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tv   Bloomberg Markets European Close  Bloomberg  April 27, 2021 11:00am-12:00pm EDT

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guy: live from london, i'm guy johnson. alix steel is a new york. we are counting you down to the european close on "bloomberg markets." ubs shocks with an 861 million dollar archegos hit. buybacks are back. bp jumps at gas trading profit, allowing it to return money to shareholders. bruno le maire expresses frustration again that the eu is falling behind, saying that the region has lost too much time. he says china has resumed its growth. the u.s. is booming. the eu must remain in the race. let's talk about where we are with european markets right now. the stoxx 600, to be honest, down 0.2% today. it is going sideways, and it has been for the last couple of weeks. last week the first down begin
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eight -- the first down week in eight. what i am not getting is that earnings are going to be the catalyst to drive us forward. we will talk about that more in just a moment. the other thing we are watching carefully is what is happening with copper. are we heading for $10,000? alix: if we look at the s&p 500 metal and mining index, they are all really exposed to copper. that is pretty much up just 0.1%. within the s&p, industrials doing pretty well, as well as materials. it is interesting where you will see the upside from that copper market. in terms of trading, the nasdaq 100 down by about 0.5%. you just said it, the earnings story. is that going to be a real driver of stocks? so far, we are not seeing a pop from the really good numbers. i did want to highlight two things that are happening. dollar-yen is up about 0.3%. the boj had to lower its inflation forecast for its fiscal year, citing cheaper
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mobile phone bills. that is going to put some pressure on the end. also watch the seven year space. we get an auction coming up at 1:00. keep your eye on that. guy: as we have been discussing, today is all about earnings on both sides of the atlantic, and it is going on all week. on average, european companies in the stoxx 600 have seen profits more than double on a year on year basis. corporate executives talking about that strength to bloomberg. >> if you look at what really fueled the results this quarter, it has really been the success of the vaccine programs. >> we can see a strong recovery in the markets, but also all segments. >> you're seeing strong demand in america and in china. >> we expect stabilization to continue. innovative medicine should be firing on all sale and there's -- all cylinders. >> we expect things to
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stabilize, which allows us to keep our full year outlook contact. >> we are very confident about customer activity. >> i think the vaccines are going to kick in now in europe. . >> as we come out of covid, customer activity will be much stronger. >> across the globe, i'm sure there are areas in real estate where there's bubbles. >> financial performance from the company has exceeded our expectations. >> we are much more optimistic then we were a couple of months ago about full-year results. guy: sounding pretty positive, aren't they? they are looking forward to a stronger economy. john bilton, j.p. morgan asset management head of global multi-asset strategy, joining us now. all of those ceos sound really positive. they see their business is getting better. share prices are not moving on the back of these earnings. i am wondering what it is going to take get european markets reenergized here. the stoxx 600 has been around
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the 440 level for quite a while now. earnings are not doing it. if earnings aren't going to do it, what is the catalyst for european it these -- european equities? john: good afternoon. let's look at the facts. we have talked about the s&p and how much that has had a great year, and we have seen blowout earnings. the euro stocks is up around 13%. so the reality is this has been far from a bad year. european equities have performed. maybe they are taking a breather, but if we actually look at how stocks performed ring earnings season at the moment, beneath the noise and the volatility around earnings day itself, it can also -- it can often be hostage to help short-term traders go into that. what we have seen in the last few years is it has taken the period of digestion and absorption of those results and guidance after earnings have come through, and that is really when we see the upgrade cycle
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come through, and where we see new money being committed toward the equities. but we have seen his interest in and flows into equities have been strong of's of late -- strong as a late. we want the analyst communities to wrap their heads around this and figure out where it is going, but let's look at the facts. 16% of european companies had reported, and they are reporting 71% of them -- they are reporting, 71% of them have reported a beat. this is the strongest earnings season since 2009. in materials, financials, and energy, they are leading the upgrade cycles, but it will take a period of the absorption to really see that translate into an improvement in terms of analyst expectations. alix: where is all of at least priced in at this point within europe? john: one of the things we've
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got to look at is we do have some concerns coming into the guidance. there's concerns being cited around inflation. there's concerns being cited around the margins not having yet really moved in a positive direction. concerns being cited about rings like inventory gaps. all of these are things which sort of reflect the uneven nature of the recovery we are seeing around the globe. but make a mistake, if we look at growth data, jobs data, fiscal support, all of that is coming through. where do we think we've got potential upside? we believe still it is the cyclical sectors, the financials, those that are geared to this global growth recovery. the recovery is perhaps a little uneven around the globe at the moment. the u.s. and the lead, and other regions looking to only now come back in, europe in particular. we do foresee a period of above trend, reasonably synchronous global growth developing through the back end of this year into next year.
