and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> now is the time for the fed to turn dovish. they have not turned dovish. >> we have interest rates that have not hit the economy yet. >> our view is for a soft landing and that is the charge for equity assets in particular. >> as much as we put stuff out there about the hard versus soft landing debate, -- >> the fed does have a loaded gun they can use as needed or as appropriate. >> this is "bloomberg surveillance" with tom keene, and lisa abramowicz. jonathan: live from new york city, good morning.

this is bloomberg surveillance. i am jonathan ferro. your equity market on the sp 500 time to bounce. equity futures up by .3%. we have had two days without gains on the s&p 500 for the first time since october. the bond market move continues on the u.s. 10 year and return to the data ahead of payables on friday. lisa: especially because we were hoping the job openings data would not matter and then he came in the lowest going back two years and all of a sudden in matter. -- all the sudden it mattered. with an edge of nervousness, is this the beginning of a grind that rose to like it -- to labor market strength? jonathan: we just had q3 north of 5% of gdp. soft landing crowd could not have made any better. you look at the ice,, prices beneath the surface to come up,

job openings coming lower as well. isn't that everything everyone wants? lisa: it was a soft landing vermont -- soft landing nevada. maybe this is what would happen, it appears to be happening. given the fact we saw manufacturing tank, given there are some tea leaves that things are softening around the edges, is this just the beginning? can you take a step in time and extrapolate soft landing nevada? -- nerve anna -- nirana. >> add coming out later. -- jonathan: adp coming out later. it does not matter if it comes out big in any direction, it matters for a moment. lisa: i was thinking about adp, i was thinking what narrative could it feed it would matter the most?

if it feeds the narrative that the report yesterday was not a one-off and you are seeing a more rapid deterioration of the labor market, that could fuel the fact that maybe the soft landing nirvana is just a moment in time and not so that you can extrapolate out. jonathan: economic data in two hours. shortly after we hear from the big banks in front of the senate banking committee. two issues will come from this. the ceos are going to want to talk about transferring risk to markets and come arising their ability to finance this economy. they're going to be two big issues later. lisa: they are saying we will have to raise our costs if you impose more capital requirements. you already see that in the proposed testimony. consumers are to pay this and this is going to be bad for the economy. where gelasius now? we heard this at the goldman sachs conference.

where is the softening? how significantly? how rapid? is it a jamie dimon softening? jonathan: banks will be limited in their ability to deploy capital in times when most needed and it will have a ripple effect on the economy, businesses of all sizes and households as well if this goes the way policymakers would like it to. is this about good policy or just about good politics? most people agree it is about the letter. crime the river. get out of the smallest violin possible. even if everything that jamie dimon and that crowd says today, even if it is perfectly intuitive, we all sit here and we understand what he is saying is right, i don't think it matters. this is about beating up the bankers going into the election next year. lisa: i completely agree, and getting a soundbite.

no one is looking to get a constructive discussion. how much are you going to hear questions about who exactly is getting loans? who is taking out accounts? there has been a debanking, a transfer of consumer loans out of the smaller banks into these private investment firms. at that point, who exactly is going to have to pay more or might not have as much access to capital? jonathan: is a question that is going to dominate wall street and the nation's capital. here are the scores on his be 500, positive by .3%. yields drifting higher but south of 420. the tenure, for 19 -- 4.19 -- the 10 year, 4.19. lisa:. to see what this means in terms

of signaling. as you were mentioning, we hear from chief executive banks -- make chief executive's. very curious to hear exactly what you're talking about, how do they shift this into an call, a warning sign of their role in some sort of nirvana soft landing. the fourth gop debate is taking place at the university of alabama. donald trump is not going to be there. very curious to see whether receiving audition around nikki haley, especially as calls for chris christie to dropout increase and ron desantis has had publicized problems to his fundraising. jonathan: he is only running because the former president is running and maybe he wouldn't be if he wasn't. lisa: does this open a window if dominic raab is not the republican nominee? jonathan: i think they tried to

clean that up. lisa: it was an effective and people are thinking on one hand you can go back to the same kind of race and give a hand what if he is not the nominee? jonathan: anne-marie with some thoughts around this around the corner. let's kick off the conversation with torticollis -- with george, go base -- george goncalves. what about right now? george: 2020 three probably was a soft landing aided by fiscal spending. that has created this perfect environment. be careful about extrapolating, this could just be a moment in time and now it gets more challenging going forward. jonathan: you have at this rate could call for the month of march for bob corker -- for four to six months. what did you predict you will

start to see? george: the bond market has had a skeptical bunch and now it is latching onto this idea of inflation is heading lower but the jobs market is coming into question in terms of how resilient it is. the bond market is acting as if it is more of a view of is that they were to break, you have to be defensive in rates. lisa: is this a fed put? the fed can cut rates were just trimming around the margins to make it a restrictive policy in line with growth? george: i am not in that camp, this idea that this is micro disinflation and the phase would usually cut rates. this is not with the bond market is pricing in for. they're pricing in for a slightly hard landing. i think it is more about that. lisa: you said markets are pricing in something that looks

more like a hard landing, are you talking about equity markets? george: no, i think it is a combination of financing ability, donald d, the banking system at large. we think banking has stalled at this point. the banks played a critical role and the banks are sidelined, it is going to starve the economy for credit and have weaker hands next year. jonathan: let's talk about the data this morning. 130 is the estimate on adp. the main event is on friday, the payrolls report. the estimate at the moment, 187. do you see downside risk going into these prints? if so, why? george: a lot of job creation has come from the government sector so adp would have to be beyond 130.

adp does play a critical role. if we see someone hundred which is within scope based on other underlying metrics, i think there's downside risk for friday. lisa: we are talking about a new narrative creation, maybe we are not stop lending nerve on but you are starting to see deterioration of the labor market that could lead to something more various. are you saying there is nervousness around that kind of reality and any lower-than-expected jobs numbers will fuel that can create a bad news is bad news narrative? you might see a rally into bonds but you also see. george: that for 25, 475 move on 10 year rates was a risk asset. if we get a move towards 4%,

that is when the alarm bells go off. that is when other asset classes relies rates are rallying because of concerns about growth and job market. lisa: do you think that is enough? do you think that is valid or at a certain point rate cuts will support this feeling that we want to go too far down which is the whole argument of apollo, that the fed has a loaded gun. they have raised rates enough and they can drop them to support whatever economic turn we end up getting. george: these things operate with huge lags. the reason we have marked this because they have to start sooner. you have to get the economy into soft landing mode. fiscal supported that and pushed back the fed being the main actor. if the fed does not start coming in march, you will have a hard landing. it comes down to this idea that it is not just restrictiveness, you try to engineer a more sustainable recovery. we are at this fork in the road. this whole soft landing doesn't

last forever. the next move should be acceleration in growth. how do you accelerate with 5.5% fed funds? jonathan: george, you are killing me. we have defined the wrong way into next year. lisa: it is an airline morning given we have airline projections. i can lean into it. jonathan: if that doesn't scream -- that does not scream hard landing looking at those airline profits. lisa: record profits outweighing anything anyone expected. how do you pair that with everyone heading toward armageddon? jonathan: georgia going call base -- george going call base there. for all this rate cut talk, etc., why is the euro back to 107? the rate price in america, we decided to aggressively price in europe.

there was this interview with the ecb with reuters, quite remarkable to see inflation come this low. a very pleasant surprise. it sounds like the hawks on the ecb and the federal reserve are backing away. lisa: let's talk about the fed funds futures. we see a 55% chance of a rate cut by march by the federal reserve. an 86% chance of a rate cut by the ecb by march. talking about how much people are pricing in. 150 basis points of rate cuts by the ecb currently priced into the market through 2024. it is getting aggressive, deterioration is marked. the bogeyman is out the door and suddenly that is the question to me. are people leaning in because it feels good? jonathan: it is not about who goes first, it is about how did they go. 175 is the call from deutsche

bank for the federal reserve. this is the equity side, the conversation we will have, is it 5100 on the s&p year end next year? lisa: he was right. he came on and bullish and we were skeptical, what about the recession we were supposed to get in 2023? people are coalescing around him. jonathan: deutsche bank, coming up at 7:00 a.m. eastern. the big ball looking for 5100 on the s&p 500 you end. yields climbing a little higher by three basis points. 4.19 on 10 year. good morning. ♪

>> i expect all civilized leaders, governments, nations to speak up against this atrocity. stand with israel, stand with

civilization. jonathan: benjamin netanyahu speaking yesterday as they were approaches the two month mark. joining us later is elliot ackerman -- joining us now is elliot ackerman. always appreciate your experience. can you describe the type of urban combat taking place right now? elliot: the urban combat we are seeing in gaza happens at the close quarters, street by street and house by house. room to room. an urban fight is like being in a knife fight in a phone booth. it takes away the advantage technology -- of technology monitors have. one of the greatest casualties is the city the fight is taking place. we are seeing that.

the best parts of gaza are being turned to rebel. jonathan: and the civilians don't live there. how do you prevent the tragic loss of civilian life we have seen? elliot: it is actually difficult. that factors into the calculus on both sides. fundamental to hamas's attack was they knew they were going to force israel hands to fight inside gaza which would lead to casualties which would lead to more attention on the palestinian cause and a significant international outcry to end the fighting. the one thing we can see when we look at what is going on in gaza is thus far it would seem that has proceeded according to hamas's plan. lisa: how much longer do think israel has from a political perception standpoint and their own aims before they are going to stop?

elliot: the aims of the israeli government is the complete annihilation of hamas. one thing that is difficult is it is a high bar to destroy a terrorist organization as opposed to the greatest capabilities for making it no longer a threat. if that is their objective, they are setting themselves up for failure because it is difficult to see how they're going to destroy every member of hamas from the earth, especially as many are not in gaza. the other issue that complicates factors is there is a significant number of hostages still inside gaza. the israelis cannot finish this until those hostages have been freed. unfortunately, i think this is going to go on longer. every day it extends, it becomes politically more costly for the israelis. lisa: you agree with secretary of state austin when he said

that the fear is israel setting itself up for a strategic defeat? elliot: i don't know that they're going to end up at a defeat, but if the israelis was site of the fact that war is always spot on two plans, the technical and operational, what is happening on the ground, how much is being taken. also the political, how those actions are perceived. history is littered with cases of nations and armies won the battle but lost the war. the israelis need to be mindful they don't place themselves in the situation. jonathan: we have been at a period of intense diplomacy. what you think the odds are of broader conflict in the region? elliot: i think they have lessened, but we want to keep our eye on any actions that can spread the conflict. the u.s. has a significant

military presence. we have searched naval assets into the metro nancy signaling break strongly to the iranians -- into the mediterranean sea, signaling strongly to to the iranians. there have been many instances of provocation and not only our leaders put our troops on the ground have to be mindful that their actions could have strategic consequences. it does not seem as though the conflict is going to spread but it is still on a hairtrigger. jonathan: i wonder from your perspective and your opinion whether you think we are already in the proxy war with iran. elliot: i think we certainly are. we have been in a proxy war with iran for decades. it has waxed and waned. i am a veteran of the was in iraq and give a stent -- afghanistan. both of those we were fighting a

proxy war with iran. as any american servicemember, i was having to dodge ied's built by iran and having to deal with paramilitaries who were operating as iranian. we have been fighting that war for a long time but it is very important it doesn't escalate into any all-out conflagration. particularly as we have another war going on in ukraine. lisa: i am glad you brought that up. as someone who has actually served and seen the threat, what is your sense of this increasing isolationism or fight over funding for some of these conflicts? do you think it is a valid one or do you think that is a retracement from the role you served for? elliot: their should always be best -- robust debate about issues of war and peace. i think that is healthy.

