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tv   Bloomberg Surveillance  Bloomberg  July 14, 2021 6:00am-7:00am EDT

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gradually putting back to work. >> that wears off. >> when you look ahead, we very much believe the economy will be growing well above trends. >> when things get really bad in markets, there is no doubt volatility is going to spike. >> we are blowing away a forecast at the last fomc meeting. why doesn't the fed recognize that? announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jon: from new york city to our audience worldwide, good morning. this is bloomberg surveillance --"bloomberg surveillance" live on tv and radio. it is chairman powell's testimony little bit later that gets your attention. tom: really front and center. i really would point to mr. summers visit with the biden
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administration and two hours ago in an eventful overnight, maybe mr. summers was a bit ill willed toward mr. powell. i don't know what that conversation was, but i just it yesterday. maybe mr. powell will be under significant scrutiny this morning by the legislature. jonathan: do you think it is easier to sling mud inside the tent? tom: there are a lot of people that would suggest that mr. summers knocking on the door of the white house the day before the power testimony was ill-timed. jonathan: it certainly splices things up a little bit later. tom: i was going to say, john was way out front on this this morning. lisa: you are wearing your beige suit. this is going to be a great show. people are looking at the details of that ppi report and a lot of them fit into the transitory message and that has
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been the message from the bond market with yields lower today and bonds reverting back to a flattening curve after people digested that most of it came from the reopening kind of economy. jonathan: this is not the life people lead. they don't get to live by trends and strip out the stuff they don't like. they have to pay the bills. i have a chart that strips out all of the reopening factors. economists want to pay attention to that. for a lot of people, the pushback, for so many people, that is not the world they live in. tom: the cleveland fed is expert at this with a major hat tip to the kansas city fed as well. i live by the cleveland statistics. all i can say is i have huge respect for what people have to live, particularly service sector inflation. things like medical bills, tuition. jonathan: forget market check. your equity market, 43.62.
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if you don't get the joke, please google. in your bond market, yields are lower by two or three basis points. i break at 119 on the euro. -- a break at 119 on the euro. lisa: we are getting new highs today even as you see that gloom persists. at least we take the message from the bond market. i thought tom keene was wearing his beige suit for the beige book that was going to be released. tom: how cute. lisa: today, we will be getting earnings sun america followed by citi and wells fargo. i want guidance on potential loan growth among consumers and corporations. what are they seeing? we did not get that much except for hope from j.p. morgan that perhaps consumers would spend a bunch of their savings and actually start to lend again. they would be able to lend to the consumers who would borrow
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again. what we are not getting clarity in any way and goldman sachs did not provide that. 8:30 a.m., u.s. june producer prices. we will get the index reading after yesterday's data. i want to understand what the friction is for some of the industrial producers. what kind of price input, how high have they gotten, and how much will that lead to inflation in the bottom line in the consumer prices that we see as we talk about when you go to the store and you see the sticker price increase. you are not going to talk about transitory factors. at 12:00 p.m., fed chair jay powell will testify at the house panel. serious about what he says about housing prices. i know that he and janet yellen are meeting on friday to discuss this. how much will he indicate a willingness to curve some of the mortgage-backed security purchasing that the fed makes every month in order to tame some of the housing crisis? jonathan: we have to talk about a big tax and spend climb in
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washington coming together. democrats agreeing on a $3.5 trillion tax-and-spend plan. this is 2.5 between dollars short, but even he is happy with what has been agreed on. tom: add $1 trillion for bridges, tunnels, roads, and infrastructure. a social plan on top of infrastructure. the language i have seen in the last four hours as this plan rolls out is stark. this is going to be a battle. there are some that would say this is dead on arrival. jonathan: this is going to be thrown at chairman powell again today and what this means for this economy and outlook. you might not want to go there. this is the second audition, maybe the final audition for a second term at the federal reserve. do you think that is a factor today? tom: yesterday, i would say no. i want to make clear, the news flow on this wednesday is extraordinary. when the facts change, i change. yes, powell's delicacies will be there and you will hear a lot on social policy. jonathan: join us now is --
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joining us now is christopher marangi. it is good to catch up. pricing power is a big focus right now. is it a big focus for you? christopher: absolutely. it always is. pricing power is what a lot of fundamental investors like us look for. it is nice to have a mark on those markets. it is a must have in an inflationary environment. lisa: how do you read the bond market reaction to yesterday's cpi friend even though a lot of people were saying we are in a new regime of three-month inflation that is the highest going back for decades versus it is just transitory? christopher: it is a puzzle. i don't understand it myself. this is more than transitory. so far, the market is bleeding. chairman powell has a difficult job. he has to walk the line between retaining his credibility and helping to keep inflation expectations anchored because inflation expectations are very important here.
