>> the equity markets got very excited at the end of september and beginning of october saying the fed is done. >> we are definitely seeing higher interest rates light in a more meaningful way. >> growth is likely to be a lot worse than this past year. >> i don't think we are likely to see another big hit to earnings. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: good morning, good morning for our audience worldwide.

alongside tom keene and lisa abramowicz, i am jonathan ferro. s&p totally unchanged. uscp i just around the corner than it is on to the federal reserve tomorrow and retail sales. the biggest story overnight, a toy maker 20% of the staff two weeks before christmas. >> it does fold into the economic data and the new reality of an real interest rate. there are structural issues with the toy industry. they don't want toys. my kids don't want toys, they just want apps or cash for make up. maybe hasbro should go into the makeup business. there's also this question of cyclical and the mystery of this holiday season. jonathan: this quote right here,

the market we anticipated had proven to be stronger and more persistent than planned. lisa: the question is bearish for who? the toy industry or the broader society considering the fact we are heading into christmas time. it's sad that people are not buying toys but i have to wonder if people have so much clutter and cannot move they already have so much stuff they need to get rid of, i wonder how much, this hangover from the pandemic when everyone bought is much as they could. >> 6000 400 employees. this is a microcap by today's standards. there's a lot of other companies like this struggling. there was free money to get along and with this inflation report today it will be an uptick on how free the free money is paid jonathan: the equity market was still drunk.

oppenheimer, 5200. tom: 5800 rounding up with the headline is 6000 out 25 months. we are one percent away from a standard & poor's 500 total return record high. we are ready dow jones industrial average total return. >> one challenge for the federal reserve and one major decision, whether to accept the easing of financial conditions since early november. >> i have to say stephen at standard chartered came out with this which i thought was fascinating. what is the language the fed could say that could torpedo market activity. a statement that cuts can, if inflation progress continues to be made would be a screaming endorsement of the conditions. if he goes the other way, nobody believes he will actually be hawkish.

>> it's more important than the verbiage. the chairman's verbiage will be adjusted by what we see. jonathan: expecting a friendly chairman powell. here's your equity market price action on the s&p looking something like this. totally unchanged. yesterday a day of gains on the s&p 500 even with some tech weakness. yields down again monday and tuesday. lisa: what we are watching today, the main event. the week starts in about 2.5 hours. all eyes will be encore. we expect no change, no increase in inflation month over month when it comes to the overall headline number. oil prices and other types of commodities. the key is 4% is where all non-energy and food prices are stuck in terms of inflation.

the u.s. is selling $21 billion of funds. i was trying to talk them up. they were interesting and did -- both were not particularly exciting but did not have a huge impact on the market. thirty-year auction should be more exciting. >> the wall street journal did an article and featured it and lisa was glowing. lisa: [laughter] later today, the ukraine president meeting with president biden and others in a last-ditch effort to try and get something. a lot of people saying it is futile. tom: a devastating article on chinese that will be the talk of the day in the world of annmarie hordern. jonathan: good to be back. let's kick off the market conversation.

global allocation fund portfolio manager over at blackrock. what are you and the team looking for? >> i think we will be probably close to the consensus inflation is slowing but it slowed at an even pace. we saw that last week when we talked about payrolls and hourly earnings that the economy is moderating but it's not a straight line down and inflation will give the fed the ability to go on pause but the big question is since the markets have discounted that is when they will start cutting. there we think expectations have gotten a bit aggressive. tom: are they finding bull market exuberance here. such a balanced approach at blackrock. my answer is to take it, is it an exuberant december. >> there has been exuberance. in november alone we were 10 or 11% off that again.

all that did is get you back to where you were in july. i think the market is more nuanced than that. you clearly had a handful of stocks that posted stellar gains , evaluations are not cheap. beyond that even if the other 493 some things are very different. you've got most of these trading at or below their historical. you look at international markets, they are not nearly as expensive. i don't think we are seeing the irrational exuberance spoken about or than 25 years ago but you see a market that is now discounting their soft landing which is very different and where we were back in march. tom: with a very nice summary you gave us and there's people that still think it's a bear market, how do you allocate out six or 12 months. >> the first thing you can do is i don't think -- i do believe

there are opportunities in the equity markets. you had the equity exposure but are shifting it away from just a handful of companies you think may have a place in your portfolio. emphasize quality, emphasize consistency in companies because as the economy slows those of the characteristics people tend to value. i think this is something we haven't spoken about in a long time. use income to drive return. you can build a six or 7% portfolio. in many years, that becomes a bigger part of return in an environment where equities have already moved quite a bit this year. >> is 860/40 more like 50-50 or is it more like 7030 with a greater credit exposure. >> i think it's closer to 60/40. but what i think you are doing differently is 10 years ago you

might've just had that slug of long treasury duration which wasn't going to give you the yield but a good hedge. today that portfolio has gotten more credit spread and more securitized. it is a more diversified portfolio with a higher yield potential then you might've had five or 10 years ago. >> can we just finished looking ahead to the federal reserve tomorrow after the cpi print. we will get a statement and the summary of economic projections. the 2024 dots specifically prayed at the moment it implies one caught. most assume it will go down another two or three. if it implies three cuts based on where the market is pricing how do you think we would take that tomorrow if we didn't fully validate market price in but got the direction right. >> i think the market would be ok with that. this been a gap between what the investor is expecting in the fed is actually suggesting on the dot plots for most of the year.

even if the fed goes in that direction i wouldn't think that's validation that the fed will cover this aggressively and 2024 is the market has discounted. >> the 10 inflation-adjusted yield, of the measure under 2%, opens this morning on 1.98. the recent low as 1.94. where should that inflation-adjusted yield be given the soup of 2024. >> i think it should be close to where it is. we were having this discussion a few days ago. i don't think it's crazy you go through 2024 and the 10 year yield is not going to be material different of where it is today. i think we've actually priced in a reasonable scenario going on the next six to 12 months. lisa: one thing from bank of america is the most consensus theme is rate cuts next year. the most counter consensus right now is higher for longer. how much do you lean against the

consensus given the fact you don't see the weakness that would cause the default cycle that would really disrupt some of the trades you find most attractive. >> we have to define what higher for longer is. if it's going to be higher than we had in a post-gmc environment i don't think we will go back to an equilibrium in part because it's not clear that inflation is moving back to the level we saw in the post-gmc environment but also the stability. part of why yields remain so low in that and was so low for so long is there is no volatility to inflation and that has changed. i think it involved more moderating. >> inflation data two hours and 20 minutes away. looking out for the economic data this week. cpi then on to the federal reserve. u.s. retail sales i know you are super focused on retail sales in

america. tom: gina martin adams on friday i thought was absolutely brilliant, don't forget the real economy. are we doing well in the equity markets. retail sales is phenomenal not inflation-adjusted thermometer. >> we will catch up with teddy. we need to talk at the latest in israel. the president hosted a reception saying this, we continue to provide military assistance until they get rid of hamas but we have to be careful, they have to be careful. the public opinion can shift overnight. the problem for the president is shifting domestically already in america. a recent poll, half of those surveyed late last month said they approved of israel's military action in gaza. 45% of americans said they disapproved. within that, 63 percent of democrats disapproved. that's the reality for this white house next year. >> i wondered if he was talking

to israel or himself because there is this feeling he's running out of goodwill within the democratic party. >> i am fascinated how this ends and every other event we have had in the eastern mediterranean has been to identifiable parties. where is the other side in this debate. we haven't even talked in days about the northern border of israel. >> they need to get to ukraine as well. splitting washington over another war. >> he's got another war which is while you were out john. the polls were pretty ugly. he's got a war at home politically whose -- biden mx. is not working with the people. >> a decent payrolls report on friday. the surface of the headline level, what continues to confuse me, you get those payroll reports and think of the

previous administration there would've been a big ceremony, a big news conference. you would've seen the likes of larry kudlow. what do you get from this administration. you barely hear from them on the economy. absolutely invisible. talking about these numbers. they are not at all. >> wears the chest thumping the can appeal to a broader swath of americans. is it the same kind of it's the best america you've ever seen is essentially what people seem to respond to. >> really tentative people you do not hear from which is bizarre. on the economy in just a moment, emily rowland in the next hour on bloomberg tv. your equity market just about positive. ♪

>> i'm thankful for these our warriors and the european partners. we will continue to do this and make our citizens more secure. we had good -- we were thankful that you will support us financially. it's very important during this challenging. . >> difficult moment for that man in his country. the ukrainian president making the rounds in washington yesterday meeting with the imf

and the u.s. defense secretary ahead of today's meeting with president biden at the white house. more coverage in a moment. s&p 500 just about positive going into u.s. cpi a bit later this morning. then on to the federal reserve chairman powell at a news conference tomorrow. futures going absolutely nowhere. down four basis points. the euro in and around one .0 -- 1.08. tom: want to dive into that but i've got to get up to speed on one of the key stories of the morning to inflame the beltway in washington. we want to get to what we saw from mr. zelenskyy yesterday but i have to ask about the article in the washington post showing the chinese espionage in america

is far more tangible than we were led to believe including in hawaii and the pacific fleet. this is red meat for republicans and democrats. how will washington respond? >> you are right that it will be the talk of washington today and at the same time, anybody in the foreign policy community already knows a lot of this frankly. the foreign policy community, nobody expected china to stand down. in fact if you read and listen to what the chinese say, they continue to say and believe they feel threatened by the u.s. activity in the indo pacific and elsewhere and will do everything they can to make sure they have the best idea of what's going on inside this country. we are a lot easier to penetrate than they are. it should not surprise anybody they are doubling down. lisa: volodymyr zelenskyy's

visit is largely futile. do you agree? terry: i don't agree at all. i also don't agree it is any kind of game changer. one of the things they say is he's likely to find a difficult environment. he is not a decision-maker maker in this process. but what we have here is a situation where i think ultimately this gets done by the end of the calendar year. but it is going to have to happen if and when biden and democrats get serious about the border. i've been preaching to people for a month that nothing happens on these aid packages without serious movement to improve border security and now we are getting down to the situation where that needs to happen. zelenskyy's plea will help but until biden can marshal enough democrats to make some serious

incursions and inroads on border security policy it is not going to. >> i want to dig further because a lot of people think it won't get done. what could a feasible border policy look like the democrats could sign off on and republicans would pass. >> there will have to be a lot of improvements. the democrats say that hr to, which is the republican wish list legislation put in it is not on the table for them. that means pretty much everything else is on the table from catch and release policy to more physical and electronic security. right across the board. they are going to have to engage on a lot of that stuff. biden importantly really made a u-turn here by saying that the border situation is broken, that is directly in contrast with what his own vice president and

homeland security's and others have said. other senior democrats including durbin in the senate most recently have said that. he is going to have to turn the ship around quickly. that said, this end-of-the-year deadline i think is an artificial deadline that biden himself put up. they have a few weeks to do that if they put their shoulders to the wheel and do it. tom: thank you for joining so often. you are stunning on disaffected republicans. with the polling of the present president, what is the path or likelihood or probability of a republican president, a republican senate and republican house even if so many of the gop are disaffected. >> i think the republican suite is a very low percentage shot. i give that 15 or 20% today.