however, i think those should occur in a functional as opposed to dysfunctional way. they should occur -- it takes a clear eyed view of the world beyond our shores and does not need about america -- and is not naive about america's place in the world. i don't think we should be debating how long and how much the u.s. will spend on these wars but if the u.s. could just retreat within its borders and that will be within -- that will be within the best interest of the country, we have seen a plan before and it does not play out in the best interest of the u.s. lisa: you are implying the debate is not healthy. what would a healthy debate look like and why is what we see right now not healthy? elliot: there is a degree of brinksmanship going on. tying a packages together -- aid packages together. much of the discussion -- the

dysfunction in congress where congress does not exist in a culture in which most operate with indifference abroad. we have projected ourselves abroad. our allies prefer a democratic or republican administration. the fractured nests of our specialty fractured -- the fracturedness of the country is affecting our policy. jonathan: elliot ackerman there. lisa: arguably as he was saying, the iran proxy war has been happening over a long period of time. the question is, how much is there a unified approach from the u.s. versus a tri-ballistic view of politics? this goes back to the conversation we were having

yesterday about the question of how the debate, help the disagreement, to have someone disagree with you and not shout them down, try to understand what they are saying and process it intellectually versus all-out tribal warfare which is what it ends up being. jonathan: i think elliot nailed it at the end, they will always be healthy debate, subdivision in washington. but my big issues, you want some bipartisan continuity. on two big fronts, we don't have that. you know what you're good to get if you have a republican white house which wars are going to be supported and you know where this is going on the democratic side as well. that does not say much for the people fighting the wars on the ground. lisa: absolutely. especially if it is being held on basement ship over unrelated issues. i am thinking about border control which is something people feel passionate about but that will ultimately determine if we get funding for unrelated conflicts because of people's

wishes to cater to factions. how do you present yourself as a unified country international at a time when preciousness -- fracturedness is so strong? jonathan: we will continue this conversation, we turn to the markets. the adp report later. the payroll report a few days away. equities positive on the s&p 500. on the market, liz ann sonders of charles schwab, that conversation coming up shortly. from new york city, this is bloomberg. ♪ what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise

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and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. jonathan: he was the price action, the scores look like this on the s&p 500, posited by .2%. on the nasdaq come up .2% despite we headed down day. okay beneath the surface. lisa: if you get rate cuts, essentially take is going to be the biggest and best thing because of the cash. they are going to win either way and you win because of the adoption of corporate spending. you get softness and rate cut was supported evaluation. jonathan: the s&p 500, the first time we have not had two cans

going back to october. here are the moves for you, for 20 on a 10 year -- 420 on a 10 year. 419.72. think about 450 on a two-year, that has held since june. at the moment, about 4.6158, drifting into the 4.50's. i want you turn to foreign-exchange. you have to think about the other side of the trade. this is the sixth consecutive day of euro weakness. euro-dollar negative for six days. 1.0785. a key policymaker is one of the best communicators on the ecb and in an interview with reuters, surprised how quickly inflation is coming down. lisa: saying there does not seem to be needed to hike rakes --

hike rates. when did they cut? -- do they cut? that seems to be where we are. jonathan: a different bank rate for europe than the u.s. we are coming with 5% plus gdp growth. in europe, certain countries talking about recession. lisa: which is the reason people are pricing in rate cuts at the ecb through next year. did you see the dax hit a record high? jonathan: at the close yesterday. lisa:. this idea of recession with a record high dax in germany. i am trying to understand markets versus economy and i don't think there has ever been a wider gap. jonathan: if you told me at the start of the year that china was going to disappoint, i don't think i would have something like 18% on the day. lisa: trying to get the market call -- jonathan: forget it. it is so tough. it is never easy.

it looks easy with hindsight all the time but it is never easy. let's get you some top stories. israel vowing to push on with their campaign against tomas amid mate pressure for another pause. israel said it would only consider under the cease-fire if it brought the release of more hostages. benjamin netanyahu saying israel will fight until the end until a crushing victory is won. lisa: here comes the question in terms of how long they have the best to support this effort. there was one story i was reading physically thing that joe biden's team has called them up and said essentially wrap it up by january so i could get my election campaign started. there is a feeling this will be harmful if it keeps going for joe biden. that might poke holes in his support for israel. jonathan: surprising words from president biden yesterday suggesting he may not have run for reelection if donald trump

was not seeking to return to the white house. speaking at a campaign event a single "if trump wasn't running, i am not sure i would be running." for president then playing down the remarks later adding he would not drop out if trump does. trump is not among the candidates taking the stage in alabama. cleanup on aisle 2024, i guess for the president of the u.s. lisa: a reporter at the white house asked if he would be running if trump was not. he said i expect so. he is running, i have to run. pointing to this need to save the country from donald trump but it does raise a question. is he getting more pressure to justify what he is running? why is he raising this issue to make this a polar fight against the former president at a time when both of the individuals are not very popular? jonathan: this is more of a question for annmarie hordern them for us. if he believes he is the only

guy in this party that can take on the former president in a head to head, what have we not seen more outreach to the people that voted for the people that -- to the people that voted for the former president? why refer to them as ultra maga? jamie dimon talked about that, that is unhelpful. lisa: take that a step further. why is there not outreach to people he categorizes as ultra-maga, why not reach for people in the middle? way is not catering to french people in his party? think about what they are dealing with with border control and some of his hesitation to back certain measures because of concerns about angering certain constituents? there is not a sense of what is his ideological driver apart from wherever the wind is blowing. jonathan: why not use different rhetoric?

ivory. -- i agree. on capitol hill later, ceos of wall street's biggest banks hitting capitol hill. jp morgan's ceo warning of tighter capital requirements leading to higher costs for customers. "this will make it -- so he can -- so uneconomical, you will likely see two outcomes, banks will subleased up officer in products and those that do will have to charge more for them to make it worth the service." they risk being transferred to private markets. lisa: notice the change in rhetoric. we are all in agreement from private investment firms and then you hear banks saying they are eating our lunch. 100% and you are enabling this and we are going to go out of business. i don't think anyone is that worried about the biggest banks.

i think it is a question of the smaller banks. the ceos might be less relevant but more advantageous for soundbites. jonathan: we will provide some coverage of that for you later on bloomberg tv. i have been looking forward to this composition, liz ann sonders joins us right now. we are not going to talk about soft landing or hard landing, we are going to talk about what you and the team have been focused on and that is rolling recession. why is that so important for you? liz ann: this is a unique cycle. i think taking a nuanced approach is appropriate. we have been using that term for some time. the only other person using that as long as we have is new guinea -- if you think about the demand surge coming out of the worst part of the pandemic, all of that demand and the money associated with it was funneled

to the good side of the economy because we have no access to services. that is where the inflation problem began, exacerbated by supplies -- supply chain disruptions. we have gone into hard landings and disruptions for housing, manufacturing, many of the consumer product areas that were beneficiaries of the lockdown. we have gone to deflation in many of the goods categories. we have the upsetting strength on the services side, the same thing that has rolled through in terms of inflation. the best case scenario is not soft landing, that ship has sailed for many segments. it is a continual role through if and when the labor market gets hit, you have found stability and even some improvement in the serious. lisa: where are you seeing opportunities that might have hit bottom you want to be investing in now and particular sectors that you think have rolled through their hard landing and are now buys?

liz ann: investors are better taking a factor based approach. but we have made adjustments based on the foot factors we are focused on. we have been emphasizing staying up in quality with factors like coverage and strong return on equity and strong balance sheet, but also positive earnings revisions and surprises. i think you want to add a valuation ticker into the mix. this year was characterized by all multiple expansion, no earnings growth. we see there is money itching to move out of the magnificent seven to find opportunities down the cap spectrum. you have seen lower quality characteristics to some of what has rallied. you want to. that and continue to lean into quality. you can find it spectrum of sectors and also outside that group of just the negatives in seven.

lisa: you said something talking about people itching to find the money they put into the magnificent seven and put it to work elsewhere that might be a lower valuation. how big is that wave of people itching to get out of the magnificent seven? is this something that could cause underperformance or has there been so much money people are looking for other ideas? liz ann: so far so good in terms of the rotational nature of this easing of some of the excesses. we have seen pullback on the magnificent seven, the russell 2000, s&p equal weight is outperforming over the past month or so. it has happened in a stealth way. that inhibits way to go through a corrective phase of excesses versus the bottom falling out all at once. what concerns me particularly once we get past the year end seasonality is that there is an incredible amount of overlap, especially in the institutional world, the hedge fund world, in terms of ownership.

up with the cap spectrum -- up the cap spectrum. if we get a catalyst, that releases more frenzy around selling, the hit would have to be larger. after that, we continue to see broadening out of your rotation as opposed to some significant crack occurring in the market. jonathan: can you help us gauge sentiment? we are told the money market funds is really sticky. as you look to the people you speak to, have they been moving into equities over the last month? what was that move in november. liz ann: you see some move in equities but it is actually within the equity market and toward areas like real estate, utilities. that is within expectations of sooner than later fed cuts. i am skeptical of that with that is where the money has gone. sentiment is interesting because

measures have gone off the charts of bullishness and very little bearishness. even the other survey where we get those bullish and bearish readings, the equity exposure of that same cohort of investors has been coming down. active institutional managers have been significantly increasing exposure. much like crosscurrents in economy, there are a lot of crosscurrents in terms of sentiment data. it is an x picture. sent -- a mixed picture. it is particularly murky in this environment. jonathan: you did mention you are skeptical about rate cuts. can you explain that more? liz ann: information is still about -- still above the fed's target. how that justifies a pivot from the most happening cycle as soon as the next quarter of next year, i don't get it. it is possible the fed could be

easing but possibly because there is more dislocation between now and then. you have the fed and powell pointing to the bond market doing tightening for the fed when you were in the surge and yields up. what would be adjusting to here is if instructors say the loosening, which is a record one-month listening in financial conditions, maybe that is some of the loosening for the fed and it would not surprise me if powell has to reinforce the notion that they are not at this point considering rate cuts. jonathan: liz ann sonders there, one of the best. it is a weaker way, a big question. the federal reserve has responded to these easing financial conditions asymmetrically. we saw much more endorsement the other way around. lisa: that is the reason why people now are looking at some sort of asymmetric cuts next year.

we leave black rock, talking to you yesterday. jonathan: she is not buying it. rates high volatility sticking around. lisa: shooting skip left out and too optimistic. we see the risks of these hopes being disappointed. to see what goldman sachs said? there are no longer any bears left. they basically said things are getting nervous. jonathan: it has felt like that around this table. lisa: get more skeptical. no nirvana. >> looking ahead to payrolls friday. this is bloomberg. ♪

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you don't have as much bargaining power if you change jobs. combined with people changing jobs permanently. the conclusion is we still have more evidence put it in the labor market softening. jonathan: actual conversation that took place in the last 60 seconds. ian shepherdson sits around a table here in new york. "are they the team with referee uniforms?" lisa: it is true, they all look like refs running around the field. ian: i don't know where to begin. jonathan: i don't know what just happened. let's tear payrolls. cutting down to friday. -- counting down to friday. jp morgan forecasting 150,000 jobs.