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once the toothpaste gets out of the bottle, it is difficult to put back. lisa: how do you use the bond market reaction in terms of your stock picks? can you continue with a reflation trade of the bond market is not buying it? christopher: we look at the bond market as a source of data. but we are making our own judgments. we are listening to companies, hearing what they have to say about wage costs, input costs. we heard from a consumer company yesterday that took down that forecast because they see higher input costs for longer. we are making our own judgments. we do look at the bond market when we are making judgments about the financial sector. what does the yield curve look like? will banks be able to make money if the yield curve stays aside as it does? jonathan: we just saw some of these banks deliver massive numbers. i wonder how relevant the yield curve is for these companies 10-15 years after the crisis. christopher: it depends on the
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bank, it depends on the institution. we do think m&a is going to be hot for a long time and that should help institutions like goldman sachs and jp morgan. the core banking business is still borrow short and lend long. it is one of the reasons we do not tend to overweight financials as much as our value peers do. we saw a massive reserve release as credit is really good. tom: the hallmark of gabelli's i'm a shareholder give my cash. do you all suggested that you are going to see share buybacks like you have never seen before? christopher: we are going to see a pickup on that. we are very cash flow-focused. it is not so much that we are looking for buybacks, but management teams to take that cash and invest it in projects.
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that is what we are paying teams to do. short of that, we would love them to return cash not so much in the form of dividends, but given the perspective tax regime, but in the form of buybacks, we would like to be the last owner of all the companies that we like. we will see more of that. jonathan: good to catch up. appreciate your time. christopher marangi, chief investment officer as we count you down tomorrow rounding from bank of america in 14 minutes. wells fargo and citi shortly after. and then testimony from chairman powell at 12:00 eastern. tom: we will get that testimony, but we are going to get the testimony as stephen major here at some point from hong kong, he has a yield view different from the zeitgeist. jonathan: looking for that move back to 1%. tactically short-term neutral. we can talk to him about that. the bond market reaction was more interesting yesterday.
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we saw the front and selloff and the log in was bid. second half of the day was driven by a really weak 30 year auction. the supply shut things up later in the day. lisa: people did pushback. yields at the lowest level in months. the flapping in the yield curve has returned. we have seen the dev patel to. i think stephen major highlights it. it suppresses long-term rates even if inflation does pick up more materially in the short term. he also points to the overhang of debt and the fact that we are in a low growth environment. he has been right again and again. jonathan: he is not a friend of the doves. steve major, global head of fixed-income research will be joining us in a couple of hours. tom, are you looking forward to that? tom: i am sorry, i don't care about it. i don't know what else to say.
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on the powell testimony, i think that it really matters now after what lawrence summers did yesterday. jonathan: what matters most about it? tom: he is auditioning for another term period. jonathan: i think a lot of people agree with that. lisa: he is going to reiterate the same message. he does not want to make headlines. that is his job today. whether it is an audition arnot, i do not expect a lot of market moving information. jonathan: we come in three phases airport -- three basis point or so. on the s&p 500, some new york city this morning, good morning. tom keene, lisa abramowicz, jonathan ferro, looking forward to this morning. chairman powell testimony a little bit later. this is bloomberg. ritika: i am ritika gupta.