trailing risk but not much more. the reason doesn't have to do with natural republican sentiment. it has to do with the small nature of the republican majority in the house. only a few seats need to flip. number one. a lot of those are in blue states, new york for example. and democrats will throw a lot of firepower at those. the likelihood that a few of those seats flip and the senate becomes nominal -- the map is much better for republicans in the senate so there is a greater likelihood that it goes republican there. the presidential, one of the things that i said earlier last week was i think the republican party at least temporarily splits if there is a trump candidacy. but at the same time there so

many disaffected democrats that both of those circumstances together make the likelihood of a consequential third-party candidacy greater than it normally would be. jonathan: inflation is coming down based on incoming information. jobs growth is still ok. this administration still wants to talk about biden mx. -- bidenomics. why is it not resonating? terry: i find increasingly in politics these days is people talk to themselves but not to anybody else. there's very little convincing going on from anybody. to your conversation before the break, there's very little energy in the executive. the white house decided to glom on as a message they perhaps could make inroads with and that's not working at all.

that narrative is so entrenched that it will be very difficult to make that go away. bush 41 found this when clinton was going on about it's the economy. we were already coming out of a recession so the bush people fooled themselves into thinking this is all transitory and will go away and we will be in better shape for the general election. >> got to fix it. thank you sir. it's kind of a head scratcher. you've got these very sharp credible people in the white house, an old friend of this program thinking of lael brainard. every single week why aren't we hearing from them? >> i think the smoothness of the machinery is not what it was two years ago but what can be said without question is this will

get written about four or six years out. >> the problem is what is the message? the reason why is we are pumping record oil. >> they can because it's against their script. there are a lot of things that should feel a lot better. you are seeing that in pockets but -- >> i love the crude production story. republicans get around saying we are not pumping enough crude and no one in the white house wants to correct them. precisely from the point you are making. >> is their script to be positive, that's a key thing. jonathan: good morning. ♪

jonathan: what a big 48 hours coming up. cpi this morning that on to the federal reserve. totally unchanged after two days of gains on the nasdaq. tech struggled yesterday with the s&p did ok. tom: spx went up. all of the magnificent seven dipped. but you are right there was a real statistical nuance yesterday to identify.

fidelity leaving -- leading the way showing the story. jonathan: shaping up as follows. the two-year down over the next couple of days. >> how much is this entirely responsible for the increase we've seen in equity markets. the index since october 20 which is one of the tops in the benchmark yields, just to give you a sense of that. it wasn't terrible and then another one similar. people are saying this is stability and we can come in here. >> do you know when there is an auction who is buying. >> that's something our next guest we can ask. there is this question around is it international or increasingly domestic. particularly older people. i looked specifically at the

camera to avoid this comment. tom: it's just absolutely vicious. jonathan: what did i miss yesterday? tom: it was a domestic. >> not sure i meant it's either time. the euro looks like this. the euro against the dollar. easy to forget this ecb meeting later this week. lisa: people are looking for basically nothing and yet this is the big consensus bit under the covers that the ecb will cut rates before what we see from the fed. will they set the script and then the ecb says we can do that now. >> morgan stanley saying maybe we can get there as well looking for that stronger dollar. u.s. inflation data two hours away. the meeting estimate calling for 3.1% down slightly from last month. core inflation expected to rise.

a year ago november 2022, cpi had a seven handle. another base affect kicks in. a very different story 12 months later. >> firming up at harvard i take a three month annual. three months data and spread it out. he has a wonderful matrix of summing up all sorts of annualized studies into a single message and still says disinflation. >> >> service sector disinflation. >> the toy manufacturer hasbro cutting close to 20% of its staff sliding slumping holiday sales. declining 19% this quarter. market headwinds have proven to be stronger and more persistent than planned. >> how much is this really the

pandemic hangover normalization. i think if people can move because of mortgage rates the idea of limited space is leading to a lack of desire for clutter. i have heard this from other people. you don't want more stuff if you don't have more space. this is personal. but it's also what i hear from others. i wonder the transformation to the computerization. >> message received. massive reality check for ford in the easy push of this administration. slighting slowing demand for battery-powered vehicles the company scaling back on electric vehicles by 12 billion and downsizing in michigan. saying we will continue to match production to consumer demand and right now based on those production figures that demand isn't there.

tom: i get that the fundamental analysis is six. five or six like an unimaginable number. this is a huge issue what we saw was cost-cutting. your conversation, the basic idea they are rationalizing out everyone wants to do this, but -- >> if this is the way the world is going, got it. if this is the way policymakers want to push us, got it. are we moving too quickly based on the lack of demand that they are finding out about which is ford, gm and all the rest. lisa: they said they are pushing out their target and lowering expectation. the charging networks, of the people need to have developed before they invest in a truck like this.

>> this is absolutely definitive for global wall street to stop and listen to anthony. portfolio manager at a west coast shop called pimco. barely describes his authority on short-term risk and how they are down to the fed out of the yield curve. thank you for joining surveillance. the real yield, the inflation-adjusted yield, negative, way out above to. where is that yield. >> it's difficult to say but it's likely to stay lofty. the central argument for that is the federal reserve, once you have confidence in the institution and its ability to foster price stability it may be difficult to get to 2% which is the target, we see inflation over 4% and it's been there for

some time and peaked for the overall level but the federal reserve is a sufficient arsenal to bring the rate down. fostering this is different than getting to 2.0 in the sense the different definitions of price stability, alan greenspan would say price stability is achieved when price levels ceased to be a factor in decision-making for households and businesses. that's likely the case before long. we see the inflation rate moving down. >> the key thing is the new positive interest rate is tangible sector by sector by standard & poor's. calling this an equity bull market. it this a real economy that can withstand this new interest rate regime? >> yields today are attractive

relative and doubled by decades average. it's higher than 2030 and near the 40 year average. it's attractive relative to expected inflation and expected volatility. the economy can handle it to some extent but can in one major way. we see this playing out in government bond markets. the u.k. in 2022 suggested lowering taxes without giving position for paying the increased indebtedness. the bond market pushed back violently. the yield rose 150 basis points rapidly. you could say the bond market vigilantes came out and disciplined the fiscal authorities and the prime minister was ousted. i wrote a book about this. it's where we reach practical limits in the use of debt.

the world is seeing that. high levels of debt we make it more challenging for nations to have high service lines. what i call it a read my lips moment ahead for the united states and other nations. from 1998 in a speech at the convention he said read my lips, no new taxes. he had to break that pledge because the interest on the debt rose to 3.2% of gdp which was a record that still stands. in a few years we will preach that. politicians solve the problem eventually with budget surpluses but washington doesn't seem to be the place these days for those solutions. lisa: as an investor, ross said he is like in credit as a possible greater component of the 6535 but credit is offering

more from the fundamentals as well as the yield, the government debt. tony: historically it's better to have some overweighted credit than not. we suggest an investor needn't reach very far for good yields in terms of risk-adjusted yields because yields are higher. we do think that this is total return time and a year for clipping coupons, of high quality bonds. next year is more likely to be total return time. what we've seen since 1978, core bonds, those with duration beat cash 90% of the time. by an average of almost 300 basis points per year on a three-year rolling basis which is saying looking at the story three years from now seeing how the returns work, it's likely that having some duration

weather -- rather than being in cash, its total return time which includes high quality investment grade bonds. looking at the bloomberg aggregate it's about a quarter of the universe. >> how do you pair this idea you will get that return next year with the bond vigilante story and the unsustainable debt profile of the united states. tony: in 2025 the bond market will look closely at what is proposed. you can imagine the situation where a president decides to propose increasing indebtedness. you could expect that to push back in that case and there could be volatility. we suggest the bond investor should worry about that in 2025. the bond market is in control so the idea of being reincarnated of bill clinton's former campaign manager is a bond

investor because you can scare everyone is something to be thinking about. the bond market will discipline. jonathan: the fact otani will get paid $2 million per season. until 10 years time. wall street journal has an amazing story on this. paying between 2034 and 2033. i will read this quote from the wall street journal story. during the last 10 years in the first 10 years he will be subject to state income taxes on his salary in california and wherever the dodgers play. by the time he starts receiving the payments he may be able to avoid state income taxes by living someplace like florida without an income tax or by moving back to japan. that's the story. 68 a season. it will be 68.

70 a season. 2 million paid up front. 680 million. that's how the matter will work. tom: not shenanigans that's not accurate to say. this is tax planning isn't it. >> and then the dodgers get to spend more money on players. >> it really helps the cap. our bloomberg business sports was adamant. this is game changing across all sports. what -- who was the guy that one formula one this year. what's he worth after this. >> now they are going to own monaco. >> these numbers are nuts though. tony: i am a new york yankee fan. tom: they have juan soto.

hello boston, please come in. >> you want to chime in here on 1986. >> go mets. >> good to see you. coming up a little bit later on the economy the federal reserve with cpi data later this morning. your equity market on the s&p just about unchanged in the bond market yields look like this on the 10 year down for basis points. from new york city, this is bloomberg. ♪