goldman sachs looking for a print of 238,000. expecting an even bigger increase of 275,000. let's talk about all this with the official, ian shepherdson. i am so sorry. ian: i should have brought my whistle. jonathan: what are you looking for on friday? ian: i have a big number -- i got a big number. i follow this to dissent from small businesses, that is unambiguously strong. it is not always right. they did a good job -- it did a good job in september, he did a good job in october, november, back to the upside. we also have a post strike rebound from the uaw strikes. also looking pretty centre contribution from the government which is still rehiring. i have 50,000 from that source along. a decent print but it does not change the trend which is gradually decaying. jonathan: if 275 does not scrape

rate cuts, how does that work? ian: what is going on is the payroll numbers are not the whole story. usually they are but we have and the unemployment rate creeping higher because the labor force is expanding rapidly. most because of a big rebound and immigration. that means listening is happening at a wage pressure level even though payroll growth is strong. which growth is barreling downwards. the rate is back to its between 19 level. all of that is massive premium you have for job hopping, that is all gone. that is what the fed cares about. is not payrolls per se, the extent to which the labor market as a whole exerts this additional pressure. despite big payroll numbers, it is this sufficient pressure. lisa: soft landing of anna? -- landing nirvana? this is the perfect recipe a lot of fed officials were talking

about. mission accomplished? sure they put a big banner up? ian: i think they should but they won't. i think they're going to hang on until they cannot hold on any longer to the idea that we have optionality to raise rates. the whole transitory thing was a disaster and they have engaged in this reputation rebuilding exercise to prove to markets they can get it right. there going to hold on to that optionality. what'd payroll is 22 -- is 325 friday in then and again for december? suddenly this talk of rate cuts will evaporate and they want to say we told you. lisa: when you say reputational risk, that does bring up something significant. they are saying we have the option to raise rates. everyone is saying no you don't. no one believes them. haven't they already lost that reputation? ian: they have but this is a story about rebuilding from what

went wrong in 2021 and 2022. they don't much care if markets don't believe them, they want to maintain optionality just in case. i don't think powell expects to be raising rates again. i think most of the government is of the same mind. it is a question of just in case. the one thing -- the last thing we want to do is come back in january and march and say something has gone wrong again and we had a declared victory. even though the markets aren't listening anymore, this is a consequence of the disaster of transitory. jonathan: deutsche bank come here is the call, earlier, faster, further, bolder, a call on the ecb. last week, they downgraded eurozone growth at raise the volume of ecb cuts in 2024 to 100 basis points from 75 basis points. here is the call, we are bringing the first cut to april, a significant cut in march, and

expect the ecb to cut 150 basis points in 2024 versus the 100 basis points previously with 50 basis point cuts in april integer. -- april and june. isn't that what is priced at the moment? ian: it is but it looks aggressive for me. i have no doubt that european growth is weaker. the retail picture is horrendous and we have modest decline in gdp for a couple of quarters. that is quite aggressive. this is an institution that tends to move slower than the fed. we are in a new world where to sufficient pressure is building rapidly pretty much everywhere. it is reasonable to expect inflation to come in below the ecb's forecast. the fed next week is going to have to admit they were half a point too high as recent as june and far too high for next year. a theme for the ecb and the fed,

most central banks, the theme is inflation coming in lower than we expected partly because i think the markets have loosened. quality of the stuff has been important. improving supply chains, the slowdown in margin increases, the normalization, all these things are adding pressure. essential banks thought this could happen but they are looking to raise their base case. jonathan: when they cut, are they easing or going back to what the mutual is? ian: there is going to be talk about maintaining disinflation pressure and maintaining a restrictive stance in the u.s. bring a rates down because admission has come down in order to maintain a reasonable real rate. they have expressly recognized that as inflation drops, real risk of higher and this is an economy that does not need to see if further squeeze for real rates. lisa: why do you think inflation

is coming down so much? there is a lot of arguments that is linear. there are certain things year-over-year that could accelerate once more next year. why do you push back against that? ian: i could point to a couple of components. fundamentally, what we have is slowing wage growth, sling rent growth, but margins after rising 20% during the pandemic, complete repair of supply chains. we have a labor market looks more aggressively normal. -- more recognizably normal. we have a full and prices year-over-year. is broad-spectrum. usually the market tells you everything but this time around is not capturing the whole story. so many other things went so bad in 2021 and 2022 which are fully reversed or reversing and that has given us a broader array of disinflation. jonathan: you set the big change

has been what has not happened on the back of robust growth, the fact that we had a third quarter of gdp growth and did not have an acceleration. neil set in your chair and said the labor market is no longer a reason for the fed to be hawkish. that is a massive change. ian: you go back a year or so, we had a burst of wage inflation in 2021 or 2022. if the next stop would be 7% or 8%, you would be looking at 1970's again. there was a horror that was a risk. even when we were single switch numbers, we were seeing -- and the premium for chubb switching was saying we are not going back to the 1970's and now it is falling and next spring it would be like 3.5. you have nothing to fear. jonathan: i have a treat for you to measure you come back.

to majesty of a newcastle strip. look at that. lisa: they are called strips? ian: it is not uniform, it is a strip. jonathan: it is not a jersey. ian: it is a short. lisa: [laughter] anyone who looks at that totally agrees with me. jonathan: but the audience of newcastle is so deeply offended. thank you, it is good to see you. ian jefferson -- ian shepherdson. deeply offended. stocks were not positive on the s&p 500. coming up shortly, deutsche bank on ableist 2024 s&p 500 target, one of the biggest balls on the street joining this program up next. from new york, stocks positive.

in the bond market, stocks are higher. no drama this morning. good morning. ♪ they told me there's no electricity on the island. we always thought that whatever we did here would be an emblem of what small communities can achieve. trying to give a better life to people that don't have the means to do it. si mi papá estuviera vivo, sé que él tuviera orgulloso también de vivir de esta viviendo una vida como la que estamos viviendo ahora. es electricidad aquí es salud.

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>> now is the time for the fed to turned up as but they have not turned dovish. >> we have had interest rates that have not hit the economy. >> our view is for a soft landing and is the challenge for equity assets in particular. >> as much words as we put out for the hard versus soft landing, neither has been the winner all year. >> the fed does have a loaded gun megan hughes as they or as appropriate.

i am not assuming it is going to happen. >> this is "bloomberg surveillance" with tom keene, and lisa abramowicz. jonathan: a fantastic start to our day, lisa deeply offending our guests. they may not come back. good morning to our audience worldwide, this is "bloomberg surveillance" on tv and radio. your equity market on the s&p positive by .02%. march, payrolls friday continues. the adp report is one hour away. lisa: if it confirms the weakness in the job report, does that increase the rally in the bond market? does it accelerate is often as we saw in the s&p yesterday? are rate cuts no longer unequivocally good news for risk assets? jonathan: more than 100 basis points price for next year for the federal reserve. the ecb something like 150. deutsche bank interesting that view earlier, faster, bolder.

we could have a move as soon as march next year. lisa: that's like a pop song. right now we have an 86% chance of an ecb rate cut, march. when he talked about earlier, bolder, stronger, there is this point to getting priced into the market, 150 basis points of rate cuts. that is what is currently priced. our people getting over their skis or is disinflation so significant that it is going to surprise everybody and that leads to stop lending nerve honor or to actual weakness? jonathan: market price is leaving and being validated by the incoming information, a surprise to the downside on inflation. encouraged also by the central bankers themselves. started last week with governor waller. it has continued on the other side of the atlantic with the

ecb. lisa: she came out and says she is surprised by how much disinflation there has been. she said this, "it has made for the rate increase unlikely." that is all people needed to go to the races and say how early can they cut. we are talking about three phases of fed policy. first hiking rates, then pausing, and then cutting rates. the pause was supposed to be a long time and the pause ended up being three months. jonathan: it started in july. lisa: is the pause over? jonathan: the markets is yes. lisa: exactly. jonathan: you need to see deterioration of the economic data and we have not seen that in the labor market. you can draw the conclusion that what you have seen so far is basically the labor market is still okay but his inflationary trends have continued -- this inflationary trends have continued.

-- this inflationary trends have continued. they are more careful with this prince from the labor market. lisa: i might scared ian shepherdson away but he said something important which is that there has been increased immigration, more people going into the workforce. this is what is son the fed officials were hoping for to lead to wage growth. that is not necessarily a lower hiring. you were still getting and the ability to get a job but you are not going to get the same rate. it is not an a shortened or where people can quit any job and get another one. jonathan: mike mckee will be grilling chairman powell. the big bankers on wall street facing a grilling from the senate banking committee in washington, d.c. look out for that. we will pay attention to that. 9:30 eastern time. this was not like this on this before hundred, positive by .1%.

the ghostwritten higher by three basis points on a 10 year, for 19 -- 4.19. lisa: does the report matter -- adp report matter? we will talk about if it matters. bank of canada at 10:00 a.m. . to see if the unemployment rate does tick up. big ceos head to washington, d.c.. jamie dimon, david solomon, james gorman of morgan stanley, jane fraser, and brian moynihan, they are going to say we have to charge customers more, you're hurting our function as a bank and then you will have these people saying wall street versus main street and a log package it is not rights we will get to listen to for a long time. jonathan: it is frustrating. it is not about a proper hearing

about policy, it is about politics. clicking videos to set up your constituents to say but what i did, i beat of the bankers ahead of the election. lisa: my problem is the transition of functionality around smaller banks and the questions about their viability. there is a question of the increasing selective miss of some of the bigger banks and what that does. the point is not that will be discussed. the fourth gop debate is taking place. are be good to get any candidate in the republican party who can challenge the former president donald trump? that will be the subtext of tonight's debate. jonathan: and reordering is 10 minutes away on the debate. with us now, one of the biggest balls on wall street, binky chadha. talked about the ecb and deutsche bank, 150 next year. i think it is 175 from your team on the federal reserve next

year. can you reconcile those calls, 175 and 5100? binky: i am not assuming any rate cuts. i would argue that the risk to the market pricing rate cuts is one of disappointment. growth has been fine. we have been growing above trend rates, five six quarters now. -- five or six quarters now. we have this concern that real rates get too high. the house call for rate cuts is based on slowing antigrowth. -- slowing in growth. if you look at fed history, they have not moved beyond minor fine-tuning of 25 basis points this way or that way outside of clear recessionary signs. they have done it three times

historically. each of those times are preceded by a 10 point drop in the ism. we are talking about the house views for a relatively mild recession. you could make the case that inflation basically is coming down, it is coming down hard and fast. i would go further and say if you think about inflation as being driven by fundamentals like unemployment and other things that happen from time to time, a lot of the inflation we saw came from other things that are idiosyncratic to the pandemic boom and bust. at the peak, the other component was contributing 3.5 percentage points to core inflation. it has gone like a rock over the past six months and down to one percentage point.

we are talking about fundamentals more than i am talking about the other parts which came down. that is what you were talking about with the previous guest which is the supply chains, the speed of the recovery, this organization of the recovery. there is still room for inflation to keep coming down without any need for any growth. lisa: we have been talking about how you can get the economic call but you can get the market call wrong. if we get what you are talking about, doesn't matter? put the economic call aside. people have more money, they're going to invested. stocks are going to keep going up. binky: the economic call matters a lot because is the macro growth that is going to drive earnings. is also europe, china, and japan -- it is also europe, china, and

japan. as you know and as i have said, earnings tell a different story from the consensus macro view that every -- that a very sharp growth is around the corner. earnings fell last year, have been growing very strongly this year. three quarters in a row of sequential growth. market has not given a lot of weight to that because the market tends to focus on your end here -- year and a year. if earnings go sideways -- reporting in the middle of january by 11.5%. that is to keep in mind -- something to keep in mind? . lisa:, much as this driven by

companies that struggle to compete. the rolling recessions, very different faiths for different sectors. binky: i characterize it differently, i say we are in the face where we had rolling recessions -- phase where we had rolling recessions. 2023 was more about rolling recoveries. your question about growth and is it all coming from a small group of companies, no, it is very broad-based outside of energy, materials, and health care. growth is going to be positive and strong by the fourth quarter. a lot of that is coming from the base effect. we tend to emphasize a sequential growth quarter to quarter. that is the way we look at all macro data. if you do one year and year and another quarter and quarter, you are not comparing the same thing. jonathan: i wish liz ann sonders was still with us, she would bring up the service sector. the labor market that has not

weakened materially. we are seeing rebalancing but is weakness in our future? lisa: especially if you look at restaurant traffic. it has gone up significantly. anyone who has paid two dollars -- paid $80 for two x. jonathan: -- for two eggs. jonathan: here we go, getting personal. [laughter] lisa: i am not going to keep going. jonathan: you spent $80 on two eggs? lisa: know, but i was thinking of your breakfast. to feed a family with children, especially teenage boys, it becomes a $200 evening out. jonathan: is expensive. i am with you. i would like to hear more about this meal. if you are just joining us come on the s&p 500, posited by 1%. the question -- the conversation with lisa about the breakfast, we continue.