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democrats on the budget committee have agreed on a $3.5 trillion spending plan that would expand medicare and provide more childcare benefits. it would carry most of president biden's economic agenda into law without republican support. it is a win for bernie sanders. he has pushed for the medicare expansion. in china, media outlets are blocking a u.s. plan for a digital trade agreement amongst in of pacific economies. they call it a bid to protect american hegemony and the profits of tech companies. china daily call u.s. dominated agreements jackals were stripping trade. the biden administration is discussing proposal for a trade deal as it tries to restrict china's influence. in australia, sydney has extended its locked for another two weeks. the country's largest city is fighting an outbreak of the delta strain of the coronavirus. stay-at-home orders for city will remain until july 30.
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the city has already been isolated for three weeks. apple is planning a big increase in iphone shipments this year. the company has asked suppliers to build as many as 19 million next-generation iphones in 2021. that is roughly a 20% increase from last year. the next iphones will be apple's second. it is pushing users to upgrade. bloomberg has learned that the entertainment comedy backed by lebron james is talking about a sale. talks between spring hill co. and nike and others are at an early stage. james formed it last year after amazing -- raising $100 million. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg.
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♪ >> everyone has forgotten about
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the one trillion dollars last december. that is a lot of money and almost $2 trillion in the rescue package. you put all of those pieces together, that is almost 50% of gdp in a year period. even during wars, we did not spend that kind of money. when you combine the fiscal stimulus with the pent-up demand and high savings from last year, the economy is going to take off and put the fatima in a difficult position. jonathan: the fed is in a tough spot. that was randy kroszner, professor of economics. good morning. i'm jonathan ferro. your equity market is shaping up as follows. unchanged on the s&p 500. yields lower again after a brief break of 140. just a brief break. 149.80. down a couple of basis points. the euro-dollar is trying to get back towards 118. positive by almost 0.2% this morning. tom: it is the movement of the
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market. i think the euro quote is really important. jonathan: why is that? tom: it is just weaker. you look at adxy, the bloomberg dollar index is broader than what you see in the traditional dxy and they are leading the way. it is a grind, but it is there. jonathan: chairman powell midday, i think it will be fascinating how he pushes through the questioning around that inflation. that data point coming from -- just before this testimony is perfect. lisa: especially because people feel this. they feel it when they go to the store. they feel it when they buy airplane tickets. they feel it in everything that they can and will do right now. there is a popular message, which he recognizes this, and is going to monitor it. jonathan: let's turn to every. -- ambery. what is the take in washington? >> the timing is interesting
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given the fact that we had that inflation number yesterday. larry summers has been so critical of the government's spending, the fiscal spending, the coronavirus, $1.9 trillion coronavirus package. he was worried about inflation. the timing is very precarious, especially as tom mentioned the fact that we are going to have chair powell testify on the hill. jonathan: do you think that puts chair powell in a tough spot? lisa: it raises the concern that even the white house has been highly politicized. annmarie, i am serious your perspective as democrats come to some sort of agreement, how much inflation is looming as part of this debate and part of the pushback from republicans. annmarie: that is what you are going to hear from a public is today. you have heard it in the past. when they ask these questions to chair powell, they are going to point to the inflation number. we have seen in the past and talk about why we should have
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more fiscal spending we have an economy running too hot. to larry summers's point, he was making the case that it is not just economics, but the political fear is very similar to the 1960's which preceded the red-hot inflation of the 1970's. republicans are going to hone in on today. the democrats are saying we need these plans and so much of them will help grow and expand the economy, but also we should note, this is just an opening of the hard infrastructure, this $3.5 trillion. it is just the top line of what we could see wearing there will be days of rain going -- it is just the top line of what we could see. there will be days of rain going -- wrangling. lisa: he is a democrat. he served in democratic administrations. he is raising the alarm about inflation. are there democrats concerned about this as they pushback against bernie sanders'more ambitious plans?
