>> i'm john ehrlichman. >> we have stocks pulling back from session highs but remaining on track for an eight week bull run after inflation readings have reinforced the conviction of rate cuts going in next year. we are looking at a nasdaq 100 just less than that. the russell 2000 i wanted to look at because that is up still more than 1.2% on the day.

that is where you are starting to see some breath come back into the market. we are also looking at the two year yield. it's only moved about two basis points and it has to make you wonder whether those rate cuts have been priced into the data we are seeing now. john: and certainly interesting to see positive performance on a day when we got a pretty weak sales picture for nike. that stock on its own is still struggling today, down about 11%. meanwhile, watching what is happening in the energy markets, where oil prices have been rebounding. we have specific news tied to occidental. berkshire hathaway adding to its holdings of that company, now more than 27%. some interesting news from lionsgate, which has ties to canada. the last couple years, people were trying to figure out some of the strategy moves they might make. they decided to take their studio business and roll that into a blank check company. those shares are down 6%.

a big move higher for karuna therapeutics, some dealnews for this company known for its focus on a drug that was very much in the sights of bristol-myers squibb and a deal has been reached. we are seeing a surge in shares now, 47% higher. sonali: the latest inflation data is reinforcing the fed pivot toward rate cuts next year. here's what lael brainard, white house director of the national economic council, had to say. >> it is really good to see we are closing out the year with inflation on a six-month basis at 2%. that is the pre-pandemic benchmark and it's a significant milestone. and if you look back over the course of the year, it is really stunning how much progress the economy has made. inflation has come down faster than even the more optimistic forecasts and growth has remain resilient. john: let's keep the

conversation going. we are joined with some more context. stuart, let's start with the inflation story because i know you have been doing a deep dive into whether price pressures have truly been tamed. what is your conclusion? stuart: today's report is about as good of a holiday gift as jay powell could have hoped for. you have disinflation and dramatically slowing core inflation. outright deflation in core goods as firms rd stocking those inventories. and as you heard brainard say come on a six-month annualized basis, that brings inflation in line with the fed target, but if firms are successful in fully d stocking their inventories, that could just be a temporary drag we are seeing now, and we could see some tailwinds start picking up in the inflation picture.

the real saving grace on the inflation front would actually be if the labor market starts slowing and super core inflation starts decelerating as the probability of a wage-price spiral dissipates, but that would be indicative of that last mile of disinflation being really hard, and actually painful for the u.s. consumer. sonali: speaking of painful, what is the risk of further shocks? stuart: there are plenty of risks. over the past week or so, we have seen energy prices start climbing again. demand for energy goods and services is so inelastic. that's a difficult thing that people have to deal with. a a lot of that is downstream from global conflict. it's downstream from attacks on ships in the red sea. sure, the u.s. is relatively energy independent and we are

not necessarily importing a ton from the middle east, at lease not throughout the entire country, but in addition to those global shocks, we still have a lot of commercial real estate that needs to be sorted out, and we still see offices not at full occupancy. while that may have retreated to some people's minds as expectations of rate cuts have come to the forefront, we are not out of the woods yet, and there's quite a ways to go before we can say that mission has been accomplished or a soft landing achieved. john: on the employment front, you are expecting a cooldown heading into next year. give us a sense of what you expect the jobs picture to look like. stuart: when we think about 2024, we're thinking about it relative to how many jobs need to be created at lease offset the effect of population growth.

about 100,000 jobs per month need to be created to offset population growth and hold the unemployment rate steady. we think that in the u.s. we will be running well below that. we think we can start seeing job cuts out right in the aggregate in the second half of the year, but running at a pace of around 70,000 jobs per month, almost one third of what we saw in november, running at that pace through the first half of the month and ultimately seeing job cuts in the second half of the month would be consistent with our expectations given where we are in the cycle. sonali: that is stuart paulo bloomberg economics. we are going to discuss the economic outlook with marie of a solid -- with maria. they explore the topics of long-term relevance in the coming years and the reality for investors today is that the same equation that worked for them before does not work for them

tomorrow with the types of geopolitical risks we are looking at, higher interest rate environment even with a number of cuts. of the other factors they are seeing that will change the way that investors look at portfolios, which among them are the most important?