to talk about banks. they are going -- let's talk about banks, they're going to get the grilling on capitol hill. can you give me your call on that sector and whether it needs higher yields or lower yields? binky: the two parts of the s&p 500 that we are long and we have been for a while is the banks. the cyclical carts -- cyclical parts of the consumer logically being if you take a look at all of the industries in the s&p 500, how much they fall in recession, where are they today compared to prior cycle, you will see at the bottom where it is the most prized in -- priced in is the cyclical part of the consumer and the banks. it is also telling you have a market has positioned itself. is already favored under weights, those are the shorts. i would argue we have positive growth surprises for a year.

i would argue that the bar for growth to surprise remains very low simply because the consensus continues to look for sharp slowing as long as that is not happen. especially if we don't go to recession. that supports the markets moving to mental point of view that have a lot priced in. if a recession happens, they already have a lot priced in. i would argue that is where you want to belong. a lot of people of is there difficult is that of you. -- with that view. if you ask yourself one year ago what was sitting at the bottom, it was mega cap growth. jonathan: binky chadha, thank you. this is bloomberg. ♪ (sfx: stone wheel crafting) ♪

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>> is calling for the nationally

-- annihilation of jews violate pen's code of conduct? so the answer is yes? >> it is a context dependent decision -- it is a context dependent decision. >> that is her testimony, calling for the knowledge and of jews depends on context? this is the easiest question to answer yes. jonathan: stunning the exchange between elise stefanik and the university of pennsylvania president during a hearing on antisemitism. mike roman has called for her resignation say it goes beyond estimate is. >> say what you will, allow the other side to speak. that is a culture of free speech. a culture where you shut people down, where you have 95% of the professor or academia speaking in one way or you permit violent protests where students are

unable to go to class because the report cuts or there is pressure is not the culture of free speech. jonathan: mike roman of apollo joining us now. and reordering is down in washington, d.c.. for people watching that play out, it was not just stunning, it was shocking. why are they unable to enter such simple questions? annmarie: very uncomfortable for those university presidents and those watching. let me tell you what clotting gate had to say, the harvard president who was also one of the individuals who had a number of heated exchanges with congresswoman elise stefanik, especially since she had gone to harvard. she said we do not sanction individuals for their views or speech. when that crosses into conduct that violates our behavior based policy, bullying, harassment, or

temptation, we take action. you see these presidents try to walk a line of making sure that they remain places of free speech but obviously they don't want to see bullying and harassment. even and i both know -- you and i both know they have gotten fierce criticism from donors who say they have not come out aggressive enough ahead of this to make sure it can be a safe space for all students and the same time ensure they are reporting free speech. lisa: mark yesterday was brilliant on this point. the point that there is something deeper going on for a time where dissent has been drowned out. certain people do tend to agree. a lot of these universities take a stand on certain moral issues and get everybody in line as one voice rather than letting each person have a different view. how much is that a focus in washington, d.c. as part of why

there has been divisiveness and polarization in the political parties? annmarie: it was a huge focus for republican congressmen and congresswomen because they wanted the professors to talk about more conservative professors and could they have data and statistics about conservative professors within their college faculty. these university professors could not. to mark's point, he was talking about the fact that they have become too liberal and they have become universities that have allowed preferred speech, not free speech. something we have heard him say to you guys time and time again, which is why you are seeing this uproar. yesterday we spoke to a former university president of california. what he was talking about was underlined culture and how some universities are getting it right when it comes to

education, antisemitism, islamophobia and others are not getting it right. within washington, d.c., besides this hearing, the biden administration, the president has put out statements about this shortly after bcp's incidents take place. the department of education is having a probe into harvard and other universities about this incidents. jonathan: talk about how this might play out on the debate stage later. annmarie: this is going to be easy for those four individuals to want to attack what they would see progressive meaning -- progressive leaning liberal universities to say the country is moving in the wrong direction , potentially using this issue to make that point. we should also note about the debate stage that it is smaller. we have four contenders now. the real show was last night.

the leader of the republican nomination, former president trump, was on television one-on-one with sean hannity for 60 minutes. these four are going to have to share the spotlight. jonathan: let's talk about what the former president had to say. telling donors that if the former president was not in the race he probably would not be running himself. then there was a cleanup. can you talk about that cleanup? what if the former president is not a candidate for the republican's? annmarie: he came out to a reporter who wanted to clarify that of course he is not dropping out. if you hear from different people and it administration, they will say of course the president feels this way, this with the whole reason for running in the first place. he felt the country was going it interest direction and he wanted to make sure there was somebody

there who could be donald trump -- who could beat donald trump. that was his impetus for getting involved in the first place. he is running against that form individual and he said the quiet part out loud which was i am not sure i would be doing this if it was not for donald trump running against me. the issue a lot of democrats are going to have is does not rally the base of your democratic progressive wing of your party to come out and want to vote for you? is that an inspiring message, especially when poll after poll continues to show they think this president is too old to run again. lisa: who said the main event was last night with sean hannity interviewing the former president and he kept asking a friend of donald trump -- he kept asking him to clarify that he was not going to be a dictator. is that you are promising he would never abuse powers or use

retribution against anyone. he said except for day one. what you make of this? what is the consequence of his discussion? annmarie: sean hannity was trying to help him and explain what you are saying is that is going back to former policies because then trump explained what he wants to do on day one which is close this other border and drill, unlock u.s. energy resources. we should remind everyone that u.s. is the biggest energy producer in the world right now so i'm not sure under former president trump how much more we would get. trump was trying to play on the words the democrats tried to paint him. it is concerning because he is set in the past she has said -- he has said in the past that people go up against everyone who was gone against him. it will be in interesting your,

especially the fact he faces north of 90 federal charges. jonathan: i find the energy portal there is. the republicans get to say that's drill more and everyone in the white house is scared to say we are. 13.2 million barrels a day. they just cannot say it. lisa: this will be an interesting debate. if a person is produce a drill, and biden will say we are not doing that. if that was happening we would have record production which we are already having. an reordering in washington, d.c., 13.2 million barrels a day. the white house is like a tumbleweed, we cannot talk about that. lisa: they are talking about the energy transition, how important it is to invest in other things. around the margins, you get the sense, keep upping a little more to offset any disruption for production, whether it is russia

or the middle east. jonathan: more markets coming right up. the s&p 500 positive by 1.6 -- by .1%. amanda lynam in amanda lynam-- amanda lynam of black rock, that conversation coming up. the data is better than good. job openings in america, the lowest level since march 2021. the mix in the ism is almost perfect. headline number robust. a pretty picture of economic data in the past 24 hours. lisa: soft landing nirvana. jonathan: stocks to the moon. this is bloomberg. ♪

(car engine revs)

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jonathan: stocks on the s&p 500, 5.1% on the nasdaq, up by .1% also, tech was strange yesterday. tech was actually ok with me still surface and then we had a day of losses on the s&p 500. lisa: the idea of softening growth leaves big tech still as the bright spot given the fact that if companies had the ability to keep spending on anything, it will be artificial intelligence. jonathan: softer growth, lower rates. a dream. lisa: especially if they are

propped up by lower rates, all of nirvana. jonathan: is that right? you don't quite believe it. it is painful to say. the writ, roar and rally we have had is painful for lisa abramowicz. lisa: it is not that it is painful. it is wonderful people are coming up for gains. the issue is lack of skepticism and the feeling that this is the reality we have. it will all be perfect, we will see no pain. it feels mispriced. jonathan: no lack of skepticism around this table this morning. let's turn to the bond market, two year, 10-year, 30-year.think about the journey we have been on on a two-year, 5.26, 4.60 now, and on a 10-year, it is a break of 4.20. we were through 5% in october. up on the session by two or three basis points. lisa: 80 basis point drop since the peak on october 19.

i was looking at this, thinking, that used to be a massive move. now it's neck up on people. this idea that we had -- now it snuck up on people. this idea of with volatility coalescing around, it could be a soft landing nirvana. jonathan: we have a massive deficit that needs to be financed next year. the stories you heard when yields were 5% on the 10-year, and the stories you hear now with the yield at 4.20 on the 10-year are radically different. we are talking about the space of six weeks. lisa: the problem is they could all be right. the narratives all make sense in the logic is consistent. how do you then coalesce around what kind of view to look at? if you just look at the earnings, companies are still doing ok. jonathan: binky at deutsche bank looking at 500. let's get to the euro, deutsche bank things we get cuts from the

ecb that may begin in the first quarter of 2024. they might be coming in march. 150 is what is price now for the ecb, the euro, six-day losing streak against the dollar, 1.0777. five days ago, if lisa: by the ecb, it would have been crazy. now it is some catching up to consensus. talk about the shifts. jonathan: incredible. some market action, let's get to the top stories. continued u.s. aid for u.s. stalling on capitol hill.the ukraine president addressed the lawmakers yesterday as a stalemate became clearer. janet yellen getting involved, telling reporters, "we can hold ourselves responsible for ukraine's defeat if we don't manage to get this funding to ukraine." the fight over funding is going to take place in the next month or so. it will be absolutely massive.

lisa: especially because there are two deadlines to get this funding across, january and february. this was the resolution they came from. will they and up just spending more or are they going actually cut costs -- willing end up spending more or are they going to cut costs? when does it start to really affect them? jonathan: so you have arguably two proxy wars, you have to talk about security on the southern border, the spending that needs to be cut. it will be a big battle on capitol hill. let's turn to your second. amazon slashing fees resellers in a bit to compete with a chinese fashion startup sein. sellers will sell 5% on clothing, a from 70%. -- 17%. shein was accused of skirting u.s. trade laws and using forced labor to offer lower prices. i thought fast fashion was

done. lisa: it definitely heard about -- it definitely depends on who you are. we heard about h&m, and we talked about how it was a bad look to have so much waste. shein --not sure how to pronounce it --in the household with teenagers, that is where i learned about it. the idea that amazon is willing to compete and cut the cost for vendors online shows this is a real threat to them, and they want to capture the teenage market. jonathan: but it depends on the environment. lisa: are you looking for intellectual consistency? have you had a teenager? not that anyone is watching, but -- jonathan: nobody is watching, it is just live tv. lisa: but there is this issue of amazon and some of the competing challenges at a time when they have raised the prices for consumers, merchants on their platform. jonathan: thank you, appreciate it.

good story. market cap of apple, topping 3 trillion for the first time in several months. getting a boost after foxconn reported better-than-expected sales in the fourth quarter. apple is getting 16% from the october low end is up nearly 50% on the year. fundamental and price action, if you look at the overall sound strand for the iphone, it has not been great. yet, we are putting up games like that. lisa: if you just go into any store, people are lined up to pay $2000 a pop, and with whatever they end up purchasing gives you a sense of what a cash cow this is. you start talking about a market call, how do you have that without an apple call? if that is the case, can it diverge that much more from the underlying economy? jonathan: there you go, apple, rate, roar and rally, you have to participate. and then you turn around and say, triple interest cash. try and make sense of that.

