>> the key to 2024 is to be well diversified. >> you are trying to time it. >> policy normalization that we see and the slowing will be a boom for duration trade. >> in the last four to four weeks, -- four to five weeks this is risk off. >> the last rally was the evidence, weaponized fomo. >> this is "bloomberg surveillance" with jonathan jean, tom ferro and lisa abramowicz. >> it feels like the last gaps in trade is on because you are

-- europe and u.s. futures are off the highs. it is like the market gods heard that, global bonds on track for the best two month gain on record. u.s. treasury the second straight monthly gain. as for the equity side of things, the dow is at a record and stocks at a record what >> happened the s&p 500? >>it is taking its sweet time. it feels like the quietest all-time high. carol: i hear you are unchanged. >> i put it out into the universe. it would be great to get a perfectly unchanged today. carol: from new york city from the global audience this is "bloomberg surveillance" long -- alongside katie and manus. two more trading days. manus: do we get that record high? and if we do what happens into the new year. there is a wonderful chart that

we have breaking all of the surveillance roles but carol: they are away. carol:they are away. manus: we talked about whether you wanted to be in the magnificent seven and can you avoid it? in the first half you had a magnificent outperformance beating the s&p 500. in the back six months of the year you have this slightly muted performance. carol: we should break rules more often. manus: send them a note. carol: i am going to do a tease later on. disruption, innovation, crypto and we have a lot to ask her about what we want to ask about what the tech trade holds. katie: where she sees the spots and opportunities. when we look at the holdings it is a lot of crypto and tesla, but not a lot of nvidia. it will be interesting to see if she is buying into the ai narrative.

you think about that chart and big line, a lot of that was ai euphoria. manus: and talking about how she is shuffling the deck, she was in australia evangelizing on grayscale. that has shifted the gears. there could be technical reasons for that. carol: so much to talk about and we want to get to our first guest. barbara and bernard is the founder and ceo of wind crest capital. welcome to bloomberg surveillance. on a day where it has been quiet the last couple of days. today feels like more activity. how are you thinking about the markets as we get ready to wrap up the year? barbara: i love the weaponized fomo. i think the market has been giddy because the research has been better than expected and we had lower inflation. i would warn if you buy future

earnings on the basis of historical data is that you are in the rearview mirror. we have lower inflation because we have lower demand. this is pent-up demand facing a rally but i do not know how sustainable it is. carol: we like talking to smart people. you called it right when we talked about inflation back in 2021, june of 2021. putting out a story and you were among those in terms of inflation were not -- would not be transitory and you were right. can graduate -- congratulations and good call. what were you thinking about happened -- what happens in the economic environment last -- next year? you have a little bit trepidation. barbara: inflation is tricky to one plat -- to unpack because are many sources and anyone can dominate. if you look at this year it is perplexing. who would've predicted that you would have home sales down

coinciding with able market in prices? they are the source of inflation is not strong demand, an inelas tic supply curve. you cannot paint inflation with one brush but i can paint a picture where longer term are going to a higher inflationary environment where you can have short-term shocks. and the long-term catalyst is undeniable. you have an aging population. the young and old are consumers. you have geopolitics where we were having the supply chain going from just in time to just in case or china plus one. you look at commodities and there is a huge underinvestment. you look at peak oil, opec has never had more control. and when you think more fundamentally, there are only three ways to fight a debt burden. in the history of western

democracy there is an easy way out. default, deflate, or grow. and i think we will inflate our way out. longer-term we will be in a more inflationary environment. shorter term, you can have lower growth. manus: good morning. there is a lot to unpack. if i look through the narrative that you have given, you are skeptical of the inflow into etf and the inflation stories. . you are also skeptical on the fed put. if i go into the 2024 with that level of question ability, do we see some near-term realization and a drawdown given that trifecta of skepticism that you outlined? barbara: i am a contrary and by nature. you look at the equity etfs and they had $6.9 billion. the public buys the most of the

top in the least of the bottom. you want to be greedy when others are fearful and fearful when others are greedy. right now i would be fearful because others are greedy. manus: how fearful? a moderate 1% to 2% and we will not get the record high. are you saying that there is going to be a day of reckoning. bond yields are falling for the wrong reasons and this market is going to get a smack? barbara: what i would not be doing is piling into an etf. what i do see in 2024 is a more broadening out of performance where i think if you want to have alpha you have to be contrarian. if i look at my top contrarian ideas, commodities and china. china is the most hated market in the world right now. three and four years of decline which is unprecedented.

when sentiment is so negative it does not take much to change valuations and inflows. if you look in november, the chinese ppi registered a 50.7 versus 49.5. that is the fastest expansion in three months. i think you have to get creative. they did very well this year because of cost cutting. can they do that again next year and an arguably a lower growth environment. carol: the csi 300 is up. and it is like investors were recognizing china as we wrap up the year. katie: maybe that starting. it is interesting to say that about china. a story on the terminal today, you have goldman and morgan stanley among some of the big bank economists expecting that china's housing slump will persist.

the sentiment is negative on chinese assets. talk to us about the fundamentals. do you see the fundamentals improving or is this a catch up trade? barbara: the housing market in china burst and when they burst, they typically do not reinflate spirit -- do not reinflate. i also think that is the opportunity in commodities because demand in china is so weak. i really like that because if i am wrong and growth is stronger than i expected, those commodities should do well because the underlying prices will do well and demand will grow. and if i am right and we will have higher rates for longer those commodities should do well because it is tightening the coil because those are capital of intention -- capital-intensive industries and it will fund development. this is the kind of asymmetry

that i like. where is there enough downside already priced in where the downside is taking care of -- taken care of? katie: you also mentioned india as a top contrarian idea. when people are talking about em, they are bullish on india and they are feeling positive at the expense of china but that is not your view. barbara: no. india is a relatively safe environment because that is growing 7% a year. inflation falling to 4% and productivity growing at 2.5% and political stability looking like modi will be reelected. i would say the u.s. is just expensive. if you look at the s&p, it is on 23 times earnings and xus is on 15. and i can get twice the growth

for half the multiple i get excited. i think india is a safe plan and a beneficiary of people being so bearish on china because it is the only market. i was in the saudi and i am bullish on the 2030 vision and there are some great tailwinds as well. carol: those are interesting areas to think about. when you were talking about andrea -- india and china, how would you suggest that investors play that? what is the smart strategy and how much exposure? it is safe to say when it comes to china because of the geopolitics and wrangling that you have to have a strong stomach, again. barbara: i am a stock picker and the chinese consumer has been relatively resilient, particularly in the investment travel. and in india, india is trichet -- tricky because no one can --

not everyone can buy it. there is the expedia of india, which has a fantastic balance sheet and wonderful roe and and alignment of interest. carol: we are going to leave it there and #welovestockpickers. thank you very much. happy new year. so great to have her here as we wrap up. i feel like she gives us different things to think about. let us think about where we are in terms of the market set up. a few hours away in terms of the u.s. open and you are seeing futures almost unchanged. 4834. just not getting there. 4008 hundred 34. futures 1.11. that 10-year note, 3.81. katie: i have not seen yields go up in a wild. manus: we had a good auction and

we saw the tens dropped by 10 basis points. 24 hours and we are still seeing that demand for the deepest. as katie said, we had this josh about looking beyond borders for returns. the brits were out in front. it is the depth and liquidity in katie: katie: the u.s.. world's biggest bond market. manus: might not deliver the best returns. katie: we have another auction to look forward to. it has to be the last one, the final one of the year. we have seen strong demand this week. carol: if investors are anticipating lower rates those auctions look attractive. katie: might as well get in on the ground floor. carol: we have great stuff coming up. we are looking forward to talking about the european bond market and global bond rally.

and we are going to talk currencies in a moment but also about cathie wood and i am curious about what she has to say about china coming off of the conversation. our next guest is not so positive on china. so a good contrast. cathie wood coming at 7:00 a.m. -- 7:30 a.m. wall street time. we had a couple of stories hitting the bloomberg. as we said coming up, sonja martin. she believes that china will not be a positive story and then talk about what is going on in global currencies. you are watching and listening to "bloomberg surveillance" ♪