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with that we get higher rates gradually, and that supports the cyclical rotation which has been the hallmark of this year so far , and we believe there's more to go. guy: jeffrey gundlach has just been talking to our colleagues in canada at bnn. he says that you are stocks are overvalued -- that euro stocks over value asia. john: yes, we do have stocks in many regions that are expensive. if you look at would lead the rally last year, it was a huge rebound in technology. by and large, that sector has traded a little more sideways this year. it has been strong, but relative to the wider s&p, those companies with earnings have come through ok. those without earnings have lagged. it demonstrates how investors are focused this year on earnings. but i think the crucial point to recognize is that we do see decent earnings growth coming through in the u.s., so this is
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a question of those fully valued sectors perhaps playing catch-up. but when we look elsewhere around the globe, the laggards of the last cycle, europe, and to a great extent places like the u.k., have that valuation catch-up. this is a world where we feel growth won't be at such a premium in the stock markets because it is more broad around the globe as we move into a new cycle. that is an environment which is more favorable for that gradual pickup of sectors and regions that are being cheap on a multiple basis. that is why we are favoring regions like europe, like japan, like the u.k. to play a little bit of catch-up to some of those big cap u.s. stocks and follow the lead that they had last year. alix: does any of that incorporate a commodity super cycle? if we are in one, do you play it right now? john: taking commodities aside for a moment, one thing that is very clear is we know that
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copper is a very good barometer of global economic growth. it is another one of very many data points pointing to growing demand and positivity around growth. does that mean we are in a super cycle? time will tell. but certainly, sectors like mining, basic resources we feel will follow some of the moves we have seen in those basic materials, and that is one of the reasons why we think that the earnings revision cycle is being led by, among others, the mining and basic resources, alongside financials and energy, which are also those progrowth geared sectors. guy: when you have conversations about europe with clients, what do they say? how hard and ask is it still to convince them of the idea that they should be over allocating to europe and asia? john: well, let's face it, the equity culture is lesser within europe.
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when you look at the actual scale of the european equity market as a function of gdp, it is a good deal smaller than the u.s.. it is around half the size of euros in gdp. if you look at the footprint in the u.s., it is about double the size of gdp. so just from the get-go, there's a difference in terms of equity culture. but that does not mean that europe is not stocked full of some really good companies and strong sectors. we believe there is strong operating leverage, and in an environment with even more global growth, with the euro zone crisis from a few years back now well in the rearview mirror, and much more collaboration across the european union, we actually think there is greater upside for europe from here, and most importantly, the policy of the fiscal and growth environment are more supportive of the styles well-characterized within european stocks, which is cyclicality and value stocks. while it is a conversation we have to have, we have to challenge the lower level of
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equity ownership across europe. it is certainly one which supports a good, close look. alix: i love it. john bilton of jp morgan asset management, thank you very much. coming up, ups a drag on the stoxx 600. archegos, it is all about that. this is bloomberg. ♪
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ritika: let's check in on the bloomberg first word news. president biden will propose a large-scale tax increase tomorrow. he will also call for giving billions more to the irs to make sure rich people and large
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corporations pay all that they owe. it would raise the top tax rate to 39.6% for those earning more than $1 million. jp morgan plans to bring all of its u.s. staff back into the office on a rotational basis starting in july, cording to a memo from the operating committee seen by bloomberg news. the schedule will be subject to a 50% quepasa cap. -- 50% occupancy cap. the world's fastest-growing covert outbreak continues. andy reported -- india reported the sixth straight day with more than 100,000 cases, more than 197,000 in india have died. 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.