>> that means one of two things. or it means we will have some new exogenous shock or driver

for positive growth. the status quo of decelerating growth falling inflation typically for equity. the no landing scenario is always kind of a fantasy right now, it feels more like a hard landing still and may be the second half we can get a broadening out. >> where this equity market is going next year this is where it is right now. on the equity market the s&p 500 totally unchanged. dollar a little weaker per euro stronger. the dollar weaker against most things. 10797. positive by .3%. busy week ahead counting down to cpi. followed by the fed rate decision tomorrow and the ecb and boe decisions. writing in this, the market is

convinced the central bank is done with rate hikes with the first rate cut potentially as early as march. with the recent head fakes and inflation, at least some of the fed may not be convinced inflation in a sustainable orderly and timely downward trajectory. >> timely is the key idea there. the force of disinflation back or anybody chooses. very sophisticated in this analysis is lindsay who joins us this morning. thank you so much for joining us and on this moment of inflation, if you will what i find fascinating is getting the last mile. getting a 2.8 is a whole different story. >> the last 100 or 200 basis points is the most difficult. it's not just the nominal level of inflation but it's the underlying momentum of disinflation but the market is looking for. we want to be convinced we are

on that sustainable downward trajectory. if we look at the third quarter with that recent back and sideways movement, that's not convincing that we are on this sustainable timely trajectory. my concern is the longer the fed remains on the sidelines, of the bigger the risk the fed will have to come back in and maybe slow the economy. if we simply dealt with inflation the first time around. >> where the improvements coming from over the last 12 months. >> we've seen some widespread improvements. its move from the good side into the service sector. widespread but a lot of that downward momentum a welcomed gauge into the key holiday spending season. when we talk about the reversal there that's probably not a long term sustainable trend. we could see bounce back up in the corridor. forcing the fed's hand to take policy action. >> one thing we've asked

regarding the fed is how much an improvement inflation is down to the federal reserve and how much is a natural on the supply side. if we are going to talk about the prospect of higher interest rates from here we have to understand what they have done so far over the last several months. >> the fed can take responsibility for the improvement on the demand side. certainly not the good side of things as you talk about the recalibration and aftermath reopening the global economy. we have seen the consumer pole back. momentum has slowed and we are now at the low single digits. consumers are still spending but at a remarkably lower pace. the loss of momentum we can attribute to the fed. they have not done enough to see below trend job growth, the low trend a spending activity and not enough to get that prolonged period of below trend topline activity to ensure a return back

to stable prices. lisa: what we hear from certain executives at hasbro there seems to be something similar. seeing a deceleration in consumer appetite. how do you pair that idea with recovery you are seeing in services and other areas you think could fuel inflation next year. >> do we wait on the sideline and hope it slows or do we take further action to ensure that price is slow. from my point of view i don't think the risk is the fed tightens too much but that the fed does not tighten enough and allows inflation to become entrenched. this is the mistake they made on the front end. if we go back to the tightening cycle they held onto that too long and allowed inflation to become too ingrained and are now trying to deal with on the wage side ingrained levels of price pressures complicating this process to get us back to 2% inflation.

a downward sustainable trend, this sideways movement does not instill confidence. we need to see broad-based improvement in some of the most sticky components particularly wages. last friday's report didn't give us that confidence. we are still talking about 4% annual wage growth. we've come down from peak levels but that's not enough to suggest we've done enough. >> on behalf of americans, can you explain the department of agriculture tells us in october we had 3.3% food inflation. no one is experiencing that. food inflation is shocking at the grocery store and restaurants. the answer is the reality, this is 24/7, the reality of inflation is totally different than the verbiage of people like you. what's the divide? >> the wholesale prices versus

what we are experiencing as the consumer because we are not buying that fish at the market. we are buying it at the restaurant or grocery store and that is the pipeline of price increase the consumer is feeling. 3% food inflation we are not feeling that. from the fed's perspective they are looking at the broad-based that regardless of where in the pipeline they want to look we are still above 2%. there is more work to be done despite the markets consistent overreaction and call for rate cuts, fed officials are talking about reaching that restrictive level. >> all showing accommodative structures. part of that is a point stock market as well. into this meeting and report in 90 minutes are we restrictive or

accommodative now. >> are we as restrictive as the fed thinks. have we reached that level and some of these indices say no. >> are we talking about a rate increase? >> it's not out of the possibilities that we see a further rate increase. if we see stability and as we move the calendar page we see a little bit of an uptick i think that could force the fed's hand to take one final rate increased to convince the market that three is not the new two. we have to get back to 2% inflation and they will not tolerate above. jonathan: why is it so important? lindsey: it's a balancing level of inflation that allows the economy to ask celebrate -- to accelerate. it also keeps the economy afloat in avoiding the deflationary scenario. it's a delegate balance the fed is trying to walk. it's the longer term average.

as we fail to reach 2% for the better part of a decade going into the pandemic arguably the fed may be willing to tolerate slightly higher inflation but it's about that downward trajectory of momentum that we haven't established. >> i wonder if we got too focused on this 100 basis points i remember from the other side of it, searching and all the effort the global central banks went to to get inflation up 100 basis points whether the effort required would be equally damaging in a different way. >> there's been a lot of study on this and of course it's been rekindled three or four times from the book last summer addressing this directly linked it to fiscal policy. the answer here is how much work does it take and the answer is no one knows and the other is it has to have a cost at some point.

to me, linzie's job is to aggregate everything out there and my answer is we are disaggregating america. they don't care about inflation, there off skiing somewhere. >> there off of pine tree, the rest of america is flat on their back. >> i thought you had something to say. >> we can move on now. is this about you? lisa: it was the first skiing. >> why am i missing the inside jokes. jonathan: trying to bully you? >> it was great, i enjoyed it. getting to the consumption of america to keep this economy strong. >> thank you very much. lindsay pierce with a look this morning. equity futures totally unchanged.

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first time i connected with kim, she told me that her husband had passed. and that he took care of all of the internet connected devices in the home. i told her, “i'm here to take care of you.” connecting with kim... made me reconnect with my mom. it's very important to keep loved ones close. we know that creating memories with loved ones brings so much joy to your life. a family trip to the team usa training facility. i don't know how to thank you. i'm here to thank you.

>> the equity markets got very excited at the end of september and beginning of october thinking the fed is done. >> the economic slowdown impacts earnings. >> we are seeing higher interest rates in a meaningful way. >> growth is likely to be worse than it has been over the past year. >> i don't think even a slower growth environment we are likely to see a big hit to earnings. >> tom keene, jonathan ferro and

lisa abramowicz. >> good morning, good morning for audience worldwide. this is bloomberg surveillance on tv and radio. your equity market on the s&p totally unchanged. 90 minutes away from inflation data in america. >> the equities did not go down yesterday and i will leak in the prosperity of the markets, the real economy. and inflation report in 90 minutes. this is what people want to see and for inflation to the fed. you mention bank of japan december 19. it's a set of good news in europe. >> you wonder what's more important this week. jonathan: the data, cpi, retail sales or just the tone of the news conference from chairman powell. lisa: what should matter more as the data. i will make a moral statement

there. what will matter more could be how asymmetric the potential risks are to over tighten or under titan whether they are open to cutting rates in march. >> the key observation i had in the last 10 days is gina martin -- where she said everyone is focused on monetary dynamics. the lm curve if you will and i asked if the real economy, you mentioned this you walked in the door at 5:55 and i got you in the first minute. you said productivity matters. >> identical for 6000 on the s&p by the end of 2025. are we seeing signs of a credible slowdown in this economy. other people might be pushing back. one company, almost 20% of the staff in the holiday season two weeks before christmas. >> it is brutal just emotionally

for people to see the toymaker is not going to do well speaks volumes about what will be under the tree. is it just isolated to the goods sector. laying off dozens of partners in part because attrition wasn't as great as they expected. they beefed up during the pandemic and people aren't leaving. the quits rate is important. there are signs people aren't as liberal about their opportunities as they were during the pandemic. >> the original slinky walking spring toy. >> the thing that goes down the stairs. >> are you to buy from amazon or hasbro. >> you would probably go to amazon for that. >> over at hasbro how much of that is the post-pandemic normalization for the goods demand has shifted. a lot of people these days want the software, not the hardware from places like this. >> it is tangible.

i don't how to gauge it with an eight-year-old or 10-year-old. 16-year-olds don't need toys prayed they need tuition. >> you can buy hasbro on amazon. >> can you sell christmas to me. jonathan: did you to have a fight yesterday. tom: a domestic. jonathan: you notice how i asked lisa that question and not you. [laughter] jonathan: here are the scores on the s&p 500. equities going nowhere. yields lower by four basis points on the 10 year. a break of 420, in the fx market figure a little stronger. dollar weaker,. >> the main event coming up in 90 minutes. we do get the u.s. november cpi. that's good to be the most interesting. it's expected to stay flat way

above 3.1% expected for the overall headline cpi. at 1:00 p.m. this is the issue this morning i really think the auctions are important and he keeps denigrating them. it cuts deep into today there's is a bond auction. the last time it didn't go well. and it actually hit the oil market. >> she is going to burst into tears. >> the ukrainian president is in washington dc meeting with president biden. we are expected to hear some sort of press conference and i'm curious to see whether he can do anything because there is a feeling this is futile based on the disappointment in congress. terry haines does not see this as an exercise in futility and sees the possibility patent -- placing emphasis on democrats coming to terms with border control. that's very fuzzy to me.

i don't have a full understanding of what's at stake and what the push poll is. >> from where we were eight months ago. jonathan: coming up in about 10 minutes look out for that conversation with our chief washington correspondent. with us as the co. chief investment strategist at john hancock. always wonderful to catch up with you. seeing some signs this rally is broadening out. is it the real deal this time into next year? >> right now it is a fed to pay for the party and we are all invited. the markets have been celebrating the idea there is disinflation in the pipeline. we have cpi later this morning but you remember that october cpi report was pivotal for the markets. it was amazing to watch, it missed by .1% and we saw this massive rally in bonds. we saw the dollar weaken and the party kept going with high-yield

bonds spreads well below 4%. bitcoin rally until yesterday. and other high-risk parts of the market. meme stocks back in the headlines so investors are celebrating this idea. in november we had the best month since the 1990's for a balanced portfolio. we have pulled forward a lot of excitement. i would expect the market reaction to be a bit more muted even if we see inflationary pressures subside into next year. matt and i just penned our outlook and call it stocks are stories and bonds are math. we can talk about this, there's been a lot of value unlocked on the fixed income side where there's been less value created as a result of multiple expansions. tom: what does cash do next year? if i believe in productivity and

post-pandemic america do i regret being in cash in the first quarter? emily: right now there's about $6 trillion in cash and it's remarkable to see the swell of money that's just sitting there in money market accounts. our view is you want to be fully invested until next year. we may see some challenges on the equity front as evaluations are very wholesome right now but we think bonds can play a bigger role in portfolios. we came in at about 4.8 percent on the 10 year and went to five. we went back down to 3.8. there's been a lot of value unlocked. 5% to 6% is really attractive. we think equities will -- will chug along here. usually it might be the biggest

drag to portfolios. >> which goes to your point it's a fed pivot party. what do we have to see to give legs to that narrative. >> you certainly don't want to see that on the upside here. the narrative really has been you can see headline ppi coming down here as gas prices have come down. you might see a modest look higher in core cpi. used car prices, there may be noise in the data due to the uaw strikes being overpaid that may limit production on the auto front. a little bit of noise there but markets are really expecting a continued moderation pricing in four or five fed rate cuts next year which might be aggressive especially going into the fed meeting on wednesday. lisa: where do you lean in and push back. emily: right now we are leaning

into owning areas like mortgage backed securities, municipal bonds, investment grade bonds. those we think offer value. we are still finding opportunities in the equity markets. we were surprised by the multiple expansion. you look at the returns and stocks. 13% of that just came from pe expansion and then you get this rerate thing and earnings estimates which also contributed to total return. i think that will be hard to come by into next year. especially since the s&p 500 is sporting a 19 times forward multiple on top of 12 percent earnings growth being penciled in. a lot of that is the magnificent seven driving returns. you have to be worried about their ability in portfolios next year. higher-quality lots of cash. we think it makes sense to pay

up for. more defensive equities in order to balance out the portfolio. >> i'm going through the guest list, did the chairman rsvp. >> i think you want to throw cold water on that. i think he's got to push back against easier finance will conditions. the last meeting caused this across markets. he suggests they are balanced between doing too much in doing too little. he's going to come out hawkish today and temper those expectations when the fed will be cutting aggressively. jonathan: a keg party going down in washington at that meeting. emily, thank you.