>> what was the cause of the united states civil war? >> do not come with an easy question. i think the cause of the civil

war was how government was going to run? the freedoms of what people could and could not do. >> in the year 2023 it is astonishing to me that you answer that question without answering -- without using the word slavery. >> what do you want me to slay about slavery? >> you answered my question. thank you. carol: that was nikki haley speaking at a town hall in new hampshire responding to a question from a voter about the cause of the u.s. civil war. the voters stunned when she did not use slavery and response. the first gop contest is in iowa on the fifth. carol massar along with katie got -- katie greifeld and manus. i have to feel like markets are going to be because nobody wants to touch that? manus: it is the u.s., all yours. carol: the markets will be thinking about these presidential candidates, or will they?

two trading days left in 2020 for the united states. s&p 500 futures are fat -- flat. it continues to move to the downside. we have talked about concerns about the middle east. $.84 to the downside and the 10 year, three .81. we have seen it taken a little bit higher. i do think about politics, geopolitics which is why we talk about crude a lot. whether it is going to be these november elections. the world is watching, the presidential election and these candidates. i will say that nikki haley and some of these debates certainly has a fair amount of knowledge when it comes to the global stage. and many would argue that is timely considering all of the pressures out there. manus: if you look at the geopolitical stage you have half of the world in peril because of the israel-hamas war.

you have a congress that is incapacitated in terms of how to help. between hamas and ukraine. we will face off literally those issues this week. the american position on its international position as it were as the number one ally and support is now very seriously in question. therefore it reduces blinken's passport when he goes to the middle east. that is not to say that america has dissipated in its function, that is how the world perceives america. carol: i will point out that the biden administration announced millions of dollars in weapons and ukraine. manus: it is nowhere near what they need. carol: they are pressing for renewal in the new year. a lot to get to with james, nice to have you here with us.

when you look at the situation in the middle east, the department of state and united states, antony blinken getting ready to go overseas to create some calm and resolute -- resolution into the middle east. how are you sizing up this on thursday? james: people around the world are looking for decisive action but that is not president biden's style, he has a process manager and has a terrific national security team of antony blinken and jake sullivan and they are also process guys. what the world needs now is a decisive signal that the united states is going to break outs as we go through ukraine and the study as we go try to maintain some semblance of restraint in israel. and just choose a side one way or the other to start moving. manus: what is it that takes the

white house to shift. blinken goes on this trip, forth to the middle east and fit in israel. our guests have said that his hand is not strong when it comes to negotiating with netanyahu because of this delay and it might well be overcome this month, this delay in funding. is the u.s. and a less powerful position to push netanyahu at this juncture? james: i think the united states is absolutely is in a less powerful position because we cannot pass the funding either for israel or ukraine. i do think that we will get the funding passed in the middle of next month. you also have to look at the situation on the ground in israel where you have a rare coming together where they want to prosecute the war and finish it. they are past caring what the world thinks of them. i think the biden administration

overestimates the amount of leverage that they have because they are really not as linked to the israeli situation as they could be or they are trying to run the world from washington and not tel aviv. katie: to bring this conversation to the 2024 presidential election. you think about biden trying to handle this geopolitical landscape with two hot wars going on. how does that play into the voting booth? will american voters vote on geopolitical issues or more concerned about the u.s. economy and domestic issues? james: i would point out that you have two hot wars and a border crisis going on. antony blinken was in mexico yesterday. a key move is to come up with a border deal, not to send blinken to mexico but to send blinken to cap -- but to send joe biden to capitol hill to cut a deal on a border arrangement and release

the funding for ukraine and israel. that is key to the equation. in terms of geopolitics, people are voting geopolitics. they are voting them in the state of michigan. president biden has a problem with the younger generation voters. part of this is due to the economy and inflation but part of it is perception that gaza is a humanitarian catastrophe as it is. but this is hurting biden badly with younger voters and swing votes in key states like michigan. so the presidential election is very well going to be influenced by events in israel. carol: what do you tell to your clients and customers in terms of the outcome in november for the outcome for the election? james: i spent most of last year telling people i was skeptical that the candidate would be donald trump the republican

side. i did not think that biden would last again but we do have a trump-biden dichotomy. the reality is that when you look at the swing state polls it is not only closely matched but donald trump might be the favorite candidate to win given his strong and intense support and biden's shaky support. i am not sure how things shake out at the end of the day. i hope it does not. we are definitely going to be in a different type of presidential race. i think that the supreme court and its role in deciding whether or not donald trump stays on the ballot and deciding how the trials of donald trump proceed. that is going to play a very high role in the election -- yes? manus: briefly, you also advise on energy and energy policy and climate policy in washington. and i am curious, record u.s. oil production and exports.

does it matter who wins the white house next year? how are you advising them because trump himself says drill and obviously big oil has done well under biden. james: it does matter because we are talking about the energy transition and how many years the u.s. oil and gas industry has left. there is no question that they would have a longer period of time to operate under a different president and there is no question that we had record output this year but given oil prices that output would've been greater if we had not had the biden administration's policies to bring down u.s. production. so you know, i think that on the whole the oil industry in the u.s. is going to be doing well for quite some time, and i am sure that it makes it. carol: that makes a lot of

sense. bottom line a lot when it comes to politics domestically and globally. that is what it means for energy specifically. thank you so much. everybody, coming up next we will check in with jeff on the european bond market. really it has -- as we have been saying, global bonds on track for their best two month gain on record. what happens in 2024. we are watching global central banks, who cuts first and who is more aggressive. this is bloomberg. ♪

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carol: from new york city for our audiences worldwide, this is "bloomberg surveillance" live. it is thursday, two more days of trading. let us get you set up in terms of the market trade. i feel like a broken ref -- record but the s&p futures close to a record but not. it is hard to say whether or not we would get there. 4804 -- 4832. down .75. nasdaq 100 futures a little bit of a strength, .2%. russell 2000 which was the

outperformer yesterday, outperforming the bigger caps. are you yawning? oh my gosh are you yawning? katie: i was thinking about how tired the small caps. carol: you hold on, let us go back to the boards. let us bring up the treasuries because we saw some upward momentum. she is not yawning anymore. we have the 10-year note up two basis points. 3.80 one. you have the 30 year at 3.97. when we think about what is going on in the mortgage market. katie: the whole curve is under 4%. manus: they are pricing mortgages at 8%. a friend was looking at a property. carol: you can say it, you are among friends. manus: it was not my budget. i do not even have a credit history in this country.

8%. and what is amazing is the limitation of products available. it is fix and bust unless to go to an alternative bank. carol: if you cannot buy an apartment you can buy an apple watch. let us get to some of the other headlines. apple resuming sales of its smart watches after the u.s. support of such court of appeals lifted the ban while the company seeks to overturn the decision. they were found to have infringed on two patents but says that the new software update mitigates the issue. a decision on whether that will be deemed adequate is due january 12. apple shares up .3%. katie: the watches will be back on shelves on wednesday in the retail locations. wider availability by saturday. i do not know, buy them quick. carol: i wonder it is going to be a pop and apple is like

everybody is buying? katie: is it like a collectors item? are you are -- if you are concerns -- manus: there are alternative products. she has the alternative. what is interesting is that the white house has backed off a little bit on this. the white house refused to veto the measure, so that is standing back. you had a valuation with $4 trillion. not worried. the china bulls have been very wrong. so get your bowls out for apple -- bulls out for apple. carol: full bull. we talked about the slump in china's housing production continuing. this from analysts at goldman

sachs, morgan stanley and other banks, that would leave china with three straight years of contraction citing declining real estate sales with developers less likely to start construction. who wants to build in this market. it is rough. one thing, but a major thing in china that officials have not been able to kind of resolve. manus: it has been a huge store of wealth. a huge propagation and the magnificent empowerment of the middle class. if you have a real estate investment it is down 8% this year. and for the whole of last year there was a drop of 8.4%. that gives you a sense, you see images of the ghost towns and these other networks and they have done their investigation. it was about middle-class wealth. katie: it is interesting even though you have this drip of stimulus trying to arrest the klein, it had -- arrest the decline, it has not been

successful. i am sure the global investment community would love to know. carol: definitely a drag. the global debt market, did we say this? it is on track to post its biggest two month gain as they ramp-up expectation for rate cuts. the total return index lifting nearly 10% in the past two months with recession risks underscoring the case. i feel like from the conversations we have been having is that people are pulling back on those aggressive moves. at the same time there is a little bit of momentum that it might not ultimately be a soft landing and maybe the fed will have to be more aggressive. and hear those positions what does that tell us about the outlook and should we be worried? katie: it feels like the writing is on the wall. you still have global central banks cutting rates and you translate that into the global curves and people are getting for duration. even though you have some

