>> we think the fed is in a good spot, we do think red cuts are coming. >> the fed is expected to start cutting. >> in my mind that only happens if really bad things happen to the economy. >> it looks like the inflation beast has been slain. >> the near term here, everybody seems to be too happy. the question would be what more does the fed need to do? >> no doubt about it, and will

continue to be a big topic of discussion in 2024. very good morning, everyone. this is bloomberg surveillance live on bloomberg. we are in for john, tom and lisa who are getting a little bit of a rest this week, although i guess they are getting ready to have a conversation with the fed is going to be a big topic. this is all going to be around. >> if you look at that last flurry into the last five days of last week before everybody exited, you had this momentum, the inflation data was good. the final victory moment around for the bulls. >> the fed is saying we have done it. >> i've got to say, the chart that i assessed with, you take a look at 10 year yields, we are pretty much right where we started the year, which i think speaks to the kind of year we've had overall. feels like everything we were

talking about this time last year went out the window and get at the movement that we've seen in the bond market with the guiding everything, we are right where we started. >> but what a long, strange trip it was. but we had to go through when it came to the bond market, fed expectations. you do wonder whether things start to calm down a little bit. >> the obsession with the recession. the recession which is probably a quiet recession but it never really ripped us in terms of the unemployment numbers. i think this is where the nuances begin to play out for the first quarter of next year. positioning in the bond market going into this. citigroup, bonds are pulling it back. bonds are supposed to be the nightmare trade again. u.s. bonds delivered at 3% return but positioning is extreme. >> with some stomach turning volatility. >> and sometimes in a given day. >> 20 basis points wings and the

single day for bonds. when it comes to the recession, the phrase that i found that i like is rolling recession. maybe it didn't happen on an economy-wide level but certain industries certainly felt the pinch. >> maybe that is why the goldilocks economy, i tweeted out a picture of goldilocks after those inflation numbers. >> the cartoon character? >> yes, thank you very much whatever. pockets of the economy start to slow down but other parts are strong that may be created for goldilocks economy that may be the fed were the does engineer this. >> gas prices are important, although mortgage rates are the next, that is the next issue. if the fed delivered the 160 basis, what happens next? next. what does it take to trigger 160 basis points of cuts? can you get 160 basis points of

cuts without something more aggressive happening to the economy? >> 75 basis points, maybe that is just getting back to neutral. 150 or 160, that feels like a recession. >> i feel like all of last year, when we feel like we understood the narrative, something happened. i think about the middle east. headlines over the weekend. it is a reminder when we think we have figured out this market environment something happens that changes that. manus: there are two set pieces. one is the u.s. striking in iraq. the other is in the red sea and the passage of ships. there was a tweet in terms of the number of ships that have diverted from the red sea is ever 100. the second-biggest container company in the world are going back in and they are going back

in with the protection of the united forces set up to keep this channel global trade open. oil is fairly phlegmatic when it comes to its response to this news flow. >> we have a lot to get to. we want to get to the market environment. it will be quiet today. it was quiet on friday ahead of the christmas holiday. the s&p 500 often eight week winning streak. the question is does it continue as we wrap up 2023. s&p 500 futures, up .2%. that is not a surprise. 10 year at 3.88. hard to remember when we were thinking about 6% earlier this year, crude watching the energy markets because of the concerns out of the middle east and you have crude quiet this morning.

katie: it has been amazing to watch crude. all of the headwinds coming to the market but it is supply driven more than anything else. >> we have a lot to talk about with the managing portfolio manager at any cora. happy christmas, merry christmas, happy holidays. so good to have you here. we'll be watching a lot of the same things in 2024. let's talk 2023 in the recent risk on trade we have seen. does it make sense question meant is it fundamentally backed? david: i think it is fundamentally backed. companies are still generating above average cash flow margins. evaluation on a free cash flow basis still sells at a reasonably attractive level. the micro is a pretty good backdrop. as you have discussed this morning, more signs the fed will be friendlier in 2024 from an

interest-rate perspective. we are already seeing the effect with long bonds down 100 basis points. that is acting indirectly as a fed rate cut. manus: happy holidays. you are the brave men who answered the call and said i will get up at 6:00. the other side of this run-up we have had in risk in the 10 year paper, in equities, is equities and bonds are not fully priced on the expectation of 160 basis points of cuts in the road is one to disappointment. are we fully juiced in equity and bonds or is the road ahead going to be trickier than we presume? >> it is always going to be trickier. the rule of thumb is better the over or bet the under.

that is the s&p returns better than 13% in a calendar year or less than 6%. we know 2023 was a bit the over year and i suspect next year will be a bet the under year for the s&p 500 returns less than 6%. where the news gets better is the average stock in the s&p 500 can be up meaningfully better than that because the micro i referenced. margins are favorable. valuations come you could still find 150 or better stocks. i think they trade at an attractive valuation. >> the one narrative that has come through over last couple of months has been the amount of money stuck in money market funds. $6 trillion in total. the flow show from bank of america showed that. you also have institutional money. is that would puts the floor and delivers the minimum return you have just discussed or can there

be a wave, a new wave of capital deployed in 2024 that we are under assuming? david: data is the plural of anecdote and anecdotally we are seeing more funds flow into stock etf, particular into the small-cap cap asset class. that will play out next year specific to small caps. the median small-cap company will grow its earnings 8% to 9% next year. that is as good as we will see in the s&p 500 went the same time small caps are trading at their best valuation entry point since early 2001. i think we will see more money into the equity markets because those yields are going to keep coming down for money markets. katie: let's talk more about money markets. $6 trillion sitting in money

markets. a lot of that in the past couple of years. a conversation i have been having is how much of that belongs to risk assets, belongs to equity markets or whether or not that has, at the expense of bank deposits, whether that is stickier money typically in money market funds. where do you fall when it comes to the profile of that cash? david: let's call it all of the above. so much of that did come after march when people were worried about the banks, banks were offering yields less than 1%. the savvy investor found its way into short-term paper that was yielding better than 5%. that was a good story in 2023. for the investor wants to get a better inflation-adjusted after-tax return it will be right back into the opportunities for the u.s.

equity market. katie: let's talk more about those opportunities. you're looking at small caps. you have specific stocks. only four analyst follow this stock and apparently you do. what do you see in this company? david: with the backdrop being one of the best formulas are buying spinoffs, look at the bloomberg spinoff index. crane is a spinoff out of crane industrial company. they make currency. they operate the machinery that makes currency that allows for lack of fraud. we are seeing currency still growing. that is where backlogs are up 80%. a under followed spinoff company has always been a great formula. on the staples side, a spinoff out of kellogg's, cheese its,

pringles, pop tarts. >> so much for healthy eating. [laughter] david: day after christmas. let's call it in moderation as we get on that scale but that is still a growth and a spinoff from the larger kellogg company. that is always going to be a good formula. as small caps do better, as well as some select large caps, there is a good formula. >> i was looking at the weekly returns last week, small caps outperformed. having said that, you talked with katie about crane nxt. it is up 70% this year. you still meet -- you still see more room to run because the fundamental story backs it. david: absolutely. the simple fact that small caps have lagged materially, whether it is crane or other small caps, i think you will see much better

performance out of small caps in 2024. it goes back to they have not traded at this type of value since 2001. i think it is a good complement to large-cap allocation. >> you are certainly a friend to bloomberg. we wish you a happy year. talk about the broadening out of the rally we have seen. david southerly joining us. i wonder if we get another year where everybody pushes back against growth, pushes back against buying the index and that is where we see the gates gaining? katie: it seems like that was the story of 2023. we have had a fantastic broadening since late april. we do have a friendlier fed, whether that is enough, we will find out. manus: i think we will all suffer from that foam oh. -- from that fomo.

there was not any breadth in that equity rally. it was a war of money. the question is how supported is at by the institutions or is it all fast money? >> i wonder at a name like apple , coming out and saying apple did infringe on two patents halting the apple watch sale. how does that affect some of these growth stories? manus: japan will also rate in apple and google. a lot of text conversations over the next three hours. >> coming up at 7:00, tom tzitzouris of strategas. you're watching and listening to bloomberg. ♪

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than the optimistic forecasts and growth has remain resilient along with the strong employment. one year ago the consensus projection was getting inflation down would require a spike in unemployment and a recession. >> that was lael brainard speaking on friday. welcome back to bloomberg surveillance. carol nasser along with katie greifeld and minnis quinney -- and minnis craney. i wonder even with that economic backdrop how that helps or hurts when it comes to the november presidential elections. katie: when it comes to joe biden the bugaboo has been he cannot get people excited and engaged with bidenomics. made of growth has gone down dramatically. overall prices are super high compared to where we were a couple years ago. manus: from the other side you

will have this lambasting of bidenomics and the inflation narrative. will have a great deal of politicization of the fed. we will go into an election year. mohamed el-erian has paraded the communication from the fed and says the fed has been backed into a corner. and there will be a debate on if and when they pull the trigger on rate cuts. how politicized are those rate cuts. that will be part of the zeitgeist of 2024. carol: where are we on this tuesday? expected to be a quiet day and a quiet week. markets overseas are closed. s&p 500 futures, 4011 we are looking at, up .1%. you have the 10 year, 3.87.

katie: just put it in cement. it is shocking to see where we are. carol: new york crude lower. i mentioned politics and that will be on everyone's mind. matthew bartlett is the principal at derby field advisors and has worked on political campaigns for the gop. good to have you here. we have a primary in january. we are thinking about -- let's talk about the republicans. is it a lock for donald trump or do you consider some of the other players? david: good morning -- matthew: good morning. you said it best. this race has been playing out in new hampshire for more than a year. as it gets colder and we get towards the new year there is a chance for volatility. this is prime for disruption and

you have players that have been out there. nikki haley has been working hard. ron desantis has been getting activist attention but donald trump continues to be a dominant force and will be until he might not be. manus: i was quite surprised when i was reading through your notes. you say trump is at 50%, not 80% , and he should be more significantly ahead. what does that do? are we are -- are we all myopically absorbing the media saying there is no option to trump or does this primary allow us to understand where nikki haley and ron desantis it and have the potential to challenge? matthew: excellent point. this is not a national race for president, these are state-by-state contest. iowa, we've seen activity, then new hampshire. after new hampshire is nevada and south carolina. we need to pay attention to the

polls in the early states as opposed to the national polls. the national polls tend to be lagging and maybe the early state polls are an indicator pull. new hampshire, donald trump, the former president, the political identity for much of the republican base for the better part of a decade, he is pulling under 50%. that is an opportunity for someone to come out and challenge him for the nomination. right now that person is nikki haley. she has the endorsement of the very popular governor chris sununu. new hampshire is a purple state, it is a swing state, a democratic delegation and a very popular republican governor. she earned his adore cement that has helped catapult her to the stratosphere where this could be a competitive race. katie: let's talk about one specific pole, the december 21 released by the american research group.

that caught a lot of attention since it showed nikki haley was four points behind donald trump at 29%. trump at 33%. trump called apple fake news. when you -- trump called that fake news. when it comes to new hampshire, how close is the gap? matthew: unclear. polls show momentum and indicate movement around a campaign and a candidate. as you said, this race will get much more real after the new year when voters pay attention, when there is the real volatility as we see in the markets almost every day. you will see that in new hampshire and iowa and that is where nikki haley it appears is in a position to capture the attention of the party starting in new hampshire and possibly down to south carolina and making this much more of a national race moving forward. carol: you resigned in protest

from the u.s. state department. you are appointed by donald trump. what would another trump white house mean for americans and the united states? you think having a second term for donald trump is a good thing for united states of america, and oddly its role here domestically but on the global stage and some mid-level things going on? matthew: that is a hard one. i resigned january 6. very hard day in this town. very easy decision in my life. moving forward i know there are many people across the country that have frustrations, whether it is economically, whether it is globally. in terms of a second donald trump presidency, i think most people across the country are looking at better options in this country, whether it is republican or democrat. if you look at the polling, it appears donald trump and potentially joe biden are on

course to get their own nominations and it appears the country wants a different option. that is why this race is so prime for disruption and it is possible it starts in new hampshire. where it goes then will be up to the voters. manus: i am curious to get your take. let me read you what lindsey graham said about the color in a ruling. "it is chilling to meet, it would set up a politicization of the presidential race and be bad for the country." let's work on the assumption the supreme court finds in favor of trump. as colorado emboldened the trump base? matthew: absolutely. what did they do better than any other campaign or candidate in history? play the victim. manipulate a situation where it is completely because of his own actions, because of the choices

and decisions he has undertaken, whether as president or to try to remain as president, and then to play the victim card. it is unbelievable and unfortunate that in this case you had a court ruling which most experts believe this will be overturned. the supercharging of the base, the grievances, you are the victim, this does nothing but play into that. we see as things turn the corner as this race get serious and there are many better options presented. carol: 30 seconds. his donald trump controlling the purse strings the gop party? matthew: yes. there is the whole consultant class. he has been in a fight with ted cruz's consultant jeff wrote and they've gone back and forth as to who should be in charge of

senate races going forward. he is the big dog, the former president. that comes not with support from the base, but influence in this town, whether it is debt ceiling negotiations, shut negotiations, the new speaker, as well as races across the country. carol: thank you so much. matthew bartlett. i could talk all day about politics. manus: you have all of 2024 to do it. carol: will also be talking a lot about big tech. coming up, dan ives of wedbush. he likes apple a little bit. ♪