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this is bloomberg. alix: thank you very -- guy: thank you very much, indeed. it kind of feels like a lot of western countries are looking over their shoulders that what is happening in india and wondering whether or not something bad is going to come out of india that is going to ultimately upset the vaccination programs. we are obviously monitoring the horrendous loss of human life in india, and i think people are aware that we are not done with this. i kind of compare and contrast this with what is happening with the jetblue call right now. robin hayes is on the call, talking about an inaugural flight being announced soon, but talking as well about business being really weighed down about 80% as well, and the u.k. is going to open for travel in some form this summer. the u.s. feels like an isolated island at the moment in terms of its vaccination program. the u.k. may get access to that, but it still feels like we are a long way away from the world really opening up right now.
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you can still feel that in the airline numbers, new extrapolate that -- airline numbers, and you extrapolate that to all of these other companies as well. alix: if we do have india and cases are still erupting, i really do believe we need to consider what india not growing double digits means, not only u.s. companies that have supplies and workers there, but just in general, do not have that powerhouse that can drive global growth in the short term. what is the trickle-down effect of that, and how can you possibly price that in at this point? guy: i think the place you can price it in is in the oil market, which i think is where we are seeing some weakness. all of the other commodities are doing well right now. we'll, not so much. alix: bernard looney, the ceo of bp, has he feels strong about global oil recovery except for the likes of india. i do feel like oil was hit last
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week because of the rise in india cases. where do we go after that? guy: absolutely. you bring it back to jetblue, the jet fuel content of the oil market is still significant, and it doesn't feel like that is going to be coming back in anything like the way it was anticipated that it would. the vaccination program is going to roll out around the world, so we get that flying. the rug is being pulled out from that one, i think, over the last few days. alix: you go to airlines, i go to oil and bp. alix: coming up, we are going to stay with one of those stories. exceptional. that is how bp describes its natural gas trading results that boosted earnings. cannot really continue, though? bp promising to resume buybacks. we will break that down with lydia rainforth of barclays. this is bloomberg. ♪
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>> will begin buybacks in the second quarter, at the same time we have been making strategic progress as we transition the company, so really, it is a story of delivering on our promise of competitive cash returns for our shareholders, while at the same time transitioning the company for the future. alix: that was bp ceo bernard looney speaking with bloomberg about share buybacks. for more on those results, lydia rings worth -- lydia rainswo rth, barclays managing director, joins us now. this was really interesting. it is probably going to close lower. what do you think that's has about how investors took this announcement today? lydia: i think it was the idea of it being exceptional in terms of the gas trading business, and there was a little bit of,
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realistically, we are looking at that initial supply with the expedition that maybe it says something about the second half of the bad back and what sort of scale that would be. what we do know is there will be a buyback, given that they have had their net debt target little bit earlier. certainly there were expectations for higher buyback read through. guy: so why the caution, then? if there is an opportunity to get more shareholders back on board, which was basically the object of the exercise, why the caution? lydia: i think they hit that net are ge -- that net debt target earlier than they were planning to. they were only planning for that at the beginning of next year, and the outlook for the oil price, given what is happening with the pandemic, they are just
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trying to be cautious about where they may end up. they should be generating free cash, and that should enable us to have buybacks coming through. alix: but also really helped results because amazing natural gas trading, particularly around that texas freeze. can they replicate it? if not, what is the hit we are going to see? lydia: they did talk about it being exceptional trading. when i look at the numbers, there was about a $1 million beat to earnings. they haven't given the scale of it, but i think it is safe to say you will see losses in the natural gas trading business. seasonally oil is always very strong for the companies, and it