central banks and i am thinking about the ecb pushing back against expectations, it has not been landing. manus: lagarde tried to push back against and that was pushed back against. so, that is more than the fed, and more than the bank of england. so it is he or she who cuts first wins the race? katie: it is a race that none of them wants to win. carol: if you have global central banks cutting aggressively what does that say about the underlying world fundamentals? manus: they tell us it does not matter. carol: it always matters. geoff yu is global market strategist at bny mellon. does it continue the global bond market rally, into 2024? geoff: broadly looking at the easing cycle and we are seeing

people are going into duration and has too much been priced into soon? for the fed, yes. for the ecb, no. about madame lagarde and chair powell they are pushing back against easing and some are more credible against others. manus: lagarde is desperately pushing back. we are just showing treasuring the -- treasury yields around the world. you say that we are going to get more easing from the ecb than the markets because it is priced in at 170 five basis points. what does that do to duration in europe? geoff: i do not think it is about the amounts but the timing. about when they are pushing back. they are starting in march and the second or third meeting and that is a credible view. but sticking with the ecb and one other thing to look at, they announced more qt starting in

the second half. will they be in a position to actually execute that and is it going to be ready for supply even though they do want the duration. quite a few music -- moving parts at this point. there is a duration play but to put things in context, we saw three or four standard deviation moves and it will be hard to repeat that heading into january. after a correction the flows will head back and then they truly begin -- i truly believe that the fed will be losing that race. manus: they will have to go first and early. does that say something malevolent about the scale of recession. thankfully you've studied that rule and i have not had the depth of knowledge. carol: could you quiz manus on it because that would be fun. i manus: manus: am just kidding. it indicates when global recessions will start. run us through, further viewers

what is this rule and why does it matter. and where is the worst shirt globally? geoff: looking at the strict definition, the moving average of the unemployment rising zero point percentage rates to the low. applying it to europe which is what we are focused on right now, u.k. and sweden are not doing too well in that respect. they u.k. up i-40. in context, this can also be satisfied if the prior employment levels or unemployment rate were far too -- was far too low. the labor market was tight. and then you could have that push on them as well. going back to the hard or soft landing push, i think the u.s. is in the soft landing camp. overall, we need to focus on the fiscal side. can germany get past this in

regards the budget. what you do not want is for school contraction into a cyclical downturn. but that to be honest is what germany is looking at. katie: i hope you guys wrote that down because there will be a quiz. manus: i have the highlights. katie: during the show we will all quiz each other. let us stay in europe and i want to go back to what you said about the ecb's credibility because the market is pushing rate cuts and i thought it was interesting, you had robert holtzman coming out and saying rate cuts are not guaranteed. that is one of the most hawkish members. still, this pushback that you are seeing from the ecb. it is not landing. what are you saying -- what is that saying about the credibility. manus: inflate -- geoff: inflation data is surprising to the downside and

then your credibility is damage. it was transitory all the time and then it turns out it was not. the last thing that central bankers anywhere want is a loss of credibility on the way up and down. this is what they need to be attuned to. so what is euro-dollar doing? it is a fed story but can you justify having a strong euro with the export market being weak, and you see a downturn in the labor market. you see downturns and they finally soften into december. you see that this has been holding european wages up and that is coming off as well. it is really difficult to justify based on the date of the hawkish rhetoric at this point. carol: i am going to go into the bank of japan and we had some comments from the governors saying that it can reach a judgment on policy before complete wage figures from small

and medium-size figures come out and he did a interview with nhk. how are you thinking about this policy of negative rates that have been in existence for so long. do you see a shift in 2024 and can they do it? geoff: they will have to shift and that is part of the equation. we do see a material drop. it is going to be one of the best-performing currencies into next year. and also let us go back to what they are actually doing. leaving the wet -- the rhetoric aside they are tweaking bond purchases and it is happening. they will do it on their own pace and judge it on wages as you mentioned, and they know that employment -- importing inflation weekly does not work anymore. it will be a problem and one of the shifts heading into next year. but to be frank, asia needs it as well. if the yen is allowed to spread it will allow other banks in

asia to move a little bit more as well especially on the strengthening side and those with more inflation. and that will be the story in a pack on court -- on top of whatever china does. manus: the two wars will decide what happens to the dollar. your call is a soft landing and the market has rate cuts. my question is soft landing in the united states of america, short the dollar or sell the dollar on the rates and a risk on narrative? does that define a lower dollar 2024? geoff: the basis of the dollar has peaked. the pick -- so pick your shorts carefully. so euro-dollar should be heading back to parity given what i set about the ecb easing timing and the fed is going to be later than that. you will not be short the dollar. dollar versus asia and that goes to soften it up as well.

what are the two most important trading partners of the u.s. close to home? canada mexico. those will be interesting pairs. the latin american carry trade's and the bank of america. the dollar can hold its own against the canadian dollar and the mexican peso. carol: you are a rockstar, thank you so much. happy new year. he joins us on this wednesday -- it is not wednesday it is thursday. it is one of those weeks. manus: i am having fun with this. carol: coming up at 7:30 a.m., cathie wood. see what she has to say is the nasdaq is set for its best year. ♪

manus: enjoying a strong season in the english premier league, sitting at fourth place despite

changing their coach prior to the campaign and selling their best player. jonathan ferro sat down with tottenham's chairman to talk about the big issue. the influx of saudi money into football and the share -- and the sale of harry king. >> harry was willing to stay but not to sign a new contract. he did not say that he wants to leave and he did not say that he would never sign a new contract. he would not commit this summer and we are in a difficult position and it is a club and we are self-sufficient. we could not live in the dream that he would sign a contract. we had no guarantee and therefore when munich came along he was willing to go to munich and we agreed on a deal. jonathan: you'd since disclosed that is a buyback pot -- there is a buyback clause and that is getting attention. can we talk about the terms. what is it? daniel: i think the actual

precise detail should remain confidential. what i would say if that harry wants to come back to the premier league and he wants to come to tottenham we would have the ability to approach him. jonathan: we talked a lot about saudi arabia and the disruption and the summer transfer not just for english football but all of european football. are you getting players saying i see the contract in the newspaper and i want a slice of that. as us -- has this change things? jonathan: it gave 8 -- daniel: it gave a huge influx into the market. it is particularly tough outside of the u.k.. and i do not see what is happening in saudi arabia will have direct bearing in terms of player contracts in europe. jonathan: what do you expect it will change? daniel: it is another market for players to look to. not every player will want to go to saudi arabia. but as not every player wants to

go to germany, france or whatever. jonathan: he has transferred his all england football club to family trust and we understand how things have changed on that front. technically that means you have the no big billion -- you no longer have a big billionaire backer to and is at something for succeeding? daniel: the ownership has had no relevance for the operations. as far as very well for people owing football clubs. with the new rules, they are going to be engineered to such an extent that hopefully you do not need to be a very wealthy owner to have a successful club. jonathan: would you be open to selling stake? daniel: my answer has been the same. we have 30,000 shareholders. they owned probably 13.5%. we run this club as a company. if anyone wants to make a serious proposition to the board

of tottenham we will consider it with all of our advisors. if we felt it was in the interest of the club we would be open to anything. jonathan: has anyone made an offer? daniel: over the years. jonathan: what do they look like and where did they come from? daniel: all parts of the world, the far east middle east, america. nothing has been put on our table that we felt has been in the interest of the shareholders. jonathan: the stadium has been a big project and that is right for the club and people are starting to copy you as well. how big of an initiative has that been for tottenham and how will it underpin the success not just in years to come but decades? daniel: i think people do not realize how big a project building a stadium is. our project took us about 17 or 18 years from start to finish. i think you have to take a long-term view. i think that it has a major impact on the club, positive and

negative because you do not build a stadium for nothing. jonathan: a multi-purposes -- multipurpose stadium. it is not about football but music concerts and everything else in all above. daniel: when you look at the cost of building a stadium you are talking about huge costs of money. and you have to find ways of paying for that asset. and just having football club and football games is not enough of an income. jonathan: so what does music bring in. tell me what a taylor swift or beyonce concert brings in. how much can you make? daniel: every concert is different. it is not just concerts it is boxing and rugby and all sorts of it. you are not going to justify spending the money by all of those other events. what they do is to make contributions to the capital costs. i would say over a year we make