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carol: good morning. this is bloomberg surveillance. we are in for john, tom, and lisa. it will be the final trading week of 2023. yay. katie: we did it. carol: s&p 500 futures up .1%. markets closed overseas. nasdaq 100 futures the upper former, up 1% last week. nasdaq futures up .2%.

russell 2000, the upper former last week. up 2.5%. outperforming. it is like investors got the memo. katie: it feels like you are still seeing big moves when it comes to small caps. quiet but very consistent. carol: treasuries consistent. it feels like they have settled down. fingers and toes crossed. u.s. two year, just up here. the thirty-year, let's flip it over to the currency market. we are looking at the euro versus the u.s. greenback. you can she just up slightly. i was just in europe. that is your market set up on this tuesday. let's get to what is in some of the headlines on this tuesday. a serious one and a reminder of the tensions overseas.

the u.s. launching strikes on three installations in iraq, targeting an iran backed terrorist group accused of attacks on american personnel. usa in the strike destroyed the targeted facilities. iraq condemned the stripes. a member of the country's armed forces was killed. this is a reminder that this is something we will be dealing with in 2024, even though there is so much pressure to put an end to this war. manus: this is everything the united states and the rest of the coalition of the west do not want to seek which is an expansion of this conflict which is the hamas-israel war, material beyond borders, whether it is lebanon and hezbollah or in this case, dealing with iraq. it is a widening of the conflagration and that is not with this white house want to see. let's see where the writer goes

in terms of de-escalation. it does not seem as if we are ending closer to that from that yahoo!. -- from benjamin netanyahu. carol: china softening its stance on gaming. the back-and-forth of chinese policy one week after moves to tight restrictions led to an $80 billion route. the country approving 105 domestic games. two of the company's hardest hit by beijing's new rules. last week china's top gaming regulator announced new rules to limit the developing of online games, including her caps on spending by players. this is the back-and-forth in terms of investors try to figure out where china lies, especially when it comes to publicly traded entities in the business environment. katie: when news came down last week come the question was was this another 2021 episode? you talk about the back-and-forth when it comes to

policy. obviously it erodes that. you've seen that in the performance this year. it has been a great year for em overall. em ex china, and that it looks like em did not work out. carol: always seems like it's own story. we have something more fun. shares of manchester united rising after billionaire jim radcliffe completed his purchase of a stake in the english football club. playing $1.3 billion for a 25% stake in the club and saying our shared ambition is clear. we want to see manchester united back where we belong at the top of english in world football. having just watched back i feel like -- having just watched b eckham i feel like i am an expert. manus: i think it is the bad blood between the qataris. the qataris lost out.

everyone thought the qataris would play $6 billion. jim radcliffe is a bridge institution. he has put $300 billion into manchester united and he gets two seats on the board. i imagine from the fan point of view, because there is a lot of angst in british football in terms of who invest and who owns these football clubs and where they are going. manchester united fans are a special group. i know them well. katie: didn't radcliffe try to buy chelsea? he seems like a man who wants to buy things. carol: a billionaire who likes sports? when does that ever happen? manus: that reminds you of the whole of saudi arabia. [laughter] manus: google and amazon have had years where there promising the future will be filled with package deliveries falling safely from the sky. zip line might be the first to

make that future a possibility. emily chang looks of the potential of drone deliveries ready for takeoff. >> so many technology companies are trying to solve problems for people who live in a few specific cities of this particular country. in reality building the future we want or we would be proud to hand to our kids involves humanity solving problems at global scale. >> this is zipline drone delivery, the startup founded in 2014 help build hype for a future filled with packages falling conveniently from the sky. as that future becomes more of a reality zipline will have to compete with the likes of amazon prime air. remember when jeff bezos unveiled a optocopter on 60 minutes? that was a decade ago.

amazon is making slow progress and alphabets weighing is getting off the ground as well. >> thank you for coming. we serve eight countries. we serve 3500 hospitals and health facilities globally. emily: zipline honed its technology in rwanda, delivering blood in vaccines and medical supplies, especially to rural areas previously poorly served by land. does that give you chills you are saving lives? emily: it never gets old -- >> it never gets old. it has been cool to see the system scale. emily: can you show us how the magic happens? >> let's do it. this is zipline's main manufacturing area. zipline has two products.

platform one is focused on enterprise delivery. platform two is launching with customers in a few months. we are a full company. we are building line replaceable units, the assemblies of the aircraft. it all happens here. you can think of this as the ears of the aircraft. we are passing a huge amount of air through here. if we are encountering such insane weather conditions or there is systematic failure throughout the entire across multiple levels, we will deploy the parachute so we can bring the aircraft gently to the ground. this is the reason zipline has had zero human safety incidents. you will lie these up with those. emily: not heavy at all. >> this is the advantage of carbon fiber materials. you can design something that is

strong designed to go up to 3g's of load. where we are now we call nesta zero, this is the first test site. >> when we started building zipline, the more we thought about logistics the more we realized global logistics only does a job serving people in the richest billion people on earth. your access is probably ok. for the 7 billion people who do not fall into that category. 5.5 million what is exciting to us about billy again automated logistic system is it will be the first logistic system that serves all people equally. emily: visit the goal to be a

modern day ups or fedex or is this something bigger? >> the opportunity to build a system 10 times faster at half the cost, zero emissions, and broadly available to every human on earth is 10 times or larger. i started -- >> i started at zipline a few months. >> members of the rolando and gone and flight operations having to train all of our u.s. members on how to do this at scale. emily: at is amazing. -- that is amazing.

t-shirts. so prepared. is the goal to deliver everything from blood to vaccines to kleenex and sushi? >> it turns out our customers want everything. a good analogy is with walmart we plan to launch around their pharmacy business. they are one of the largest pharmacies in the u.s.. rapidly it was clear customers wanted to order everything. today we deliver 24,000 of the 29,000 sku s in the store we are attached to. emily: you have competition. >> there are a lot of big companies with infinite resources talking about this market. talk and walk or different things. we're the largest commercial economist system on earth. emily: compared to amazon?

>> a lot less. you have to ask them that question. emily: companies platform is all about precision in reaching more dense urban areas. >> one of the most important things about making the system work is how do we integrate with the companies that want to take advantage of this to enable teleportation from their businesses or warehouses or stores directly. zipline can show up and installing magical portal in your wall. that is how we talk about it. emily: it is a harry potter door. >> a rick and morty door. you can choose. emily: pizza and coffee. everybody has to have pizza and coffee. is this going to spill? all right. here you go. >> you just teleported something via zipline.

we need to be able to deliver silently with dinner plate level accuracy. this is the only thing coming close to you, your family, your house, it is not making much noise, it is totally safe. emily: what is going to happen to the ups guy? what about jobs? >> do technology there is always a worry it will put people out of jobs. we are in a world where unemployment is the lowest over the last 30 years. there are not enough humans to do the work and labor we want done to live rich lives. manus: you can find more stories from bloomberg original streaming online and on the bloomberg app. carol: can you share what you just said? what you said about cities? manus: i grew up in the

countryside. lived in two were three major cities. you get caught in this myopia of how can you have delivery from drones? you just heard that in terms of the capacity for this kind of delivery mechanism, it is like bringing internet to the parts of africa. this is about billions of people accepting new deliveries. carol: i wonder if our next guest will have something to say about drone delivery. he is all in when it comes to technology. bullish forecasts on apple. very upbeat about 2024. dan ives is coming up next. he will talk about the bullish outlook for 2024. this is bloomberg. ♪

>> this is not an accident or infringement. this is a deliberate taking of our intellectual property.

apples documents show they knew their product was not good enough to be used medically. there needs to be an honest dialogue that needs to be an apology. these guys have been caught with their hands in the cookie jar. instead of being embarrassed, they are playing it -- they are blaming everybody and fighting every bloody. -- and fighting everybody. carol: that is the company at the center of apples watchband. the ustr now seeing two patents were infringed, and said -- including the one from that company. a great set up to see what dan ives has to say. senior equity analyst at wedbush. great to have you. dan: great to be here. carol: happy holidays. is it going to be a happy year for apple? dan: dan: i think it is time to get out the popcorn because in my opinion this is the next stage of the growth phase in cupertino. carol: how do you factor in this

kind of stuff? i need a new watch? dan: we are talking less than 1% of disruption from apple watch. it speaks -- they will have patent issues like this on health care. there is a renaissance of growth on iphone units, services double digits. that is why i think a lot of the bears are deep in the caves in hibernation. i think a year from now we have a $4 trillion cap on apple. manus: you say the bears had a great fictional story. dan: a netflix fictional story. manus: i have to hand it to you. the shirt screams full confidence. you look at the china story. how do you get to $4 trillion when you still have the government pushing back against apple products? it was a headline in december. is that a myth or a headwind? dan: is a headwind, and my view in terms of china is i'm not

saying it is roses and champagne in beijing with apple. we are seeing growth. that is something we are seeing come out of asia over the last week. we have 100 million iphones in china in the window of an upgrade. for huawei is a good phone but it is an iphone 12 from a functionality perspective. i think it is a headwind they have to contend with. it is the hearts and lungs of the apple story and that is why a lot of the bears -- it is all about china. it is always about the big bad wolf, the china story. china has been fueling the engine. katie: let's talk about what the bears are saying. they say in terms of the product lineup apple has not had a hit since airpods in 2016. you talk about new growth, but

from the product lineup where will that come from. dan: is the best install base in the world. from install base you have 250 million iphones. iphone 15, christmas came early. for 2024, and gurman has talked about this, i believe you will have noxious new phones from an iphone 16 but we believe you will have the iphone app store, nai app store. that will be something incremental. that is very important. you combine it with vision pro and more products coming out, you flex the muscles. carol: is there a bearish story on apple. if tom keene were here -- we are an apple family. if we go to buy something it has to be an apple product. katie: no green text bubbles.

none of that. manus: there it -- carol: there is an app you can get. that installed base. $397 billion. any time the apple numbers cross they are off the charts. even if the growth is not significant -- dan: if tom keene was here -- katie: he kind of is. we just have them under the desk. manus: i am incarnation of tom keene. i am a hologram. dan: it is a i generated. realistically, if you look at valuation, if you look at the cash flow generation of apple that we will see over the years, margins are expanding. a lot of the bears look at their spreadsheets on park avenue in their tower. carol: so you do not have a bear story for apple? dan: the story is valuation, it

is china, it is a headwind, but more fictional than reality that will hurt them. it is more competition. it also comes down to valuation. that is why this year, the bears focused so much on valuation instead of the actual underlying growth story that is happening noxious rapidly but we believe it is the start of a new technical market. manus: this is your pizza -- this is your thesis next year. 2023 was a year any time you saw nai story -- carol: we were talking about ai this year? katie: ai and o's epic. -- and ozempic. manus: ai has been the dominant forces as well as balance sheets in tech. let's put apple aside. cloud and ai, how do i disaggregate who will perform well?

what will make a cloud a grade and an ai a-grade stock? dan: if you look at what is happening from a cloud perspective, now this is more monetization from the hyper scale players, from microsoft, for amazon, for google. for cloud spend, there is 35 to 40 incremental ai spend. that is why when you look at microsoft and google, this will be a new frontier of growth. then you have the godfather of ai. this is just starting what we view as a 1995 moment. manus: the godfather of ai. carol: top-performing stock in the s&p 500. dan: biggest tech transmission in 30 years. have not seen it since 1995. we believe this is the next phase of the bull market. carol: are there a million ai

etf's? katie: there were a few dozen launched way before we started talking about ai last year. i want to talk about eb demand. -- about ev demand. it feels like all of these automakers miscalculated how much demand there would be for ev's and now you are seeing production targets cut. how does that factor into what you are thinking about tesla? is that a bear case for tesla or just tesla command more of a shrinking pie? dan: right now it is tesla's world and everyone else's paying rent. they are doubling down. you look at what is happened to detroit, gm, ford peeling back from larger vehicles. demand has softened. price wars have come through. a lot of the storms have passed. for tesla, unit volume looks strong in china.

this will be a record quarter for china in terms of q4. you go into next year, i think demand starts to accelerate relative to where people thought. i think for the overall industry it is still a massive transformation but now you are starting to peel back in terms of maybe 25% to 30% penetration. katie: china is the rallying call of the bears. so too when it comes to tesla. how does tesla compete overseas? dan: a lot of the price war, this was a poker move for the ages by elon musk. cut prices and focus on units. right now this has flexed the muscles in beijing for apple despite bear noise. carol: before we started we showed a piece on drones. 25 seconds, is there a drone play for you? amazon is in it, walmart?

dan: i think that has passed. i remember being at cs years ago. carol: you don't buy it? dan: that is why you have to separate. you separate hype from the reality. there are parts of that market that are growth but you look at ai, this is the super bowl in terms of tech market. manus: -- carol: we will have a bull tech market in 2025? dan: i think this bull market goes for another two years. that is why right now is getting the popcorn out. carol: dan ives of wedbush. check out his calls on apple and the tech market. coming up next, tom tzitzouris of strategas. counting down the last five days of 2023. coming back. this is bloomberg.

