This is "Bloomberg Businessweek Daily," reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. "Bloomberg Businessweek Daily" with Carol Massar and Tim Stenovec, live on Bloomberg Radio, Television, and Bloomberg Originals.
A very good afternoon, everybody, across Bloomberg platforms. Yes, indeed, this is the Tuesday edition of "Bloomberg Businessweek Daily." I am Carol Massar. Tim on vacation.
Yeah, family gathering of sorts. He will be back in about a week or so. Jess covers the equity markets, all the twists and turns. On a day where yesterday we were talking about American exceptionalism, the S&P 500 at an all-time high.
Thanks to the AI-linked stocks. We will talk about the good, bad, and ugly with AI over the next three hours.
I love that you said that. Yes, we have a pullback in oil prices and a pullback on trade. Shares of Nvidia on the verge of becoming the first company with a $6 trillion market cap. That is our backdrop. We will talk about AI today. So too, talking about AI is one of the most listened-to voices on Wall Street.
A great exclusive with our Tom Mackenzie. They talk about AI, the boom, but our bigger macro, whether it is inflation, debt, where we are in the world.
Of course, the moves in U.S. Treasuries and why a top-heavy stocks rally dares bonds to break. We will hear from John Authers soon.
He will join us and listen to what Jamie Dimon had to say with us and give us some analysis. Speaking of AI, it is our big theme this hour. We have Isabel Guzman. She will talk about global AI risks. She was there during the Biden administration, so we will get her thoughts. We also have the TIAA chief operating officer talking about the workplace flows. He will be back with us. It is all AI. I don't know if you know that.
It will be a great conversation. Looking forward to that. Stocks up on AI, but talking about the risks.
Have to look at how it is impacting. Let's get a check on the trade and the all-time high on the S&P 500. Charlie Pellett is back.
Thank you so much. Just remember, it takes AI to spell gain. And a 54-point advance on the S&P. A record 7828, up by 0.7%. We will keep you posted. Two hours to go ahead of the closing bell. Nasdaq will definitely be a record. Nasdaq up by 0.2%. Dow Industrials up by 0.5%. S&P at a record. The two-year, 4.78%. The five-year at about 5%. The 10-year, 5.26%. The 30-year, 5.63%. Gold up by about 0.6%. Crude has been bouncing around, but the key takeaway perhaps a little changed on West Texas Intermediate, down under 0.1%. $89.38 a barrel. A barrel of Brent up by 0.1%.
A story we are keeping an eye on: Delta Airlines says the systems are stabilizing after a limited global tech issue that disrupted data connectivity to some backend operations. Delta says the teams are actively working to restore full systems safely. Delta shares right now are trading a little changed, up by about 0.2%. Nvidia nearing a $6 trillion market cap as investors return to the AI chipmaker after a disappointing start to the year. Shares of Nvidia are advancing today, up by about 0.5%. So again, recapping, the Dow, S&P, Nasdaq higher. That is a Bloomberg Business Flash.
We will check in with him throughout the hour. As we mentioned, this hour we really are looking at AI from a bunch of different vantage points and hearing about it. We will hear from J.P. Morgan Chase Chairman Jamie Dimon about AI. We will also hear about what he had to say about the macro environment in a moment, but we want to get his view on the macro and why a top-heavy stocks rally dares bonds to break it. The former chief markets commentator at the FT joins us in studio. Good to have you here.
Are we seeing another fuel for rise in markets because of AI?
There are quite a lot of key differences between this and the one that got the title of that book, which was in large part about how QE was keeping yields effectively zero. That was what was fueling.
We are not at zero anymore.
This is different. This is about a genuine belief — whether it is correct is the key question — that the economy and corporate America can keep growing even with bond yields having returned to basically a historical norm. Well, I am not the only one who has my doubts. It is obvious the market overall is still being convinced.
We talked about the pain thresholds for global bond yields. Where do you view that? There is the argument of the speed with which they rise we have not seen in past cycles.
The speed with which you've got — you had the 5% psychological barrier and the previous pre-crisis high were close to each other and went in very short order. So I certainly thought there was a risk that would be the pivot point. It has not proved to be the case.
Because here we are at records.
That being said, one of my killer factoids from a column earlier this week: if you look at advancers and decliners for the S&P 500 since the low for the year on March 30, 200 decliners.
We are at an all-time high even though 40% of the index has actually fallen since hitting quite a major low. That is not usual. I think for the time being what we are seeing — you can see the politics of distribution coming back into politics, but there is a distributional effect between stocks and bonds and the winners and losers of the stocks we are not used to.
I want to get to Jamie Dimon in just a second. In a week where we are talking about France and their debt situation and we talked about the U.S. debt situation, but we are seeing a debt buildup. We are looking at the fiscal houses of many countries.
Yes. I think there is an analogy with the tequila crisis with Mexico in 1994. Back then, for those lucky enough not to remember, Alan Greenspan —
I may have been drinking tequila, sorry.