20 or 30 million pounds of additional revenue as a result. jonathan: what do the gate receipts for football compare or stack up? daniel: the gate receipts are over 100 million pounds. jonathan: they have come after antonio contact and jose. what was it like dealing with antonio near the end. daniel: you know, i had a good relationship with both of them. they are different. and as i said to my forearm last night, i said i made a mistake. they are great managers, just not right for this club. and you know, the way they want to win is different from how we need to win. jonathan: they are proven winners but what does that mean? daniel: our style of football that our fans crave is that we

want to tack and football. and if that means winning 4-3 and so be it. whereas their style of football is they do not mine -- mind being defensive and winning 1-0. we were in a situation where we were so desperate to win and when i go back four to five years ago, i think we would've taken any way of winning, but we did not. and when you do not win, we have a very disgruntled fan base. jonathan: where did the pressure come from to higher names like that? i was listening to the recent form that you did and you mentioned that certain players wanted a certain kind of manager. you alluded to that but i am prayer phrasing -- paraphrasing to some kind of extent. do they knock on the door and ask about that? daniel: it was not about the name but they wanted to win. we had some -- we had some -- we

had come so close with our previous manager, and we got frustrated. and i think we went through a phase where we said at us try something different and it did not work. jonathan: define success for the season. what is success for you this year? jonathan: that is -- daniel: that is difficult because i think i am putting unfair pressure on my new coach. for us we want to play football where we are entertain. we want to come to a game looking forward to a game where we believe we have a good chance of winning. we just want to entertain fans. jonathan: entertain and win? daniel: of course, but with style. manus: winning with style. a great conversation between tottenham hotspur. having bids from all parts of the world. carol: he was not having too much fun.

manus: he got a trip to london for the whole week. when it comes to the money that flows around the world the region that i just left which is the uae and saudi arabia they are voracious in terms of english football clubs and star players. saudi arabia spent 800 million dollars. that is number two to the english clubs. it shows that the names at the end of the career take the money, honey. carol: i was looking at tottenham telling three stars that they can leave the club. this happens. manus: they are strategically encouraged to consider the direction of their career. katie: in prepping for the show i did a lot of macro research and i learned a lot about politics. i did not expect to brush up so much on football? or soccer? manus: look at renaldo who went to saudi arabia and has a dispensation of how he lives and

how his lifestyle is. there is one of the big sovereign wealth funds in the world has decided to trim some of their exposure to saudi and other gulf nations because of a whole host of reasons not the least because of human rights. there are a lot of different pros and cons with now is the time to invest in saudi. carol: listen there is so much money in sports whether it is football, football overseas or globally, football in the united states. whether it is streaming or traditional linear television and broadcast but that is where there is an awful lot of money and that makes sense that you see a lot of attention being paid to it and a lot of folks play -- paying up big time. we are going to shift a little bit from sports. coming up next we have sonja martin getting her thoughts on certainly the environment when it comes to 2020 four. she is coming up in a moment. ♪

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when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. we have been able to reach over 100 million people impacted and affected,

and at risk of hiv. the rocket fund takes all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> nikita 2020 is to be valid diversified. -- the key to 2024 is to be well diversified. >> the last four to five weeks, risk on has taken precedence over risk off. >> this rally that we are seeing now is the trading evidence. >> this is bloomberg surveillance with tom keene,

jonathan ferro and sub rhomboids. -- lisa abramowicz. manus: alongside my cohort carol and katie. double nickel is the phrase that is used. that is what the nasdaq has done. do not get the order wrong and do not screw it up. where was i? trading bonds badly. my first bloomberg terminal was 1992. carol: but it was the era where you through.com off of everything. but is it? i would say that the tech trade is much more logical. i feel like investments get smacked down really quickly and plant the markets versus back

then. katie: there are so many comparisons to the tech bubble but also to the internet. it is as interesting as the internet was. i was not paying attention to the markets in 1999 -- carol: thank you, katie. you can shut off her microphone now. katie: i tried to keep an open mind when it comes to ai. manus: we have already had a couple guests this week that are very bullish. but also referring to this moment in technological time, which is ai. you had this technology revolution and you had alan greenspan talking about a paradigm shift. i we set for something stellar in regards to productivity and labor market?

these are the issues. carol: for the unknowns, in terms of the impact they have. katie: when does it translate into profits for these companies? carol: nvidia is working out. katie: but think about the companies that are spending billions of dollars on research, near-term, which seems like a little bit of a margin pincher. manus: the big narrative is the bond market. it is led up. we have had -- we have been warned, but it is a global momentum. katie: it will be interesting to see where the floor is. briefly, just fantastic moves that we have seen there. is 3% inevitable or maybe be returned for percent.

carol: half of the fleet avoiding attack. we see this risk on trade, whether in global bonds, or talking about equities. we have been talking about crypto. manus: we have a full package of crypto for you in just under 30 minutes. we will be able to talk crypto. carol: it is a reminder that there is serious stuff going on around the world and we are not sure when this will come to an end, if it expands, if we see a wider conflict in the middle east. there is just a lot out there. manus: we will see what can be negotiated. not done at all. let's check the markets for you. good morning to you, if you are joining us. it is a fairly flat looking

board for you this thursday. seeming much more aggressive relative to the u.s. pick. bonds, as we just said, looking at the lows, we drop by 10 basis points. my voice will last until the end of this market check. we add to that momentum. an inventory buildup. you are looking at that. nine weeks in a row. let's bring in sonja martin. we will see what she makes of these calls. a very good morning to you. the stage is set for a soft landing, we have been told, and a drop in the dollar.

the last guest to talk about the dollar suggested that he pick your dollar very carefully. how do you see the trajectory going forward into 2024? is the dollar reflecting that already? sonja: we have seen movements in the markets as of late. it is likely that we will continue to see that. i was looking at a chart this year. we have been trading in the lows. we have really fluctuated and have become very bullish, very bearish. what we have seen in the bond market. as you mentioned, there are so many stories happening. talking about rate cuts, how similar the slowdown will be in the u.s. and what is happening

on the geopolitical stage. there is a lot in the mix. i love the fact that you have been using this term because it describes perfectly how investors have been rushing like mad in one direction and then the other. carol: is it going to be a race to the bottom when it comes to cutting rates or a little bit more tempered? sonja: i think they are currently massively overdone. we are all celebrating the fact that inflation has come down. i do not know how it is for you guys. but let's face it, inflation seems great but 3% means it is getting expensive. it is just not getting as expensive as before. the problem is it will be quite

sticky. when you pick up inflation in early 2024, that should dampen expectation. they will not be able to cut rates until inflation has come down more significantly. i think it will be later than what the market is currently expecting, so it will not be as aggressive as what the market is pricing in. katie: it will be fascinating to see that last mile of inflation playing out. let's talk about the rate differentials between the ecb and the fed because i think it is striking that you are seeing the euro rise to the highest level since july. take a look at market expectations to move more quickly and aggressively than the fed. how does that translate against this strength that we have seen? sonja: it does not make sense,

if we are being honest. it is not fit together. it usually goes hand-in-hand with a stronger euro. you could always argue the economy side you could argue that makeups are positive. i have been in this business for more than 25 years. you could argue it either way for the story that you want to tell. i do not think the ecb is anywhere near cutting rates. but people are not listening, and they will not listen until the data is there and we are expecting inflation to pick up again early in 2024. when that happens, the narrative will change again. let's not forget that this is christmas now and it is really quiet. i would not put too much focus

on what we are seeing today and the next couple of days, waiting for the second week of january. katie: maybe there is some volume coming back into the market. i want to talk about china because at the top of the show we talked to a contrarian bull on china. the sentiment seems to be in the gutter, but you right that it will not be a positive story next year. if that is the case, what does that mean for europe? sonja: china is definitely not a positive story for us. we have plenty of problems. the real estate sector is still very wobbly. there are a lot of problems in china. this is something that we will feel quite keep me in europe. we have a weak economy. germany has been particularly hard-hit at the moment. pretty weak growth and we will

not get a positive kick from china, so even though we are expecting things to pick up slightly, it will remain very anemic. honestly, where should it come from? manus: let's finish off briefly with the u.k. we have done the survey and we are going to skirt that. 3% growth for next year, but if we are misunderstanding but the ecb is going to do, how mistaken are we in terms of what the bank of england will be capable of? how long does that endure? sonja: again, it seems overdone to me. early this year we kept getting mixed up because they did very well on the back of the u.k. economy not doing as bad as expected. we are seeing that happening again now.