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from a market perspective the fed is expected to start cutting. >> it looks like the inflation beast has been slayed. >> the new term everyone seems to be too happy. the question will be what more

does the fed need to do? this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. manus: from new york city and our global audience worldwide good morning it is bloomberg surveillance live your usual group is on vacation resting well after a long year. good morning ladies and happy holidays it will be a full monty of risk at this week. we have the pce that set us up for a homerun in bonds. carol: it certainly has felt that way and i wondered during this quiet week there will be a ton of activity but i think about thanksgiving when there was a quiet week and things started happening. katie: hopefully we don't start

eating crow by the end of the week. there are no earnings this week earnings season never truly ends but maybe we can put a pin in it. we could see the drama with the price action when he think about global liquidity. it does matter when you think about this weekly game streak whether it continues or breaks that could be the one news we get. manus: we just had a wonderful conversation about all things tech and the 4 trillion call for apple from wedbush but when you look at the magnificent seven, this equity market doesn't need 160 basis points of cuts. carol: i keep thinking of the

liquidity story. whether it's investors, companies, i'm curious to see what kind of shopping we will see? manus: global shopping? carol: i hope john is on watching no shopping, just eating. manus: equities had an eight week winning streak. u.s. equities are a little bit higher .1%. euro-dollar at 1.101. an expected rate cut from the ecb in march. 10 year yield at 3.889. carol: it actually turned out to be the year of the bond.

crudeness flat despite the military movement by the u.s. against targets in iraq let's bring in tom zitzouris. the u.s. bond market pulled it back from the jaws of defeat. does that set me up for magnificent 2024 at 3.88. tom: it depends on whether we have a recession and it's hard to predict at this point in time because washington has decided to run the economy at full employment which means it will be difficult for the consumer to pull back. we have a seasonal weak spot coming in the next fuse -- few

months. expect those rate cuts to materialize in the bond market to push yields lower. if you don't have that seasonal weak spot it will be hard for the bond market to rally further from here. manus: they're going to run this economy at full speed, what does that mean? what are the additional risks? one was about issuance and indigestion in the bond market. we did not get indigestion on these bond auctions at the back end of the year, what is my risk in 2024? tom: it depends on what the fed does. i believe 2024 will be the year we have a serious discussion of the federal reserve's credibility as a separate entity. if you look at the economy it is

in a decent spot, unemployment is low. it's hard to justify rate cuts by march. but the market is pricing in 150 points. carol: is that too aggressive? tom: maybe 50, 75 at full employment but 150? that's a steep amount of cuts for something that is not a recession. carol: one of our favorite drinking games was dated-dependent. how many times that the fed tell us we are watching the data points? do we need to watch these data points closely? tom: i would continue to watch wages. hourly earnings and cost index are the most important ones. that will tell us if we have room to cut but wages will tell us of cpi re-accelerates after

the cuts hit. wages are going up 4%, how can you stay at 2% of rate cuts culminate? i don't see that right now. carol: what worries you in terms of the economic story? the fact we are all expecting a more aggressive fed? tom: i have two worries, the consumer is running out exhaustion building up credit card debt and we are seeing seasonal pullbacks. the consumer is binging from in to august and then halloween to new year's and every six months the pullback gets bigger and bigger. it will require more and more stimulus. but you are keeping the economy

of full employment. katie: i want to go back to the politics of the fed and the discussion coming to the independence of the fed. you think about fed cutting by march, is a political? carol: the argument they are making is they want to get out of restrictive territory. katie: do you not buy that argument? tom: neutral might be 5%, it's not three point 50. why is the futures market pricing in such an extreme amount of rate cuts when the economy and equity markets are all projecting differently? i think future markets are questioning the credibility of the fed, the treasury will have

liquidity in the middle of the year. if you look to june you say rate cuts need to happen before then. katie: i feel like we don't talk about the treasury enough. if we enter into a period where feds are cutting rates, what does that mean for the bond market? how does the fed message that and how is it received by the market? at first glance that would appear the fed is acting at opposite ends? tom: this will be difficult for the fed to deliver on this politically it will look like they are being accommodative regardless of what they do. they will have to communicate this in a way either through ample reserves in the banking

system, stopping fallacy reduction because there could be liquidity issues. that will be a questionable argument. manus: i was mulling this over last night, we got obsessed with the bases trade. the bank of england noted it. what is the risk of some kind of an eruption or reversal of the base trade? talk about the risk from bases trade? tom: the risk is that you have liquidity providers become someone who is large and dependent. in the financial crisis when we were dependent on provider dealers and basis traders.

when you become overly reliant on one type of liquidity provider you are always a risk and odds are the provider will have a pullback which will cascade into a full market liquidity sees a. carol: we have been so u.s. focused but i wonder about the global bond story. how do you factor all of that in? tom: the economic weaknesses greater outside of the u.s. and as a consequence you should see other central banks of it themselves and move towards rate cats. you will see other central banks pulled themselves back from balance sheet reductions. there should be global support for the bond markets because you have a weakening bond market economy. carol: favorite bond market? tom: right now, the u.s..

manus: thank you so much for being with us this holiday. tom zitzourkis. you have eight weeks on the s&p 500, the consumer has not reached exhaustion yet. we had wedbush say that we will have a two-year run in 10 year trades. will the fed actually cupped by 150 basis points? tenure at 3.89 and crudest flat up by .29% with the tension around iraq. carol: it's quiet but interesting. manus: i think with the iraq

story and what is going on in the red sea, is perhaps one of the underpriced risks as well as taiwan. the u.s. risk has not gone away. katie: the conversation we had about how the conversation will be dominated by politics. what a tricky situation to navigate these wars going on while trying to appeal to the american voter who was interested in domestic issues. it is going to be a difficult road and interesting have a place out. carol: the world is watching. they are watching the elections and worried about who heads up at the white house after the november elections because what is it mean for these global tensions we are seeing?

manus: and of course we are waiting to see where we are with congress when it comes to the shutdowns. carol: haven't we already dealt with that this year? katie: it never ends. carol: i'm curious to see what the ceos say about earnings in the comfort they have on putting out outlooks? manus: let's hear about recession expectations. coming up on the show we will catch up a conversation about corporate debt. ♪ ♪

the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

>> there is a risk to shifting to a seven stance. the risk is you don't make as

much progress as you want on the inflation front there is no free lunch in that regard we think the fed is in a good spot with rate cuts coming. manus: good morning, it is bloomberg surveillance. let's talk about the markets, you're coming off from the holiday. equities are up for eight weeks in a row. carol: quite a run? katie: but quiet. we are moving to the upside but we really leveled out. but it adds up on a weekly basis. manus: the question is whether if it's now will require trade. the bond markets are sitting in an extreme position in the long

end of the curve and that's where when things become crowded it doesn't take much to dislocate earnings. look at nike with a 2 billion cost-cutting program? carol: this is why i like earnings. are they feeling wage pressures. when a powerhouse like nike talks about significant cuts. and you saw a lot of the piers trade down in sympathy. it feels like some of these stories are idiosyncratic to nike but there is this underlying nervousness. manus: when we look at some of these big real -- retail plays, it was pro-china, china will save us all. save the commodity market in the

industrials. the great china reopening simply did not evolve like we all thought. look at height and luxury, it is really suffering because they can't push out product in china look at goldman sachs? china is no longer correlated with emerging markets. katie: just going in opposite direction china to the bottom there in emerging markets going higher. carol: we will go back to our last guest, what is your favorite market? the u.s. market outperforming and feeling like a safe bet.

i wonder if that place into the the corporate debt side of things? manus: so let's bring in our guest this morning, caleb is joining us now good to have you with us. is it a case of investment grade credit, a free ride. is that the ultimate trade u.s. investor great credit outperforming the rest of the world? >> a lot of people that we talked to are very bullish about the u.s. credit market. when we started this year everyone said it would be the year of the bond and we saw volatility in march. next year we are expecting the fed to cut rates in the bonds

because they are long and bonds, there will be a huge push for these bonds. carol: how active do you expect the u.s. market and sectors playing into it? caleb: were expecting a busy january. if you look back over the past 10 years the issuance has been 20 billion and next month expect 160 billion. carol: why is it more in january? caleb: financials are the biggest issuers. then you have earnings coming in and a lot of these companies are able to grow and sell off without. katie: let's extend beyond january and the issuance picture. it feels like some of this past

year issuers had to be opportunistic in look further for windows to sell bonds. it was expected from the fed reaching the end of its tightening cycle? could we go to the environment where borrowers sell their bonds? ? caleb: there are expectations that the fed is going to cut rates and that should entice a lot of borrowers to come to the market. one thing i would like to mention, investors are worried about so many things some you have to borrow for the right reason and investors are looking at this. we have not seen a lot of issuance to buyback stocks. there will be windows to borrow but they are being careful about it. katie: are we going to see esd: sold?

it feels like automakers overestimated ev how does the look on the bond picture? caleb: a couple of years ago investors were happy to pay more and give the issuers the benefit to bring these to the market but that has changed. you have a lot of pushback coming from the public and woke capitalism. if you put a label on the bond they will ask you what is green about this or social about this? it they don't want to attract the kind of attention when they come to the market.

a lot of firms say they don't see that changing going forward? katie: it's politicized? manus: do you see is significant wall of refinancing, what are the numbers look like it will that be an obstacle? caleb: it will boost issuance going into next year. you don't want to borrow -- they will want to take a chance to refinance by next year. on the investment-grade side of things. manus: the narrative is a soft

landing, and immaculate disinflation, 150 basis points of cuts. if we look back in 1995 at the last soft landing for default rate, what's the next offramp? caleb: not a lot of people expect terrible defaults. we will see quite a few downgrades. a lot of people worried about regional banks and people don't want to touch those kind of bonds. carol: real estate debt? caleb: commercial real estate and they have huge exposure to commercial real estate. manus: caleb, thank you very much. setting up the bond story on the investment gray high yields going into 2024.

coming up at 8:45, we will talk to darren chesley, she joins us to tell us whether retailers have had a happy holiday. but where does it stand on risk, there is green on the screen. we will have a two-year tech rally. in a rate cut race between europe and the fed. crudeness inching higher as the u.s. launches targeted strikes in iraq this morning. in iraq this morning. (sfx: stone wheel crafting) ♪

the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

manus: for our audience worldwide a good morning. this is bloomberg surveillance, a very good morning. a quick snapshot of what's going on in the equity markets. s&p 500 at a 4808.75. you have had it weeks of the winning streak. google, microsoft and nvidia, are not going to see a year like 1995. mastec features of .11%.

russell 2000, there was a pickup last week that we had not seen in a while. stocks are muted, we had good core pce data that help the bond market trade higher. and we start the agenda here at two-year guilds raising slightly. we were just talking about the bond markets and how the economy will run hard. 3.8948 at the 10 year. could yields back up a little bit? this market is over concentrated at the long and. euro-dollar trade at 1.1014. let's get you up to speed out what is under surveillance this morning. there is one story that is

particularly important about the tensions in the middle east after a series of strikes in iraq between terrorist and the u.s. military. a drone strike the u.s. facility. early assessments indicate that these u.s. airstrikes destroyed facilities and likely killed the number of militants adding there are no indications of civilian lives affected. when it comes to investing, cathie wood made her first shares of a japanese internet company. fintech buying shares in a wide.