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how much will that feature? annmarie: that is a very good point. that is where the power holds. it is in the moderate democrats. they will be the ones to get this through to the caresses or night guest to the progressives are not -- to the progressives or not. they want to make sure that they can pay for this responsibly, those moderate democrats, and that is where the power is going to live when you see the debate on -- where the power is going to lie when you see the debate on whether they are way to get this over the line. jonathan: when you break it down, 42 basis points higher in cpi. new cars, launching transportation services, added another 28 basis points. for me, we can argue all day about this, the definitions, the time frames. it comes down to something simple. the price surge we see now, has
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it overwhelmed the recovery? does it overwhelm a sustainable recovery that will lead to full employment? that is where the federal reserve is confused at by introducing this word transitory where there is this huge debate on what it actually means. annmarie: that is the issue right now. you are seeing this in the housing market. that is what you are seeing in the yield curve. perhaps jay powell will be able to address that today. jonathan: annmarie hordern, thank you. on the inflation debate as we work our way forward to chairman powell's testimony later this morning, chairman powell is going to face a lot of questions perhaps from both sides of the aisle. lisa: how concerned is he about disrupting a bond market that is pretty much asleep? you have people looking at this, you have less than a 1.4% treasury yield. the 10 year real yield is the lowest it has been since past february. we are talking about this dissonance between people
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expecting higher inflation and yields that are camped out by a very easy fed. jonathan: some more important bond market reaction from yesterday. the way we responded to the data or the way the auction went a little bit later. there are two stories there that are different. we have the reaction to the data in the morning and the reaction to the auction later in the afternoon. lisa: that yield on the 30 year auction was very low. there is pushback at a certain level. i think is a muddy question and looking at the flows, how much is it foreign demand, how much is it technical versus a fundamental statement on the economy. jonathan: your equity market coming into wednesday, elevated, close to all-time highs. we have parted at around three points. in 20 minutes from now, you should get some learnings from bank of america. then citi and then wells. we will hear about investment banking fees, soft trading, an environment that might not get better. but then we have to talk about what it means for banks. yields in a couple of basis
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points. there curve is flattered by that one basis point. we were pushing 160, 150. they were calling for 170, 180. we are back to 115. lisa: it raises the question of can you invest in the financial sector at a time when you have a flattening yield curve, especially because investors expect that we have already seen a peak in the yield curve steepening discussion. jonathan: coming up, responding to those bank earnings and anticipating some of them as well. we will catch up with kenneth leon. looking forward to that conversation. alongside tom keene, lease or winds, i am jonathan ferro -- lisa abramowicz, i am jonathan ferro. we have some testimony from the federal reserve chair and some earnings from bank of america, wells fargo, citi. your equity market, 43 .63 on the s&p 500. a couple of points and a push i once again on the nasdaq 100, up
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47 points. big tech, and dynamic we can talk about later. big tech versus small caps. that tug-of-war continues. 139.80 on 10. from new york, this is bloomberg.
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♪ jonathan: from new york city, good morning. let's get you set up for the price action and the events of today. chairman powell's testimony later. equity futures basically unchanged on the nasdaq. on the nasdaq 100, 8 weeks of gains into this week. of about one third of 1% -- up about 0.3%. these are what we are watching today gary wells fargo -- what we are watching today. wells fargo, citi. let's wait for the numbers. since jim, we are down about seven or 8% -- since june, we are down about 7% or 8%.