If you were not, you certainly were by the end of that year. Alan Greenspan surprises people by being hawkish, creates a brief but quite brutal bear market in bonds, and then Mexico has an unrealistically strong thing against the dollar. It is that rise in yields that points out to the world where the weakness is, which in that case was Mexico. By the end of that crisis, half of the entire banking assets in Mexico had been written off. This time around, it is France that has an unrealistic currency which it does not control because it is shared with the rest of the euro zone that has a very high fiscal deficit. And it is France that is now — once those yields rise fast in the States, it reveals who is swimming naked. I am not saying France will be as bad as the tequila crisis, but France is the Mexico of this particular bond bear market. Sorry I talked so long.
No, you do not talk so long. You talk smart. I want to bring into the discussion what Jamie Dimon had to say earlier today on Bloomberg. He spoke exclusively with Tom Mackenzie at the conference in London, and they talked about debt.
We can't borrow endlessly and spend endlessly. It has been going on for a long time. If you look at the buildup of debt around the world, America has gone from 50% of GDP to 100%. Countries around the world are borrowing money. I think we cannot be complacent. The lesson is there will be a point where the market will ask for more and more and more, and at one point that will feed into corporate debt, things like that. The best thing to do is deal with it before it becomes a crisis. If it becomes a crisis, we will deal with it, but in a much less pleasant way.
Some would argue we are on the way for that in France with the crisis and where politics stand. Do you watch for contagion into the credit markets? Is that the transmission mechanism we should be monitoring?
I think yes. All businesses should prepare for different outcomes. I will run my business according to that because you should be prepared for a wide range of outcomes. It is very good to think about it. You may think the odds are less than me or more than me, but inflation is sticky and rates continue to go up. For corporations, whether you are leveraged or not, when you have to borrow money, you are prepared for higher credit spreads and stuff. At J.P. Morgan, we have to be prepared for it. If rates go up, we are completely fine. The reason we run it that way is we continue to service our clients. We are not making bets on those kinds of things. We are serving clients through thick and thin.
On the U.S., essentially full employment, growth north of 2%, fiscal expansion, the deficit of 6%, record borrowing. Is that dealt with ultimately through financial repression? Is that ultimately what it has to come to, more inflation?
We don't know yet. We have good news. Corporate debt is not too much. Consumer debt is not too much. It is government debt. The government debt fuels a little inflation and corporate profits. So I don't know how it will sort out. It does not have to be financial repression. I think rational things make it better. This may be my next op-ed. Good policy is free. I believe that good policy in the United States and in Europe can drive growth 1% higher and does not cost money. That is permitting, school education, deregulation, without creating any additional risk. Rational climate policy, different immigration policies can drive growth. Done properly, it is deflationary. In almost every country, the 1% growth will drive debt to GDP down.
I want to ask you about the Treasury markets. Ray Dalio says the Chinese and Japanese are getting more cautious and want to unwind in Treasuries. That pushes up the long end, yields up further. Is that underestimated by the markets, the role of Japan and China in the markets?
No, because it is completely public. China has already gone from 1.2 trillion to 700 billion. It has been going on for two years. Japan is a little different because they have issues about the yen to buy the dollar, and how they will fund some growth. I will leave that to the Secretary of Treasury on how they deal with that. It is supply and demand. The dollar is a commodity, and bonds are a commodity, interest rates are a commodity.
Inflation moves higher from here given the supply chain, given the competition, spending around capex around AI. Are we looking at a more inflationary world?
I don't know yet because I don't like predicting the future. There are some good arguments that these things will drive inflation down and drive growth. Growth is good. Growth can be non-inflationary. It does not have to be inflationary. There are signs things are inflationary that we are doing, like spending money. Immigration policy is probably a little inflationary. You have to balance both. I look at what is the possibility and probability. The possibility of going higher is higher than other people.
I know you don't want to predict the future, but markets are predicting another hike from the Fed this year.
The markets, whatever they say, they have been always wrong. If the Fed predicts, they are wrong, and I would say it has gone from going down to going up. It does not tell you anything. In my view, they are reacting to short-term data. The thing that may drive inflation long-term are the issues like oil prices and wars and global deficits and things like that. There are a lot of forces taking place here. I don't spend a lot of time guessing about it.
All right, does not spend a lot of time guessing where the markets are going. We know members of his team talk about it a lot. That was exclusively with our Tom Mackenzie at the conference in London. Still with us is John Authers, Bloomberg Opinion columnist. What was interesting?
Unfortunately, I am paid to spend a lot of time thinking about the market. There is almost nothing in there I would disagree with. I think maybe he is being a little disingenuous saying if credit spreads burst out, my J.P. Morgan will be fine. I am sure they have done their risk management so they will not go bust. I would imagine that would not be great for their share price if bond spreads, credit spreads burst out.
Beyond that, I am afraid to say, from the point of view of the cut and thrust discussion here, I could not find much to disagree with in there. Which aspects would you like to talk about first? China and Japan, completely right. 20 years ago, people were scared China would repatriate a lot of debt in a hurry and deliberately crash the U.S. economy. It was always nonsense, and they have done it very slowly.