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allows them to actually have that cash benefit that brought the net debt benefits down and allowed them to start that benefit program. so it is not replicable in terms of earnings, but the benefit is real. guy: can i extrapolate this? i've got a lot of earnings over the next few days. am i going to see anything similar from a buddy else? -- from anybody else? lydia: the scale of it, probably not. what you do tend to find is that it is seasonally very strong for the energy companies. typically, they get the majority of their cash flow for the fiscal year in that first quarter, so you will see a good set of them across the oil companies. alix: what is interesting is
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when you look at that map, what the exception of chevron at exxon, for example, a lot of these guys are trying to become different companies. i am wondering what parts of their businesses are getting credit for that. lydia: i think not as much at the moment. when i am looking at the numbers, it really does take time to transition, and that period of's acceleration -- that. of -- that period of acceleration is post 2025. i think they will be more valuable than they get credit for, but the focus at the moment is very much on the discipline side. can they generate returns in the business, and ultimately, how much cash will be they -- will they be sending to shareholders? i think it will take time to get those businesses, so you will see it and whether it is hydrogen, biofuels, businesses are being built to scale, but it is just going to take a little but of time to get that. guy: what is the nearest
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comparison in terms of multiples that you will be able to put a post transition bp on? are they becoming utilities? i see they are applying for licenses to sell electricity. are they a generator? i am really curious as to what kind of company you see this becoming. is it a whole new category or something similar to something that exists now? lydia: i think probably a new category is probably where we want this to be, and this idea of integrated energy companies. if i look at some of the energy transition stocks, they are about four times where the current oil companies are trading. it is going to take us a long time, and i think that prospect -- so we are still a long way from that. but there's an offering that they have that i think will lead to more stable returns, that that really does benefit them
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coming through. guy: we are going to wrap it up there. great analysis. thank you very much, indeed. really appreciate it. looking for do a busy week for the energy sector. let's take a look at where european equity markets are going into the close. the earnings are coming through, but the market is not reacting. the numbers generally look like good -- look quite good, but the ftse, the dax, to cac 40 all trading lower today. we will deal with the details in just a moment. the european close is coming up next. this is bloomberg. ♪
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guy: wrapping up a tuesday session for european equities.
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we are down. we are right in the middle of corporate reporting season. we will talk about some of the single stocks. the market is not reading the story well. most of the earnings stories are resulting in negative price performances. intraday, we are in spitting distance of record highs. we are struggling with that catalyst to get us to the next level. we are down .2%. the story that is writ large across markets, the ftse, the dax, and the cac 40 all down. the cac 40 down a little bit less than most. those markets are tracking a little bit lower. in terms of the sector story, it is the travel and leisure sector doing the best. it is the leisure on the travel side of things that generally is where we are seeing the best performance. the ftse, the cac 40, and the
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dax all tracking lower. the story on the grr, the ftse is down .5%. let's move on to the grr. i want to show you that sector rotation we are seeing in the market at the moment. it speaks to the narrative of what is happening. travel and leisure up 3%. the banks are having an ok day. we will talk about ubs in just a moment. banks a little bit higher. telecoms energy tracking higher as well. that is the bp narrative. it is interesting, we are seeing good numbers coming through in terms of the commodities, basic resources down at the bottom. let's talk about single stocks. devolution is the reason -- evolution is the reason the sector is doing so well. the numbers today were blowout. is this sustainable going