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maybe the bond market matters at the moment alone bit more where the stock price goes. we take a look at two's, tens, and thirties. a soft auction. 2.0 to present on a 30 year. this curve from the end of march has gone from pushing 160 basis points to just about holding onto 100. that is where we are at the moment. that is really shaping sentiment when it comes to these banks. tom: the banks are back and forth. i read the research about traditional banking. i am less looking at that. i am looking at what is their plan out three or five years. jamie dimon has articulate at that, but i need to hear from this ceos in their conference calls what is the 2025, 2028 view? they don't have one. jonathan: jamie dimon at jp
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morgan, a phenomenal leader who is really responsible for what wall street looks like. the one thing i think j.p. morgan acknowledges, the likes of square and others, they missed and now they have to spend. tom: they've got to buy. jonathan: i know some all he has done a lot of work on this. i know -- i know sonali has a lot of work on this. when it comes to purchasing an m&a and all of that, morgan stanley, a lot of attention. tom: he has done some strategic things in wealth management. it is a little bit away from the tech part and much more towards his comfort, his wheelhouse. the other thing we have to look at, i will be honest, this have to do with banking as well. we had a transaction yesterday that was done completely outside traditional financial banking. it was done in private equity
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and the financing for that including blackstone, the aft wrote this up beautifully overnight. what is the future of banking three to five to six years out? i don't know. jonathan: i don't know either and that may be part of the thing that is kept these banks back. these have not been the big performers over the last 10 years. the big performers over the last 10 years have come from somewhere else. they have come from big tech. tom: that is a nice window into the bombshell this morning which is the repricing on apple. this is for the end of the month with the bank earnings coming out. it goes up to $170, up 16%. but john, the apple success, the apple reset this morning is a proxy for that big tech. jonathan: we have not seen a new high on apple until very recently. some of these names, absolutely nothing until recently. the 8 weeks of gains that i
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talked about on the nasdaq 100, that is really important. i will talk about what -- this little bit later. there is a story there. there is a story for the federal reserve about growth and the perception from some people in this bond market that the fed could choke at all. if we think that a little bit later chairman powell is auditioning for a second term at the federal reserve, do you think he wants to talk about growth anytime soon? tom: he is not going to choke off growth, but job formation. the job formation and amazon along, apple up 27% off of the bottom in march. let's swing back to banks. very important right now. particularly we see with the breaking news, a joint venture with jeffries. ken leon joins us with cfra. let me ask you, are we going to see a consolidation in the
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financial space that you follow each and every day? kenneth: the consolidation will happen, yes, and it is happening to the largest banks, regional banks, and the smaller banks. there are still thousands of u.s. banks that can consolidate, but the disruptor is fintech companies that accelerate consolidation because they are looking at digitalization to replace bricks and mortar. tom: how do they compete with jp morgan and the others from bank of america? how do they compete with big people with big budgets? kenneth: it is increasingly more challenging because many consumers are banking via their mobile phones or by their laptops, which means that local presence and relationships is almost a legacy look in the rear mirror to older baby boomers because digitalization is changing how we live and how we bank. lisa: in the meantime, people are looking at consumer appetite to borrow at a time when they are flush with cash and that is going to be in the forefront of
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many people's focus, particularly at wells fargo data that comes out later today. what are the signs you are looking for that even if we do not see loan growth now in that capacity, it will pick up later this year and that we are close to that turning point? kenneth: that is the million dollar bet and it is part of the reflation trade of having a stronger recovery and consumers beginning to spend. what we learned yesterday with jp morgan and we are definitely going to get today with wells fargo and the other banks is whether the consumer is leveling back up. they are flush with savings. we have seen an increase in consumer spending even on credit cards. auto loans are strong. but they are paying on time, which means loan balances are not going up for the consumer. that is a serious issue, certainly, the v-shape story for the second half of this year for large banks probably is over and we are looking to the narrative for 2022 for this recovery and
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increased lever of the consumer in the household. lisa: i love that is considered a bad thing. people are able to repay their loans on time and they are not racking up huge credit card bills. they are saving money. what a terrible thing for banks. there is a question of whether these banks are a buy, given the valuations, if treasury yields do not go up and if people continue to use their savings to the extent that people are expecting for the rest of this year. kenneth: that is correct. these stocks are still valued well below the valuation of the market, the s&p 500. they are very attractive for investors and portfolios of growth and income or equity and income portfolios or funds. when you look ahead, the mass of the economy growing, whether it is the u.s. or global, is not likely to be this move we have seen this year. we thank you need to have some
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-- we think you need to have some momentum. the momentum for the second half of this year is neither going to come from the consumer or from the widening in terms of net interest margins and higher net interest income and a big way and that is really import for banks. jonathan: what does that mean for the sector? you have done pretty well doing that over the last year. do i need a crystal ball? if i had a crystal ball, i would have studied goldman and set out of jp morgan, and got a gain of north of 40%. what would you suggest people do? a basket or get specific? kenneth: i think in terms of funds strategy, certainly have a basket where you are going to play different areas of the financial sector. and that when be banks as well as nonbanks, consumer finance, insurance, so you are diversified.