this geopolitical issue makes inflation a sticky situation. how do those two forces come into effect? >> yeah. i listened to this commentary about inflation. of course the news we are seeing in the market is encouraging. inflation is coming down if you slice and dice it in different ways. you can get it to look like a slow 2% over the past six months and this is great news but it does not mean we are out of the woods. inflation, core, pce is still

3.2%. we are still not at the 2% level. and at the same time, we have a really robust economy and a labor market that is holding up. we have 1.4 openings for every unemployed. so there's really not a good reason for easing and my concern is that the fed is setting itself up for a potential policy error in the first half of the year or a significant volatility event in the markets. john: meanwhile, maria, when we think about some of these longer-term inflationary forces, we have talked about the global supply chain changing, geopolitics at play. in canada, we talk with executives who talk about a new north american framework, maybe some distance with china. how does the china story

longer-term factor into your perspective? maria: these are some of the issues we will be examining at the institute, and that is why i actually find this so exciting, but indeed, if you look at everything that is happening in the world, all those forces that you described, the changes in the geopolitical environment, the role of china, the new alliances that have been formed, the new role of brics and the enlarged brics, how we see emerging markets, what is the role of china? all these things that at the end of the day could be inflationary in the medium-term. so that is another reason why declaring success on the inflation front could be premature. john: is it also challenging to make that declaration when one of the things we have clearly learned over the last couple years is we just don't know what lies ahead when these worries

about real risk, the risk of war, keep popping up? it seems like we enter new years with things we did not anticipate, which then have sizable economic ramifications. maria: exactly. some of the decreases in inflation we have seen came because of lower oil prices we have seen. we have seen the resolution of the supply-side issues, but that does not mean we may not see another wave of issues going forward, and if you look at the world overall, in the past, when we were worried about low-inflation, we were also looking at the inflation transmission mechanisms in the world, and at that time, we were actually importing disinflation. now, we are in a different environment. you see other parts of the world, europe in particular, where, actually, the growth is

much lower than here and they are really challenged. they continue to be concerned about inflation and they are less quick to pivot to cuts in order to safeguard price stability going forward. sonali: you said something interesting earlier because you have a lot of the market already declaring victory, this idea that there will be rate cuts, that the fed is on its way to meeting its goal, that you said there's a risk of policy error. what would that look like? maria: it could be like what we saw in the 1970's when they started cutting too early and inflation picked up again. the fact that we saw a few months of falling inflation numbers does not mean that inflation will be falling monotonically forever, so we could see it pop up again going forward. now, when i look at the markets, i think they are priced for perfection, and so any hesitation that may appear from

the side of the fed in the first quarter will actually catch the market off guard. at the same time, you know, we may see the fed changing its mind and that could create a lot of volatility in the markets. john: maria, you have given us a lot to think about. appreciate your time. maria vassalou joining us and we will continue to track some of those longer-term factors in the crypto market. we have seen a huge run as traders await a decision on the spot bitcoin etf, which some are speculating could come as early as next week. we will have more. this is bloomberg. ♪

that first time you take a step back. i made that. with your very own online store. i sold that. and you can manage it all in one place. i built this.

and it was easy, with a partner that puts you first. godaddy. you can't buy great conversations or moments that matter, but you can invest in them. at t. rowe price our strategic investing approach can help you build the future you imagine. t. rowe price, invest with confidence. it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything.

john: this is bloomberg markets. i am jon erlichman wishon ellie bostick. crypto excitement has been fueling shares of coinbase, now up 400% this year with the market increasingly preparing for bitcoin etf approvals in the new year. analysts see coinbase as a potential winner. it was suggested the rally could continue. one third of analysts still have cell ratings but they too have had to push up price targets. after the run-up, mizuho did so today. let's talk more with hannah miller, who has been tracking the sector. possible etf approvals not really a secret at this point, so what is the positioning looking like heading into january? hannah: so people are saying that this approval could

potentially come as soon as next week. if it does come, it will be by january 10. and the industry is super excited about this. this would be a more compliant channel to get involved in crypto. it would bring a lot of excitement to even other digital currencies in the space. bitcoin is not the only cryptocurrency that's been up, basically. sonali: i want to talk about this idea that anthony scaramucci, longtime crypto investor, if you can say that it's a long time -- it is a new asset class -- he said that just a theory has, it feels like the bitcoin cash etf could be approved next week. it's a holiday week and also a way to bury the news when people are not paying attention. a classic news dump. the market is not expecting it, be ready. how much is this theory gaining steam and how much would it make a difference for this to happen to happen in a kind of lull holiday time versus right out into the new year? hannah: we are expecting it