-- ly. poised for is best year since 2020. cathie wood will join the team around the desk on thursday at 7:30 on bloomberg surveillance. be careful what you do with their children at christmas. spirit airlines issuing an apology after putting a minor on the wrong flight right before the holiday weekend. the six-year-old was set to fly from philadelphia to fort myers but instead he was put on a flight to orlando. they did not address how the error came about. the stock is down more than 13%. carol: incorrectly boarded?

katie: also unaccompanied minor, were talking about a six year old. manus: it's like home alone. 7.5 million people are expected to fly between december 23 and january first. carol: good luck to them. manus: i just took amtrak. carol: where working on trade travel. manus: jim zellner calls private credit of 40 trillion opportunity and a 2008 crisis is unlikely to happen again. he spoke to bloomberg surveillance at apollo headquarters earlier this month. >> what is de-banking?

>> i use the evolution of finance. we have had amazing tailwinds with localization and technology and lower rates. banks were advisors for decades. 2008 happens and there's a lot of legislation that changes our business model but at the same time, rates were lower. and ceos are focused on shareholder return there is a massive gap where companies need to find capital and firms have been at the front of the parade in terms of providing capital across our business. when he put that together with our funding model of lp capital

from around the globe plus retirement services, we are unique player. manus: let's get into how big the addressable market is. we think of leveraged markets, everything on the bank balance sheet, how big would this be? jim: you talked about private capital in private markets. when they talk about private credit they talk about direct origination which is 1.5 trillion. we think the definition of private capital is around 40 trillion and that would consist of solar frames, inventory finance, franchise finance along with a lot of corporate lending and investment grade private that banks used to hold on their balance sheet but in their search of our ob that's not the

right place to hold that. it may be the right place to originated but not to hold it. tom: i want to get out of the way the stereotype that is fancy derivatives. on your website you lead with retirement services. how conservative is apollo? jim: we don't like to lose money. we look at our firm today, 630 billion, 100 billion a private equity, 400 billion in credit. a vast majority of that is investment grade in this year alone, whether it's air france, at&t, we are loaning money to companies that are investment-grade. you talk around the globe,

buying investment-grade debt, you make a double digit returned with the compression of spreads and otherwise. we lend to large companies and from our perspective is a 40 trillion opportunity. lisa: you have been focused on investment grade which is underperformed high-yield. where are we in terms of where you can make the most money? jim: it's in higher-quality credit. you will have a debate later on but we are short of a goldilocks. concerned about a slowdown which is been on everyone's mind.

the fed is done a nice job of maintaining high rates so i would argue that the fed put us back in the market as people worry about soft and hard landing see me making double digit returns. lisa: does that mean we will not have the same credit cycle? jim: you will see an economy where there will be winners and losers in the ghosts area where prices are lower but services are higher. as the economy navigates what's going on the fed has maintained fairly high rates in the market has gotten ahead of it in the fed does have a loaded gun they can use as needed. we are students of history and

we expected another 2000 and eight but i don't think we will have it. there are science that are a bit more challenging, a lot of buyouts but you're going to have to navigate it with the broad toolbox. tom: we had 73, 74 and then we had 1977. is that the analog right now? jim: if you talk about the four tailwinds i talked about globalization, lower rates, and technology. we are on the precipice with ai,

cost structure and education, that can have a huge impact. the cost and capital will be higher for the next five-seven years. back to your original question, the banking system is evolving in the u.s. is in front of that and as you will hear about, we think we are at the player is that industry continues to evolve. jonathan: are we not transferring the risks from banks to places like this? jim: we take the risks consolidated from financial institutions and bringing it to a broader system where we are diversifying those risk. our investors are either sovereign or pension funds the doubt on these assets on leverage or other retirement services.

we go with higher-quality assets . it makes the system less risky. manus: that was apollo ceo with the original surveillance team. we have the alternate team with us this morning. carol and katie. the most sobering thing is getting use to a higher cost of capital. we are obsessed with these hundred 50 basis points of cuts. but the reality is, this economy is going to function at 4%, 5%. it is the 26th of december. if you are waking up bleary-eyed, your equity market continues to be upbeat.

will the ecb go for a rate cut around the same time as the fed? yields trade at 3.900. you have an extreme positioning on the bond market and you could get a little bit of an deception -- indigestion. 1.10 euro to dollar. you have a movement of ships away from the red sea after the attacks of houthi rebels. katie: oil has had a few weekly gains but overall, it has been

ahead scratcher this year over the past few months. carol: what are some of the concerns? katie: it comes back to the supply picture. manus: you have the u.s. pumping oil and non-opec supply and then angola leaves the opec family. carol: i feel like the conversation is changing. manus: coming up, madison miller on the increase of weight loss drugs. have you bought yourself some ozempic? what do you see on the horizon? uncertainty? or opportunity. whatever you see,

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>> it is all about data, it's the data. we thought the market would be

90 billion altogether. right now the market looks like it will be bigger. it's a sizable opportunity. manus: that was the pfizer ceo speaking to us about the potential for weight loss drugs. and wow, did that move the markets. let's take a quick snapshot of what is going on with the markets. how much liquidity is in there? carol: as we wrap up 2023, it will be quiet. there are a ton of people flying. katie: not a lot of people here to participate in the equity market. it is december 26 but we are here. we are watching the markets and

interesting to see how we finish this era. since late october, it is been off to the races. but it feels like maybe we have reached a settling point, and equilibrium. manus: there are 6 trillion and money market funds. if those rate cuts come through, the majority will roll off. maybe there is some kind of precipice. katie: or doesn't it go back to banks? when you think about the flow of travel out of market funds, where's the flow of travel? carol: if you look at rsi, we are overbought. katie: remember when we had a one hiccup.

it was triggered in the last hour of trading. but the technical start to come into play when you think about the syndicators. carol: i think about all of the companies and names involved in the new class of weight loss drug. two stocks posting double digit gains. novo nordisk and eli lilly things to the popularity of weight loss drugs. these were to very important sectors when it came to market activity. for more, she has been all over this madison. i've always enjoyed our conversation so we learn so much

when we talk to you. we heard the head of pfizer talking about the market. how big potentially are this class of weight loss drugs could be? especillwhen it's not just weight loss but other important health problems? madison: when we hear just about weight loss we hear 100 billion by 2030. that's a lot of money when it comes to obesity treatment. that's not even baking in these other uses, kidney or liver disease or alcohol abuse disorder. these drugs could have other uses beyond weight loss. this market could really only grow and that remains to be seen how big it could get. katie: it feels like there are

tons of cheerleaders when it comes to these drugs, what are the concerns as you continue to cover it? madison: there are concerns with side effects and continuation of usage. we see a lot of people stopped taking the judge -- drug once they achieve their goal and insurance issues prevents people get coverage so they discontinue using the drug. that's one of the big concerns as long-term usage and how that will play out. we are starting to see, there is not as much excitement going into the next year and we see a

shift to eli lilly because they have an exciting pipeline of next generation coming along. there is a drug that has shown 30% weight loss which is like bariatric surgery. novo nordisk does not have as much in the near term. there are not as many big data readouts. we are seeing less excitement going into 2024. manus: where are we with haircare coverage on these drugs? that is something i presume changes the game materially again in terms of the size of the market? madison: that's a really important piece of this. coverage is still spotty and

medicare does not cover these drugs. we see more medicaid programs cover the drugs. i am in chicago and illinois decided to cover weight loss drugs so we will see more and more coverage in terms of medicaid. medicare is a piece of this that doesn't look like it will budge. with commercial plans it depends on the plan. the companies are lobbying substantially to get insurance to cover these drugs. manus: without insurance narrative, what does that do potentially to the margin of these products? i think of the prices of ozempic

is 50% cheaper in the united arab emirates. where are we with margins as a result? madison: the rebates are helping/the price for people who don't have insurance coverage. they will be paying 1000 a month and one of the things that comes up is that in other countries these drugs are substantially cheaper. that is something that will continue to be a conversation in this more companies enter this market are more products become available there is the assumption that the price of drugs across the board will come down. they are hoping more competition

will enter the market in order to bring down the price of these drugs because right now, they are extremely expensive. katie: something that is pla gued these companies is supply shortage. where do we stand on that story? madison: novo nordisk continues to limit new prescriptions. there supply issues have plagued the company this year. eli lilly has a better handle on it. all of the dosages are in supply right now. but their cfo has told me they continue to see tight supply going into 2024.

both companies are invested in ramping up heavily. carol: covid, do we even talk about it? i had another round of covid last week? is that something we need to continue to think about? madison: we see cases rise across the u.s.. i've read about people getting it again as well. there is a variance similar to ones we have seen. it is still around and it is important. carol: we so appreciated, madison muller who covers everything in health care. futures are up .1 1%. the 10 year 3.8986. coming up matt miskin from john

hancock. what he has to say, coming up next. ♪ (adventurous music) ♪ ♪ ♪ be ready for any market with a liquid etf. get in and out with dia.

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>> the signs are that the inflation dynamics have really exited the pandemic. >> we can enjoy modest growth

than it suggests the last mile may not be overly difficult. >> this immaculate disinflation is what we've had. >> in terms of jobs cracking inflation and collapsing, it's not there in the data. >> if i described 2023, better than feared. >> this is bloomberg surveillance. lisa: a very good morning from new york city for our audiences worldwide. this is bloomberg surveillance. carol: we are in for john, tom and lisette. it's expected to be very quiet because of the holidays but we are getting ready to wrap up 2023. let's see what's happening in terms of the market. take a look at futures because we have had quie a run when it comes to the s&p 500. we are just up about 5.5 points.

looking at the 10 year, 390 so a little bit of movement there. new york crude, concerns about mideast tensions so we're watching it which is up about 1% so it's building strength to the upside as we work our way through the morning. having said that, it's interesting because i feel there was a lot about the santa claus rally we have seen this year. craig johnson of piper sandler said since 1928, the market has rallied an average of 1.7% between the last five days of september and the first two days of the new year. manus: that sounds great. katie: it's easy to make fun of the santa claus rally but you think about this period every

year which seems to be pretty good except for last year. manus: some of the positioning is setting the stage for 2024. positioning in the long bond is extremely long. how much of that move is already priced in? they also said get ready for a little bit of indigestion. katie: it feels like there had been a fight against the fed and the market probably one because howell was way more dovish than expected but heading into next year, this big gap between what's in the dot and what the market has, i don't know who wins that fight. carol: what people were saying

at the beginning of last year in terms of what kind of market and many people got it wrong. manus: she wants to come back tomorrow. katie: carol: a lot of things got thrown at us that nobody anticipated and it's a reminder that we are living where things are happening overseas, serious stuff that can change sentiment and market reality and fundamentals in a snap. manus: we're all waiting to see whether the disinflation story accelerates. i'm not saying there's a risk of deflation but it's how much of a more material progression of the disinflation story continues. pce came in sub 2% and that's important from the data. what are we? we are data-dependent. we've got the memories of goldfish. carol: that's why our producers

are buying us some coffee. chief and just meant strategist from john hancock is joining us. there is a lot that could come out of the new year but as you look back at this year, are there narratives you think will carry over into next year? >> thank you. the last two months to find 2020 free markets. it was really around jay powell's pivot so in september, they forecast another rate hike in december. no rate cuts into 2024 and that change significantly. in november, he went to no hike in december and in december, really pivoted. it almost look like a travel gear where the pivot foot moved because powell did a 180 from his tone in september to november.