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looking at banks, we have more of a waiting with morgan stanley and goldman sachs because we don't have to worry about the consumer or a rising yield curve. certainly there are quality names like jp morgan as well. jonathan: when -- where did the likes of square and paypal fit in with this? kenneth: it is hard to see what the outlook will be for the large banks. they will defend. they are investing billions in technology. but the ability where you change behavior in the consumer in terms of how they shop and how they bank is something that worries large banks. certainly, we could see some tactical acquisitions. the direction of consolidation within the banks, we are likely to see the large banks move ahead looking for disruptors in technology that helps them defend or grow in this new era. jonathan: could you see one of these big players getting with a company as big a square? ? ?
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could you envision that do you think that could happen? kenneth: it is hard to say. my analogy would be walmart versus amazon. walmart did that and now the respective in terms of a shop online and home delivered. i think for the large banks, they are making some acquisitions in venture capital. they are increasingly having a seat at the table for these really substantial changes going on with technology and banking. jonathan: ken leon is going to be sticking with us as we await bank of america. we are talking about $100 billion company at square. we talked about m&a with these tech firms, you have to get your head around the size of them. deutsche bank is north of 20 billion euros, we are talking about a company four times as big. these are big companies having a discussion about m&a. tom: there are the little companies as well. the singular news is the behavior of consumers and you
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see that in the panic at goldman sachs and apple to set up and affirm equivalency. afrm has not done all that well to smaller companies. you know what, in december. the big boys are petrified -- you know what, it is simple. the big boys are petrified. lisa: i am wondering if biden, if that is how he is going to make his name, how he will allow these big eggs to acquire other big financial tech firms -- how he will allow these big banks to acquire other big financial tech firms. jonathan: did you come up with that name? tom: no. -- lisa: no. jonathan: i have heard that before. we are waiting for numbers. from, this is bloomberg. -- from new york, this is bloomberg.
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ritika: president biden says it is a national imperative for congress to pass voting rights legislations to counter laws passed by republicans. he calls it election subversion. most of the democratic representative in texas left for washington in order to prevent the republican majority from passing new voting limits. germany's chancellor will have a message for president biden when they meet at the white house tomorrow. europe wants a seat at the table too. angela merkel and emmanuel macron are pushing for the european union to have more of a say in relations with russia and china and at the same time, angela merkel is likely to acknowledge president biden's moves as those of a dependable ally. a remarkable turn around from a year ago when the pandemics into the u.s. economy into a tailspin and decimated oil consumption.
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now, demand is at the highest level in three decades. gasoline and diesel demand is that pre-pandemic levels, but the recovery is being propelled by a surge in petroleum use for products such as plastic and lubricants. cathie wood's investment management has been selling chinese tech stocks. the etf has plans to less than 1% as recently as february. woods says there has been a valuation reset in chinese tech stocks. beijing has intensified its recent crackdown on that sector. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. jonathan: from new york city, or
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come coming earnings from bank of america. let's go through them -- here come the earnings from bank of america. let's go through them. $1.7 billion, that is the estimate. $3.6 billion, the estimate $3.78 billion. just a little bit lighter. etf's coming in at the dollar at $0.3. a couple of details coming from the ceo, mr. moynahan. over 85% of building offices are open. slowly getting back to normal. the number is softer on trading again and softer on fixed income trading specifically. tom: they do a very nice job. edge report is different. i would suggest it is a pandemic struggle. there is a struggle. jonathan: that stocks coming in at point 5%.