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forward? this is a sector that is emerging rapidly and continues to take huge amounts of money in terms of the top line. evolution gaming responding to that, up 14%. bp starting up strongly this morning. the stock nosed over. alix address that just moments ago. maybe the earnings could have gone further, to the point about what is happening -- then we get to ubs, a shock. a significant shock. we were anticipating that would not be a material hit from archegos. maybe not material but certainly substantial. alix: morgan stanley, same kind of deal. ubs ceo spoke with bloomberg earlier today about the banks plan to review risk management. >> it is not only that we should
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demand it, it is also we should look at recommendations to come in in order to ensure an idiosyncratic event like this does not happen again. alix: joining us is andrew stimpson, head of european banks research at kbw, part of steeple. have we seen the worst of the arcade goes -- of the archegos hit? andrew: we have seen the worst. credit suisse will be the worst. credit suisse and ubs sing the last tale of the losses come through, partly in the second quarter. the really big bit that needs to come next is why did this happen, how did this happen? guy: my colleague put it beautifully in a piece she wrote for bloomberg opinion earlier on. clients need to be asking themselves how does a single
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client event and up doing more damage than the pandemic. however we in this situation? andrew: i wish i could answer that question. i'm sure a lot of people involved in making the rules after the financial crisis will be asking the same question. the banks can take some loss on collateral they collect when it is a margin call. it is not super unusual. for stocks, a lot of these stocks have been flat here to date, they are even down that much. they have taken such a huge amount of leverage and not be flexible on the margin in a systematic way, it is certainly worrying. whether it is because there a family office might be a reason. it is up to the banks themselves. i am not sure degree we need regulation on the culture in a regulators have pushed the culture.
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risk management should have been able to capture already. it is whether the risk management functions over risk in the past. which is i suspect with regulators will be looking into, how that risk management functions. whether it was flagged and overridden is obviously a concern. alix: ubs looking for more transparency from their family offices and other big clients. they will not close their prime brokerage unit or pair that down like credit suisse. does the aftermath of this affect the way they are able to do business? you need banks to take on some risk. is there going to be a learning curve? andrew: we want banks to take risk and certainly they will be edging more risk-averse than they are on normal bits of business. the economy needs banks to be able to take more risk for economies to grow. what happens here seems to be i would hope it would be an outlier.
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the european banks in particular we have to ask why they were taking such large risks relative to the size of the overall bank. if you look at the trouble the european investment banks have been in, they have struggled to match the profitability of the larger scale players in the u.s. , and of taken a question if you have one of the smaller scale investment banks, nevertheless much smaller than the u.s. government. if they are smaller, they have not the diversification benefit. can you operate in smaller investment banks where you are always stretching to reach these roe targets. guy: what are you expecting for the rest of the week? a lot of banks coming out with numbers. the smaller investment banks, have they been able to keep pace this quarter with what is happening in the states? andrew: without the archegos losses from credit suisse, the
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results would've been very strong. businesses had been doing very well. we expect to see -- management guided for i.b. revenues to be up 20%, although judging from what the u.s. has done there could be some upside surprise. the overall day-to-day business they have been doing in the past quarter is good. there are some questions about how sustainable that is for the rest of the year. that is true for the u.s. and the europeans. outside of the archegos should have been strong in the first quarter. alix: i want to get your take on the shift. you can see this with hsbc, hiring a lot of people which is raising the compensation ratio they have. as an analyst, you like that? you want to see banks hiring a lot of people even as they compete for talent or not.