i look at small-cap stocks in particular as the biggest beneficiary, down 5% on the year before november 1 and right now they are up 17% year to date. small caps are looking the highest this morning. carol: talk about a 180. >> exactly. manus: do you think that's where we go next? the s&p 500, 23% up on the year. more than 50% of the move was done in the last two months and you say the optimism is already baked into stocks. the math for you is not compelling. there is the russell, up over the past two months 22%. the math not being compelling, do i stall or draw down? do we shatter in january because

the bond market is convinced we are on slice and dice from the fed? >> the russell 2000 earnings are down 17% this year. one of the ones i love the most is technology and carol was talking about earnings and i love earnings as well but technology earnings are up about 5% this year, that's not bad. that feeds most of the world and earnings. companies are up pricewise, 55% so that shows you how much this has been multiple expansion versus earnings. it's all about powell this year. i don't think next year will be that meaningful as it relates to everything with the fed. fundamentals will metal -- matter more and economic data will matter more in the fed is in its opposition because the soft data, you had to focus on the hard data. the hard data legs the soft data so they have to wait.

they will wait on that and i think they will have to wait until the last minute to cut and that may be too late and they will have to cut more aggressively than the market thanks. katie: i don't like earnings, i like talking about the macro. you seen equities really be driven by the macro even at the single stock level. i want to talk about the different psychology between the equity market and the bond market. your notes as stocks or stories and bonds are maps. what do you mean there? >> with the bond market, it will be your income and income right now, even though it's changed a lot in the last couple of months, we were up five-6% in high-quality bonds which is amazing. we've been looking for these levels for years and finally we are getting it. it still four or 5%. we think that is an income stream where you can depend on that in high-quality bonds will

be an attractive stream into next year. $6 trillion in money markets on the sidelines, what will that you'll be like next year? if it's five now, it could be down to three or 4%. we don't want to have variable interest streams, we want a fixed movement and that's about the math. we like the factual part of that. stocks right now look like your high earnings estimates and sentiment is all about soft landing and that could change quickly into next year. katie: we've been batting this around all morning. where does the money belong, the cash that's come into money market funds. when it comes outcome is that -- does that belong to risk assets or is it stickier than usual? >> what we looked at when we saw money market assets like this

before, we trended and we see money market assets usually rise going into a recession. they accelerate and everybody sells right at the low of the market. the peak in money market assets is the trough of the s&p 500. it happened in 2008 and 2020 and now we are building. we think it finds a home in a balanced portfolio with stocks and bonds. bonds have some influence this year, 100 billion dollars taxable income and that's the highest outside of money markets but is still a fraction of what money markets do in fixed income. we are not seeing the overly aggressive bonds sentiment. we hear investors who are still pretty cautious and they say we will wait until next year to buy bonds. high yields move really fast, faster than usual and we don't want those yields to go away. carol: for such a big time, with

the bond market, we're seeing what it continue so why not lock it in? you are looking at your 401(k) and saying wow. you look at the equity returns and a lot of it was the second half of the year and just in the last month or two. how do you justify the bond story when you can get many times over into an index fund? >> i have conversations with friends and family and they say how long do i hold these bonds? i will go all in on aia or whatever. it because back to behavioral finance principles we learn about when you always want to have that thing that's performing the best and sell the

thing that's down the most in your portfolio. to us it's about rebalancing at times like this when you have a huge run in stocks versus bonds, a more disciplined approach. we are looking to rebalance and trim some risk into next year. we think a lot of the run up has been built into the equity side portfolios and we want to rebuild that into higher-quality fixed income and get that income stream into next year. that's how we would look at it. carol: some things never change in terms of balanced portfolios and the importance of bond markets in your strategy. thank you so much and happy new year. we appreciate your time on this tuesday. we are looking at a market that's still quiet. crude oil is 1.5% higher. we've seen the momentum build for a couple of hours and there are concerns over the middle east.

s&p futures are up 0.1%. we will be watching the broader market we will also be talking about retail which is have some significant outperformance in 2023. not all retail is a like so coming up, we will talk with dana telsey on this year's holiday shopping. coming into this year on new year's eve, retailers were closed. i feel like pre-pandemic days are going when everything was open thanksgiving evening until the bitter end on christmas eve. it feels like a different time. katie: it's also where people are shopping because they wouldn't necessarily be going to those doors of the last minute. they would probably be online. that was the story of the thanksgiving holiday shopping this year, the amount of dollars being spent online.

that's where i almost entirely do my shopping. manus: i helped the american economy in a variety of ways this year. shoppers spend $1 trillion on credit cards. $48 billion added to the third quarter on the extend and pretend. katie: by now pay later is a big story this year as well. what does that mean when they had to pay later? manus: that the irish version of pretend trade. carol: they do that knowing they have a few weeks or a few months to pay when the interest rates start to kick in. they are positive they can pay it. ♪

>> if you look back over the course of the year, it is really starting much progress the economy has made. inflation has come down faster

than even the more optimistic forecasts and growth has remain very resilient. if you recall a year ago, the consensus projection was that getting inflation down would require a spike in unemployment and a recession. carol: that's lael brainard, the economic council director speaking on friday. in terms of how the administration sees the economy from fed speakers, we are expecting an aggressive rate cutting fed in 2024. that seems to be built-in but what happens is there is economic data and geopolitical and that's something we were reminded of this morning. katie: it matters chiefly for investors. you haven't really seen it in oil but maybe in the past week or so. you are starting to see crude price and some of the geopolitical risks we know are multiplying.

carol: let's take a look at crude oil because there is momentum to the upside. you see the trade in real-time continue to edge higher. a significant move. the u.s. military launched strikes on three locations in iraq targeting what's said to be a terrorist group backed by iran. we are watching what's going on the middle east. we have the former senior u.s. intelligence official and senior advisor of the transitional threat project joining us on this tuesday. what do we need to be thinking about as we continue to watch headlines and what seems to be escalation of the middle east conflict? >> good morning. over the last several days to move seen a multi-front escalation in the region. have the israelis moving from a holding pattern of north gaza to areas which are the most

difficult and challenging aspect of the war. just the location of the hamas leadership and a vast array of tunnels, perhaps twice as many as anticipated. we've seen the attacks by u.s. forces in the u.s. response against three sites in iraq. that is demonstrating a capacity for retaliation but not necessarily to terrence. we've seen the is really -- the israeli killing of the most senior i ramy official. he was responsible for the shipment of iranian weapons and his death will require some sort of iranian retaliation. we've also seen some modest continued action by the who these against shipping in the red sea. that's been set with a variety of shipping. manus: the coalition of up to 20

countries continue. i think that is quite progressive. you were the principal intelligence officer overseeing national intelligence policy on iran. i sat down with the iranian foreign minister when he was here at the you and and i asked him about scaling up in terms of troops and ships? he prevaricate it and accused me of interrogating him rather than interviewing him. when you look at where iranian proxies are, where are the weakest links for the coalition of the west? is it in lebanon? is that this one off reprisal from the u.s. into iraq? where is the weakest link for the coalition at the moment? >> the most important area for focus i continue to believe would be the red sea. we have to watch for the possibility of houthis using

strong boats and mining and believing the retaliatory capacity of the coalition is weak because it is untested. the u.s. is now not used to an escalation of regional conflicts. i would look therefore a result from the proxies. we have a lebanese soldiers and one soldier died today. the lebanese has below appears to be constrained by its own perception that it doesn't want to be involved in a conflict that could bring strategic damage to its own equities. katie: since october 7, the guiding thought has been the administration and governments worldwide don't want that to broaden into a wider conflict. you think about what's happened over the past few weeks with the red sea and now these drone attacks in iraq. is that starting to look inevitable? >> the posture of opposing an

expansion of the conflict is inevitably eroding. the deterrent capacity of the international community and collective security, iran's proxies are testing redlines. they say summer pink and they are normalizing a certain scale of violence. there was a time when medium-range ballistic missile shot from yemen to israel would have been seen as sparking a regional conflict and now it doesn't make the news after a few hours. the normalization of violence is a troubling issue. carol: the israeli prime minister outlined three prerequisites to achieving peace in the war with hamas. the destruction of the group, the demilitarization of gaza and being erratic allies. having said that, there is a lot of pressure on israel to end this. what is the likely outcome? is the pressure building that

you think there could be some kind of truce created sooner rather than later? >> the head of hamas has made an announcement during this time in which he has refused to surrender and is made some outlandish claims on losses. when you look at the prime minister of israel statement, the troubling aspect is the de-radicalization of gaza society. that's something that would take months if not years. the international community does not have a lot of experience with this. saudi arabia and the emirates do this for their own world. netanyahu did not mention the hostages and is, to significant pressure for not doing more to bring back the roughly 100 plus hostages who remain in the hands of hamas. manus: will we hear a different rhetoric from the biden administration going into the new year? >> i don't think so.

the white house will continue to express support for israel's right to defend itself and to punish and eradicate the hamas leadership but you will also see continued pressure by the united states to bring in more humanitarian supplies and respond that the more fuel that comes in and hamas uses that fuel to retain control of tunnels and that extends the conflict. i think you will see a continuation of the administration's narrative. carol: is it time for the administration to change that narrative if you consider the global pressure? >> that would be difficult. it would be difficult for israel which has gone through the october 7 massacre and the bad news on hostages and the losses of its own personnel to say it would tolerate the continued existence of the hamas top three military leaders in the radicalization of the society on the border. what we should look for is the likelihood that will increase its focus on eradicating the top three personnel in the hamas

military leadership or forcing them to flee country. carol: we appreciate your time this morning. norm rule of csis. i feel we are getting to this point where we widen out and it becomes a bigger situation and it feels like we're possibly there or is there some way of bringing it to an end so we can move on? manus: from a human point of view, the death toll is increasing and you were right to ask the question, will there be a shift from the white house? a 1.5% lurch in oil prices is significant and that talks to the ongoing risk from houthi rebels in the red sea.

that can bring flashpoints by itself and that's the risk. carol: that can change in a moment. katie: it's been a lot of what wakes up cruise? maybe we've reached that point. it will be interesting to see whether that continues into 2024. manus: the presumption is the deficits will appear in the first quarter of 2024. carol: wti crude futures up about 9% and we've had above 2% in this early trade. we will keep a watch on this. we are talking retail next. ♪

carol:carol: welcome back. this is bloomberg surveillance on this tuesday. we are watching the markets. it is quiet, certainly on the equity front. no surprise. a lot of people are traveling today. we had a bit of a breather on friday. what are really focusing on is not the bond market but new york crude. we have been about 2% in the trade here early on. up $1.40. this is on concerns that what is

going on in the middle east is broadening out, involving maybe increasingly the united states. the u.s. military striking three installations in iraq, targeting what it called a terrorist group back by iran. this comes as tensions rise in the region with the israel-hamas war and shipping attacks in the red sea. crucial trade route. katie: -- all the snarls we had during the pandemic may be working themselves out. now another headache. manus: over 100 ships redirecting from the red sea.

you have one of the second-biggest container companies in the world. the air returning to the red sea to resume shipping through the red sea. you have this coalition of the willing in terms of a protectorate across shipping. this is important from a supply chain of view but also the messaging back to the proxies in terms of the defense that the coalition will bring to bear. carol: they will not do it if they think something will go wrong. if something goes wrong, you start to see a freeze. manus: it is incremental. so far, no monumental debacle in shipping. it is whether something of field or size really changes. carol: a different kind of debacle has to do with samsung, they ought --. they are delaying. the company pushing back mass production at the lab to 2025.

it had been scheduled to start the second half of 2020. also proposing that postponing production at the arizona site. everything has chips. we have seen a global move to up production and bring it back home. katie: you think about supply chains. the biden administration wants to avoid a repeat of what happened in 2021 when you had that shortage wanting to bring chipmakers to american soil. we will see if it gets delayed again. manus: the ships act promised 100 billion conductors in support of the semi conductor industry. i was on a call with henri. he said every ceo he speaks to in europe is obsessed by the inflation reduction act. when you come to live here, it

is as if these policies are very politicized -- i understand that -- and very political, rather than seeing them as the metamorphosis of the infrastructure technology of europe. katie: got to start asking american ceos, argue obsessed with the inflation reduction act? carol: another earnings call. before we talk about liquidity. that is another round that is coming to the market as a result of that measure. shares of manchester united getting a boost after jim ratcliff agreed to buy a 25% stake in the club. the deal values of the club at about $5.4 billion. the purchase marks the end of a drawn out sale process. it is torture, to say the least. manus: today by american? katie: they love rockets, too.