have a wonderful christmas if we don't talk again before the holidays. how credible is a hawkish hold tomorrow? this market is on its own planet and they need -- do they need the endorsement? lisa: she basically is expecting a hawkish sort of talk that she will disregard because it is a pivot party. that's essentially the markets attitude given the fact there is a credibility gap. >> this is so important, to put this in perspective. this is what everybody got wrong in january. back under 20. the real economy real stock market analysis away from the fed, a price to earnings ratio, price of stocks compared to earnings. standard & poor's 500 everyone agrees it is a lofty statistic.

we are not going to do that now. apple, 31.57. that's what emily rowland mailed. jonathan: fundamentals haven't been great over the last 12 months at that company. i'm talking iphone sales specifically. tom: it is not a growthy story except for services but it is for profit. jonathan: welcome to the program on the s&p 500 almost totally unchanged. positive 0.01%. yields up. this is at least -- this is going into cpi later on. seeing how they respond to chairman powell. we get that hawkish hold, if we get that again, does this market continue ignoring them. lisa: that's what we just heard from emily rowland unless there is some specific details about why they are going to be more

hawkish and not necessarily cut rates as soon a smart. it seems like the market will disregard that which is why i'm more interested in the numbers. what exactly is going on at hasbro and ernst & young, how much is the economy cooling beyond what we expected. jonathan: tom: i'm with you -- jonathan: just on the retailers, coming into the holiday season guiding us cautiously and then we see the numbers supported by by now, pay later. see what we will look like -- with the numbers will look like on thursday morning. retail sales at a couple of days time. the federal reserve is the meat of the sandwich in between. ♪ (sfx: stone wheel crafting) ♪

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>> i will not endorse prior to the virginia primary. i want -- i'll let virginians choose. i firmly believe that americans, republicans, independence and a load of democrats understand that we cannot as a nation afford another four years of joe biden. jonathan: governor glenn youngkin of virginia speaking with anne-marie down in washington. here's the stage set as follows. the price action looks like this. positive 0.02%. yields are lower by almost five

basis points. down on the 10 year, the dollar is weaker. the euro is stronger. that currency pair is firmer by one third of 1%. inflation data about one hour and 13 minutes away. not a nice and neat slowing to 2% within this backdrop. will make it hard for fed officials to cut rates until activity data are more clearly weakening which is why so many are looking ahead not just to cpi this morning but retail sales on thursday. tom: retail sales to me is a huge deal. all this data including this morning, the service sector dynamics still front and center. there is an assumption of goods deflation, outright deflation. this is not about goods, it is about service sector. jonathan: we seen the rebalancing in goods.

that's the next step. that was perfect. tom: where we are this morning. i look here in 10 minutes or so and it is different off the jobs report on friday. is it about the real economy unemployment or just rates, fed talk. jonathan: wall street versus main street. wall street working out whether the federal reserve will surge or go all at once. main street is focused on the sticker shock of the cumulative inflation. tom: a cumulative inflation is tangible particularly in virginia. our bloomberg washington correspondent spoke with the governor last night. election results -- what does glenn youngkin in your conversation yesterday, what does he symbolize to disaffected republicans right now? annmarie: he has a purple state

so for him it is about balancing act and yes he went into the general virginia elections almost calling for a referendum on himself. he said before that election i want to put my record to voters. it also came down to abortion. he was calling for a 15 week limit. yesterday he said it was not a mistake to talk about abortion in the election even though you had some republican delegates talking to the press saying the third rail of politics but he was outspent by the democrats when it came to that end a lot of these races were close. he's optimistic about still being able to get a lot done. he can only serve one term. what he is dealing with is less money, pandemic aid money has dried up and he's going into a divided government. he is looking at a potential him in this economic council are

thinking a mild recession next year. this is how he is framing going into next year and in his purple state he has to balance the populist and the neoconservatives of the republican party. >> if there's a lot of republicans out there like youngkin perhaps distant from the former president how does president biden get them to vote for him? annmarie: i do not see those republicans voting for biden even if they are not a fan of trump. the governor didn't say he wasn't a fan of trump he just said i'm not endorsing anyone until the virginia delegates make their decision. he is very smooth and trying to answer these questions because some of that buzz has evaporated given the fact he did not flip virginia red but individuals especially donors really see him as the future of this party. what we are seeing in the

republican party is they are about to nominate a man who is going to be older than joe biden was on his inauguration day who lost the 2020 election and they will see a generation of republican executive talent pushed to the side. glenn youngkin is term limited, mitt romney is leaving the senate. people in high-value leadership positions who can do these jobs are leaving. it remains to be seen what happens end of trump or two when he is only one term. this sets up a wide field for 2020 anyone willing to stick around. lisa: there's a question how wide the field is on the democrat side. an increasing number of polls show -- how much sweat is there in the white house right now? >> the white house or the campaign will tell you there is obvious concern but they still have a year out.

president biden is sitting on a massive war chest of money they can deploy. i think at some point once the republicans go through their primary early to mid next year they will start to deploy this and they will go after the issues they know can turn out voters. we have seen it time and again. abortion, you can imagine going to spend a tremendous amount of money. we have seen the last few weeks him ramp up the fundraisers he was in boston and vegas and los angeles. you will see a lot more of that 2024. >> shifting to the ukrainian president, what types of items do you think will come from that and how much pressure to get something passed for aid to ukraine by year end? >> it was around this time last year that president zelenskyy was here and he was triumphant and jubilant in his visit.

he was greeted as this war hero and then he came in september, it was more toned down. now it is definitely more of an awkward meeting. not for the white house but he is going to have a very tough time in congress. you have individuals like senator j.d. vance saying ukraine is one of the most corrupt countries. he will meet with speaker johnson who is struggling in the house to see whether or not republicans would back ukraine aid. he was elected after they announced -- rejected speaker mccarthy. so this will be a tough one for volodymyr zelenskyy. he does not want to wade too much into the internal politics of the united states. he probably won't touch the issue on the southern border wants to make the case that ukraine is the last country standing between russia and a nato ally and that's why it's imperative for the u.s. to continue supporting ukraine.

he said yesterday standing alongside lloyd austin that the only thing that this acrimonious nature going on in congress only helps pruden and his sick collect. >> thank you, a big challenge to try and deliver that message. it may well fall on deaf ears. tom: the evolution here, it starts it's going to end quickly and then -- jonathan: fatigue. tom: financially fatigue. i saw a blurb the other day running out of ammunition. but the fatigue is the right word. lisa: i wonder as we head into the election how much there is nationalistic focus of voters versus some international half. whether there is this feeling. to me, i am uncertain on that.

i've seen conflicting poles about where the focus is. specifically some based on age, affiliation, it's one of the big questions. >> the new isolationism which i can characterize is partly of the historic isolationism of america. >> coming up on fixed income and the federal reserve. equities just about positive on the s&p 500. yields coming down by four or five basis points. we are one hour and four minutes away from inflation data in america. good morning. ♪

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jonathan: equities on the s&p going absolutely nowhere. 60 minutes from cpi. here are the scores. for me by 0.1%. nasdaq up zero point 2%. these and couple of gains on the s&p 500, even without weakness in big tech yesterday. we were getting used to yields near 5%. now we are back down to 4.6825. when we did the november cpi report 12 months ago, we were talking about a seven handle. lisa: talking 3.1% the

expectation for headline cpi, yet what i am interested in is when you go under it and you look at the excluding energy, excluding food, we are looking at a 4% inflation rate that is probably sticky. this is causing thanks -- angst. jonathan: retail sales thursday, than the tug-of-war between two central banks. you have to push that through the fx market. the euro against the dollar shaping up on the euro at about 1.08. a weaker dollar through g10 this morning. the federal reserve will cut next year, according to pretty much everybody under the sun. the ecb will go first. that seems to be the consensus of you, which is why, until recently, we saw a bit of a euro weakness. lisa: at this point i wonder whether parity is the call people can get behind or whether you could see surprising upside

at a time when the french stock market just reached another all-time high -- jonathan: germany, too. lisa: people are talking about weakness. where is it? tom: there has been a gross underestimation here about data-gathering and the pandemic -- may i point out the shock of the ukraine war. it is a jungle -- jumble. you will see this in davos. the basic idea is the ecb has to listen to the bundesbank. the netherlands electorate in complete turmoil over the last 12 months. i would suggest there is a political and cultural overview here that there is not in washington. jonathan: the inflation, without a doubt, deeply unpopular in the nation's you just talked about, and everywhere else as well. let's get you to the top stories. we are an hour away from the latest cpi print ahead of tomorrow's fed decision. headline inflation expected to remain flat. bloomberg's outlook seeing core

inflation falling below 3% in the first half of next year, which is why so many people think rate cuts are around the corner. lisa: because you're getting that good disinflation and can cut rates in tandem with a disinflationary band. how much does the fed chair lean into that? i am guessing not at all, and no one cares. jonathan: and if he does push back, does it matter? do you get that hawkers hold from the federal reserve tomorrow? tom: it is part of it, but i will go to my recent overweighting of the real economy in this new, better productivity. that was not in the equation in the spring of last year. jonathan: let's get to the latest from corporate america. we talked job cuts, almost 20% of staff going from hasbro. here is the latest from oracle, continuing its fall. the software and database company posting two consecutive quarters of slower growth as

competition builds. the chairman defending the outlook, saying demand for cloud services is "over the moon." you question, with this stock down 9%, if this is it an oracle problem or if it is a signal of something happening elsewhere? lisa: is it the story of the year, consolidation among tech giants, or is it the suggestion that maybe companies are spending less based on the performance of aws, microsoft's azure, i would say probably this is an issue of oracle losing some of its market share to the giants, which we have seen consistently throughout the year. tom: we are exhausted from the soap opera of a few weeks ago, ai, openai -- the answer is it is about engineering. it is about engineering, what amd will do, microsoft racing to catch up with nvidia. that is about american technology. jonathan: here is the last update. the harvard student newspaper

reporting president clogging gay will remain in office even following pressure after last year's capitol hill testimony. another petition in her defense earning the support of 700 faculty members. tom: i want to know where the other 200 schools are. whatever the number is, i am not informed on that. i find unseemly the focus on one or two or three schools. there must be a lot of other schools in the same boat, the same debate, and they are just needs the radar. jonathan: amazing to see the shift in tone i've witnessed. the embodiment of the liberal elite, the establishment, with an incredible monologue over the weekend. neil ferguson writing this in the free press on the intellectuals and the treason of the intellectuals. this quote -- "i've also is the willingness of trustees, donors