private credit. apollo acid -- apollo defended private markets and calling it a $40 trillion opportunity. >> we think the definition of private capital and private credit is around a 40 trillion number, and that would consist of solar finance, inventory finance, trade finance, franchise finance, along with a lot of this corporate lending and investment grade privates that a lot of banks used to hold large on their balance sheet. again, in their search for roe and appropriate returns, they are not the right place to hold that. jonathan: joining us to have the conversation, amanda lynam, of black rock, good morning. how much money is shifting to private markets? amanda: are forecast calls for it to grow from 1.6 trillion to 3.5 trillion at the end of 2028 globally, so that implies a significant continued growth pattern through the next five years.

i really four drivers, the increase in the addressable market is one, but it is investors looking for diversification, borrowers looking for certainty of execution, structural shifts in public markets, which are serving larger borrowers, so that renders a small middle-market debt deals in liquid, and then forces the opportunity for banks to partner with non-banks, and then given the wealth contraction in lending and tightening of bank lending standards to feel like growth. that is our forecast. lisa: was that a nice way of saying de-banking that private credit is stealing the banks lunch? amanda:amanda: i watched your coverage yesterday and did see the de-banking dialogue. i agree with the comments that banks will rename at the center of the lending universe. the important take away is that as private credit has become sizable and scalable in its own right, it can now compete against other parts of the market where it was not historically.

so what we have actually seen are some companies with demonstrated access to the public markets choosing to refinance in the private markets. i think there is an opportunity for banks to partner with non-banks in terms of an environment with more capital and liquidity rules may change to partner and move some of that lending into other parts of the non-bank system does not mean the risk transfer is at negative. it means capital is being reallocated, like it did after the financial crisis. lisa: so there is a larger question when you say, banks will be the center of the lending universe, it raises the question about what that means. it will be the center in terms of organizing these transactions but not necessarily of profits or the center of deploying risk and then getting that outsize return for some of the private loans. is that i'm saying they are going to be the center of transnational expects -- transactional aspects, but then the private loans will get the upside? amanda: from the side of the

banking relationship, they have a lot of the client relationships, a lot of the underwriting expertise. in an environment where risk-weighted assets are going up, does it make sense to hold all of that capital on the bank balance sheet or is there a more capital efficient way to do it? i think that is really the shift that we are seeing. some of these factors have been in place a long time, going back to the financial crisis after dodd-frank was enacted, the publics indicated leverage loan markets grew because banks did not want to keep them on their balance sheet. they syndicated them out to a wide range of investors. that is how the public debt markets have been growing so . -- growing for so long. it is another reiteration of the shift in response to the potential rules for basel three, and i think it is a longer-term shift. i would say are 3.5 trillion forecast seems at a 15% compound

growth rate, below the rate we have seen the past five years and consistent with the growth rate over the past decade, so it sounds large, but it is a continuation of the trend that has already been in place. jonathan: let's talk about big moves, credit spreads so much tighter on high-yield, 3.67 right now. still up in quality and what do you make of the move? amanda: the move is consistent with this kind of year-end rally that has been fueled by pretty favorable technicals. we have seen issuance picked up but not to a significant extent that it is interfering with that tightening. from our perspective, yes, up in quality still of sense for this important reason. most of the issuance in 22 a3, the left end market, has been up in quality with the market, so double b's and high, single b's. triple c's and low single b's has been attested. there has been talked about rate

cuts. that is not our base case in the first half, but even if we get some modest rate cuts, the implied refinancing cost on average for triple c's is above 300 basis points. for the distressed universe, 1400 basis points. this low end of the quality spectrum, even if we get right to relief, they are still going to be refinancing into a much higher cost of capital regime. lisa: how long can goldilocks last? amanda: the title of our one q outlook was a widening divide, and i really think it speaks to the dispersion that is evident under the surface and a lot of these markets. for goldilocks investment grade, goldilocks high-quality, high yield, they are in a pretty good spot, especially if we can achieve a soft landing. if you are a triple c rated credit with refinancing to do when you are looking at your current coupon and the 600 basis points it may cost to refinance in today's market reward, different story. part of the reason why we expect defaults to march higher through the first half of next year. it is not a spike, not a

significant increase, but i don't think that we ask a lot, have we seen the last of this transition to a higher cost of capital? i don't believe we have. jonathan: equities, prices follows, positive by .2% on the s&p 500. let's talk about the rate cut called to wrap it up, we have heard from deutsche bank, 150 on the ecb next year, looking for 170 five basis points of cuts from the federal reserve next year. what is your call and why is it different? amanda: the best case outcome would be central banks are cutting rates to get ahead of a potential slowdown and really responding to the declining inflation. i think the bar for that is very high because, one, i think central banks have told us they do not want to cut prematurely for fear that inflation would re-accelerate. wage inflation is moving down but still elevated, especially in europe and the u.k. that is honor base case. what i would flag is an

observation is that if we do get rate cuts in response to a growth downturn, spreads are likely much wider in that scenario. as it relates to corporate credit, it comes down to what is the all in cost of capital? and wider spreads, even if you have lower rates, is still the same outcome of a higher capital. we feel confident saying rate cuts in the first half are unlikely. we will see what the second half brings. that kind of goldilocks, as you refer to it, scenario, we are just cutting to get ahead of a growth downturn, that would be great, but i'm not sure that is the base kate at the moment. jonathan: amanda lynam of blackrock. we talked about that a lot, not all rate cuts are created equally. they just are not. get down to economic growth and rate cuts, different outcome for markets. from a beautiful new york, this is bloomberg. ♪ (sfx: stone wheel crafting) ♪

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pgim. our investments shape tomorrow today. >> i think the world is de-banking, and i see it -- see it this way, every economy, revelatory scheme, credit is

tied to gdp. regulators have two choices as to her credit comes from, the banking system or the investment market. there is no third choice. and everyone around the globe has made a different decision, but if you look at the trend with the exception of china, everywhere in the world, regulators are favoring investors over banks. jonathan: is not going to change anytime soon? that was the apollo ceo saying he thinks the world is de-banking. the ceos of wall street today, and the biggest banks on capitol hill, this morning for their testimony, they expect further questioning of the regulation, including high capital requirements. jamie dimon, david solomon, james gorman, among those expected to appear. there are two issues, one is finance of the economy, let's talk about the number one issue

as it pertains said that, what is the big push from bank ceos today? >> the big worry is declining profits going forward. they don't see a scenario with the current regulation climate where they can see -- where they can sell a great picture for themselves, which is why you had this unique situation where we are seeing it designed as a platform to hold big banks accountable is going to turn into one where they are going to air their own complaints. i think about it as two bickering parents, one parent, the regulators to the bank, trying to impose discipline and put in place strict capital rules, so what are the bank ceos doing? going to the other parent to find a sympathetic ear. going to play to that and say consumers will suffer because of this, higher airfares, you cannot make more loans, reality is, that at the end of the day, their profits will be hit. the fed is betting back the idea

that this will have an impact on the economy. they are saying, yes, profits may not grow that much but that is fine. in the last decade, the sixth biggest banks had one trillion billion -- $1 trillion in profits. jonathan: any reason the direction of policy is going to change anytime soon? sridhar: there is belief that there is likelihood of that happening. think about it, when a tom keene is watching bills versus the bangles, and he sees an ad on air talking about technical bankrolls, that is not to convince him to get in charge of the fed but to try and shift over to the window and tried to angle the negotiations so that even if you don't get a complete unwind of the rules, at least water it down enough that they don't feel threatened. as it is, the banks are clearly facing a dominant challenge. what private markets used to do is being done elsewhere. that is already hurting them.

they just feel these new roles, which are over and above everything you have seen the last 15 years, will only continue to hurt their future prospects. lisa: yesterday we heard from mark rowan that he does not think jamie dimon wakes up and worries about the little fish in the pond, apollo. do you think that is true? sridhar: absolutely not. it was a fascinating interview with marc yesterday, but that is what i disagree with, and the big bank executives definitely wake up every morning and thinking about the mighty blackrock and everyone else because what is happening is not that they are just finding a new corner where they can go and sell their wares. what is happening is the business that banks used to do, regular way, middle of the fairway banking business, is being shifted into the nonbanking space. marc said it himself, the majority of investments, and they oversee about 5 billion, the majority are private

investment grade. that is just a fancy name for commercial lending. that is what things used to do. lisa: if you take there point, it is not far away in short to lend long. they are not taking customer deposits and having to offset the risk or other types of short-term instruments and then using those for longer-term loans. maybe that is a more appropriate place to have it. still you see the jp morgan's delivering record profits, so what is the business case that this is somehow wrong and not actually a sort of correct transformation that is underway? sridhar: the conventional wisdom is to go out and say, this is really scary and worrying, something we should all panic about, and that the private markets, especially the private credit space, has not truly been tested in a crisis. there something else that marc said yesterday, for the longest time, the worry was private markets meant more risk. he is saying now it just means less liquid. and when you don't -- when you have that match where you are looking out at a 10-year

horizon, you don't have to return money at the start of every week or quarter, ab it is not a problematic space to be in. jonathan: retirement savings, do you need debt liquidity? which is the argument they are trying to make, right? lisa: yes, at the same time, just a push back, they are increasingly coming up with individual retail types of options that do have different types of redemptions, and then there is the question of transparency. jonathan: i get what they said yesterday, we are not a bank, i understand that. isn't the risk that we are about to see this activity shipped to private markets and this is not about apollo but what happens everywhere and elsewhere, they start to get bad lending elsewhere? sridhar: don't get me wrong. just because we see that this is perhaps a good idea does not mean something that will not happen. wall street has a history of taking a good idea, pushing it to the absolute limit, taking over into the green space, then you have problems. so you have a market that has grown from -- private credit

markets have existed for decades. the last five years, they have gone from relatively nothing to 1.6 trillion two you had blackrock earlier on saying the private markets could grow to 3.5 trillion. that is rapid growth. to say that every actor in that space will be acting responsibly and cautiously, beggars belief. jonathan: do you think supplies are getting left behind here when it comes to financing the economy and there will be more difficulties, if you are not big, you will not find service? sridhar: not necessarily. for every business that needs a $400 million loan, there are more businesses that need a $10 million loan. blackrock and apollo will be in the business of servicing them. you will have small players in that space, as well, which is why banking executives expressed the concern that you have heaped on so many regulations on us, have focused on the banks the last 15 years, and we are governed by the regulation sandbox. you have nothing of any serious

magnitude in place for this other space, which is growing phenomenally rapidly. lisa: but this is not the purview of the jp morgan's of the world, it is more of a concern for some of the smaller midsized banks that would be catering to some smaller midsized businesses that do account for a greater part of the consumer loans that already some of the bigger banks have gotten out of. how much is this a story for midsized banks and not as much that big of a concern for the bigger banks that already have established lanes that have already been highly profitable at it? sridhar: i would argue that up-and-down it affects them. middle-market lenders are probably looking at midsized banks in the business they do, but the big lenders are also looking at the business that banks do. at big banks do. yes, banks have gotten out of a lot of it. not necessarily willingly. there is money to be made, and they would like to make it. just because they made a trillion dollars the last years does not mean they don't want $1.5 trillion.

they have lost out on potential profits, and they say, if you impose new restrictions on it, even that trillion dollars might not be repeatable in the next 10 years. jonathan: looking forward to the hearings later, i know you are, as well. some breaking news, drumroll. who do you think the time person of the year is? shocker. lisa: taylor swift. jonathan: let's get it on screen, taylor swift, time person of the year, 2023. lisa: she guided the american economy. it is entirely taylor swift doing. jonathan: i am not going to say what i think. i don't get it. i don't get it. lisa: why not? jonathan: i just don't get it. lisa: ♪ players going to play, play, play, play ♪ ♪ jonathan: comparing it to the beatles. lisa: i will not get into musical discretion. jonathan: i think she is brilliant, but i don't get it. lisa: people love her.