Complains about U.S. debt.
He also brought up France.
I cannot disagree with him. It has been a concern, a problem for a while. And ultimately, it will be a political decision whether it becomes a really major crisis. You do have the European Central Bank, which has a fair amount of freedom of movement, and probably, given what has happened the last time there was a sovereign debt crisis in the euro zone, will probably do "whatever it takes" to keep the euro together.
If the political risks might be greater in Germany than in France, if you get a political decision, if people vote for actually we are really fed up. We are the austere. We are the Germans tired of bailing out the French.
Less than a month before U.S. midterm elections, how does that fit into this?
Do you see that as a risk?
Not really. In terms of the things we are most worried about at the moment, I don't see any way the deficit gets worse with gridlock.
Bond markets in particular like gridlock. If a blue wave including a Democratic president, rightly or wrongly, that would probably create some concern. The Trump presidency so far has not exactly been a group of deficit hawks. Broadly speaking, when you have a gridlock with Congress, they try to stop you from doing whatever you are doing, which at this moment includes increasing the deficit. So in terms of the most important issues we look at at the moment, I don't think that is a problem. Similarly, the executive branch needs to sign off on tighter regulation of AI. So if you have the status quo, that is fine. Looking at Nvidia's share price, etc.
We will have more columns from you. I always look forward to the end of the year when we look back with you. John Authers, thanks for sticking around. He is the Bloomberg Opinion columnist, senior editor for Bloomberg Markets. Coming up, we are still in on AI. We will get you some of the risks. Yes, they are out there.
It is 2:21 p.m. on Wall Street. We check markets all day long on Bloomberg. Stocks well off session highs. However, still on track for a record close. S&P at 7827. That is a gain of 0.7%. The closing high is 7798 on the S&P 500 index. The Dow up by 0.5%, 248 points. Traders driving stocks to records on growing bets that corporate America will weather the threat of the elevated price of oil and interest rates. Nasdaq up 0.6%. The five-year above 5% at 5.02%. The 30-year yield, 5.63%. Gold up to 4170, up by about 0.7%. Crude moving lower. WTI, $89.25 a barrel, down 0.2%. Brent flat on the day right now. $100.32 for a barrel of Brent. McDonald's plans to overhaul its restaurants and menu. That plan is sparking a lot of concern among U.S. franchisees facing upgrades that will cost at least $800,000 a person. McDonald's shares moving lower today, down by 0.4%. Stocks higher. S&P at record. For on-demand news 24 hours a day, subscribe to Bloomberg News Now wherever you get your podcasts. That is a Bloomberg Business Flash.
Thank you so much. You are listening to and watching "Bloomberg Businessweek Daily." OpenAI today reiterating its apology for artificial intelligence models breaching Australian government websites. They pledged to respond faster if they do occur. J.P. Morgan's CEO Jamie Dimon, we just talked about it with John Authers. He talked about a lot of things including AI.
The potential cyber risks that are out there that go along with that as well as data centers.
I remember years ago, might even be 20 years ago, he was up on a stage talking about the biggest risk to the company and he said cyber risk and talked about the amount they were spending when it came to tech and security. In the interview with Bloomberg, Jamie Dimon talked about Anthropic's Mythos AI model and how it dramatically increased global security risks. He said it went up tenfold after Mythos. He spoke today with Tom Mackenzie in London. Here is what he had to say also about data centers and when they are placed in different communities.
Data centers, half of the new ones in America are in Texas and Virginia. People don't want them there. You will not win. You have lawsuits. There are a lot of states that will take it that have access to power. Any big company needs to be a community citizen.
That is Jamie Dimon earlier with Tom Mackenzie at the conference in London. That full interview on the Bloomberg Terminal. Our next guest and team have been looking at the impact of AI as well. She is chair of the Global Risk Advisory Council of Global Situation Room, a crisis and management firm based outside of Washington, D.C. She served in President Biden's cabinet. I spoke to you when you were in the President's cabinet. How are you?
Going to be back. Great to see you. I am doing well in Los Angeles and focusing on issues around economic development.
Tell us about the work you are doing. I want to get into the Global AI Risk Report because, as you have gathered if you have been listening, almost every conversation has to do with AI. We are like, what happened? What went wrong? Tell us about your world right now in this report.
Yes, one of the first things I did was agree to chair this Global Situation Room and the Global Council that guides it. The index is the barometer of the reputational threats that exist in today's environment. It is no surprise that AI has again reemerged at the top of the list. It has been topped throughout the last year and a half plus that the index has been released. It is really reputational damage caused by accelerated adoption or the lack of adoption or misuse. Whether you are a doomerism believer, AI represents opportunity for growth and transformation if it can be broadly distributed safely. The risks tell the story of how it perceives the broad and equitable distribution or the safe deployment. I think public trust in the U.S. at least is not high when it comes to AI. It is emerging constantly as the risk for companies.
Those reputational risks you are talking about, within the survey it was mentioning when it comes to financial services organizations. Tell us more about those findings.