a slightly positive surprise there, but still pretty high. the bank of england will not be able to cut rates nearly as fast. also, the sterling is not a winner for 2024. manus: they have been hammering home that message that we are to presumptions and to assuming about the rate cuts that we are going to get. we wish you a happy new year in advance. i'm sure we will see you in 2024. and if you are just joining the program, let's check what the markets are doing. s&p 500 at 4833. that is down .25%. it is interesting, her point about the ecb. all have -- we are all obsessed by 150 basis points of cuts.

it changes each week in the u.s., likewise in europe. inflation is going to be sticky. they be putting a floor under that euro-dollar. where the big trades seem to be is in fx. katie: i love fx because it is a zero-sum game. it is easy to follow and that way. i keep going to the point that you keep bringing up. when you think about your dollars short, you have to be very careful and select. maybe not in europe, but around the world, there is plenty of opportunity. carol: the difference between what equity markets are telling us versus the other, one of them is going to get it right. katie: think about the pricing for the ecb and then take a look at the euro strength against the

dollar and it does not make a ton of dense right now. manus: if you have such a demise in rates in germany, the u.k. and u.s., is it something much more malevolent in the economy? carol: anticipation of lower rates. manus: absolutely. coming up, we'll catch up with isaac, director of policy and research, right here on bloomberg. a very good 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? ♪

>> president biden has a significant problem. part of this is due to the economy and inflation. there is this perception that

gaza is a humanitarian catastrophe. the presidential election could very well be influenced by events in israel. manus: a senior political analyst over there. we are waking up to antony blinken with his trip. that is one of the big questions that we have. fairly flat on these markets. of 55 percent. we also had a floor. listen to lagarde. yields are kicking up ever so

slightly. katie: that was after we broke 380. lily looking across asset classes. carol: it feels like everybody is squeezing in gains, but it is limping towards it, and some ways. curious about how it sets up for the new year. manus: where does that get invested into the act of but geopolitics are fun and center. one of the stories is about the amount of global trade that is potentially at risk because of the flareup in the red sea and the issues from some of the proxies. isaac is the director of policy research. a very good morning to you. we are setting the table for the visit to the middle east.

a huge problem after various swing states. does he have a growing political issue that could really challenge him as he goes into this election on the position of the hamas and israel war? >> look, i think the white house is undoubtedly concerned with numbers, regarding that. when you look at that segment, 18 to 29-year-old segment, you see real slippage in the president's support. one that i continue to look at focuses on key battleground states. biden is leading by one or two points in those battleground states and there is undoubtedly a concern for these young voters. it might be the middle east, student loans or any number, but what i hear when i talked to

democrats is something that i think they will repeat for themselves for the foreseeable future. it seems as though young voters dislike the democratic party on every day of the year except election day. it is very easy to extrapolate and expand on some of the dynamics, but when they get to the polls and are asked to pull -- pull a lever supporting either joe biden or donald trump, democrats feel relatively comfortable that younger voters will show up. carol: how much are you betting that it is another matchup between joe biden and donald trump? how important is it, who he is ultimately running against come november? >> i found it interesting the past couple months. democrats continue to say that there is a chance that i could step back. contacts continue to say maybe

there will be support that coalesces around nikki haley or someone else who is set to overtake trump. carol: go ahead. >> at this point, there is a fair amount of hoping coming from the traditional bases of parties. we look at the numbers and you look at the way that the primary system works with a lot of these states being winner take all. you have to assume that it is joe biden versus trump. what i am focused on and what others will have to remain cognizant of is the last election between joe biden and trump was decided by thousands of people. we have to start layering in how third-party candidates could impact the calculus. carol: i think we all care about

the outcome because we are looking at the balance of power newsletter. risk of a new global war, talking about conflicts overlapping from ukraine to the middle east. this time in terms of another mobile or, that it starts with a bang, not one big incident, but several things brewing around the world. who is in the white house will be important. how do you think about the situation that we might be facing come november? >> i think we need to be as humble as possible. no one in my seat was talking about a war in israel four months ago. no one was talking about the red sea month ago. we need to be humble and understanding that there are no clear mile marker's from

geopolitical perspective, but we can understand how we as a country respond. that has been the struggle. traditionally, it was pretty easy. that was something that he would see cruising through with unanimous support a few years ago. our ability for politics to stop at the water's edge, which has been a driving force in american egos for years has stopped. our own political dynamics are difficult to have a unified international stance. it makes it easier for others to rise, which is what you are seeing with saudi arabia. to me, it is more a focus of the domestic dynamics. governing problems. they make it harder for us to be the force that the world has grown accustomed to since world

war ii. katie: in late november he published a year ahead look and took a look at the winners and losers in this potential election. in the democratic white house and a republican white house, use on the defense sector as a winner. what does that say about the year ahead? >> democrats want a small military. republicans want a big military. i think that is something that is a truism that they can really sink their teeth into. we are going to have continued spending on security defense. it is something that will happen whether republican or democrat in the white house. it is one that is interesting

because i think it is relatively safe from political volatility, given the world that we live in and resistance that both parties have embraced. manus: as we go into 2024, this time next year we will know who is in the white house. what is the risk? carol: i remember all those broadcasts afterwards. manus: but very briefly, what is the risk, if there is a shift? does it have an impact at all? ? trying to separate signal and noise.

the 400 billion dollars in green energy tax credits is safe. you can say not with emphatic certainty. it simply will not happen. here is one reason why. some studies have suggested that the flows have benefited by and large almost 80% of early dollars are going to red districts. that is the brilliance. they are structured as tax credits and republicans do not like getting rid of tax credits. manus: we have to cut it there. thank you for being with us. up next, the queen of tech. ♪

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manus: for our audience worldwide, a very good morning. alongside me is the crew. carol massar and katie greifeld. newly 7:30. a little hint of green. the nasdaq is up. the darling of the world up 55%. it was not as resplendent as in the first half. roll it over and have a look at the rest of the markets because you are looking at yields

ticking ever so higher. a robust bond market action. you are looking at a nice smooth down. down by 10 basis points. the bond markets took the auctions quite well. let's see how we do later on today. global bond markets are up by double digits in november and december. there is a world beyond borders. let's take a look at the bond markets. willie endure? talking about parity. be careful of what you choose because. he is on its way. -- parity is on its way. a snapshot of surveillance this morning. we are waiting for data. the regional fed, regional banks are expecting the labor market to cool in 2024. same manufacturing employment expectations are the weakest

since 2009. the number of texas manufacturers expecting an increase in jobs is at the lowest levels since the start of the pandemic. we will break that down for you. apple resumes in the sale of its latest smartphone watches in stores after an appeal court rules on lifting a band. the company is in a dispute over it. they will resume online sales by noon pacific time. one of kathy woods' etf's are shaking up. bitcoin has more than doubled this year in hopes that they will approve the holy grail.

we are waiting with bated breath. carol: we are all waiting with bated breath. kathy, merry christmas and happy holidays. so glad to have you here. we do have this story on bloomberg. tell us about this overhaul in your thinking when it comes to how your thinking about your investment strategy when it comes to crypto. kathy: we are as optimistic about bitcoin as we ever has been. but there are a few regulatory and tax uncertainties, and we had been waiting for the discount between the ptc and now

to narrow. it was as high as 50% at one point when there was great uncertainty around all the turmoil, and now it is single digits. there are now other products out there that we can use to gain exposure to bitcoin, in this moment. it is just a moment of uncertainty between now and january, january 8 to 10th. out of an abundance of, we did not want to take any risks. let's get a little bit specific -- katie: let's get a little bit specific. but caught a lot of people's attention is that you so down your remaining egg. you bought into the bitcoin strategy etf, which tracks bitcoin futures. can you explain that shuffle?

what was the thinking there? cathie: it is already approved. there is no regulatory uncertainty. we chose to maintain our exposure for the time being and as i mentioned before, there are some tax and regulatory uncertainties as part of this process. we do not know exactly who will be approved and whether they have met all of the criteria that the sec has put before us. we know that we have, but we do not know if others have. we just do not know. dpt's discount was as much as 50% relative.