did you see the movie? would you see the movie of her tour? jonathan: no. lisa: why? jonathan: don't you want to see the economic phenomenon that is taylor swift? i can see it in the numbers. lisa: you're going to look at the spreadsheet. jonathan: i think it is great she is bring in the country together. it is good we can get behind something together across party lines. lisa: that is the most diplomatic -- wow. any you put her on screen -- jonathan: let's show some real dancing. lisa: would you like to demonstrate? jonathan: all of that is still to come on bloomberg tv and radio. your equity market and the s&p 500, -- seriously, congratulations, taylor. lisa: i'm sure she feels warm and fuzzy. jonathan: if she is watching this morning, congratulations. futures up, .2% on the s and p, 4.18 on the 10-year.

from new york city, this is bloomberg. ♪

(car engine revs) (engine accelerating) (texting clicks) (tires squeal) (glass shattering) (loose gravel clanking)

>> we have had a great rally, and now it has chillaxed. >> at some point, i do think we

probably want to turn bearish on this market. >> the question into 2024, can we stop the cooling before the economy tips into contraction and makes us all nervous? >> i would argue the fed put us back in the market right now. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: don't send in hate mail, i am not a swiftie, she writes her own music, i agree with all of that stuff, that's great. lisa: she. is also pro-woman jonathan: i am supportive of woman, too. lisa: i was doing research. there is a lot of academia behind taylor swift and her popularity. we can get into it later. jonathan: just because i said i don't get it does not mean i actively dislike a person. it is amazing to see how much money has been spent on that tour. lisa: if so and give you a ticket, would you go? jonathan: it depends on the

value. lisa: but the historical context of understanding. jonathan: no, absolutely not, resale value. lisa: just nuts and bolts, value. jonathan: i would give it to an asset manager looking to go to private markets. we can see how that money compounds over time. in a couple of decades. you tell me how that taylor swift concert was, and i would tell you what is in that fund. lisa: i think i will have a happier experience. jonathan: taylor swift, congratulations, "time" person of the year. from new york city this morning, that is not what you tuned in for, good morning, good morning. this is bloomberg "surveillance" on bloomberg tv and radio. in around 15 minutes, you will get the adp report, the appetizer for the main course. that is payrolls on friday. typically, we know how this goes, it does not matter until it does. lisa: the narrative that i am hearing is the one that people might lean into, the question around rate cuts. yes, they are coming on

softness. if we get a weaker number that we could see the bond rally continue, but the stock market falter, and that, to me, is the increasing kind of rumblings under the surface right now. jonathan: the data is not saying that right now. just had a third quarter of 5% plus gdp growth. yesterday, forgive me if you have this already, but it is fresh for others, the perfect mix of growth and inflation at the moment, growth is still robust. prices beneath his surface came down. job openings drop to the lowest since spring 2021. you cannot make it up any better. that just looks great. the question i am asking, can the growth inflation mix get any better than this? isn't it just kind of downhill from here until next year? lisa: that is what i like, a good take. i appreciate the skepticism. first of all, taylor was probably responsible for the 5%. somebody did right and saying that .01% chance that you had in

getting 13-year-old daughter interested in finance with our discussion for taylor swift, so there is that. there is this concern that everyone has bought into this perfect soft landing nirvana, and it basically is goldman sachs saying, there are no bears left and that does not make people feel good. jonathan: no. sentiment shifted quickly. what a difference a month makes for equities and bonds. lisa: this year has been whipsawed of all different narratives. you can pick your narrative. william saunders put it well, the rolling economy, rolling recessions, and we heard rolling recoveries. these are kind of the different stories moving on different cylinders that lead to a complicated reading in a complicated moment. jonathan: example, ecb. you said this and i think you are right. a couple of weeks ago, someone says, the ecb is going to cut by 150 basis points and start in march.

you see here and go, ok, what did you smoke this morning? three weeks later, deutsche bank comes out and says, this is what we are going to get from the ecb next year. 150 basis points of cuts, and they might start in march. and then everyone turns around and says, you are just following markets. lisa: what took so long? jonathan: thanks for catching up. lisa: that is how quickly things have shifted and now we are looking at 100 basis points priced in the fed rate cuts, all with equity still continuing to do well and people expecting the employment picture to remain benign. jonathan: everyone is exhausted, including the bank ceos. you will hear from them at 9:30 eastern on capitol hill. there will be two issues at play, one, transferring risk to private markets. we talked about that briefly. two, compromising their ability to finance the economy. they will push on that hard. this is jamie dimon i jp morgan in prepared testimony, eggs would be limited in their ability to deploy capital in times most needed, and it will have a ripple effect of all

sizes in american households. the role we are taught -- the rule we are talking about is high capital requirements. is anyone going to listen to them? that is the question. lisa: especially given the fact that they just delivered record profits. they are still delivering those, so how much can they say, we will not be able to continue to and we need to remain stable? nonetheless, will markets listen to their economic calls given that people are looking for some sort of indication of what is to come next? jonathan: how do those economic calls work out? lisa: there's is not so well, but walmart ceo, better. jonathan: what do i do if i put a market check in between, and let's not forget what lisa said, here is the s&p 500, positive by .2%, yields down by couple of basis points, 4.1858, coming up later, the adp report, 130 is the estimate.

going into friday, 187k's estimate for payrolls. the previous rate was 150. we had ian shepherdson on the program earlier this morning, who was looking for something closer to 300k. lisa: 275. jonathan: amazing. lisa: given the fact that the early indicators keep showing this, he said, that said, 50,000 hear his government, 40,000 is the union, and you put it together, it is fine. jonathan: let's get to tom kennedy. good morning. let's talk about payrolls on friday. what are you looking for? tom: the continue moderation and job growth, consistent with an economy rebalancing, to your point, with out much economic pain. the moderation in the labor market is a necessary requirement for the durability of the soft landing. when you look at that balancing act between inflation and growth or inflation on labor markets, the inflation site is already there.

i think that is what economists on wall street are coming around to. in november, there were historic easing conditions. but with prices, the last six months, 2.5%. if you adjust for housing, which we know, you are around 2%. is this as good as it gets for inflation? for the moment., this is perfect but is it durable for the soft landing? that is a question we will rotate to and payrolls will be important for that. lisa: do you believe in goldilocks? what kind of payrolls number would confirm goldilocks? tom: 150,000 give or take. why that confirms it is you are still seeing the deceleration but not falling off of the cliff. and then the durability of calving get a soft landing in the economy, prices the around 2% but growth comes down towards trend slowly? around hundred 50,000, give or take, i think you are showing that consistent -- hundred 50,000, give or take, i think you are showing that consistent decline and then you can talk about the quit rate, which should be consistent with wages declining. lisa: doesn't make you never so

many people are buying into goldilocks? that the idea that goldman sachs put out there that there are no longer any bears left because everybody is buying soft landing nirvana? tom: umm, our processes to look at what is in the price, beyond the sentiment and the behavioral experience. if we learned anything in covid, things move fast and we are behavioral organisms. you look at the price for equity markets, and, yes, at the index level, you are talking about pe multiples near historical averages, magnificent seven types of stocks trading expensive. that is the place where you are getting earners growth. start to adjust and maybe do a paid ratio. comparing pe's to growth, that is the only place you are going to get growth if rates are this high, so i think we should pay more for those. everything else, relatively inexpensive, have we been exuberant in a one-month period? maybe, but i think they are still value in some of those names. the conversation we are all having the next three months is, if i can buy, what do i buy?

larger mid-cap or small-cap -- large, mid-cap or small-cap? if you get a soft landing, though small caps will rally a lot. our baseline scenario is moving towards the softish landing and respecting that the process of getting a rebalance in the economy is never perfect, but you can, at this moment for investors, you have so many choices to get your money where you want it to go. you can have a cash rate at 5.5%, it will not be there forever, so the marketers fully recognizing, but you can get fixed income yields that will help you meet a goal for the first time. in over a decade, we will help you get there. and that it stocks, what we have seen in our community, people have raised cash the last two years, increased by 10 percentage points at the expense of risky assets. november showing if we get a soft landing, those things will perform well. jonathan: before we get into fixed income, i am pleased you brought up earnings. are you confident the earnings recession is behind us and not in front of us? tom: the earnings rolling

recession is one that really works for us. these are micro recessions post-covid. tech was the one that was the biggest struggle in 2022 and into early 2023. they are out of it. i just about all of college guys are going to rely on the tech sector. it has to work. it is a huge piece of the s&p 500. but those earnings are reflecting higher. what we are seeing from big tech names as they are doing. they have shown us -- they are doing capex. they have shown as they are good stewards of capital, and that will be a return on investment. expected earnings for next year, around 240, is only saying q3 2023 will happen four times next year. it is not really embedding a substantial increase in earnings growth. just suggesting what we have done can keep happening. lisa: it seems there is a shift in what you are talking about because six months ago, you seemed more interested in credit and equities. the fact you are talking more about equities raises this question, what has changed for you? why is there suddenly a better

value proposition in stocks? tom: because the fed is coming back really quickly. you were right, jon, to say in the earlier segment, there are good and bad cuts. nonetheless, we are talking about cuts. the trade-off between growth and inflation year ago was massive. as recently as june, the fed predicted we would have a recession. but inflation has come down and we have not had much economic gain. they are getting closer to the ability to say, are inflation mandate is reached, so now we can start to support growth. and all else equal, they have lots of room to cut. if things get worse, they can support the growth outlook. and that cut just keeps coming closer and closer. that is what has changed the most. lisa: why not bet on credit most of all? tom: it will support credit. credit spreads are tight. there is likely still to be some distress. there are names that just cannot live in an environment or interest rates are 200 basis points above where they were two years ago and 100 basis points

above where they were five years ago, but that does not mean the entire complex will feel material stress. and credit can perform quite well there. but if the equity market had been discounting this world where rates would say hi forever , and i and be dramatic, of course, but we are slowly seeing that -- i am being dramatic, course, but we are slowly see that is not the fact one way or the other. jonathan: higher rates for longer, when we start cutting, i get the direction story and it is hard to push back after the data we have seen. whatever going back to? 3, 2 what do you think it is? tom: i 2024 outlook, we called it investing reconfigured. for our community, where we have seen cash allocations get raised at the expense of risky assets, and only four out of five clients have adjusted their fixed income portfolios, no changes or material increases. we can get portfolios where they

want to go with less risk than we did pre-covid because rates will not go back to that zero rate environment. so what do we pencil in? i think a 10-year rate will settle around 3.5%. that is lower than today. jonathan: so almost the old normal? lisa: really old. tom: one of my best advisor said, i hear you talk all the time. all you are saying is go back to my portfolio i had in 2006. jonathan: is that what you are saying? tom: i think we are. all these people are giving us feedback, and i thought that was the best summary conclusion of what we talked about all day. this has been a reset to what we have all seen before, but it is a higher interest rate regime, where the world will exist fine, but we need to reconfigure how we invest. jonathan: but that is not a call on what happens two years later? just what the portfolio look like in 2006? tom: from an asset allocation perspective, we know the right thing to do, and that was to take up extent come allocations.

lisa: he just wanted you to say we are not heading toward mortgage armageddon. jonathan: no, just in case people are wondering what happened next. lisa: exactly. not exactly the same. tom: you guys spend a lot of time on where leverage has accumulated, it is not at the consumer, hardly in the banking sector, so are their stresses, and will there be credit issues? of course. but will they be a crisis? jonathan: like the treasury yesterday. thomas, good to see you. tom kennedy of jp morgan private bank, thank you. economic data drops in about 15 seconds with the adp report. mike mckee is excited. he has joined us. the estimate is 130,000, going into equity features shaping up as follows -- futures shaping up, yields look like this on a 10-year, higher by a single basis point. the data drops, it is a downside surprise. michael: so does the adp number drop.