manus: societies love buying football players, sports teams. here we are. the attorneys on strike. it was thought that they were back to $6 billion. ratcliff has paid up to a $33 billion. carol: interesting. you see the middle east wanting to get involved in sports. manus: there is the zeitgeist and also a british field to this. it is a british billionaire paying $33 80 share, putting money into the club. he just finished watching netflix. carol: because my whole reference point. david beckman, his closets are immaculate. katie: tim and victoria. what a power couple.

i do that. i was born and grew up in the 1990's, but to see it was a nice reminder. manus: it is a fact that you see him as a beekeeper. carol: very successful individual in terms of how he played and what he did with it afterward. manus: to leave in the brand and the market. founder and ceo of coffin advisors. believe in the power of immaculate disinflation. 160 basis points of cuts. how bullish are you this morning? >> i -- in terms of the outlook for next year, i am quite constructive on risk assets such as equities. there are a lot of reasons for that. you referenced six cuts. i think it is almost seven between january 2025 and today. there is a bit of a disjunction

going on. if seven cuts are instantly coming, i will not be so bullish on equities. i love the fact that the apex of this violent hiking cycle. if powell is really going to cut six or seven times over the next 12 months, it is probably because there is something beyond inflation going on. from my perspective, that is not dead love coming back. but i am constructive on the economy. i am constructive on the earnings profile broadly speaking next year. it will not be that, oh my god, we do not have a recession upside condition that will define 2020 three. that upside surprise factor is gone, but i think it is held

together well by a decent picture. i think the big tech names will continue to be the real driver of overall earnings and an overall reason to be heavily a in the stock market. katie: you mentioned that if the fed is cutting six or seven times, it is not necessarily the fed put. interesting note from citi last week saying that pullbacks are an opportunity to buy more, saying that by the dip is coming back. is that a proper mindset for 2024? michael: you cut out for a second. i think you're talking about buying the equity dip? katie: yes. michael: when you step back and you step back and think about what happened in 2022 and 2023, you had a big surprise to the downside in 2022. you have a similar thing in

reverse this year. you have to understand so much about the rally this year was instigated not by dramatically accelerating fundamentals so much as it was, wow, there is not a recession. you tend to think of positioning mismatch as things over a couple of days, maybe a month. this was a whole year. the lot of the big allocators were playing catch-up in the second half of the year because they were probably overweight in bonds and underweight in equities. as we get to 2024, i think that positioning mismatch is going to be largely behind us. it will be less of a factor. there will always be positioning mismatches, but i think what is

going to happen will be more of a healthier, more rhythmic equity market conditions there. carol: is it safe to say that we are through all of the pandemics? i feel like every market conversation over the last couple of years, is we have to think about where we were pre-pandemic, factor in the stimulus. we are catching everything in that. are we through that? are we back to normal? michael: it is funny. i do not think you can never get completely back to one point in time. but i guess your question is have the normalized so much of the covid-specific issues, whether it was supply chains or fiscal stimulus? most of that, there has been a process. what is so important in this discussion is that during 2020 and 2021 and 2023, there was an

emergence of a longer-term structural trends that had nothing to do with covid but energy transition, globally -- deglobalization. we were talking commodities and oil prices earlier. there is a different condition of emerging. and also commodity producers being less given to supply expansion. you were talking about oil, but iron or is up 50% in three months. copper prices look ready to go higher even without china. there is a lot of structural's, lower moving conditions. one of the things that investors have to keep in mind is we have had some violent price action and economic activity. i think what is happening is they are slower moving but significant, structural themes that are starting to play out there, that are very

significant. that is how i try to contextualize that. yes, we will not normalize 2019, nor should we. we are normalizing something else. the big shock are behind us. michael: the big -- manus: the big shock and not behind us. we think we will see 7% to 8% earnings growth. michael morgan capital. our guest this morning. green on the screen for the moment. carol: for the moment. no surprise, but it is a slight move, other than oil, still up .9%. really quiet. no surprise. we all expected this. having said that, you are looking at s&p 500 futures, 4808 , the last print. up .07%. call it little changed.

that is our environment. what i like about days like today is it gives as a moment in the year where things were fast and furious and big stories, whether it was crypto, regional banks, it could change. manus: gut wrenching, frightening moment for the lot of people who have never lived through the prospects. they are looking at the credit suisse debacle. that was a crisis, but first republic and other banks were critically important comments in terms of the reality of risk. those are called lift tail comb risks. katie: with the benefit of hindsight, we can look back and say these were not systemic banks we were talking about, but at the time, early march, there was a lot of questions about how far this would go. are we looking toward a global financial crisis moment? ultimately, we were not.

but it was widespread. carol: just a reminder that things can come up, nobody expects it, and it is significant. there it is private virtual real estate is there something we are potentially missing iesco manus: not massive faults on commercial property. how does that play out in 2024? who is holding the biggest commercial equity? carol: exposure. we are watching markets. we'll is the standout market story today, up 1.9%. we are talking retail. ♪

at the end of the day, consumers have been spending. as long as consumers have jobs, they will spend.

exactly how much they spend is up in the air, but they are spending. carol: that is julia coronado, macro policy perspectives president and founder, talking about the retail environment. reach out, we have seen as a broad group -- retail we have seen as a broad group outperforming. katie: for there are idiosyncratic stories there. the story of the past several years, you talk about consumer sentiment being in the gutter, but consumers are still spending. a lot of that goes back to the labor market, but how much juice is left? how much pricing power though -- do companies have left? manus: i was young, i had no aversion to by now, pay later but then i got stung.

seriously. paul donovan, i am going to paraphrase him, which is never bet against the avarice of the -- and the greed of the u.s. consumer. katie: specifically u.s.? manus: the hellenism, there you go, the hellenism of the -- he donism of the u.s. consumer. carol: appreciate you coming on with us again. the u.s. consumer they do like to go out and shop, the included. what are we hearing about the day after christmas shopping? any early reads? dana: we just got one. mastercard came out with the data from november 1 through december 24. holiday season sales up 3.1%, slightly below their forecast of

3.7%. it goes through december 24. many other forecasters either go through december or january. that is coming in at the lower end of the 3% to 5% range. as you mentioned earlier, it is still up. consumers are still spending. we have got gift cards that need to be redeemed. some of the interesting data that came out of it is the fact that apparel is up, online stronger than in store sales, jewelry down. restaurants that focus on experience, some restaurants and grocery being up. carol: just coming back from an overseas trip. i-8 out a lot rather than shopping. -- i ate out a lot rather than shopping. what do these numbers tell you about the health of the u.s. consumer? dana: i think the u.s. consumer is healthy, being cautious in their spending. the change that i have seen, even in the past year, we have

seen a moderation in spending across income levels. that spending has moderated with a much more cautious and discerning consumer. you think about some of the things that have changed. the luxury goods spend is lower than it has been. you are seeing apparel, spending is discerning. jewelry has been weak. it is expected that in 2024, jewelry will have more than uplifting given that we will get back to most -- more normalizations and engagement post-covid, but for the most part, it is discerning spend and retailers planned appropriately. discounts and promotions were not as severe as pre-pandemic. manus: interesting that this fresh data is lighter than the estimates. give us your take in terms of hedonism. when you see credit card balances over $1 trillion on a

great proportion of buy now, pay later, is that hedonismic behavior? or can we say stop worrying about credit card balances and buy now, pay later? dana: the u.s. consumer continues to exhibit strength. i would have thought this year you would have had a greater moderation in spend for the lower and middle income, but exactly what you just mentioned, the strength of employment, inflation coming down are giving them the ability to spend. they might not be spending as much as they did two years ago with the stimulus but they are still spending more than they may have thought. now if you wanted job, you can get a job and your wages are going up.

wage growth is substantial with inflation easing. i think the u.s. consumer is an optimistic consumer, even though the rate of spend is not as great as it was in pretty 21 and 2022. katie: it is interesting to hear you say that. how do you have the said hiking rates by 500 basis points without too much pain? it seems like when it is coming to that consumer spend, it can continue. maybe we got through this tightening cycle without the associated pain widely expected? dana: it does feel that way. you have have have had categories that have been weak -- housing, luxury goods. but one of the data points to watch is when you look back to 2019 to today, even luxury goods sales are up 50% plus.

if that consumer, if they want a job, they can get a job. but one of the toughest things for retailers is we are seeing more confidence in their ability to project profits than sales. you will continue to see retailers be cautious on sales growth. we do not have the tourism we have had in the past. orders that retailers are placing continue to be cautious with vendors. nobody is expecting a riproaring retail environment. katie: the advisory groups 2024 top x, always appreciate a year ahead list. i want to talk about the consumer technology category. topic is amazon. who can stand up to amazon? dana: amazon is your online choice, but when you thinking about discounters, whether it is

target, five below, dollar tree, many of the off prices overall have had same-store sales of 5% to 6% plus. they are getting the benefit of the tray down customer. i am watching these sales carefully. indoor -- in-store sales remain important. carol: dollar tree down about 3%. i feel like there has been some struggling. not all retail is the same. who is most vulnerable in this environment? dana: when you are watching where the vulnerabilities are, it is some of the retailers who are too overloaded on inventory and have not innovated or do not have value. when you think about the 2020 for outlook, who had the hallmarks of product newness, innovation, and value? in apparel, it is birkenstock and roll floor ran. and you have burlington and t.j.

maxx. when i think about special retail, i think of bath and body works and european wax. when you think about discounters, far -- five below, dollar tree, target but do not leave walmart out. walmart continues to be a shared gainer. carol: did you want to say something about birkenstocks? katie: not the most statically pleasing shoe. carol: pink ones. it just going to say, katie greifeld. katie: that was after she left barbie world. carol: even better. birkenstocks, prox, even the runways, they go everywhere. you are a gem. thank you. happy holidays. i was looking at the s&p retail index. it is up 41% this year. it drops a lot into that index.

but nonetheless. katie: what a strange economic cycle this has been. you have not seen that lower spend drop out in the way expected. luxury has been resilient as well. it feels like the hedonism of the u.s. consumer is unbreakable. manus: the hedonism of the riches what you want to keep an eye on. copies like ridgemont, we are -- they no longer pay for business class. the kid actually told the kitchen to cut the coffee because they were too expensive. billionaires and millionaires noticed the price of coffee. i am gay. get the bonus. carol: we move from retail. coming up, michael landsberg. this is bloomberg on a pretty

quiet tuesday. ♪

>> the signs are that the inflation dynamics have exited the pandemic. >> we have enjoyed modest growth

and disinflation. it suggests the last mile may not be overly difficult for >> you mentioned the phrase immaculate disinflation. that is what we have had. >> in terms of inflation all collapsing, it is not there in the data. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. manus: good morning. it is bloomberg surveillance live. alongside the cohort for this week is carol massar and katie greifeld. this is not your normal surveillance. everybody needs a bit of a break. happy holidays. we have been here for three hours.