after the new year, that it will be in january 2024, not next week, but that is not to say that it could not happen. there was a lot of news over the holiday week in 2022 regarding sam bankman-fried's trial, so things happen during this time. there is stuff that does definitely happen during this holiday lull. john: you know, hannah, i was reading one of your recent pieces, which had the headline somehow 2023 did not kill the crypto industry. people are talking about a huge surge and bitcoin and coinbase. where the people predicting these kinds of big moves at this time last year -- were there people predicting these kinds of big moves at this time last year? hannah: i think last year people were in the dumps about crypto. there was a lot of negative sentiment about the industry. i think those people would be surprised to see where crypto is at today, where bitcoin is, at

today so that goes to show you there are still people betting on this space. there are sell financial institutions excited about crypto. there are still venture capital investors making investments in crypto startups and still a lot of excitement about coinbase, the biggest public traded crypto company. sonali: our thanks to hannah miller. coming up, elon musk and cathie wood discuss the state of the markets. this is bloomberg. ♪

sonali: this is bloomberg markets and i am sonali basak alongside jon erlichman. elon musk is lashing out over the state of financial markets. he spoke with kathy what about the high regulatory burden faced by publicly traded companies and here is some of what he had to say on x. >> i frankly would recommend companies do not go public unless they absolutely have to. there's a lot of pressure, immense pressure, on a public company to not have a bad quarter, so this can actually result in a less efficient operation where you are going to great lengths at the end of a quarter to not disappoint people. sonali: now let's discuss with bloomberg emily griffey oh because this is a big -- this is

a person who does lead a publicly traded company that has investors. what is his problem with that? emily: on the public markets, he did acknowledge in this chat with cathie wood that at least for tesla being able to access capital by being a public company has been beneficial and tesla is one of the largest public companies, but as we also know, spacex is private, one of the largest privately held companies. he also took twitter private, so this push and pull he's talking about here has some validity. in terms of the passive investing, when he had this discussion with cathie wood, this is one of the first times i heard him mention jack vogel, the founder of vanguard, the father of passive investing, and muska talked about an argument that a lot of academics have brought up that passive

investing increases volatility and decreases market functioning. basically when you have a lot of index tracking funds that have to pile into a stock if it's added to a benchmark, a lot of these academics, and musk included, have said it can increase market volatility and decrease efficiency. john: it is all good conversation considering the fact that bloomberg has been crunching a lot of numbers over the last decade on how much passive activity is taking place now. the numbers show quite a change. and now we have this evolution with active etf's and then you have cathie wood, who is arguably one of the faces of that phenomenon when it comes to actually being an active etf manager, what can we say about her own performance? emily: she's had an outstanding year. she is up 70%. when you look at her fund, she is truly an active manager.

there are a lot of etf's that have an active label but don't have a stock picker like cathie wood making these high conviction bets. a lot of her performance this year has been attributed to coinbase. that stock has been rallying this year on those bitcoin etf hopes, but she actually does not have a lot of overlap with the s&p 500, and so it was not too surprising to hear her engaging in this conversation with elon musk that, yeah, maybe passive investing has gone too far. those were the words that he said. but when you ask the etf industry people, they say those claims are overblown. ? will himself even said that passive investing could take a lot more of the market share and it still would not lead to market inefficiencies. john: all right. emily, thanks very much. bloomberg's emily graffeo. speaking of the s&p 500, it's getting close to returning to that all-time high. looks to be in the neighborhood of 30 points from that level in

a neighborhood where we have been talking about record levels for the down and nasdaq. currently that benchmark index of .3%. ford sonali basak, i am jon erlichman. this is bloomberg. ♪ to finally lose 80 pounds and keep it off with golo

is amazing. i've been maintaining. the weight is gone and it's never coming back. with golo, i've not only kept off the weight but i'm happier, i'm healthier, and i have a new lease on life. golo is the only thing that will let you lose weight and keep it off. who loses 138 pounds in nine months? i did! golo's a lifestyle change and you make the change and it stays off. (soft music)

romaine: live from studio 2 from bloomberg headquarters in new york, i am romaine bostick. >> i am scarlet fu. the inflation report investors wanted coming through as they hoped. bonds are pre-much mixed. bonds closed for trading at the top of the hour. the record for the s&p 500 is