103,000, a significantly below the 130,000 as the expectation. 113,000 unrevised from last month. i will see if i can pull up the revised number. most of the decline it seems to be is in goods producing, which is kind of interesting. manufacturing loses 15,000 jobs. most analysts are penciling in a big increase in manufacturing jobs because of the uaw workers going back to work. that is kind of an interesting view from adp. service providing jobs, 117,000. looks like most of the job creation that there was was in medium-sized establishments. the other aspect of adp in recent years produced is the median change in annual pay. job stayers, 5.6%. a slowdown. job changers, 8.3%.

that is a slowdown. does all this mean? i don't know. the last time we had a number this small was 89,000 in september for adp, and private payrolls came in at 246 thousand. so you take your chances are your choices, whatever. i will say that the whisper number remains low for friday. jonathan: what is it? michael: 156. we are at 187 for overall payrolls. jonathan: previous rate, 150. here is the price action on the s&p 500, shifting higher by .2%, unmoved and equity market, up on 3% in the nasdaq. bond markets have turned higher by a single basis point. two-year, 4.5847.

are you ready, does this mean anything for friday? michael: no. jonathan: thank you. michael: you could add it into the long list of things you put into your model, but i think most people have already accounted for what they think adp might do. jonathan: isn't it always the way? lisa: it is. jonathan: shifts markets for five minutes and then economists say it does not matter for friday. lisa: they say it does not matter, then when the jobs report comes out, they throw adp in as the tea leaf that showed you some kind of softening in the narrative. it is selective. jonathan: 150. 150 something. lisa: 156. michael: it was 157 this morning. jonathan: payrolls on friday. michael: 158. it has moved up. jonathan: michael mckee, thank you. the adp official survey, 187 k. with us around the table, the head of public policy at pimco, libby.

another big debate. : libby yes -- libby: yes. jonathan: is just a big one? libby: this may be the last one. there is not another scheduled before voters go to the polls on january 15 in iowa. viewership has declined since the first debate, when we saw a top take of 13 million, the last around 7 million. we will see if people are even paying attention to this. the real question is, can nikki haley have another breakout moment? does this sustain the momentum she has in terms of the polling and importantly in terms of the donors? that remains an open question. i think the other three folks on the debate stage will be attacking nikki haley. i think nikki haley will attack president trump. it should be raucous. lisa: what is the chance to see another biden-trump matchup? libby: what we are guiding our

clients to is that, one, biden will be the nominee. the idea that there is great of all -- cabal at the convention that will unseat him, we just don't think is founded. senator burroughs from louisiana, who served with joe biden in the senate, said as long as president biden is breathing, he is running. i think that is something we should just take for what it is. on the republican side, obviously, if the primaries were held tomorrow, it looks like trump would be the nominee. they are not held tomorrow but in around 40 days, and what we have seen with iowa and new hampshire is that things can change. they have not really changed in terms of dictating the nominees since 2008, when obama, who was underperforming and all the polls, and then outperformed a new hampshire, so a lot can still happen, but as of now, as you are saying, if the primaries were held tomorrow, it would be another biden-trump rematch. ironically, 70% of americans do

not want that. lisa: that is the reason why i think it got so much attention yesterday when joe biden said if it was not for donald trump would not be running again. what do you make of that? if nikki haley is the nominee for the republican side, there is a chance joe biden would step down and pave the way for some deals? libby: his press walked that back after the comments were made, in private at a fundraiser, and i think they were saying they were taken out of context. however, this is something president biden has said since he was a candidate in 2020, that that is why he was running the first time, so it is consistent with that messaging. if trump does not get the nomination, i still think that resident biden is the incumbent president and believes he really has a record, both on the economy and foreign policy to feel confident to run on, so we are not getting any indication from folks close to the biden

world that he is not running. he is running. jonathan: i think we can all benefit from delegation and a rules clinic from you, how have things changed for the republican primary? libby: especially as a non-u.s. citizen, i appreciate that question. this is important. it is very nuanced and a lot of our clients' eyes, glazed over, but to get the nomination, it is a delicate game. you need 50% of the republicans at stake on the republican and democratic side. the republican side is the real story because the trump campaign is much more organized than it was in 2016 by their own admission. they have systematically change the way states allocate delegate rules to benefit him as long as it is a crowded field, meaning that they have change the rules to winner take all, so as long as president trump is winning a peralta of the vote in many states, he will get 100% of the delegates, and the punchline for

all of us is that it makes it much easier for him to get the nomination much more quickly, so i would argue that by march 5, super tuesday, we will have had 45% of the delegates being voted on and we will likely have a good idea of who is going to be the nominee or whether it will be more of a competitive two person race. jonathan: there arejonathan: four people on the stage later, is there a dates where that four needs to become one to change the outcome? libby: there are a lot of folks on the republican and democratic side, as there are now democratic donors, donating to nikki haley, sort of interesting , unprecedented in many ways, who are trying to argue for chris christie to drop out of the race before iowa. i think what we have seen before is that so much can change that much of this is unprecedented, particularly given what we might be facing, which is two incumbent presidents effectively running against each other. i don't think there is a dropdead date, but i do think it

needs to become a 2 person race on february 24, so the bottom line for markets and investors is that the next 75 days really matters and we will have a good idea by super tuesday, march 5, whether this will be president trump, biden, or a two person race between nikki haley and trump. lisa: and 75 days, we have a couple of deadlines for funding the government. we keep talking about, where's the leverage? in the u.s. government, and something to figure out in order to keep operating. how are you advising people in the market to understand what is happening with the likelihood of a shutdown and what that means in terms of the growing risk that it has been attributive to an markets? libby: two things, this is not the debt ceiling. the debt ceiling was existential to the markets and that has fortunately been addressed until january or february. of 20 25 this is the most -- february

of 2025. this is to keep the lights on. they keep kicking the can down the road. doesn't matter if they shut down the government? probably not if it is not for a sustained time, but if it is weeks, then we don't get some economic data and that could hurt the economy. i think this is noise, but the punchline from a fiscal perspective is this effectively funds the government at the same levels as last year, and we will not see anymore fiscal stimulus. the threshold for any sort of stimulus, even if we do go into recession, i think maybe we has bond investors are less so, but the threshold for any fiscal stimulus is going to be high. we think the government probably will be funded at the last moment, but from a markets perspective, we are not sure. jonathan: it is always the way, equities, hopes, dreams, bonds, fears and nightmares. thank you. great to catch up, libby

cantrill of pimco. nobody thought you were in equity kind of person. lisa: no, i would make a terrible one. jonathan: sunshine and rainbows, absolutely not. lisa: someone said, i don't get equities, it seems like all stories. i said, welcome. jonathan: it is the hopes, dreams of human nature. lisa: i wish. jonathan: coming up on the open, we talk about hopes, dreams, and retail. dan scally, ajay oden, a beautiful new york, this is bloomberg. ♪

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lisa: 60 minutes until the start of opening trade day in new york city. we are looking at a little bit of a fade in some of the selloff in treasury, almost flattened out in terms of the yield space after adp numbers came in lighter than expected, raising questions about whether we could expect a weaker number than current wall street forecasts on friday for non-foreign payrolls. that is giving a little bid to the s&p, which did see a down draft yesterday, about .25%, 4587. to me because of that study

loosening, the fact that the -- the euro fascinating to me because of that study loosening. all of a sudden, people are looking for the ecb to cut rates and ease policy starting next march as inflation under willems. we are also focused on the media circus that is going on in washington, d.c.. wall street heading down there and bank ceos are testifying on capitol hill. it starts in about one hour, this is include jamie dimon, david solomon, brian moynihan, and many others. jamie dimon warning of tighter capital requirements leading to higher costs for customers writing, "this rule makes services uneconomical, you will likely see two outcomes: many banks will simply stop offering certain products and services and those that you will have to charge more just to make them make it worse with the service." what you think is most notable for the testimony that has been

released for these hearings? >> i am standing in front of the building where bank ceos will be testifying in about one hour. have their own agenda, fighting against capital rules that are put forward by the fed. how much will that change? unclear. they have been in the works a while and will take a while to implement, but as you have noted, jamie dimon said to senators in the prepared remarks here that this is not a threat, it is just n economic reality -- it is just an economic reality. they don't just make it about the banks for the broader american economy, and this could tighten lending standards and costs for things like food manufacturers, airlines, and all sorts of things that impact the real american economy. all makers will have their own agenda. there has been a lot of frustration. we have seen this, about the fastest set of rate hikes in decades by the federal reserve and so very little of that

passed on to the american consumer in the form of savings rates, and most of the banks on stand today will be hearing questions about why that has been the case, especially given that they have minted record profits in recent years. lisa: so everyone should get more fees for the deposits and savings accounts. why does this happen? what is the purpose of these hearings that happen on a regular basis? sonali: a few things. we only started seeing this in 2019. in 2019, maxine waters called the banks down to washington. a lot was going on in the american economy at that time and this happened in the wake of the george floyd murder, for example, and there was frustration about the banks not serving low income and minority communities, a big feature of a lot of the hearings. this week, we are not going to see hearings in the house but the senate. and sherrod brown, ohio senator,

voiced similar concerns about the big banks, leading citizens of america behind, and the point they are trying to make is that they still serve two thirds of american lending, and jamie dimon put out private credit, saying it will take over. and they might not be as kind to your people as we are is kind of the undertone here of the testimonies. lisa: i am wondering from the other side, when you talk about wall street executives saying this could cut credit to the broader economy and hurt it, what did we hear yesterday from goldman sachs when the ceos were speaking in terms of the state of play, with a c consumer and the economy heading? -- where they see the consumer and economy heading? sonali: brian moynihan is the most optimistic of the group, and you have seen him talk about

how things are going to be ok, but when you have heard david solomon and goldman sachs for a long time, their tone has even been more constructive over the last couple of months, even though everyone things there is a slowdown coming. what is interesting about this is that for the banks themselves , while many of these banks that are presenting today are laying off staff by the thousands, sometimes the tens of thousands, some of the headcounts have become more loaded, like j.p. morgan, for example. each are facing pressures on, hey, think about how many banks are testifying have raised their minimum wage, for example, the last couple of years. really, by the way, on the back of these hearings, i think a lot of people think of this ceremony, but overdraft fees have been attacked and changed in the wake of these hearings starting. pay has been addressed in a visceral way in the wake of these hearings at these banks, so these annual testimonies actually do make a difference in the case of a banking sector, though, there is a lot of politicization and frustration

and concern about the direction of the economy, certainly from the top bankers and lawmakers questioning them. lisa: we will look to your coverage through the day at hopefully the wind will not blow you away. thank you. as we are speaking, we are seeing a little more pronounced move in the bond market as people parse through the economic data we just got. adp came in at 103,000 jobs created. this was below the 130,000 expected. also, the prior month was revised lower. 106,000 from the previously stated 113,000. you can see yields now lower on the day, 10-year, 4.16 percent heading toward that lowest level we have seen since the end of august. you can see it give a little more pop to the s&p but there is a question about if this is a goldilocks nod to what we might see friday. joining us is michael pu

liese, are the numbers we got from adp, important and pointing to the soft landing that has been driving the narrative towards the end of november? michael: the adp numbers are one piece of the puzzle, but they are relatively small. i don't put a lot of weight on what that is going to tell us about the much more important payroll numbers. adp tracks the nonfarm payroll numbers fairly well on a longer-term basis, but month-to-month, the relationship is pretty weak. we are a little above consensus on friday, looking for 215,000 jobs. i think there is underlying strength in the labor market, in addition to seasonal quirks that might boost hiring a little bit in addition to the strike affects. lisa: is this a perfect kind of strength? we have asked this a while, given the fact that we have seen productivity increase, we have seen wage increases moderate, even at the same time we see a

