check in terms of the numbers cause hearing what the action on the screen. I know I sound gloomy. I know I sound do we I know what my monologues are, but she's always repeating. But OK. But but this is actually important
because we're actually seeing downward revisions that are faster than people expected to 2023 earnings per share. We see a more hawkish Fed, even Michael Barr is on the border of like, you know, pessimism about U.S. stock. So I'm just saying, you know, at what point will this translate into some price action? I read Marco yesterday. Yeah.
From J.P. Morgan talking up international perhaps perhaps and UK stocks. I saw that, too. I think that's the international story listed in the UK as opposed to bank the UK economy. But we can have that discussion on a time could split like this on election day in America.
Lift equity futures up Monday. Rally Tuesday. Will we get more the same? Equities up a third of one percent. Yield lower by basis point for 20. I like seeing euro dollar just there.
Parity just just kind of decent dad at least up just 1 0 0 0 0. It feels like that's how it's meant to be now. Yeah. It also feels again, like the state says that the market is today. Right. This churn and lack of conviction one way or another, it's just flat flatlined. Did it do it anyway? Okay. Here's what I'm looking at today.
Mid-term elections that I'm curious about which seats are actually up for grabs. Tom, what did you say, 60? I saw a working number of 61. Those are the lean this way, lean that way. And the real ones in the middle. I think your number was more the real ones in the middle range. David Westin and her team will be looking at 10 p.m. 11. 2 is western Utah.
2 a.m. probably. Exactly. I think so. Yeah. Could be. You know, hon, sounds like torture long. No, I didn't say that. I said it's gonna be a long night. Well, ma'am, torture perhaps will be the third says that the Cook Political Report has been saying is toss ups.
OK. Let's get there. We do have actions today, 40 billion dollars if three or nodes definitely on the forefront of everybody's minds. So curious about what we're going to see with respect to yields. It's not the most important auction ever, but it comes at a time when there is this growing expectation of pressure on the Federal Reserve and how much pushback there's going to be to really take off some of the hawkish tilt that you've seen with yields climbing to around the highest going back to 2007 and aftermarket, the earnings does kind of trickle to a close about nine tenths of a percent.
Nine tenths of all S&P companies have reported Disney and AMC. Among the those that are going to be reporting, AMC is going to be interesting. Does it matter what the earnings actually are? Donors are basically just going to be, you know, if there are enough people saying to buy at. I have to say it was the one surprising thing through Covid. If you've asked me if I'd ever go back to the movie theater again, I might have said no. I've been back to the movie theater
quite a few times. Really? You have? Yeah. Yeah. To watch what? Tom Keene mafia? Oh yeah.
I watch that movie night about four times and I went to watch another one recently with and Robin I forgot what it's called is Amsterdam. Something like that. I don't know. I haven't. And I was great. Yeah. You made it to the movies.
No, I'm in a movie theater in like 15 years. I mean, it's just there's just a lot of defense that you don't get it. I don't watch that to get it. I just think that room, lots of secret
same screen resolution, what she answers with. Okay. Manahan joins us now. Equity strategist at Wells Fargo Securities and Service.
Save us right now. Great to have you with us on the program. And talk to me about the view that your clients expect and the outcome that you think will be the most bullish for this equity market for the midterms later. Well, what's more bullish for the market
or the most likely outcome here? You know, they don't necessarily go hand in hand. But in this case, we may be looking at an ideal scenario like you guys were discussing earlier, gridlock, gridlock. We like gridlock because it gives us certainty in a sense. And even if it's not the best news, being able to prepare for it. For example, like in the earnings season, these are the kind of things that help equity stabilize. And I think that with the gridlock we're
expecting, it's going to help put some upward boost on the equity market. And I have been dying to talk to you since the death of the Nobel laureate, Ed Prescott. He died of Arizona State University, and he is one that brought physics to economics a good thirty four years ago. He talked about the moments, the talk, the the tensions within the economy. Bring it over right now to the cross moments in your equities space.
What did they tell you? Variance, ketosis. The rest of its skew. What did they tell you about this unusual moment? I think it's telling you what these I mentioned earlier is that the conviction we're lacking really strong conviction and that at the variance of the volatility, the market.
But in these kind of times, it's very frustrating and can be easy to be lost. Where we want to do is position where we think on average you can perform best. And right now that style has been momentum rather than get to hold up in one sector or to concentration in a portfolio. If you look sector neutrally and we look at Morrow's style that we're looking for, it's high momentum and that high momentum plays have tended to be those with more reasonable growth. And at the same time, those growth
opportunities in a slowing economy and a recession that we expect next year. That's an approach that will put our money for. And when you look at a little bit longer term, the question that we've been asking repeatedly is longer term, is gridlock really good for stocks? How do you game out the longer term ramifications of withdrawal of fiscal spending, regardless of exactly what happens in all of the the contested elections that we get today? You bring up a great point, Lisa. And when we look back historically at previous dreadlocks or what we cost general elections, we've noticed that there has been some good performance in the 1 Shery Ahn the sixth month. But once you start getting outside of that, I think what we start introducing is more what was the economic status of the economy at the time. And that's really why you start
introducing those other variables and you start seeing a little more variance, as we mentioned before, and the outcomes. So in that kind of scenario, where we are today is generally consensus is we start seeing that slowing down of a tightening policy. Eventually we'll start seeing cuts. And in a recession, what kind of
economic stance do you want to take? And for us, you know, you can take that low volatility, more defensive approach. But really, it's going to be that struggle of finding growth that can continue to put up numbers, especially after what looks like a bit of a weak earnings season. Ana, thank you as always. Ana. Home there of Wells Fargo Securities. I think we've all heard the same lines
over the last few months about midterm seasonality, about the third year of a presidency being the best year for this equity market. Lisa, when you speak to people about that, it just feels different because of what the Fed chair is hearing this year round. It feels very, very different. I couldn't agree more. We're talking about inflation we have not seen since the early 1980s. We're talking about a potential deal, globalization that we haven't seen ever because we haven't really seen this kind of pullback from some of the trade negotiations, at least in modern history. How do you then factor that in
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