not only have we enjoyed the run, but we have had a nice closing of that discount, which has been double good news. carol: is it possible to get approval? cathie: we think the probabilities have gone up because the sec has been highly engaged. before, it was just denying approval. we kept putting our filing in again. , so here we are. we think we are first in line, which is why there is this january 10 deadline. we like the idea that they have been so engaged. we think a number of funds could

be improved at the same time, and they have been asking not just one set of questions, but follow-up questions, which is a very good sign. the last few questions have been very technical, so you would expect them to be asking these questions as we head towards an approval. it is not 100% certain. we want to make that clear. this is the sec and we never know what might happen along the way. carol: you mentioned engagement. let's talk about engagement. easily outperforming some of the major market benchmarks. still down from 2021, but for you, a lot of critics. you have a lot of fans and a lot of critics. does it feel a little bit like a

victory lap this year? cathie: we are very happy that a couple of things have happened. this idea that interest rates were going to continue moving higher has been proven incorrect. even the fed, while there is that small possibility, the fed is starting to talk about the other side of the interest rate move. i believe that all we have seen so far is a reaction to that judgment call. we went through our flagship strategy and all of our strategies went through a difficult time through december 2022. interest rates were presumed to move up or forecasted to move up. and then they did move up. it was like a double discounting. we have seen the first installment of the correction

there to the upside for our funds with this notion. the forecast that interest rates will come down. we would presume that if they do come down for the reasons that we think they are going to come down -- the most important one being deflation, that our funds will be a good shape because our companies thrive on deflation, technologically enabled. manus: this is the first time that we have met. we will move to a deflationary environment. let's wait a moment before we talk about the funds. how much interest rate cuts do you presume that you are forecasting? what do you presume will happen next year? cathie: we put up a chart in a youtube video that i do every

month on employment friday. in that chart, you will find a ratio. metals price to gold price. there has been an extremely tight relation between that ratio and long-term interest rate. in october, we published it. what you will see is that there was a very wide gap that had developed. the metals to gold ratio was near its low for the past 15 years and interest rates were at their high. the correlation, if you just eyeballed that chart suggested that reads should go to percent. maybe they will not go all the way to 2% but we think that long-term interest rates are way above because of deflation.

manus: we will come back to that. i have to ask you about the flows into the funds. you have a little bit of a victory lap going on at the moment, but this is the first year of outflows. have those outflows stopped you from having a good performance this year? have the outflows stopped? has that bleed stopped? cathie: we were very gratified at our asset retention in 2021 and 22. we had inflows, if you combine both years, of more than $18 billion. this year, one might expect that those who averaged down into the very steep declines that we were seeing in 2022 especially -- it might take some profit. i know for our flagship strategy is roughly $500 million, maybe

for all of our strategies, 1.8 million, so 10% of the inflows that we enjoyed during 2021 and 2022. we are grateful to our clients for the support that we continue to receive. manus: has the outflows stopped? cathie: we have had days recently, yes. part of this is many people do tax management towards the end of the year, so some of the outflows might be associated with a client that got in, but i think we are through that. carol: do you find it surprising given the run-up? it has to be a little bit disheartening. cathie: not at all.

we put out a piece for resolute, our distributor. we basically showed them, if you rebalance our strategy when there have been moves, one way or the other, if you rebalance regularly are based on a rule, when the funds are up 15% relative to anything else, take some profits. what it showed is that if you are disciplined that way over any five year period, it is highly likely, almost 100%. you could beat the market over a rolling five-year period. a lot of our funds are with advisors who are very sophisticated and responded somewhat in this tax management

part of the year to that message. carol: sit tight. we will be back. it is amazing that we have not brought up elon or tesla yet. a lot more in terms of conversation. curious about a i and nvidia. if you are just joining us, the s&p 500, call it change right now. more with kathy woods, coming up. a quick check of the 10 year. a little bit higher as we talked about some of the auctions. we will come back in just a moment. ♪ (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? ♪

carol: let's get back to cathi -- let's get back to cathie

wood. i feel like we have to talk about tesla and elon musk. i know you just had a conversation on twitter/x. you have had this investment in tesla. when we first talked and you were getting started, you talked about him being the next thomas edison and how his vehicles would turn the u.s. economy upside down. having said that, there is an evolution. how are you thinking about the tesla story right now? cathie: thank you very much for letting me interview that time? you gave us that opportunity, so thank you. the world is evolving even more closely to what we expected

because we expected a lot of traditional auto manufacturers to see the writing on the wall and rushed as quickly as they could into scaling big time into electric vehicles. both gm and ford have said, we are stepping back and we are not going to do this until it is profitable. in order to be profitable, they need to scale. these are learning curves and they are expressed in cost kleins. katie: i want to keep the conversation going on elon musk, but i want to bring it to the fund. take a look at the portfolio. you also have x formerly known as twitter.

you had written down your twitter stake by 47%. fill us in on the past couple of months. how has that changed? cathie: it is still there. we have to be very careful. it is a 40 act fund and we have to work to market every day. our clients can get in and have access to these amazing companies for just $500. that is the good news. the markdowns -- if we see in the secondary market employee stock trading at a steep discount, we have to take that into account. if we see others in the traditional world like fidelity and others, marking their holdings down, we need to take that into consideration during our daily market. we have a five year investment

time rise. do we think that is where belongs -- x belongs? absolutely not. a $20 billion valuation for what we believe will truly become the everything app. elon started his entrepreneurial career in the payments industry. he has been thinking about this for a long time. he has many transmitter licenses and more than half of the state. we learned that the other day when we had our interview with him. he is going for it. katie: we will see if that one lands. let's talk more about the private markets. the private credit market has gotten a lot of attention right now. you are looking at this integral fund that you have. when you think about the opportunities on the horizon, do you see more so the public

markets or the private markets right now? cathie: now that we have had this very nice run this year, we think the answer to that question is in the private markets, they are close. what is fascinating is that the public markets have been leaving the private markets for the past three years. as our funds were falling in 2021, private evaluations were going to all-time highs, along with the nasdaq. but real innovation, if you look at our portfolios was starting to revalued to the downside. we are still seeing major down rounds taking place in the markets. i'm always surprised at this sort of thing because you would think that the private markets lead the public markets, but that has not been the case in

the past few years. carol: i think whenever we think about elon musk, brilliant also erratic. i'm curious about how you think about elon the individual versus elon and the companies he has created. any other ceo of a major company -- i think it's safe to say that they would not be able to get away with a lot of what he has done. educate us about how you think about it. cathie: first of all, very often we just look at what he does not exactly what he is saying, which can be a distraction, or it can be an advertisement for his cars or for x, or spacex. but we have a scoring system, as we are evaluating companies and their founders, and their management teams. there are six metrics. one of them is mote and barriers

to entry. i think elon is a maestro of raising barriers to entry with innovation, and that is so much faster than anyone else because he is so first principles and his analysis of how to approach a new idea, a big idea. manus: tell me this. as you look at that, does he hit that bar? you have tony would -- wood. does anybody come close to elon? is brian armstrong at level with o'er and above -- with elon musk or above? cathie: we do look at our

scoring system at the scorers. valuation might surprise people. those are six scores. but all three of them score very highly. which one scores the highest? they are actually very close to one another, to be honest. manus: one of your key holdings, we talked about that. i'm curious to know, and openai, the valuations have raised between $80 billion to $100 million. when you take a position in openai? will that be part of your holdings as you explore the next step in ai? cathie: in our private

portfolios, we are already exposed to a major beneficiary of the drama around openai that we all witnessed a few months ago. if you look at gpt for, the largest language model that openai has published, it is way above others, in terms of performance. there you have it. the pros and cons. we cannot tell you what we are going to do and then portfolio, but we are so impressed at how openai has led the industry. we like to encourage more of that movement. we know that meta-platforms is working on others and moving very quickly. a much lower cost.

companies can get close. we want to see the open source movement. in the venture fund -- carol: we never have enough time with you. can i ask you a quick question, five seconds? any future etf's coming our way from you guys next year? really quickly. cathie: we bought a company in london. they have some very interesting funds. carol: we will leave it there. we always have our audience wanting more from you. happy new year. if you missed any of it, check it out at bloombergtechtv.com. coming up, and rathburn. this is bloomberg. ♪

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>> the fed is going to be forced to cut together very restricted territory. >> as probably because the economy, is a question of when the fed cuts and how much they cut. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. >> six rate cuts means things are coming undone. having said that on this thursday the nasdaq on track for its best year since 1999. the dow sitting at a record, could the s&p 500 be next? from new york city, a very good morning. this is "bloomberg surveillance live on radio and tv. that is our set up on this thursday morning. >> everything rally come here we are. carol: all in. manus: seems fairly robust, she

has had a tough year. i like when you said to her is this a victory lap and she is very modest. carol: you guys know this, bring they also create of innovative funds. really noting her strategy at the same time. >> and love copycats to pair with those critics so i'm glad you asked about the out low. it is such an interesting case. usually you would expect flows to follow performance even though you can't argue with is numbers. you've seen that outflows in almost every single one of her etf's. curious to see how that dynamic shapes up next year especially if we get this friendly fed that everyone is expecting. >> right, like what happens with investors? >> to be fair, this was the come back here.

over three years, down 25% and over five years just a gain of 9%. so the question is has she still got the midas touch? she saw a lot of stocks very early, you've got to give her that. >> these are stocks that were not necessarily on everybody's radar. for such a long time elon musk was not getting any kind of respect and she kind of stuck to her knitting, if you will and stuck to her fundamental thoughts on this company. >> she did say openai. she didn't commit to whether she was able to get a hold of any but i think it is probably too early for that. >> we've been talking about the news from think about her public portfolio, taking public falla, she does have some exposure, but ai does seem to be a huge theme. >> and her concerns were about valuation.