-- by a liberal coalition of woke progressives. the pushback you are starting to see is getting bigger and bigger. tom: i put this out on twitter and linkedin. it is 10,000 words, and it deserves to be read. i will go back to a book that was changing for me, somewhat like "shinzo's list -- "shch -- "schindler's list." -- neil ferguson uses that heritage of an ugly 1920's. it is a tour de force. lisa: i just hope it launches a question of what is free speech? it is not simply allowing certain speech and not others, it is this question of not having some sort of present censorship of different viewpoints and different concepts. tom: patiently waiting, as we discussed this events. rob waldner joins us, chief strategist at invesco.

these are delicate conversations, and one of the delegate conversations for invesco is a 15% bond market loss. that is the drawdown, roughly. it has been a nice recovery this year. internet year, is there -- into next year, is there an inertial force because 2023 was better? rob: i think it is clear that, next year, we have the tailwinds behind us for the first time in quite a while in fixed income. it looks like we will this year in positive territory, but 2024, the question is not what direction to go but how quickly the fed will cut. we either have a slow cut, which is based on what you may call maintenance cuts as the fed realizes inflation is low and will stay low, or a quick cut, which would happen if the fed overstayed their welcome, kept things too tight, and created a

more impactful slowdown in the economy than how they moved quicker. so we are either in a path of slow cut or quick cut next year, and both are pretty good for bonds. so valuations are little bit rich right now, but it sets up great for 2024. lisa: so you are leaning into emily rowlands' pivot party? rob: absolutely. we think we are in a slow growth, design flair -- disinflationary environment. the data now is pointing to that. gdp coming in is at 1.2 right now. we get cpi data today. the market is leaning a little bit on the bearish side, on the low side of the zero point 3% but we see is the sort of consensus. today, there may be a little bit of noise, but clearly, china is in deflation. inflation in europe has come down much faster than most

people expected. inflation in the u.s. has come down. we think we are in a continued disinflationary environment. lisa: the question is what is the weakness of companies, do you go into government debt or corporate debt, in particular, risky corporate debt? do you go into small caps and others that are leveraged in the economy? given we are looking at high yield spreads the are the lowest going back almost two years, there is a question of how we overpriced the risk of a soft landing? rob: we have -- we think a soft landing is a base case. pricing to the soft landing is not a bad thing to do, but we do need to be very cognizant of the potential harder landing of a recession. certainly, credit spreads, particularly in i.t., are very tight. credit industrials are very tight. but if you go back to an all in

yield perspective, they are still very compelling. in our base case, where you get this disinflationary slow growth this inflation this year, which also, as you are pointing to, would be good for credit across the board. tom: as a civil engineer, you understand partial rentals and partial derivatives. one of answer in the yield space is all of a sudden, use of cash in the equity space is a challenge. in the next year, are we going to see a migration of middle ground, balanced portfolios towards equities, if this market expands, and away from bonds? are people going to go for total return of equities over the coupon of yields? rob: great question. i will take a slight different tack at it, which is with the real yields where they are, historically extremely attractive, investors will continue to look for the bond market. they can get a lot of what they

need from a term partner from the bond market. also, equities will do quite well in the environment i laid out. the source of funds is likely to be cash or money market funds, these types of things, which have been very appealing because they have high yield and low risk. but i always a money market funds in cash's one risk is reinvestment risk. so if you get the bond market doing well, the equity market doing well, that is likely to draw cash off the sidelines into the markets. jonathan: rob waldner there of invesco. there is a question of what is the trade of least regret going into 2024. isaac we have asked this a few times. in 12 months, will you regret not locking in that yield reinvestment risk, or will you be happy that you can do ploy it on the s&p 500? extrapolating that out, i think

you know the answer, but that is the question you have to ask. lisa: where are the dips? if you want to buy on the dip, which is what so many people say for so long, they may wait for the dip, but it may be 1%, and everyone jumps in. this is the problem when everyone does the same trade of short-term cash. tom: i will say something i've never said and i have no evidence -- i've never seen a record high standard and poor doubt total return with less exuberance than we are in right now. i've never seen it. someone will say, look at 1990-this or 1980-this --i've never seen such a lack of exuberance. jonathan: it is because of where we were two years ago? tom: we have basically gone round trip. the 24 month total return is -- jonathan: punishing. exhausting.

if you're just joining us, the show continues. equities on the s&p 500 positive by 0.1%. yield a little bit lower at 4.1853. the stand corporate story of the last 24 hours. there is a toymaker in america which is cutting 1100 jobs. almost 20% of the workforce two weeks before christmas. their stock is down 5% in the premarket. it has already lost about one third of its value since early september. lisa: i remember when people played dungeons and dragons and my little pony. but there is a question, is it a question of people going to row blocks, where the kids are. is this a company that excelled during the pandemic when everyone was desperate? versus signaling what we will see in the retail season, especially because there was a report about small business optimism that was worse than expected. on the margins, you are seeing a feeling that maybe people are

running out of patience. tom: there is a slide out every morning of bankruptcies sliding -- spiking up. they're not 2008 grim, but i will go back to two americas. there is one half of america that do not care with a grocery price is, they will celebrate the holiday season. there is another group saying wait a minute, how do we get to february? jonathan: i absolutely agree. tom: can i come back tomorrow? jonathan: absolutely. coming up next on the retailers, the 2024 outlook from "bloomberg intelligence." this is bloomberg. ♪ (sfx: stone wheel crafting) ♪

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>> yes, we are seeing inflation slow, but consumers are not really feeling that right now, and they are still seeing a high level of prices which is

contributing to some of the consumer fatigue we are starting to see develop and think will carry on through 2024. jonathan: sarah house of wells fargo. u.s. cpi data in about 45 minutes. bloomberg intelligence writing that retail companies like walmart may face a difficult operating year in 2024. --communication from corporate america and the last couple of months for 3q. walmart using the "d" word. tom: and they followed up after, we heard from their ceo. this thing has legs to it, where their leadership is looking at what i will be polite and call price flatness. it is tough to grow, tough to look at your fixed cost if you have a price level like that.

what we will do right now is give you a view to next year. we do this with our outstanding people. jennifer bartashus joins us. hasbro, jon ferro mentioning hasbro laying off tons of people. they distribute their product through your world. in the toy aisle at walmart, how grim is it? >> it is a weak season for toys. there are a couple things happening. first, the discounts are not as high as they were in previous years, according to the price study we run each week, but also, the consumer is being much more selective. during the pandemic, people stopped up on a lot of things like board games, things to keep them entertained. the demand is a little slower, but overall, it is still a weaker season. tom: your amazon note in your

outlook is simple -- they will battle, they will cut price to their retailers to compete with the other people. how is that going to play out 12 months, 36 months down the road? >> i think amazon will continue to pull share from brick-and-mortar as people continue to seek convenience and low prices. what we have read and seen in studies is amazon is priced best compared to most rivals, including walmart, so that is encouraging and really drives shoppers to its platform again and again. what is interesting is while to ys is off to a slower start because that is not that many discounts, there was actually a callout category four amazon -- it was a popular category. the demand for toys is there, but people are getting selective on where and how they get them. lisa: do you see this as the beginning of something greater, basically a trend that can last, especially given the fact we are

seeing deflation when it comes to gas prices, some food prices, some goods prices? poonam: i think the trend remains. the trend did not start this year, when consumer started to combat inflation. it has been around for quite some time, whether in the apparel space or many other discretionary categories, where people are making choices. they are figuring out where they can stretch their dollar and maximize their spending power. we think that trend is here to stay. what is going to drive spending as we move into 2024 will depend on the fashion, on the brands consumers are seeking, and on top of that, convenience in price. lisa: from your perspective, how much is this a tale of two consumers? there is one looking at different fashions and whether they want to buy that nice item or not, and there are other people seeing what their grocery bill is and deciding whether they can buy extra things. in other words, you are seeing big differences in the trends and the weakening depending on

which sector of the population different stores deal with. jennifer: it is very true. we are still seeing that division of the consumer. people who are comfortable will continue to spend. but what is notable, and we have heard companies like walmart talk about this, they are getting trade down customers. they are getting some of those higher income households coming to walmart to buy groceries. part of that may be people looking to save where there can and -- where they can and looking to where they can indulge themselves, but you also have consumers very tightly strapped. this is where retailers are looking at the value play. it will make it difficult for these retailers. they will have to keep prices competitive for a lot of consumers out there. tom: to both of you, and as a general statement, are your stocks richly valued? in the show this morning, we have heard about expansion and the rest. when you wake up, do you go,

"wow, these things are rich"? poonam: i will start with amazon. it is the largest company i cover. we have argued the cloud business alone is bubbly worth more than where amazon sits today. it depends on how you look at the businesses and how you value them. but when you break up or try to break up the pieces of amazon, there is clear value and growth across each of its segments. tom: and i look at the big boxes as well. we are looking at macy's yesterday, trading for a cup of coffee. the competitive landscape, do they keep growing and growing, earning those multiples? jennifer: i think they do continue to grow in this environment. if you think about it, they have the greatest touch across the united states. they can touch lots of consumers. they basically meet the need that is out there. traditionally, staples are a more defensive sector, and we are in a period of time where

value is king. these companies will be rewarded by consumer behavior by virtue of the type of businesses they run. jonathan: bloomberg's jennifer bartashus and poonam goyal. looking at the rallies off the low, the lack the end of october, just after bond yields peaked. we had a move of 27% on the airlines in the s&p 500. lisa: this comes with the projection of record travel. this comes as oil prices are lower. it will be a huge boon to their potential margins. third of all, this challenges the idea people are not spending. it is what they are spending on. it is a story that has not gone away. is it something that will be a staying shift, where people buy fewer things and do more? tom: when you get to the economics, and on friday, somewhere in the vintage is the of 4:15 -- somewhere in the

vicinity of 4:15, we have to look at breadth. jonathan: the rest of the market is doing nicely over the last 24 hours. yesterday was a bit of an interesting moment. whether that continues is the bigger question. tom: liz ann sonders at schwab covers this nicely. the answer is the breadth is there, been there for 30 days. but it is whispers here. if he keeps going, it is more than a whisper. jonathan: if you are expecting a consumer -- of the consumer to drop off a cliff, we are rounding into that. in the next hour, we will break down cpi for you. and about 5, 10 minutes, we will catch up with alicia levine of bny mellon. an christyan malek will join us. he has been bullish on crude, next year and the year after.