the one thing that has moved incrementally is the oil market. this goes back to the toppling line of the story. it is about a changing dynamic of geopolitical risk in the red sea. the u.k. navy reports two incidences on tuesday on ships in the red sea. no injuries but this puts on the table geopolitical risk, which has been underpriced in the oil market. we have been only talking about supply and deficits, neither of which have had much of an impact. we are talking geopolitical risk. katie: you say it has been underpriced. feels like it has not been priced at all. on the others, demand has not been there. that comes back to the china story. we have not seen demand coming from china. you think about the most bullish forecast going into this year not panning out when it comes to

oil but seeing some real signs of life as we get geopolitical risk priced in. carol: it is important to figure out where do we go from here and does this continue to heighten? so often, conversations are like, that is far from here. we are worried about inflation, jobs, labor in the united states. but when you talk about supply chains, that is something that globally will impact things, potentially dramatically. it is higher on our radar. manus: and what opec-plus will do with the supply side of the equation. the societies are all in there in terms of cuts. if you are waking up this morning and you have had your 25th of december celebrations, equities half green. we have had wedbush securities

talking about getting ready for a massive monster technology rally. who will cut first and most aggressively will define the trajectory for the dollar. euro-dollar trades at1.1015. we have had a weight dovish debate as to whether 160 basis points will be delivered by the fed or not. perhaps too effusive bit of a backup in yields as we are perhaps more aggressive. the market is more aggressive than the fed will deliver. let's bring that suspicion to michael. good morning, michael. i hope you are fully invested in the 60/40 portfolio and all is well with your clients. as you look at some of the performance in these equity markets year to date, there was not any other -- any better trade than being along the s&p. as you look at 2024, how much of

the bolus -- bullishness is fully priced and equities with cuts assumed by the market? michael: i will punch a bit on the 160 basis points. that is wishful thinking by a lot of people on the street. but the s&p did well this year, concentrated in a few stocks. not healthy for such a small amount of stocks to drive returns. great that we owned them, but realistically we have to look at other places to be able to generate returns. there will be a letter of variation in returns in terms of what goes on. and the amount of cuts we get will not be 160 basis points. crazy to think we will get back. thanks in the middle east -- things in the middle east will be interesting. inflation goes higher. does that potentially mean those cuts will last longer? manus: the first man to say it

is crazy to call 160 basis points of cuts. so we do not get those cuts. what does that due to the tech equity narrative? to a certain extent, the outperformance by the nasdaq is predicated in part by the collapse in yields. is my screen at the right size? it is up 40 odd percent. to what extent is that outperformance going to continue in tech? 43.52% on the nasdaq. michael: part of what happened as everybody got excited about ai and they put ai in their speeches and earnings reports. in reality, this will drive earnings based on ai. there will be some stocks that do well that have the ai story embedded in their business. it will not be a soundbite year

like 2023. in 2023, if you said ai, your stocks would rally. it will have to show this year what that drives. i also think cybersecurity will continue to do well. as ai gets bigger and bigger, cybersecurity has to protect everybody from ai. they will drive what tech does. it would be nice to see the fed do what the fed does, but we are anticipating three cuts, not to happen operably into the summer. we are getting closer to the fed starting but not there yet. we are deliberate with raising rates. carol: that is what i find interesting. you said three cuts in 2024 but not until july. pushing it off. the fed wants to be convinced before it starts cutting rates that it truly has inflation in check. >> absolutely.

the only fly in my ointment would be of data comes out that is really awful and we are headed into a bigger recession, they maybe will come earlier than that, but if things play out the way powell one, you will see a cut maybe in july. that allows them to continue. we are seeing oil tech up. oil is a huge factor. even though inflation seems to be under control and wall street is cheering and the rest of main street is not, sentiment is awful. we want to make sure we got it done. cutting rates may increase inflation. carol: i am not happy when i fill up the gas tank. my daughter is like, why does everything cost so much? exactly. do we need to see some kind of recession in order for some fluff to come out of the on the ended order for a new cyclical round of growth to start? michael: it depends on how you

define the recession. we have had three or four negative earnings growth quarters for the s&p. apple has had four in a row. you will see a rolling recession. we will not have this massive recession. the labor market is good enough to not see that, but you will see some softness, some sectors that you want to avoid, and some that you want to invest in, with the idea that rates are starting to come down slower than people want. i do not know if we are going to get the recession where everybody wants to run the playbook. you will see rolling recessions was different sectors doing poorly in different environments. that continues in 2024. katie: taking a look at the fourth paragraph of the notes you sent over. the things for you are ai, syverson dirty. -- cybersecurity. but one thing you could look at

is buying indian etf's, that is interesting to me. you are thinking about this boom in india that has been an underappreciated story of the last couple of years. walk us through that all. michael: i think what happens is we are trying to find with those big three themes, we look globally as well as domestically. what other areas of the world are having growth and not having a central bank raise rates to hurt them? in particular, india has been our longest hold this year. we think it continues. gdp is 7%. they are a capitalist economy. the chinese economy is not. we do not know what they are going to do, but the indians are aligned with a u.s. capitalist society. i expect them to encourage businesses to do well. you could own that broadly with

ets, large caps and small caps. buying international stocks, we do for our portfolio, but for most clients, exposure to etf's is smarter. katie: you bring out of china. china has been interesting over the past year. e.m. asked china -- emx china has caught fire when investing overseas. is that how you are approaching e.m. as well? or are you putting china to decide? michael: absolutely. the chinese economy is not a capitalist economy. they do things that are contrary to what investors want to see. obviously, you can get excited about all the consumers and positive things people talk about, but the government is not on the side of the investor. we are looking for countries that are, whether that be

countries in latin america, brazil, south africa. there is other countries where you want to be able to invest alongside governments that want the economies to grow, want stocks to grow higher. there is a cap to what you can make in china. geopolitical risk is not what we want with countries who want their citizens to make money. i do not see that with china. manus: and look at emerging markets, excluding china. they are up 13% this year. where does china go in 2024? the quality of the stimulus that is brought to bear. michael, thank you. michael landsberg of landsberg private wealth management. you are probably not that interested in taking too much risk at this stage. s&p 500 up .1%. the market is issuing rate cuts

going into next year. euro is up 1.3% this year. trading at three point -- u.s. 10 year at 3.90 at the moment. how much pricing of rate cuts has come to bear? i think it was mohamed el-erian's tweets that shows a parabolic move in yields higher. that is the personification of what this bond market has done. katie: it looks like a roller coaster. you go up and down. but i have been dying to talk about old. it is not moving too much this morning. of a hero two, more so than the equity market. you did talk about this a lot, at least on my programs. carol: gold does not get much lower. katie: it hit a record high this month. i have a viewer writing in on ask. -- on x.

gold looks solid this morning. praise the yellow rock. it has been a pretty good year from -- for gold. manus: death to anything is when you call your financial advisor and go, i would like some esg toast and i would like some gold. let's see whether immaculate disinflation does come to bear going into next year. who will win the race for the ip of 2024? carol: chilly all of a sudden. manus: we will talk to should knowledge bass a. who are the winners and losers in the ip flow show? we leave you with a hint of green for this holiday season. ♪

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it is just taking longer. interest rates are stable and probably going down.

we are probably going to see deals in a number of sectors. we are going to see a lot of industries looking to invest in technology. manus: frank aquila. if you are waking up this morning after your holiday celebration, fear not. we have stabilized the markets. there is a hint of green on the equity narrative. euro-dollar flat at 1.1022. who will cut the most in 2024? that will define the trajectory of the dollar. 10 year yields at 3.90. you have had this almost immaculate disinflation story, pivot party from the fed. let's hope it stays that perfect

pivot party going into 2024. there have been strikes on ships in the red sea by the u.k. there have been targeted strengths by the u.s. in iraq. these red sea incidences keep rising. no casualties. brent advanced. you must look for deficits going into 2024. carol: if you are looking for an interesting train, it is what is going on with oil. momentum to the upside this morning. katie: it has been amazing to watch over the past three hours, that move extending. if you think about this big slide we have seen in crude, think about what that has meant for the federal reserve. they strip it out in various ways, but you think about how energy prices play into inflation expectations and the

stability in inflation expectations. a lot of that ties back to what we are seeing in energy among gas, oil. manus: in part, this is driven by a number of things -- geopolitical tension and to a certain extent, it was not priced into this market. there was an ignorance of what potentially is going to happen in the red sea, beyond borders, beyond the israel-hamas war, what would happen with lebanon. the capacity of the hezbollah in lebanon, parts are more limited, but these targeted strikes by the u.s. into iraq is an extension of the conflict. for the u.s., it is everything they do not want. carol: do want to put an end to this. i was thinking about the chart we just put up. it is dramatic in terms of what we saw today, but it feels like it is not out of control. not a 5% jump, not a 10% jump. manus: 5.26% in the space of six

trading days, which is more on the tightness of the market. from geopolitics to the land of plenty, what ipos are going to be stellar in 2024? if sonali basak joins us. sonali: good morning. happy holidays. manus: the holidays are over. carol: not yet. there is new year's. manus: right. the biggest thing this year -- they chose not to have more of a u.k. lien. what sector is going to be hot in 2024 for the market? sonali: farm was supposed to jolt life into the ipo market. since then, we have instacart and flavio. a lot of what went public this year has not done that well. how does that set us up into 2024?

there is hope for a rebound in the market, more stability but there is a window. q1, q2 is when you have to see these listings hit the ground. any uncertainty in the market, more geopolitical tensions, u.s. elections at the end of the year. so much uncertainty that that recognition of the window might make it tough for a real revival of the ipo market. katie: who might take advantage of that window? read it has been reported to be thinking about it. kim kardashian, tell us about that. sonali: these are recognizable names. others like sergeant or cvc have been rumored to have been thinking about an ipo next year. some names have considered it for the long time. but here's the thing. not just that. a lot of private equity companies need that liquidity. they might seek to bring

portfolio companies to market as well. what is investor demand? if there is not enough demand to meet these companies to go public, they might also have to swallow evaluation discount into public markets year. it is a complicated calculus. carol: show it to the private credit side of things. we have talked about this over the last few years. there is so much money in the private world that companies that used to go public sooner can stick around for 10 years. the money is there. sonali: private credit will get you into part of the e equation here. it can help people raise capital to make it through the side of the storm, but we are no longer in the storm. people like to have stock to make acquisitions. there are reasons to go public before he private equity backed company, you are levered up. will a public investor want to get into that capital stock now? there is bigger demand for

profitability and better balance sheets going into these markets. limited partners of private equity firms are finally demanding returns. what i have heard is even if private equity firms are willing to take test in terms of valuations to get companies to public markets to get money back to investors. carol: is there is -- is there one company that you feel like will set the tone? sonali: it is not like this past year where we had arm. that was such a giant listing. the big question mark is not just companies like reddit. it is also international companies, companies based in china looking to list in the u.s., given geopolitical tensions, given worries about health china is approaching their own technology giants. that is a question amongst bankers on wall street today. manus: i am going to throw

gambit in there. i just arrived here from the middle east. the only place you earned money as an investment banker was in fees in the middle east. they did 10.5 billion dollars of ipos this year. 45% of the volume globally got done there. cannot endure in 2024? they still have a very ambitious agenda. sonali: that is nothing to save all the money going into private hands from the middle east. sonali: do you go public, whether it is in the middle east, london, or new york? or do you take money from saudi arabia year, looking to deploy and diversify? manus: interesting political issue for capital markets. which equity backers are you going to take money from, given the geopolitical status at the moment?

sonali: we have talked about this. the middle east has held on strong to their base of privately held companies, venture capital firms. money has been drying up across the board. think about how the u.s. hedge fund distracting. the middle east has still been the place to go. no sign of that letting up into next year. manus: a great deal of this will come down to the de-escalation of the hamas-israel ward. good to see you. first time we have been on air for a full conversation. >> [laughter] manus: a rare financial sunshine. we will see you tomorrow morning. shall we have a snapshot of risk? it is the 26th of december. a different triptych is in charge this morning, driving the

car and changing gears at the same time. equities 0.9% on the s&p 500. maybe this is why elon musk does carol: not like public markets. carol:katie: prude close to 3% higher on the day. manus: near-term spreads have tightened. assumption of a geopolitical risk and potentially deficits into the first quarter of 2024. coming up is will smith of alliance bernstein joining us. it is foggy outside.