>> the birth that the s&p 500 in the front half of the hale-bopp ever since like the second half of the year. a less magnificent performance but it is still have. >> lengthy was going on the market that up we've been talking about it all morning, there it is. take a picture now, get it. i wish there was parity with the euro when i was there. would have been a little bit nicer. seen a little bit of support upside to the yield on that tenure. new york crude down another 1.2%. we continue to always keep on the radar what is going on in the middle east, concerns about the conflict at the u.s. secretary of state here antony blinken gets ready to head overseas. having said that, keep

investment officer, welcome, welcome. almost happy new year. how are you thinking about the new year when it comes to investment basis? >> the markets have been kind of rotting up on hot air, and that definitely makes us nervous. we are diversified investors with diversified portfolios. but the upside didn't come from the valuations being superlow. it wasn't a huge buying opportunity and certainly the fundamentals don't look all that strong going into 2024, so while we are just as excited about innovation and what back to do to the economy like cathie wood, it doesn't mean that the other areas of the economy will have weaknesses. >> so you see a red flag when you see such a rapid decline in on yields. would you be then exercising the

intent to be longer duration as a hedge, you think bonds will be a hedge in the u.s. economy here? >> the bonds and stocks, they've been moving with very high positive correlation. that is not always the case. at some point we are expecting that correlation to break down. when there is a lot of demand for treasuries as we saw in the two option in the last few days, some of it, yes, it is a rate expectation, a rate cut expectation, but i always wondered to myself why is there such high demand? especially when things are a little bit shaky in the world in terms of geopolitics. it makes me a little bit worried that there is still some kind of a safety place built into it as we look forward. so in 2024, we do expect there to be a safety played into bonds. holding onto bonds isn't so much

that yields are going to fall precipitously as we seen in the last two months, it is more about a safety play. >> getting deeper into the psychology of booth -- of this, it seems like our word of the week is fomo. how much do you think could be fomo that people missed out on 10 year yields and they want to get to them before they get back down to 3%? >> i think there is certainly some of that. i would expect to see fomo more on the equity side but certainly those yields are very attractive. the two options that i was talking about our two year and five years of we are not talking about long duration, we are talking about shorter duration. while there is a desire to capture that high yield, there is also desire to play it safe. though short-term treasuries are more liquid than the longer ones.

>> another object coming up today, seven year note. but let's get to equities because you writing your notes that right now, the equity market looks a little asked insist. you take a look at evaluations and then you consider the psychology of this market. does that overwhelm maybe some concerns about valuations at this juncture? >> not really. i am waiting for some kind of a calendar affect in january, but also a lot of the fomo in the equity markets has been from the retail investors. there is a little bit of a pattern of when the retail investors get excited about fom o, sometimes the valuations are in the overstretched area. we do believe it is overstretched. and look, even if the fed cuts six times as the market is expecting, i don't believe that

will happen, but let's just say it does, 25 basis points each, that is still about 160 basis points down. that is upper threes in terms of fed funds rate. we haven't seen rates that high since 2008. >> do you feel like next year we could have a year where there is a first half and a second half in terms of the trade? how should investors be looking at it especially as we try to strata rise -- strategize would global banks will ultimately do? >> global central banks, they are all combating different inflationary profiles. this idea that everything is going to go the same direction as we have seen the last several decades, i don't think that is necessarily true. so as soon as we have some kind

of data point on inflation or the job market that actually works against these expectations, we have to be careful on that. in the second half i do think there is high expect asian or probability of the that actually cutting and if that is the case that will definitely be more preferable for the markets. >> let's get your call as we close out the week, everybody talking about diversification. that tail off in the latter part, we are showing that your audience. this was based on earnings growth, robust cash flow, strong balance sheets and cost cuts. can that endure in 2024? >> they spin some comparison of what we are experiencing now to the 90's, and i don't like that comparison because what we ended up with was a tech bubble. but i don't think that is the case here. as you say, the fundamentals have been solid.

the risk there really is on the entire s&p 500 and looking at the gains and thinking that we are ok when it is really seven stocks. but as i said, there might be short-term volatility, but there is a lot to be expected about innovation and technology and how it is going to actually change the way we work and make us more productive. >> can ask you to wrap your? what is it you spend the most time without? >> fundamentals, the economy. consumers is a date, big topic because the economy is really driven by the consumers. lately we've been talking a lot and geopolitics. the red sea situation is inflationary. we don't really know what is coming in 2024. i'm a little bit surprised that

after having gone through a supply chain debacle in the last few years we don't look at this as a potential risk to the chain. it certainly is. geopolitics has become a big topic for us. >> thank you so much. curious about what the fed might be talking about when it comes to geopolitics. thank you so much, happy new year to you and yours. that is a long ways to go. >> a lot to look forward to. >> can powell. pivot backwards? >> is a double pivot just a 360? i'm just wondering. >> no pivot when it comes to s&p 500 futures. we are pretty much unchanged on the numbers. we are up 0.01%. >> there is no drum for that. >> i think that is pretty inspiring. >> you can yawn now. >> even if we put the percentage

year to date it would be much more exciting. >> it has been quite a run on the major equity averages. so much of the momentum coming from late october really was a late 2023 rush. >> i also managed to show that chart about how the magnificent seven has really petered out. the gains the nasdaq 100 has put together and then the sentiment over the summer, it was really pretty poor. the narrative whiplash that we've gotten this year, i'm tired. >> apart from that, you galloped straightaway through. this global bond market. there is a u.s. bond market rally obviously that has lit the torch flame of a global bond market. i did give it to you both in the end. it's the u.s. bond market that lit the torch of a global bond market that delivered

double-digit returns globally. >> we talk about the magnificent seven but i'm looking at small caps since late october, 26%. it has been broadening and. a lot of market strategist have been talking about the broadening out of the rally, healthy, good but if the u.s. economy starts to come undone in 2024, watch those small caps coming up, our market conversations continuing and the economy. lara rhame reacting to jobless claims data. just about 17 minutes from now we've got a read on the labor market.

>> we have the supply side story coming from the u.s. the market wants to see inventory draws start to come.

we saw a big builds coming in in january. we start to see draws in february and march and that is where we start to see that. >> the director, it is interesting talking at the energy markets. oil, we do see it pulling back for a second day as we continue cc stockpiles of the united states enough. we do have thin volumes in terms of trade but the spring of some of the market numbers if we made. we talked about the equities, unchanged. is anybody around, anybody? hello? >> volume would suggest that people are celebrating early. >> it's interesting to see the market pullback by 1.5% because we got further stockpiles. stockpiles in the u.s. again

romping home for nine weeks in a row, so that supply and that inventory build is what is crushing the spreads. >> thin volume, so we have to be careful in terms of a trade. >> overreaction for sure, important to take these moves with a grain of salt. you think about the situation in the red sea, there is a really interesting story that half of red sea container ship fleets are avoiding the suez canal. nobody wants to take the risk. ellen wald follows the energy markets and has for a long time. great to have you back here on bloomberg. so how are you adding up some of the tensions that are happening in the middle east? we are talking about stockpiles in the united states, what does

that mean for the energy markets? >> one of the important things that we are taking in is the kind of pullback and look at the larger middle east geopolitical picture here. and if you kind of step back you will notice there have been apparently 103 separate attacks on u.s. troops across the middle east even in places where i wasn't aware we had any troops. that is a very large number. that has been since october 17. to me, that says that things are kind of bubbling under the surface, potentially escalating. on top of that, you got iranian drone attacks on chemical tankers in the indian ocean and you've got this red sea situation which is just getting more and more tense by the day. like you said, you've got half of all container shipping avoiding the red sea, and then when you look at the oil situation on top of that, i