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how you look at it? andrew: it depends what areas. most of the hiring range pointing to today is in the wealth management business. that is a business you would expect to be on a sustainable basis -- because it is very capital light. that aspect of things we really like. hiring more people into investment banking, it depends on what roles they are in. we are looking for much more efficiency. the european investment banking businesses are not the most efficient in the world. consistently hitting their cost of equities. we do not want to see them adding too many more costs if the revenues are not going to follow through. guy: can i ask you a question
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about footprints and travel? hsbc is talking about cutting its footprint. short-term target 20%. also talking today about absolutely slashing corporate travel. scott kirby at united air is on a call talking about the fact he sees business travel likely to return in january. what is the potential, the long-term potential for banks traduced -- for banks to reduce cost as the pandemic. andrew: i'm not convinced that would be such a large cost, a good thing for their target, to reduce their own carbon footprints. it would help cost a little bit. i would not have said it was a material in 2020. i am interested from reducing their carbon footprint, but really for the banks. they need to look at the carbon
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footprint of their lending portfolios. that is where they can make the biggest difference. the emissions are almost insignificant versus the emissions from their lending portfolio. guy: baby i'm looking at it from the point of view of the airlines -- maybe i am looking at it from the point of view of the airlines. at some point appliance need to be visited -- at some point appliance need to be visited -- at some point clients need to be visited. european equity markets are done for the day. banks had a fairly good day, as do the travel and leisure sector. these are the final numbers in terms of what we are seeing. let's take a look at what is happening. the ftse 100 is down .2%. bp adding a little bit to the downside. the dax down .3%. the cac 40 finishing the session fairly flat. guy: coming up -- alix: coming up, it is about the higher tax bills for wealthy estates and the audits.
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we will take a look at what to look for it with president biden's tax package with greg valliere. this is bloomberg. ♪
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ritika: this is the european close. coming up, daniel hom, 11 madison part owner. this is bloomberg. let's check it on the bloomberg first word news. joe biden is taking a claim on economic issues ahead of the 2022 midterm elections. according to -- the support plans are an appeal to the white voters that put donald trump in office. he is also targeting suburban
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women. polls show there is some republican support for the bided proposals. france and germany support the biden proposal for 21% tax on corporations. >> i'm quite optimistic we will have a good solution this summer , and this will change international taxation a lot and we'll end the race to the bottom we see today in international taxation. >> we have the historic possibility of getting to a compromise and to an agreement by -- so let's do our best and we will not spare on national enforce to do so in close cooperation with germany to come to an agreement by next summer. ritika: this is "balance of power" on bloomberg televion and radio. -- ritika: global news 24
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hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. alix: president biden will deliver his first address to a joint session of congress tomorrow evening. taxes is the focus. look at some of the projected changes. all you have to read is higher taxes are coming. a higher corporate tax rate, a higher top rate on individual tax brackets. long-term capital gains tax will be raised, putting more money potentially into the irs into increase the tax compliance. let's talk to greg valliere, ags investment jeep u.s. apology -- chief u.s. policy strategist. what is the most important thing tomorrow night? greg: i would say the main point is the opening salvo for joe biden is the beginning of negotiations. i do not think he will get all that he is seeking. i think he will get something. they will have to cut deals. guy: one area that does seem to
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have commonality across the aisle is the issue of funding the irs. is that a done deal? is the rs going to be significantly better funded? what impact will that happen terms of revenue generation? greg: that is a great point. i think the irs would get several hundred million dollars, probably in the billions for enforcement. there is a widespread belief in both political parties that people have been evading taxation. the irs will get a town of extra money for compliance. i think that is a done deal. alix: what is the timing of all of this? certain things might be more compromisable. what is the timing of all of this? greg: i wish i knew when it came to the capital gains rate. i do not see it being retroactive to january 1 of this
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year. that is unlikely. at the same time, if you made it january 1 of next year people would be selling assets throughout the fall and early winter. my guess is it may be -- the effective date may be the date of introduction of the bill in the ways and means committee, which will be the first committee to look at this. that is fairly imminent. i think the bill will be introduced by late spring. maybe there is an effective date right around that period. guy: this is coming sooner rather than later, giving people less time to reposition their portfolios. i want to talk about corporate tax. we just heard from the french and the german finance minister and the clips we played before you came on air. one of the criticisms of what the bided administration is doing is an elevated corporate tax level, both at the federal and state level will make u.s. companies less competitive. if the biden administration can get a global tax deal done, to