a multiyear call from j.p. morgan. we will do that in just a moment. after that, for the energy story , part and parcel of the inflation story. the reason why headline is going to come in. most people think it is the energy coming in. lisa: which is the reason why people are looking at core, because that will be such a disinflationary and deflationary force. here is my question. are lower oil prices now a good thing or a bad thing when it comes to the inflation story? on one hand, it is a good thing, because it means headline inflation numbers will come down and people's expectations -- expectations for inflation, down, but it gives people more spending power. it is basically a stimulus check in their wallets. jonathan: isn't that good news? lisa: what is it just good enough, not good enough? jonathan: you do not want to spend too much? lisa: this is sort of the goldilocks idea. jonathan: isn't that a

ridiculous waste to be in, that we are looking at low energy prices and are printing the as a bad thing? far more interesting to ask a question about the american economy, is it a good or bad thing, considering we produce more than 13 million barrels a day of the stuff. lisa: it is just a way of thinking about the drivers of inflation going forward, that potentially we are set up for the idea oil prices could rise, if there is sort of a supply with drawl. second of all, you are dealing with something that essentially gives consumers more money to go out and keep spending. jonathan: which is -- lisa: it depends. jonathan: kind of a good thing, because if they come down too much -- lisa: basically, you do not want to much inflation. jonathan: very confusing stuff. tom: 1987, "a christmas movie" -- lisa: you follow. don't make me feel dumb.

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♪ >> when you step back and think about the cumulative inflation, but is what a lot of consumers

are still feeling. >> inflation may be coming down the going to the supermarket doesn't feel better for anybody. >> the fed needs to ensure that inflation is stamped out and will not return, which means caution. >> inflation is going to look a lot less immaculate in q1. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, everyone. inflation countdown clock in 29 minutes. the important report. what part of the du care about? jonathan: we can check them out in the premarket. tom: 1987, great movie. jonathan: i imagine the control room. lisa: 100% that is what happened. tom: can we get him on? jonathan: let's park that and

focus on cpi. we are seeing signs of a credible slowdown in the economy. not just disinflation. morgan stanley says yes. if we are, where does that leave chairman powell tomorrow? and forget the data, forget the decision, focus on the turn -- tone of the news conference. tom: the basic idea here is we have got a glide path in place and the dispersion of opinions here on how you go from four to three or four to 4.3, is there a rate increase? jonathan: the threat of one. do you think that is a credible threat, because this market is not listening. tom: it is part of the probability distribution. given what events happen, you

may see this. lisa, i'd go to where we are and say we go 11 from here. is that in the report in 20 minutes? lisa: if that is still the pivot party, is that enough that we just gets to the strength? not necessarily when it comes to inflation, but over the long-term, stability and bond yields. but i find interesting is that since rates peaked out in this cycle around there, that is when you saw the massive broadening out. everything beside the magnificent seven that has gotten serious. tom: david rosenberg is brilliant on this. it is simple. i look at the plane flights i look at and it is rosy, it is wonderful. lower prices, it is great.

i ordered groceries yesterday off the computer, it was outrageous. i ordered dog food, it is outrageous. that is what people are feeling. jonathan: a lot of this people in the country totally agree with what you just said and yet we are still having a conversation on wall street in that rate cuts next year so that's talk about the rate cuts next year. and a lot of people out there think that perhaps you add an additional two. his direction enough if the fed moves toward you but doesn't get there, is that enough? tom: they are going to wait for the data. michael mckee with great leadership on that. let's get to the data, i've got a bit of green on the screen. spx within 1% of total return. jonathan: getting a ton of targets on the s&p for 2024.

john stole foods of oppenheimer, the most bullish at 5200. not far behind calling for 5000 expecting a slow first half at a rally into year-end. down the other end, 4200 on the s&p year-end is the call over a jp morgan. jonathan: can't show this enough with the new numbers we are seeing. i want to talk about the euro call, but people say that for another time. you had a beautiful sentence in your report. cash will underperform. the known world is in cash. discuss. >> almost $6 trillion in cash. if you step back and say what with the trade this year, it was ai, glp once and cash.

so the question you say is if i look into 2024, with an expectation that we are going into a healthy slowdown for the economy, the fed is going to cut we think the second half of the year, not the first half, and we have inflation moving in the right direction, where does cash lead you? this is the time to start reallocating into other assets. tom: where does cash go, individual stocks, the etf's? i'm fascinated within the equity space. where do you see that the cash will migrate to? >> we see it going to equities. it should be going to bonds and we are calling for 20% allocation to alternatives as well because we think -- tom: what is an alternative? >> it is a great time for privates because you are getting the repricing this year into next year and there's going to be distress opportunities out

there because of the rate hiking cycle. that is just a nice set up for an entry of new capital into this asset class. jonathan: talk to me about cash, how sticky that is. when you are taking these recommendations, what is the time like? >> clients are receptive to this because with the understanding the what has worked is likely not to work over the next 12 to 18 months, the same trait doesn't take you far every single year, and on top of that, we pick peak rates, inflation is slowing, cash will underperform. >> and we seen the distress? >> we haven't seen distress in large-cap america. we are going to see it in small-cap an area -- america and other areas that are reliant on funding growth. for instance, the small-cap world.

40% are non-earners. the need to borrow to grow. the debt they are using comes to you a lot sooner than the fixed rate data from the large-cap companies that took out loans in 2020 and 2021. you are looking at a situation where you have some parts of the economy relatively insulated at low rates like household sit with mortgages and other parts that are more exposed. lisa: is there any inconsistency with being bullish on risk and also expecting a tick up in distress on bankruptcies? >> there is not inconsistency because this is not a blanket call. the way we had a rolling recession you're going to get a little bit of that going forward. we do think there's some consolidation in the first half of the year and in an election year, there is a lot of crankiness in the market in the first part of the year. policies get discussed, different sectors are targets.

we are going to have a year that is up 22%-20 3%. it coincides also with if there is a slowdown, it is the first half of the year. tom: lisa: is there anything we could see in less than a half-hour time and shake your view on this does elation that allows this next leg of the cycle? >> it the core. energy prices look to be well-tamed. and also the warm winters everywhere, oil prices seem to be well-contained. that is the case, they will filter into every other sector. we will see what we get in a few minutes time. that is where you can get a different narrative if it doesn't come down further. but to this point amount whether the fed cuts were not in march, it is just not realistic in the

last 18 months, the market has been overly optimistic on when the fed is cutting. we were talking about the fed cutting in august of 2022. the market has once that fed cut for 18 months now. and if our call is right, clearly not cutting in march of 2024. tom: there's a lot of greek letters getting thrown around right now. the skew is silent out there. explain to our audience the silence that some of these volatility measures show right now. >> the fix of 12, but it is just shocking. that number is really about the volatility in the bond market and the volatility in the bond market is just a well-behaved since early november.

the whole market for the last 18 months has been driven by the bond market. every other asset class. as long as that is tamed, the vix is tame. jonathan: what do you expect from chairman powell tomorrow? >> it is his one chance to push back. it is is one chance. i would expect something like that. the easing of financial conditions can't be too pleasing for the fed in their fight. and they will definitely fight back against that first half rate cut that we're seeing here. you don't want to call victory to early but he will definitely fight back here. jonathan: cristobal time. do you think the market listens to him anymore. is that a credible threat? >> the data has been very kind to risk assets. 8:30 today is really the key. more so cpi than powell but i expect powell to push back against all of this excitement.

the risk in the market is that everybody is expecting a soft landing. jonathan: two months ago, tk. tom: did she just say we are going to cash, is that what i heard? >> you ask me that every time. but let me just say this. a year ago you said how do you avoid doing 5% in cash and i said we do relative allocations, we never go to cash. if i'm worried about recession, where do i want to be, and that is u.s. large-cap. jonathan: you want to be in the nasdaq 100, up 48% year-to-date which is absolutely bonkers. that is nuts. 40% gain on the nasdaq 100 here today. >> is also the cumulative gain, and i'm sorry, 1977 rings here.

next year the bears are still out of it. there's a huge number of people out of it. >> blink and you miss it. if you are just joining us, welcome to the program. we are positive 0.07%. yields are lower by five basis points. lisa:lisa: on the nasdaq composite, looking at 30%. these are shocking gains especially since so many people left the big tech names for dead. nobody is willing to say they are not going to invest in big tech next year. they will just broaden out around the margins, but no one is willing to bet against it. >> you can trade if you are a traitor. our portfolios are not trading portfolios, but i think it is a mistake. go back to 2009, 2010. you had one underperforming

year, and that was 2022, and that was the regime change year, and we are there. we got through it, tech was down 60%. dance with the one that brought you. tech brought all of us here. tom: 1980 today, apple stock was issued in the commonwealth of massachusetts. secretary of state decided it was too risky. and scott galloway of nyu saying the single thing he ever did was buy that garbage and he never sold it. jonathan: why have i never heard that before? dance with the one that brought you. that is just brilliant. have a wonderful christmas. thank you so much. cpi just around the corner.