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so the first time i ever seen a golo advertisement, i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician. i was 424 pounds, and my doctor was recommending weight loss surgery. to avoid the surgery, i had to make a change. so i decided to go with golo and it's changed my life. when i first started golo and taking release, my cravings, they went away. and i was so surprised. you feel that your body is working and functioning the way it should be and you feel energized. golo has improved my life in so many ways. i'm able to stand and actually make dinner. i'm able to clean my house. i'm able to do just simple tasks that a lot of people call simple, but when you're extremely heavy they're not so simple. golo is real and when you take release manus: this is a special edition and follow the plan, it works.

of bloomberg surveillance. good morning. we are moments away from the start of the cash trade. these are the futures. longest winning streak since 2017. new you -- do you really want to report money in these markets? or do you want to be more convinced? home prices headed towards records. you are seeing the consumer spending. across assets this morning,

yields by barricading around the 3.90 level. probability of rate cuts from the fed. who will cut more aggressively and faster, the ecb or the fed? crude is the explanation. up to .73% of the moment. -- 2.73%. carol: the markets have been mellow this morning. that is one part of the trading world that has stood out. it has to do with increased tensions in the middle east, specifically with what the u.s. has done with attacks in iraq. that has increased the concern in terms of does this spread further? that is really nervous is -- nervousness from day one. katie: the dramatic move in crude has not bled into cross assets. manus: we -- let's talk about

some of the deals on the slate. it may in theory be four days of quiet. how are you doing? >> good. manus: intel is taking $25 billion in israel. they have got incentives. this is israel trying to resecure its destination as that tech hub. >> that is right. back to the middle east for us. this is a $25 billion ship plan intel is building in israel. we knew the company was going to do this, but we did not know the likely incentive package. israel had announced the deal in june. it is 3.2 billion dollars. this entails intel spending $60.5 billion with israelite

suppliers over the next 10 years. this factor -- factory will have to do with wafer fabrication and will employ almost 12,000 workers across israel. last year accounting for 1.75% of the country's total exports. just expanding there, the ceo on an aggressive campaign of expansion to try and build up its technology capability. that is an interesting one for us this morning. manus: just one other deal on the slate, bristol-myers red. give us the topline details. simone: bristol-myers squibb buying raise bio, a company that specializes in radioactive therapies, targeting specific tissues in specific organs for cancer and not damaging outside tissues.

truest says this is a good deal for raise bio. we see that reflected in the share price this morning, but the transaction expected to close in the first half of next year. this investment the risks the radioactive drug space. -- derisks you active drug space. manus: let's bring in our guest, will smith. there is this narrative like -- of immaculate disinflation, soft landing. i am drawn to your observation about allocation. investors are under allocated to fix income and credit. with decompression in yields and spreads, what happens in 2024? do you think there is a major additional allocation of capital to credit and fixed income? will: good morning.

happy holidays. we thank -- thin k there is potentially a big rotation trade that can and should happen next year, maybe into the next few years. over the last decade, yields have been so compressed within fixed income that investors have moved more capital into equities and private markets. more recently, they have moved a lot of capital into money market instruments. when we look at some of the recent in yields and spreads, we think the market is starting to anticipate some of this rotation. if you look at an instrument like the money market space, there is about $6 trillion that are sitting in those investment vehicles. as rates start to move lower, investors will have to reallocate that capital elsewhere. we think fixed income is the

area that over a longer term horizon looks underinvested. manus: that is quite a conviction. it is your world, but what is it that makes you believe that bonds and credit will win the war against equity in that flow narrative from the money market world? institutions also have money in there as well. what is it that makes you think they will trump equity? will: two things are important. what is the starting point. investors have a lot equities in their portfolio today. you look at the balance of those portfolios and it looks unbalanced. you have a large allocation of equities and a large allocation of money market funds. you do not have that kind of ballast in the portfolio that you would like to see, things that will make you money if risk

assets selloff. that is what bonds do. we think that they can from here continue to do not because levels of yields are so much higher. that is the first reason. the second is that we think investors should align themselves closer to tax flows. what we mean by that is because yields are so much higher, companies have to pay more of their cash flow to creditors, which means that as a creditor yourself, you are benefiting from those higher rates and cash flow being diverted from shareholders to bondholders. we think that is an important dynamic and we think investors are starting to grab a hold of that narrative and like this idea of aligning more with cash flows and less with residual returns, which is essentially what a stock investment is. carol: i want to build on what manus said.

won't that be a great environment for riskier investments? will: get might be. the context matters. if we look at what happened last year, the fed and central banks hiked rates more than the market anticipated. that was good for credit. while it is easy to say that central bank cuts are also good, that might be misleading. if the fed were to go out and cut rates six, seven, 8 times next year, that is aggressive. the context matters. we prefer to see the fed and central banks cut just a few times next year and that is more because growth has held up and in flushing -- inflation come down. katie: the why behind the let's talk about how if that relates to the high-yield credit market. i thought this line in your note

was interesting. the overall risk, it is seen that generally, but a subset of the market needs a significant rate rallied to work. which sections of the credit market are you referring to? will: there is a staggering amount of debt that needs to get refinanced. we have never had this much that needs to be refinanced in such a short time. the vast majority is about companies having access to capital who could refinance that debt but they are waiting for prices to come down. so far, they have been right to rate. there it -- to wait. there is a percentage of that maturity wall within companies that do not have access to capital. the reason is that their balance sheets were constructed in a different environment, an environment where rates were

near zero and expected to stay low. there is a lot of debt put on these businesses. we see more of this in the loan market and in the private credit markets than in the bond space. those two markets have seen the majority of that kind of aggressive issuance that came out of the covid time period. those are the areas we are more concerned about. those balance sheets do not work with borrowing costs that are significantly higher than zero. those companies need to restructure their debt levels. katie: refinancing risk is still out there and still real. private credit, a guest last week made the point that the high-yield market in the u.s. has gone a lot less risky because some of the problem children in the high-yield market have gone into private

markets. does that thesis hold water with you? will: it certainly does. one simple way to look at this is the size of the triple seat universe in the high-yield on space. it is about 12% of the high-yield bond market. historically, it is more like 17% or 18%. going back to the great financial crisis, it was 21% for me 2%. there was a lot of private credit activity. lbo's refinanced the bond market. that has not happened. most firms are moving to private right. the triple seat space really has shrunk over the last five to six years as capital has moved into other markets. it is a very different high-yield bond space today than it has been historically. manus: we often talk about king dollar, u.s. exceptionalism. will there be greater

opportunities outside of the u.s. the credit sphere? or will the u.s. for you? will: we think it is balanced. european credit from a valuation perspective looks cheap, but we think it is cheap for a reason, which is the economy is weaker there and more likely to run into rough issues next year. but we are always finding some good credit opportunities outside the u.s., in europe, asia, india. we think building diversified portfolios is the key. you can always find good opportunities outside the u.s. thank you. let's see who cuts first and fastest going into 2024 and what level we have the u.k. and europe that they define the ex -usa truck. let's look at markets. the s&p 500 trades at 4766, up

2.4%. we are a whisker away from our all-time high. carol: do you think about what we been through over the last 12 months. manus: guest after guest after guest, if it is on credit, on bonds, on equities, to what extent does the maturity wall in your cd impact the flow show from money market funds back into equity and back into credit and back into bonds? katie: it was nice to get sort of a refresher from will smith. refinancing risk is still out there, even if rates come down. weaker balance sheets out there, they will still have to deal with that. it has been interesting to hear guest after guest talk about this broadening out of the rally. at least for the first nine months of 2023, everybody was saying this is an up coming

world. carol: that is certainly been the trend over the last month or so. but it is interesting when you have to tap the debt markets as a company what you can do at 3% or 4% or 5% versus 10% or 12%. manus: 10 to the patience of private credit investors. they can be more focused. carol: what we heard from sonali basak that private equity wants an exit. manus: keep bonuses may look sweeter in 2024. coming up, we catch up with charlie rose of invesco real estate. are you full bowl or nervous? are you full bowl or nervous? [announcer] if you're thinking

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with everything that i was going through. [announcer] we'll be with you from day one to graduation to your dream job. ♪ it all starts the moment you find your program. [announcer] go to snhu.edu to get started. >> the big story in valuation is china. it is a headwind but more a

fictional netflix story than reality. it is more competition but it comes down to valuation. that is why this year the bears focus so much on valuation instead of the underlying growth story that we believe is the start of a new bull market for tech. manus: senior equity analyst at web bush. you will have a moment in technology like we have not seen since 1995? where were you in 1995. he is talking about technology. apple will be worth $4 trillion. this is the state of play. s&p 500 up .25%. yields up ever so slightly. but this will be a thin liquidity market. i love carol massar. in 1969, the s&p 500 has averaged a gain of -- a gain in

the seven-day period after christmas. carol: do you do not mess with santa claus. there this fear of missing out. people have been jumping we finally have some clarity from the federal reserve maybe some expectations that there is a gamut in terms of are they really aggressive or just a bit aggressive? katie: we have clarity but did investors take it too far? 150 or 160 basis points of cuts priced in? carol: there is pivot and then panic. katie: doing away with the notion of higher for longer. manus: we will come out with a lot of cliches. is this irrational exuberance? is this correct exuberance predicated on rate cuts? we will debate that a lot in 2024.

you will also debate what will happen in the commercial real estate market. carol: does it come undone? manus: to has been a few quiet defaults we have not made enough of. let's ask charlie rose of invesco real estate. we have talked about a quiet recession. we have talked about a slow burn recession. give us your perspective on the defaults we have seen a 2023 in commercial real estate. have we assumed was going on? set the stage as we go into 2024. charlie: to go into the cliches, i think santa brought a gift for commercial real estate this year. that is the fed pivot. it is the first step we have been looking toward for there to be normalization in commercial real estate values. within the real estate credit

markets, we saw more disciplined this cycle as compared to the years leading up to the global financial crisis. overall, delinquencies remain moderate, well below what we saw during the covid lockdowns and less than half of what we saw during the global financial crisis. carol: you walk around to different major cities and you still see a lot of vacant commercial properties. one more thing -- just a few days ago, brookfield property, their issuer credit rating was cut to jump, and negative outlook by s&p global ratings, investor quality deteriorating amid higher borrowing costs and the office demand. the work file well-known, global player. how do you cross that with shouldn't concerned about commercial property? charlie: absolutely.

commercial real estate values in the aggregate are down, depending on the dataset you look at, right around 20%. but there is a lot of variation. commercial real estate cannot be painted with one broad brush. you have the office sector, which is about 20% of the sector overall. portfolio is right around 7%. commercial office has experienced more weakness. we are seeing relative strength in the industrial sector, still strong, positive rental growth in that sector, strong fundamental demand. still positive growth in the multifamily sector, along with a long-standing, under supply of housing. you have to look at property type. carol: location, location versus type, type, type.

u.s. office prices down 25%. this is data from green street, which is a real estate analytics firm. having said that, commercial office properties, is there something we are missing? a lot of people come on and safe remote work is with us. we might not feel it in new york offices, but it will stay and have an impact. charlie: our focus is on the multifamily and industrial sectors, where we are seeing strength and which today are the largest two property types within commercial real estate. office, i tend to compare it to the mall sector. in that 10 plus year burn that we saw, there are a performing malls. visit westfield century city, just west of beverly hills. sales are at record high levels.

we have seen some real strength in retail over the last year. office will come back, but it will be the best performing assets. in the meantime, there is plenty for us to do in other asset classes. katie: i do not need to tell you that a conversation about commercial real estate in march or april would sound different than the conversation we are having it now. a ton of doom and gloom about commercial real estate after what we saw the banking system in march. you point out that 32% of all cre lenders have exited the market over the last year. is that just banks going back? charlie: commercial real estate debt, a $5.8 trillion asset class. 51% of commercial real estate loans are held by banks. banks have pulled back sharply, over 70%.

that has been the single largest driver in a reduction in lung supply in the market, but we have seen other lenders pull back significantly as well, driving the reduction in active lender profile. the agencies have pulled back on their underwriting standards as well. we are seeing this large asset class with the record high level of maturities over the next couple of years leading low supply from the park -- traditional participants in the market. katie: what is the risk here? you talked about parallels with the malls, but industrywide, what still keeps you up at night? charlie: we have seen strong fundamentals across the industry, with the exception of

office, for the last several years. as the consumer weakens and as we have supply on the multifamily side, we have seen a tempering of that growth. multifamily rental growth has gone from that 50% to 20% range coming out of lockdowns -- 15% to 20% range coming out of lockdowns and has turned negative in some markets. we are focused primarily on the credit space, given the insulation that we can get in the credit space and by elevated base rates and spreads 100 bits wide. manus: we sat down with a buyer of deals who says the deals mothballs will be taken off in europe. he sees opportunities there, data centers, warehouses, and some housing.

are you dovetailing him? charlie: we are active in europe. commercial real estate markets in europe are less liquid than in the u.s., much less information available in the market. we some values reset more quickly. the growth picture is weaker in europe that there are values to be had. it is a much less market driving higher spreads in that market. manus: thank you for being with us, setting the stage for 2024 and beyond in real estate. we close with a quick look at risk. we change gears. nobody fell off. carol: nobody got hurt. manus: a bit of green on the screen, up .2% on the s&p 500. the run is not done. carol: four more days? katie: three days. carol: stick around.

bloomberg markets is coming up. sarah kunst will join the team. this is bloomberg. an ever-changing landscape comes with challenges. from our vantage point, we see opportunities. as a top-ten real estate manager, we harness the power of a 360° perspective, delivering local insights and global expertise across public and private equity and debt. our experienced team and vast network uncover compelling opportunities giving our clients an exclusive advantage. principal asset management. actively invested.

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