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what extent does that undermine the argument? greg: a lot. i think they can get it done with very little fanfare. for the last two or three years negotiators have been working on a deal that would include the u.s., france, germany, many european countries. what i cannot figure out is what happens to the outliers like ireland and singapore and the bahamas. they seek to avoid a tax at 21%. the big powers are close to an agreement. alix: would have to be 21% or could it be lower? greg: it could be a little lower i think 21% is the number they are looking at. when it comes to u.s. taxation, the top u.s. corporate rate is 21%. joe biden wants 28 percent. i think he has a good chance to get it up to 25% as joe manchin
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is insisting. there will be something in a lot of these tax proposals. it may not be quite as steep a tax hike as joe biden will propose. guy: in terms of what joe manchin does -- how are these proposals pulling -- how are these proposals polling and what extent do you think that will influence joe manchin's thinking? he is looking for some sort of bipartisan discussion. i wonder if the administration feels they can get him on board, feels they have the numbers, feels they have the support from their base to push ahead with this and do so aggressively? greg: you have raised a good issue and i think the democrats will say look at this proposal, look at public support. make an argument to reluctant members of congress that they should vote for it. the numbers show the public
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feels big corporations are under taxed and avoiding taxation, and the polls show the super wealthy argued the same way. i do think there is political support. i think it will get whittled down, i think the president will get a haircut. he will not get all that he wants. alix: it is not too early to talk about the midterms. what does this mean for the midterms and for the presidential election? greg: let me say this. historically the republicans have a slight advantage going into 2022 for all of the house and one third of the senate. then you add on top of it the census data that came out yesterday. there two or three or four seats in the deep south, one in texas, one in florida that will probably go to the republicans. i think that is still another
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reason to think the republicans have a decent shot of regaining the house. guy: the window is closing for the president. can he get it all done in the two years allotted? greg valliere, hef investment jeep u.s. -- afg investment chief u.s. policy strategist. we will have special coverage on president biden's address tomorrow. that kicks off at 8:30. the other big event tomorrow is the fed announcement. we will have great coverage of that. michael mckee will drop by for us next. ♪
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>> we don't know. nobody know. most concern is about things we think we know. there are plenty of indicators that suggest inflation will go higher, not just on a transitory basis. we will see. that is how i think the fed will paint the picture. they are guessing. guy: there is the word again. transitory. is tomorrow's policy announcement going to be interesting? the next one will be. this when i'm not so sure. michael mckee is going to be there. what can we expect? michael: here is the thing. this is difference between the old fed and the new fed. the purple line, this is what happened in the past. interest rates went up, inflation went up, so did the fed funds rate. this is what is happening now. we are seeing the interest rate
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in the inflation expectations go up. we are not seeing the fed move. the fed is betting the white line, which is pce inflation, does not go above the other two. they will say something quickly about the good economy. they will not be talking about the exit strategy because they do not want you to see the yield curve jump as it did when ben bernanke managed a taper tantrum in 2013. at this point what we are looking for is a quiet meeting from the federal reserve. alix: that is basically michael mckee saying it will be boring. i'm just interpreting what he is saying. michael: but i will be on the show. alix: it will be fun because michael mckee will be there. we have coverage, the fed rate decision in chairman powell's news conference. stay tuned for balance of power with david westin. this is bloomberg. ♪
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david: from bloomberg's world headquarters in new york to our tv and radio audiences worldwide, welcome to "balance of power," where the world of politics meets the world of business. i am david westin. president biden addresses a joint session of congress tomorrow evening and part of it will be given over to new social programs he proposes and paying for them with increased taxes. for a preview we welcome laura davidson who covers capitol hill for bloomberg. it seems like everyday there is a new tax proposal. what is the latest? laura: a long list of tax increases. one big one this morning is an inheritance tax that has been on the books for many years. it means when someone who has a stock or a business during their lifetime, when they died there is a tax paid on it before it is passed on to their heirs. that would be the big change. also looking at the top rate going up to 39.6, as well as a big investment in the irs to defund their efforts on audits.

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