♪ >> the pressure increases for them to roll these cuts forward through the remainder of the year. around one million barrels per day surplus for the second quarter and around an overall surplus of about 20.6 million barrels per day through all of 2024. these cuts do need to be maintained to balance the market through the course of next year. it could balance this market and keep this price if they work together. jonathan: they just did not see triple digit crude around the corner. that the global head of commodity research.

fruit looks like this right now on wti. wti, $70.50. we are down by a little more than 1% on both of those contracts going into inflation data, routine minutes away. that destination -- disinflationary story we are all talking about. tom: the schedule that we got coming up in 12 minutes, michael mckee will join us to interpret the many different parts of cpi in america. right now on oil, christian joins us, managing global head of energy general strategy at. on oil, we did this yesterday for you, we missed you so much. a gallon of petrol from the peak down 32%. i guess that is part of the inflation, that story. christian, two years ago you were modeling out oil demand led

by emerging markets that would put a bid to oil. is that theory still in place, that em and developing economies will find a bid and have stable or denisi -- increasing demand on oil and lift the price? >> if anything i think it is strengthened. there is demand in the world that recently cannot see. modeling demand on a scale of one to 10, there is demand that is negative that is going to be positive. there is demand, penetration of energy that we see today that they would love to consume any form of energy to get themselves out of poverty, whether it is the street, being able to get to work. that intrinsic demand that is not visible is so significant that i don't think we will see demand peaking in our lifetimes, particularly as demand growth continues to surprise on the upside.

lisa: which is really counter consensus. let's go through the outlet that you just put out for next year. talking about how prices could stay around here or go a bit lower as we do have u.s. reduction reaching all-time records, offsetting some of the cuts. but then what? what happens in the second half? >> we've had a lot of discussion around these additional barrels that we don't see necessarily coming from the u.s. shale, and these guys had done a great job in delivering additional productivity and therefore more production. the key from the second half going into next year is that these are all additional barrels. they are not millions of barrels. there is no malik -- massive quantitative volume that we don't know about coming into the market in the next two or three years, which ultimately means it is not about when the market tightens. even as we see potential surprises, we seen a lot of discussion around surpluses next

year, and we could talk about opec, but in the end, when do we know the market is going to tighten? when opec meets the market. that is not a negative, that is a positive. oil jonathan: prices will be substantially higher why are people so confused by what is going on in crude? >> it is a great question. there is a law led by russia, iran. very bearish despite our super cycle call, perishing for the first have of this year cindy because there was a lot of volume that we just couldn't see. at least with shale, we can see it. so that is the first point in terms of the volatility of esau. the second is the risk premiums introduced to the conflict in the middle east where there were concerns about potentially widening that conflict which could create a premium to the

upside. if we are thinking about that in the context of how do we see oil prices going into next year, probably the biggest learning curve for us in terms of discovery, discussion around surpluses and deficits in some ways will be critical. the reality is what you can't change is the marginal cost of oil. that has gone up significantly. if you look at the current structure, it has basically moved over time, and so why is that relevant? if the marginal cost is going up, it is getting more expensive to produce. we can look at the time when it all went to $70 through april and take heed from it that it potentially starts to look like a fall. that, to me, sounds like next year in terms of the range.

but let's not forget that the marginal cost is going up, and that typically is the early leading indicator of an up cycle. jonathan: this confidence that you have goes beyond 2024. talk to me about why it is that you can push it out beyond 2024 into 2025. >> there is no significant volume of oil coming to market in the rest of the decade. all that we know we can see, if there is additional upside, fair enough, but there is no major content. it is not like the north sea in the 80's, like shale in the next 10 to 12 years. that in mind, it is just a matter of time before the market significant we tightens and we expect the second half of the decade will see severe tightening. that is the point where the only real quantity of volume that we can reliably lean into his opec. it is a bit like the 80's,

getting weaker, they are retreating in order to advance. when all that the volume out there has diminished. i'm not saying that we won't see more volume, but not in the millions of barrels that we need to meet the future demand growth which is at least going to be 300 a million barrels by 2030. jonathan: what is the signal you take from the consolidation leasing on the u.s. side of things? >> to tells me two things. one, that these companies are struggling to significantly raise productivity. they are having to now appear premium using paper to gain more land in order to take productivity, apply it to the land that they've got, and raise. so this is definitely a narrative of efficiency, a narrative of increased productivity.

but it is telling you that they don't have it themselves. they've sort of maxed out productivity which is clearly bullish. but equally that means there is more wood to chop in terms of the acreage to raise the productivity to the standard they are on. for example, exxon. while we will see potentially more volume at the market, we underestimate the productivity gains. it seems to be a short duration called to the upside because what these are telling you is jan 2025, 2026 we are now seeing is to get reduction in what did hit the market. the actually need shale. but shale as a base, it is going to grow every year based on the oil price. i think those days are over. now we will see additional volume but not significant. jonathan: you're one of the

best, appreciated. just an update from harvard university just moments ago, this crossing on twitter from the harvard --, we stand in support of president gay. lisa: and it comes after the harvard newspaper came out and said that he would remain as president with 700 academics supporting her, signing a letter of her. what this does going forward in terms of changes to the policies still is an open question as people at the chart a new path. jonathan: to pressure, the pushback against this isn't going to go away. tom: it seems to be school by school. each school has a different emotion, a different culture. jonathan: that is the latest on the college education system in america. still to come, cockrum, the way from a cpi report in the united states of america.

in the next hour of bloomberg tv, we catch up with victoria, david, troy to take you into the opening bell about an hour from now. tom: we welcome all of you on bloomberg television and bloomberg radio. inflation report in three minutes. michael mckee joins us now. he's in charge of the inflation countdown clock. michael mckee, the bureau of labor statistics says they look at 80,000 items for inflation. i think our audience has an understanding of the predicate of the of jobs, of adp, even of claims. is it easy to predict inflation? >> prices don't change that much

that often and a lot of them are very visible, so it's not too hard for them to plug these numbers into a computer. we should see something along the lines of what is forecast today. tom: what is the weighting of rent and food, the things we actually spend money on, housing? >> rent is over 30% of the index in the cpi. food and gasoline coming down makes the consumer happier. gasoline prices will be the story today, down 6% during the month. if food prices rise a little bit, that adds a little twist to it. lisa: what are the whisper numbers?

we don't have a specific whisper number, but the lien on wall street is to perhaps a slightly lower cpi then we are anticipating. at higher one would certainly have an impact on the markets as bombs reprice. a lower one might have more of an impact in futures markets in terms of what the fed is going to do. tom: i would suggest the markets are already celebrating. a small attainable lift. yields coming in nicely. jonathan: i think that is the whisper. this kind of attitude has taken over with inflation with regards to how markets have traded over the last month. lisa: we see disinflation, more of it than people have expected time and again, and it is international. but also in the u.k., we saw wages.

wage growth came in a little bit lower than expected earlier this morning. people are kind of leaning into that. how big of a surprise to the upside would it take to disrupt this narrative? jonathan: it would have to be a big one, it really would. in about 30 seconds you're going to get cpi data in america. onto tomorrow, a federal reserve decision after that. for many of you, the year over. let's get to the equity market on the s&p 500. the scores look like this. equity futures positive here by 0.2% on the s&p 500. just a little bit of a lift in the equity market. in the bond market, a massive rally over the next month. yields are off. the inflation data just around the corner with a two-year, down about four basis point on the session. with your economic data, here's mike mckee. >> coming in with a bit higher

on the cpi headline. the forecast was for a flat reading and that is what we had the month before. we do see a decline in the year-over-year headline. as far as the core, is what was forecast. a slight take-out from last month's again, so that leaves us at 4% for the month of november on the year-over-year basis. again, what was forecast. some progress as we go forward with these inflation numbers. that last mile proving slow for the fed. >> nothing to change the story, equities march on of a quarter of 1% of the s&p 500. the rally continues, yields lower by seven basis points. session lows at about 4.65. just a touch more dollar weakness against g10 and against the euro.

the euro just off session highs, largely in line away from the headline figure and the take away for so many is ok, carry on. lisa: this is markets looking for a reason to keep on partying. basically what we're hearing about from emily roland. you can lean into it across the board. the tail risk is off the table that potentially could see every acceleration of lesion ahead of this meeting tomorrow. jonathan: into the fed. chairman powell statement, projections, news conference. what is the playbook for you have the team? >> he has got to look at these numbers and have a pretty good reason for saying we have made progress, but we are not there yet so we are going to the option open to raise rates. they are not going to put any timetable on that and they will put off any discussion of whether or not they are going to cut rates because he will say it is too early for that. i do have some good news here in the breakdown of this. food prices did not accelerate,

they actually dropped a little bit. 2/10 again for overall food prices, and food at home drops to a 1/10 increase. if you go to the grocery store, prices are a little bit more contained. gasoline prices as anticipated down 6%. that is the big drag on the overall number. interesting though, electricity is up 1.4% from the month before and they wonder if that is because we go up a light savings time and people entering the lights on sooner. used cars, dropping a little bit. actually, used cars go up, which is what was anticipated, 1.6%. a legacy of the uaw strike, there weren't new-car is, some more demand for used cars. that will probably reverse. and in apparel, this is one the areas that wall street was looking at for a drop in it comes in as 3/10, 1.3% drop on

the month. maybe a little the bonus for people who are looking for christmas holiday gifts. and then terms of shelter costs, they were up by 4/10 during the month. that is of a little bit from 3/10. so not exactly as good as the market had hoped. lisa: but we are seeing also is that real wages are going up and that average hourly earnings and average weekly earnings are increasing. when is this news too good to be true for the longer term? when does this become something that feels spending? how long can we continue to see immaculate distant ration which is what we are seeing in the port? >> well remember, these are based on wage percentages from the prior month. so it doesn't suggest necessarily that we are getting way out of line. 8/10 is better than most months but it is still the same as we saw the prior month we had the

weekly earnings are up half a percent better than decline in the prior month. it probably keeps people spending money. we know that people tend to spend what they earn. it is less about bonuses and less about government aid, more about what your paycheck shows. so if people are seeing that money goes farther, maybe they are continuing to spend money. we will see on thursday about that. jonathan: always great to get the breakdown from you on economic data. here's a breakdown of the price action, deposited by 0.1% on the s&p 500. nothing in this to change your mind. whatever you thought yesterday, there is nothing here to change your mind from that. tom: i'm looking at the micro moves in a think correct. we did see a beneficial spike indicating more disinflation but critically we did not go through, depending on the support resistance levels of six

to eight days ago, we didn't see the 10 year real yield rate down underwear it was the celebration of december 6 and december 7, so we wait for more data in the next 48 hours and we get more data. >> onto the federal reserve tomorrow before that. tom: we will have to see office meetings as well. the levels are so important, we haven't really done that today. 46,000 900 knocking on 37,000, the nasdaq 100, 16,470 is a shocking number. john mentioning of 40% for the year. dana peterson knows a bull market when she sees it. chief economist at the conference board, wonderful perception on the american consumer. how do you link in inflation report like this over to retail sales on thursday?