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-- 0.5%. just to go through the numbers, that was a soft spot many people were looking for. lisa: the other thing that is really interesting is that the deposits were up 21% in the quarter, even as brian moynihan said consumer spending significantly surpassed pre-pandemic levels. there still is so much cash and the fact that this is pressuring banks balance sheets is a conundrum. given the 23% increase in deposits at jp morgan to see this increase from already elevated levels raises some serious questions. jonathan: just quickly, a reserve police of $2.2 billion. -- a reserve release of $2.2 billion. tom: we know the reserves are there and the release of them in good times like we have right there. one chart that gets my attention here, this is on page four, the presentation. this goes to the modern banking of square that you were talking
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about. credit cars 30 days past due -- credit cards 30 days past due, down. a better picture for consumers. jonathan: before we move on to sonali, it is interesting to blend in what mr. moynahan is saying about in-person meetings. they are raising growth and wealth molly smith -- wealth management. how much of this business is open and how important and pertinent -- a person meetings are. -- in person meetings are. tom: we have to get you and lisa in here. sonali and i are holding court at her desk. bank of the -- bank of america is a unique presentation. sonali: what people are murdered about four of america and jp morgan. tom: traditional banking. sonali: compared to $11 billion
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a year ago, that tells you how tough this business can be. i vcs are in above expectations so you see them really feeling that debt capital markets engine way above $1 billion and helping the investment helping the consumer bank offset those challenges, fixed income trading. he looks back at them to come in goldman sachs and fixed income. they fell short of expectations, well short of expectations. they will be questions about whether there were market share losses given that they felt so short. equities did come in all right. all in all, very mixed results. as you guys have been talking about, mixed is not going to cut it. jonathan: the cfo said total loan balances grew for the first time since the first quarter 2020. that will be a big part of the story. what are we learning from jp morgan and bank of america? sonali: that loan balance
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question is a big thing. credit cards not growing, that is a tough thing for jp morgan must certainly for citi group. for bank of america as well, we are going to want to watch the mortgage business as well. home loans rising. that was also challenged at jp morgan as well. again, a mixed bag. it is not enough to appease investors. bank of america has promised it will be shipping more towards e -based businesses. even goldman sachs, that was a big promise. more predictable revenue. that has been the story lately on wall street. lisa: you talk about how it is not good enough for investors and certainly you are seeing the initial reaction, which is not that big considering how big the rally has been to date. but it is still down more than 2% in premarket trading. how big of a concern or a benefit is it with the deposits on the bank's balance sheet grew by more than 20% at a time when they want to see people
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spending, they are saving? sonali: it is not just the deposits. what is shocking is hearing analysts asking brian moynihan and jamie dimon if they are going to get to the point that they start turning away deposits. that is something we have not seen in this country. but it is that loan-deposit ratio that is concerning to regulators. why aren't banks lending in relation to the deposits they are taking in? digital user ship is also up significantly into this pandemic. as things start to reopen, the question is what is bank of america's strategy? jamie dimon said they have opened 200 branches. half of their 400 branch gold. it is not that every bank is stepping back, just on average they are. tom: we will keep diving into this. when we look at 4, 5, 6, 7 banks, the chart presentation in
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the heat of an earnings release is best in class. there is no other way to put it. ken leon. is with us. brian moynihan had the courage to but the efficiency up in a gorgeous chart. the number was a brilliant 60% after the pandemic and in the pandemic my is not. do you have a belief that the banks could get back to the efficiency ratios of the past, or is that days gone by? ken: it is only for the problem banks where the official -- efficiency ratios will stay elevated and that will be citi group and wells fargo. four of america, jp morgan, -- for bank of america, j.p. morgan, that is yes. with investments in digital and technology that has enabled them to improve that ratio. it is a simple ratio that captures their whole business. it is kind of a second derivative for analysts as we