robust hiring market. is there still a perfect recipe with all the signals you are monitoring? michael: i think that the slowdown so far on the labor market and in growth and everything else has been encouraging. 600 thousand jobs, 500,000 jobs a month, at the pace we saw earlier in the recovery, would never be sustainable. that was one of the many data points that was spanning the concerns for the fed of the economy running too hot, so the path to a soft landing, to me, it always looked like slow economic growth, slower job growth on a trend basis. the hard part is sticking the landing, is getting to 100,000 to 200,000 jobs a month, which is a healthier sustainable rate, and sticking that on a trend basis and not going into negative territory. lisa: how much are you seeing that is still the likely scenario given the fact that that is currently with the market is pricing? michael: yeah, i think it is a

tough call. market probably has gotten a little optimistic on this front, but i feel more optimistic than i did a year ago when you had tighter financial conditions, inflation that seemed to go up and up, a fed hiking 75 basis points at every meeting, and slowly but surely we are getting there. inflation is still high. the fed's preferred measure of inflation is 3.5%, depending on if you look at the headliner, but generally speaking, i think that that is an encouraging development. if they can continue that, and you heard this from governor waller, if they can get three to five more months that look like the past few quarters have, i think that allows them to slowly cut policy, regardless of what is happening in the real economy because they are finally seeing the inflation sort of getting in that ballpark of 2%, so we are not there yet, but i am more optimistic than i was 12 or 9, 6 months ago. lisa: we were speaking of tom kennedy of jp morgan asset management, talking about how we

may go back to a 3.5% fed funds rate world, where if the cut at that level, back to 2006 conditions, not with the mortgage market but with portfolio arrangement, do you think that is an accurate reflection of just where we are in terms of rates remaining higher than they used to be but everything chugging along in tandem? michael: i think that is exactly right. if you go back to late 2010's, what was normal for rates? something like 2%, 2.5%, a good neutral level. above that, type. low that, accommodative. and there are good reasons on a go forward basis to believe rates will be higher today than back then, maybe an economy growing faster, inflation running hotter, generally speaking, more uncertainty with term premium. i think that is right. with the end of next year, our 10-year yield forecast is 3.5%. fed funds a little about that with them not done cutting

rates, but getting there to something in the low threes. that is how i frame it, as well. rates over the next decade will be higher than the previous, but do i think 5% fed funds were 5% 10-year yields will be what we sustain over the longer run? no, i would take the under on that. lisa: do you think and 10 years when we look back on history and take a look at zero rate policies, are we going to say that in some ways, they constrained growth and that some yield on basic income producing instruments is stimulative on the margins, all things being equal, in terms of delivering income, particularly to people who have big pools of assets or are retiring? michael: i don't think so. there were challenges with zero interest rate policy in the 2010's, not to say there were no negative side effects. i think there certainly were, but the 2010s were a difficult recovery. when i look back on history, 10 years back now, i think the thing that strikes me is just how bad that recession was,

unemployment of 10%, steep decline in real gdp, and a years long recovery in private sector balance sheets, given all the debt challenges that came out of the housing bubble. i think the challenge there was you had all of that happening and some fiscal austerity happening in the early 2010s with the euro zone debt crisis and the fiscal cliff and sequestration, and all the things we have now with those 10 years of hindsight. zero interest rates were not perfect and had negative side effects, but i do think they were attempting to help an economy that had a lot of issues at that point in time with the fundamentals. lisa: if you are just joining, we did get that adp report, fueling a little bit more of a boost to the risk on market that we can feel. s&p futures up nearly .4%. you can see it is fluctuating in the bond space as people try to understand if this is a soft landing and can price in some sort of increase in rate cuts next year. the s&p, 4591.

i want to get your cents on the 5% gdp growth in the third quarter, if we get down to 1.2% gdp growth in the fourth quarter waste on gdp now for the atlanta fed, is that the new glide path? is that the reality that you think reflects what 2024 is going to look like on a growth picture? michael: yeah, what i think about that q3 growth number north of 5%, i don't even need any optimist to think that is the run rates for the economy. i think 5% was in q3, and you see this in all economic data, that is like quarterly gdp numbers here at embers there only contain so much of her mate -- members, and growth numbers only contain so much of it. for growth, i think about it similarly, coming off a strong growth rate in q3 will do for a little bit of a letdown in q four, and i would average those

often say, if you do get 1% of q4, maybe we are sitting in the middle of to point something at the run rate, and i do think that will decelerate. i don't think we will grow 2.5% next year, let alone 5%. i think something weaker than that makes a lot of sense, given that there is a lag impact of the tighter race you see on job growth and many other parts of the economy. lisa: michael pugliese, thank you. the heated debate continues around academia, the role of free speech, what that means, as well as antisemitism and islamophobia. coming up, david rubenstein on his discussion with bill acwood. this is bloomberg. ♪

>> he wrote a thoughtful letter that people saw on twitter, and

remarkably, i did not get a response, which, to me, is a very, very bad and weak approach. literally, no response, acknowledgment, no, dear, bill, i hear what you are saying. nothing. yes, i am an activist. my activism today is probably not in the corporate room. it is on campus. lisa: that was bill ackman saying harvard ignored his open letter to address antisemitism on campus in an interview with david rubenstein. you can watch more of that interview, which is fascinating and goes into one of the most important issues of the day, peer-to-peer conversations at 9:00 p.m. on bloomberg television. joining me now is david rubenstein. i want to pick up on that point bill said, which is his activism is now not in a courtroom but on college campuses. we heard this from mark rowen of apollo, how much have you heard that increasingly from some of

your peers? david: there is no doubt that bill ackman is not need to be an activist and invest any more because as he said, he was not that well-known when he was an activist and therefore he had to get attention and now he is pretty well known, so he can avoid that part of his investing process. in terms of college and harvard, he has been very active with his letter, and mark rowen has been very active, as well, and a number of businesspeople people have been active. there is no doubt there was a lot of concern in business and other communities about what has gone on at college campuses, it is an unpleasant situation to be a jewish student at some campuses these days, or a muslim student at some campuses, as well. i don't think there is a perfect answer and we will not solve it overnight. it will take some time for the colleges to figure out the balance -- the right balance. lisa: is there something

specific people are asking for that goes beyond the statement on antisemitism or islamophobia and goes more toward the nature of conversation at certain universities? sonali: certain universities -- david: certain universities i would say, far left or right, there is not a lot of room for those who disagree. and people disagree with the conventional early majority view and then don't get the kind of support they might want to receive from the universities. in some cases. harvard is seen by people in congress that is seen as far left, maybe it is or is not, and i think harvard does the best it can, and i think the president university has done as good a job she can in a short amount of time dealing with these issues, but nobody will be able to solve this problem overnight. lisa: you are also on the university of chicago board, and full disclosure, i attended, and i would like to be transparent,

there is a question on whether it is appropriate for the university to take a stand at all on any social issue or to let the individual professors and students have their own voices rather than some sort of collective voice that you have to stay within? do you think that is the way to go? david: same issues the ceo space, corporations take issues on these, sometimes they do, they don't, you universities are places where people are allowed to grow, and when they leave campuses, they tend to be sometimes more true in certain things than when they become an adult. at the university of chicago, we have had a 100 year policy are basically the people say what they want, promoting they don't do anything that harms anybody else or incites violence, but there has been a lot of free speech at the university of chicago, and i think that is a great tradition there. lisa: do you think there will be any change in response to some of the pressure going forward? david: given the pressure we have seen now, i suspect something will happen, but i

don't know that congress will do anything. i think university boards will be more sensitive to these issues, and there will be more security for certain students, but i think there will be more of a move toward an approach were more people are allowed to see what they think without feeling that if they say something that is unpopular, they will be criticized or harmed physically. lisa: besides this issue with bill ackman, he has also been vocal about investing in treasuries. if you are starting to hear this -- i am curious if you are starting to hear this more that certain hedge funds are struggling to get an edge in public markets are just making bold trades on the path of interest rates? how much are you hearing that? david: bill ackman said he generally does not make big macro bets. that is not what he does. he generally makes bets on companies, but a couple of times in his history, he has made macro bets and some have worked out extremely well, and he has made one where he made like $2

billion profit in a relatively short amount of time and that is hard to do. this time, he has made abet that the treasury rate will go down or the interest rate will go down in the fed will lower interest rates sooner than the conventional wisdom things, and if they do, he will make a fair amount of money lisa: i assume he is pretty happy with what he is seen. david: the conventional wisdom today is that the fed is likely to cut interest rates sooner than maybe people thought a month ago. right now, i think the fed does not want get into the election season, so if they are going to cut rates, they probably will not do it too close to the present election, so they will probably have to do it sooner. lisa: meanwhile, breaking, citigroup's reporting figures and what they expect, and they say fourth-quarter trading revenue is expected to drop 15%, 20% compared to the third quarter, and you can see that as the cfo talks, you see shares falling. this speaks to the sense that there will not be the same kind

of opportunity to make profits for some of these firms as there has been earlier this year that basically, this is what they're going to pitch when the ceos go down to washington, d.c., and start saying maybe we earned record profits, but we are going to lose it to people like you, david rubenstein, of private credit and equity, what do you make of these arguments? david: i am not too worried about the large banks, they can take care of themselves. when interest rates go up, they tend to make more historically. if interest rates go down, they will find other ways to make money. private equity and credit firms have done quite well over the last 10, 20 years, and we have a lot of smart people and try to figure out how to navigate the interest-rate environment we have. lisa: david rubenstein, thank you. david: my pleasure. lisa: we are seeing a bit of a move in terms of citigroup shares. david rubenstein of the carlyle group, host of the david rubenstein show, peer-to-peer conversations and always a wonderful watch, highly

recommend this bill ackman interview. you can watch it on bloomberg television and :00 p.m. eastern tonight. we are at -- at 9:00 p.m. eastern tonight. we are parsing through data, given the fact that we expect some sort of significant market response. we are parsing into the adp numbers and seen a greater move. michael mckee here by my side, what do you see that might be giving a bit of a further pop to these markets? michael: certainly a big pop and the equity markets after labor cost members came out surprisingly high. we knew growth was strong in the third quarter but productivity comes in at 5.2% and the estimate for 4.9% and unit labor costs, which had fallen the last quarter .8%, down 1.2%. this is at a time when we have been hiring a lot of people which would in theory put downward pressure on those things. it does suggest that we are going to see additional possibilities for corporate profits from the third quarter. and into the fourth quarter.

so we are seeing a reaction in the equity market circling. you also get a little bit of a reaction in the bond markets because it makes the fed's job easier to cut rates if we. are seeing productivity gains -- we are seeing productivity gains. lisa: will it be welcomed as long as it is not too weak and is that what people seem to be looking for to continue this goldilocks? michael: it reinforces the mood and motive wall street right now. the old saying is that if the fed raises rates in the markets cut, then the markets are in cut mode right now, and as david said, it is simply a question of timing, and you do have to throw in the politics of it to a certain extent, but the way things are going right now, it does look like the fed could be cutting by midyear. i don't know if i want to say as far as the first quarter because they do not want people to think they are declaring victory too early, but all of the numbers

seem to be good news in this sense of confirming kind of a soft landing. lisa: within the adp payroll number, you are seeing 5.2% nonfarm productivity versus 5.9%, and the fact that labor unit costs went down and it highlights that sort of perfect situation. we don't care about trade balance at all? michael: trade balance is a revision to the member that originally came out and it is small, so it will subtract a little from third-quarter growth but not -- actually, fourth-quarter growth, but not a big deal at this point. lisa: michael mckee, always wonderful to get your insights, bloomberg. as we do drumbeat into tomorrow and the initial jobless claims going to friday and to payrolls report, coming up later today, the chief executive officer on

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of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. jonathan: two days without gains on the s&p 500. we are trying to do something about that today. positive by 5.4% are live from new york city, good morning, good morning, the content to the open starts right now. >> everything you need to get set for the start of u.s. trading, this is bloomberg, the open, with jonathan ferro. jonathan: transatlantic.