>> i think the key thing is that we are seeing inflation flowing and it is consistent with what the fed expects. but as was mentioned earlier, a real wages are rising and certainly into supporting can spending. but will we ask consumers have a feel they are still complaining about ration, still saying everything is too expensive, interest rates are rising. that means if you wanted to buy that car or refrigerator, it is going to cost more. i would expect that even though real wages are rising, inflation is still there and consumers are probably going to start pulling back on ending. tom: how are real wages to and within that, are they actually part of the inflation report? as we adjust for inflation and the wages? >> i think wages are part of the inflation story. certainly you have a number of industries experiencing labor shortages and when you look at wages, phenomenal and real, they are still rising pretty. that is showing up in the services aspect.

both also not forget that insurance costs are rising because many of these companies are suffering losses and they are raising so between insurance and wages, we still have the sticky inflation measures and i don't think that is going to go away right away. lisa: do you think that people are a little bit overzealous about the idea that the that is going to cut rates significantly next year? >> i think they are. the fed tomorrow is probably going to signal it is done, but don't expect rate cut anytime soon and don't expect that many next year. anywhere from 50 to 100 basis point probably makes dense, especially if inflation according to the sep doesn't get beyond 2% before the end of next year. so i still think that yes, we could get the 2% by the end of next year, but that is really going to suggest that not many interest rate cuts are priced in. lisa: with transitory right? are we just seeing the rightsizing of the supply side after the pandemic and that is entirely what we are seeing now,

or if this disinflation transitory, is this basically a head fake before some of the stickier elements take place in a more significant way? >> i don't know why people are surprised that inflation gains are slowing. the fed did raise rates by five to 25 basis points. this is part of the program. certainly be some housing market slow first and that is showing up with significant lag in the rental component of the cpi and the pce deflator. so that is slowing things down. certainly food and energy prices are determined by things external and we don't have the massive disruptions from opec or even wars affecting the energy prices, so they are coming off. but you still have the influence of insurance costs and wages because labor shortages are here , and i think those two things are going to be the challenge to getting inflation back to 2%. but we could still get there.

tom: please stay with us, we are going to come right back. he saw a spike and beats sort of given it back. s&p five viewed -- s&p futures have a nice pop. something in the yield space. i noticed the real yield was 1.97, has come back nicely. perhaps we are already on the way to adjusting for the fed meeting tomorrow. what is nominal gdp? how about chairman powell, he watches every morning. what is your estimate of the animal spirit of chairman powell america? >> i think nominal gdp, they are probably not going to be as strong as what we saw in the third quarter, probably looking at growth around 1% in real terms in roughly 4% in nominal terms, ending in roughly 3% headline inflation. so that is a slowing economy and that is part of the program.

the fed wants to see the economy slow to help ring down inflation. when we look at business investment, that is already slowing outside manufacturing were companies are bringing back product and production and they are building factories. away from that, there's really not much investment. the last few to drop has to be the consumers and we know consumers are more indebted now. credit card interest rates are higher. student loan payments are coming back and consumers are quitting last and they are thinking well, maybe the labor market is going to slow/lome spending as well. lisa: we are seeing prices prima chops that the decline? is that sustainable or this just a lag before we start to see housing costs downward? >> i don't really look at the month on month for housing, i look at the year on year. year on year, the rental components are slowing consistent with an 18 month lag of home price index.

month-to-month, you are going to have pumping this, but it is a year on year growth rate or rate of inflation that we should be paying attention to in terms of what is driving headline and core inflation in the pce deflator? tom: thank you for the brief. with a conference board and onto the fed tomorrow. always important to get the conference board on thursday. we have a spike up, the big move. we come back, the dollar fractionally weaker as well. there is a pulse to the market, i don't want to underplay it, but certainly we did not get the drama of the cpi report as some expected. lisa: we did not get the tail risk which was an upside surprise. it was in line, and that was enough to set this pivot party on its trajectory upward. yesterday, the s&p closed at the highest level in 20 months. we were talking about a real kind of momentum that this

doesn't lean against in any way. tom: the total return index, the dow is record high, and 1% away as well. right now, futures fractional up 1/10 of 1%. tom: now it is over to fed chair jay powell. what does he do with it? does he say that this shows progress that there is clearly more to do, or does he say there has been a real using and financial conditions and we are concerned this could work against the progress we are seeing? they could potentially shift things a little bit. tom: what is so impressive to me , to seek amount with a middling press conference? if it is not a snooze fest or a nonevent, but if he doesn't give a tendency, isn't that just more ambiguity into the end of the year? lisa: if he does not push back against easing and financial

conditions, the rally that we seen in stocks and bonds, that will be viewed at the starting gun to an even greater rally because people will say let's go, there is no reason why he will push back now. tom: thanks to mike mckee for his leadership. thursday as well, i would leadership will be about the equity markets. gina martin adams was brilliant on the real economy. the underestimation of corporations, these two wonderful guests give you perspective. futures up nine, they come back flat. futures right now, that is unchanged. nailed that. from new york on radio and television, "bloomberg surveillance." stay with us.

♪ >> the earnings recession has largely happened. we had rolling industry recessions. even in a slower growth

environment, we are likely to see another big hit to earnings. i don't expect to see the magnificent seven crater in 2024. i believe that stocks can and will outperform cash in 2024. lisa: leading into this idea of stocks outperforming in 2024. this is bloomberg surveillance. preparing for the open, we didn't just get cpi, pretty much in line with expectations. markets bouncing around, retracing some of what we just saw given the fact that people are pursing below the surface realizing that it was pretty much in line but there are some things like used car prices that surprised a bit to the upside. tom: we were up nine i think at the peak here. celebration of cpi and some new analysis. frankly i would suggest people have leapt right onto the fed meeting as well. can i give you a mover? give me this banner, i think it

is so important. what a delicate interview you and i had with john in london. she has surged off our london visit, up 37%. that is an example, she is in a lot of other stuff, but that is the surgeon we have seen -- surge we have seen near record high. tom: it is the rally fueled by the disinflation narrative and the soft landing hopes and dreams that are becoming increasingly reality. core inflation did come in line with expectations despite one point 6% increase in used car and truck prices. that is unlikely to persist in the coming months. room for downside on core inflation ahead may be fueling some of the hopes that have been baked into the market. joining us now, the chief u.s. strategist on interest rates are bloomberg intelligence.

what do you take in terms of the actual report and the market reaction? >> the market reaction is that the datum wasn't much weaker than expected. we had some we did at of europe overnight, we saw a bit of everything. government bond rally going into the number, and pretty much as expected, some of the details are interesting. but i think the impetus for the fed to be more dovish tomorrow because of this is off the table and that is why you've seen real yields under 2% in the 10-year space. now they are a little bit above 2%. tom: where is the appropriate real yields? i've heard 1.5, i've also heard 2.1, 2.2%. where is the efficacious inflation-adjusted yield for the chairman?

>> i think he would like to have it somewhere between 1.5% and percent. obviously we're pretty close to that. the thing for the market and what the market is going to be pricing is in the federal reserve going to be able to cut below 4% because right now, we are pricing for the terminal, and if it is going to be below that. you can certainly see 10 year real yields down, maybe even under 1% by the time we get to the trough in the fed funds rate in the next cycle. tom: is your space driving the stock market? are you driving the space that gina martin adams lives in? >> i will let gina talk about that but it certainly seems like on the big days, in particular when interest rates are moving higher, that is a headwind to risk asset markets. on a lot of days you see interest rates up by 10, 15, 20

basis points, you definitely see weakness throughout the entire complex. part of this i think is just the idea that all markets are almost correlated now and that is a symptom of what central banks have done with the balance sheet, with ua, -- qb, quantitative tightening. when treasury prices are down, stock prices might be down as well. tom: the dow of 68 points. thank you so much. she was absolutely brilliant the last time she was on. gina martin adams drives all of our strategy of bloomberg intelligence. gina, i want to go right back to your insight last time around. how was the real economy revenues and earnings in a buoyant stock market reacting to all this fixed income chat? >> well, i think that the market reaction this year tells you everything you need to know. large caps are rallying even

though yields have risen this year, and that is because earnings have recovered after the recession they went through in 2022. when we look at the outlook for next year, i don't think it is all about rates. i think rates are a component of a move the equity markets and certainly did impact valuations, but ultimately the outcomes of 2024 but probably be determined by the degree to which companies can surprise on the upside. very, very low earnings expectations. the market narrative is still the u.s. economy flirting with if not maybe going to fall into recession, and yet the corporate earnings three continues to recover, posting relatively solid growth in the third quarter, expected to show acceleration growth throughout the year ahead. this is certainly going to take the market by surprise if it does happen, if the consensus of analysts is correct. what is in the price, though, is with the bond market is telling us with respect to rates. we can see if the bond market is wrong in the fed is not going to

reduce interest rates 20 degree next or even to the degree expected by the bond market, that certainly could impact the equity market but i think that earnings are also important. lisa: just to develop that a little bit more, you saying that a lot of these inflation reads, even retail sales, and out of stock investors are going to be looking more for the tail risk, more for confirmation that there isn't some extraordinary weakness or extraordinary inflationary band just to even more bullish? basically the idea of what isn't happening, get it confirmed and then keep going. >> the trouble that we have in the market right now is that for two years, we've been talking about this weakness. the equity market has been conditioned and trained to expect persistent weakness in the economy with some ration pressure and the fed therefore responding to inflation. and anything that is contrary to that sort of central set of the narrative is going to move the equity market. so you are spot on, it really is

about where our expectations and prices today? what do prices reflect, and then any shock to those expectations move the needle. tom: give me the breadth update here. you had a homerun this year. all that cash is out there. alicia levine says stop, stop, stop with the cash. what is the breadth going to look like? >> well, look. this is a little bit of an overdone story. certainly the magnificent seven have had the strongest gains in the s&p 500 and because they are the biggest market at component of the s&p 500, and a lot of the gains in the index are attributed to the stocks, but we are sitting at a situation where roughly 65% of the stocks on the s&p 500 are trading above the moving average. we've got plenty of participation in this market. where we need to see more precipitation is in the small-cap index.

this is been an anomaly very contrary to historical experience. p very largely -- barely see large caps rep like this even if leadership is concentrated. participation is very firm and we are not seeing that in small caps yet. but i would expect to see in 2024 if that theory of a broadening recovery plays out into next year is small caps should start to participate and it certainly will take the entire can insist narrative buys rise. tom: that so much. ira jersey, thank you so much. as we look at an interesting inflation report of stability, lisa, now a small issue, but before we hear from chairman powell, we have to look at industrial business inflation. the world used to stop. 30 years ago, ppi was more important than cpi. i'm not going to say that now but nevertheless there are the numbers of a distant nation area tint.

ppi, food, energy, trade. the dodgers-otani deal. tom: lisa: and the gap a sense of what some of those margins might look like or put america to gina martin adams point. basically, how much can stores keep marking up prices despite the fact that their prices are going down, and if they can keep increasing the price, what does that tell you about the strength of the consumer? tom: the market is churning here. i don't know what to do with the vix. alisha was dead on about that. yields, now flat. a two year yield fractionally. what i would do, i would stay with the day in different markets and of course, the fed meeting tomorrow.

from david hunt, the president at 3:30 this afternoon.

jonathan: good morning. the cpi report is behind us, chairman powell ahead. equity market a touch softer on the s&p. the countdown 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: live from new york, coming up, chair powell gives a

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