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look at what is performance. tom: i see a moonshot on the chart and it is what jon is talking about. we are using digital, we are using our phones. we all move money around to our kids. ken leon, what does zelle mean for brian moynihan, jamie dimon, and the rest? ken: you definitely want to be a player and take advantage of how society is changing behavior, how they shop and how they spend. but do not get distracted. i don't think brian moynihan and management at bank of america that a fiscal presence will help them. for the delayed rebound of the consumer for banking and small business, small business loans, they come to a local branch or to a financial center. we are also seeing market share gains of the large banks and even the top 100 metropolitan
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markets in the u.s.. it is kind of a boring strategy, but incrementally that is going to help them especially when we see a pickup in loan activity. unfortunately, that is with confidence in 2022, not for q3 of this year and maybe we get a glimpse of that later this year. jonathan: that comes down to what is happened on the fiscal side to get a decent read on what is happening with loan growth? ken: so much of the catalyst for loan growth is really the consumer. it is not commercial or corporate. they are flush with cash. they had access in the u.s. market to the capital markets and we saw that and fixed income underwriting. for the consumer, you look at the fed data, many metrics, household savings, the ratio of debt relative to their income, they are at record lows.
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it might be, we have technology going, but the consumer is more conservative. it is like coming out of the depression of the 1930's or the financial crisis. we are saying, we are going to pay our bills and we are not going to let these credit card balances rise as much as they can. that is a big story as we go into the next quarter because we will see if that is true. jonathan: the big distinction to come out of this one. i am wealthier, not poorer. that is the big distinction. lisa, you have written about this, the distinction between main street and wall street, companies and consumers and how that cash is being deployed. lisa: you can bet more reliably and that is what we are seeing in the stock price on banking, mergers and acquisitions, other types of financial market activities for consumers to be with their spending, going forward, can investors continue to rely on the banking activity to support any lag in lending until that takes backup -- picks
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back up. ken: the banks are strong. that balance sheets are at great levels and return of capital. for the consumer, the banks are solid and for the investor, there is return of capital. we have substantial increase in dividends and buybacks. keep in mind, the whole battle here again is that they are capturing wallet share of consumer spending, but we did not talk about today the strong results of the asset management and wealth management businesses. for bank of america, all the large banks, and this is great because this drives for investors confidence on recurring revenue and cash flow. jonathan: ken leon, thank you. bank of america out just moments ago. trading coming in softer than anticipated. already low or that particular part of the bank. looking at the numbers, we are down to 38.90.
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negative a little more than 2%. a little of a disappointment. tom: i give them the highest credit for the chart-driven presentation they have done. you can glean so much from this presentation. it is available to the public as well. what i would suggest is if there was not a pandemic, with these banks look like they look now? jonathan: in what way? tom: everything has been sped up. the whole digital thing with everybody, these are non-essential workers, but with the tragedy of this pandemic, the banks have sped up their digital experience by 2, 3, five years. jonathan: maybe the consumer balance sheet would not have looked as good without the pandemic. that is what is bizarre. lisa: it mutes the reaction function in the economy and financial markets on every level. frankly, how do we get a clean read on what is going to happen when all of the signals we have
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relied on in the past are just gone? jonathan: how exposed do these banks feel to this underlying economy given some of these sources? coming up, steve major on this bond market. from new york, this is bloomberg.
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♪ >> the consumers have been venturing out into the real economy, and they have been gradually putting that cash to work. >> americans are more flush with cash, but that wears off. >> we look ahead the next few quarters, we believe the economy will be still growing well above trend. >> when things get really bad in markets, there's no doubt that volatility is going to spike. >> we are just blowing away a forecast that was already revised up by a point the last fomc meeting, so when does the fed recognize that? >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: chairman powell just hours away. from york city, for our audience worldwide, good morning. this is "bloomberg surveillance ." alongside tom keene and lisa abramowicz, i'm jonathan ferro. equity futures, 4364 on the s&p


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