think there is a real risk for europe here. not that they won't get the products and the crude oil they need but since they are no longer buying from russia, they are basically either importing from the middle east so now a lot of that is going to go around africa, or they are importing products that are made maybe in india from russian oil that has also got to go through the suez canal or african now. so we are talking about longer transport times, higher cost, higher insurance costs and just in general higher risk. to me, that sends the idea of inflated prices, although of course we got the balance that with higher stockpiles. >> that's focusing on the red sea. we have a happy coalition of defense trying to help shippers return to what extent this coalition will actually be prepared to protect the maritime fleets going in. the last thing the coalition of

the west wants is a deep escalation. >> exactly. the fact that it has been assembled does not necessarily mean that it is going to do anything. there has been a lot of hype about the coming together of this coalition but to me, it is too little too late. where was this coalition last month when container ships and tankers were being attacked? it is one thing for them to say we are going to attack israeli-linked ships. now they are just basically attacking anyone, a tanker that was going from pakistan to saudi arabia was recently attacked and had no links to israel or anyone else. to me, this says that they are going to continue to be emboldened, they are going to continue to step up these attacks. we've got u.s. destroyers and the red sea trying to basically intercept these attacks as they

are happening. that may not be enough. in fact, it is looking like it is not enough for most of the shipping industry. >> you lay a very febrile image in my mind of what is actually going on. we are so physically far away from it sometimes we believe don't understand the level of risk. why such a response from the energy markets in that case, is it just thin volumes, or is it that this will pass, we've seen these flashes in the pan before? why such flag manic response in the energy market? >> that is a really great question into think it is a combination of the high production levels from the united states, the sense that these 13 million plus barrels per day production is just going to offset risk, which i think is a bit of an oversight, then we got the fact that nothing has

happened before and you've got the fact that i think it is in the interest of the biden administration to avoid a larger conflict at all costs. on the other hand, they might not be able to do this. the risk of a conflict, while still low is nonzero at this point. i do believe that that number is getting higher the longer that these attacks on international shipping are allowed to go on >> given that that is a nonzero risky your view, you think about the war premium that is priced into oil right now. should there be more of a premium priced in? >> i do think that there should be, particularly as no one in the year. generally, seasonally low demand but as we head into april, may, when things pick up, i do think that that premium, if this conflict has not been resolved by then, that premium should definitely be much higher, particularly if opec-plus is

going to continue to hold barrels off the market. >> how much higher, give us a quote. >> i don't like to protect oil prices that i wouldn't be surprised if it is more than several dollars a barrel. i do think that this risk is being underestimated now and i think that the fact that u.s. supply and the fact that we know opec is holding so much oil off the market is kind of negating that geopolitical risk at the moment. >> above 80? >> she's pushing. >> i'm not going to say no. >> that would be a very different trade. >> thank you so much, really appreciate your insight on what is going on with the energy market. wti crude, down about 1.4%. a very different trade. >> but even so, it feels like

the dominant story is just the supply picture. you think about the u.s. shale industry just record production levels, maybe bedeviling the stories of opec here. >> the u.s. produces 13 million barrels of oil per day but it is still actually a net importer. you need to shift your vision on this because even though it is producing 13 million barrels, it still needs more than it produces and exports are record. >> it is so political. the terms that we were thinking, so much more in terms of renewables. here we are talking about ramping up some of the drilling that we are doing domestically. >> it is also a question of timelines. the u.s. government has these

lofty goals when it comes to clean energy, but you have to deal with herein now. you have to deal with how much oil this country needs. >> but that has perhaps delayed the additional ramp-up of oil production here. but of course, to coin president trump in his lines in the interviews, drill, drill, drill. that is what he intends to do. >> we didn't even get into iran, what they would like to be doing, what they can't be doing and how we talk tonight yesterday that they would look to destabilize the united states continuation. coming up next, lera reim -- lara rhame reacting to the u.s. jobless. this is bloomberg.

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♪ >> a very good morning, everybody, this is "bloomberg surveillance" live on bloomberg television and radio. a quick check on the markets for you on this thursday, not much going on. just one point on the s&p 500. yesterday it was the dow that had a record. does it happen today, i don't know. the momentum is pretty mellow. we did get some reason u.s. stockpiles, 3.80. under surveillance we go, some of the headline stories we are watching for you. the first electric vehicle

declaring ambitions to become a top global carmaker in 15 to 20 years and compete against tesla and porsche. it has a range of up to 800 kilometers on a single charge and a top speed of 265 kilometers. yeah. >> that is a big range. >> range anxiety is real, but you can go pretty far 500 miles. >> i think what is going to be interesting is the price point which this car comes in. just looking at it, china set themselves up to rival of porsche turbo and tesla model s so they are coming in at 200,000 yuan, that is way under where the model s is. >> what is that u.s.? >> i'm global, i haven't got that in dollars for you. i will get you the dollar price. >> norway's largest pension

fund: $50 million from persian gulf companies over concerns of human rights violations in diamond risks. saudi aramco was blacklisted in addition to a dozen companies in the real estate and communications sectors. $70 billion managed for pensions and the norwegian public sector and called of responsible investor. we watch what they do because, i don't know, some people might say capitalism. but it is interesting to see what they are doing. >> they raised a couple of critical issues around saudi aramco, saying that the energy transition plan that they had has failed to meet expectations, and they talk about other countries and companies in the middle east. they've got concerns about human rights. it is what you call a massive reminder of money. $70 billion fund. we are talking about $15 million. >> i was just thinking that maybe that is a drop in the bucket.

>> making a statement. >> one more story for you has to do with some breaking economic news just at moments ago. u.s. initial jobless claims up 12,000 218,000 in the latest week, 8000 higher than estimated. does that say that there are some concerns about the labor market maybe not as tight as it was, but a little bit of an uptick? it is hard to say. >> there's a lot of adjustments that just come off the back of the >>. next week is going to be a big week for jobs. >> rate to have you here with the team. let's go to jobless claims, is that significant in terms of the uptake? >> this one month of readings is not significant but this indicated to me is one of my

most-watched indicators. the fact that it has been low for months and months now to me says that while there are concerns about the labor market normalizing or people starting to talk about cracks in the labor market, when i look at this indicator i see companies still really eager to hold onto workers. they may be taking more time to rehire if somebody is lost. they may be a little more rational about job openings, but when it comes to layoffs, companies are very closely guarding their workers and i think that has big implications. going into next year is one of the reasons why the economy has been a lot stronger than love is expected. >> i want to ask you about jomo replacing fomo.

>> the business cycle lives and dies surrounding consumer. that fomo, now is the time to spend, we have put it off, . that is going to be replaced by a more moderate joy of missing out. just a way of saying people may choose that more staycation's. they may start to be a little more budget-conscious. that is not to say that household budgets are in trouble, but we know that credit card debt is high now and interest rates on credit cards, like home mortgages, they are not fixed. they are moving up fast. it is this idea that we are still going to have a healthy consumer, healthy jobs market.

you're going to have a consumer that is maybe a little more moderate and ab decides that they can wait a little bit over differ some joy. >> i think we have a new t-shirt, hat and coat to make. >> weaponized fomo. our guest of the other day said we have weaponized fomo but we are now christening you on jomo. it could be a boy band or a band of many. >> you won't believe it. >> you are in the camp of uncomfortably high inflation in 2024. now, does that just mean we get stuck where we are because the disinflation has been really quite aggressive, one could say. but you say we are going to get persistently high inflation. is that going to mar the call

for multi-rate cuts in the u.s.? >> i think we do get stuck where we are and i would argue that where we are is uncomfortably high. it does three big things. the first one is that it keeps this wet blanket on consumer sentiment. also, in surveys being very downbeat about the economy. that gap has to close and i think it closes more towards spending decelerating and part of that is the inflation picture. partly the housing affordability picture. the second thing it does is give the fed less room to maneuver. i don't think that fixed rate hikes in a non-recessionary economy as a likely outcome. i could see them strategically trying to cut rates, but the reality is that with inflation where it is today, it is very hard for me to see them just

making the deep, programmatic cuts that they do and we are seeing a recession. in the third thing it does is really challenged fixed income investors. everybody looks at the two-year, four and a quarter. it is a multi-decade high, it seems like a very good investment when you think about inflation at 4% vs. 2%, your rear turn is much smaller than you think. >> should we be talking about the possibility of another rate hike here? you mentioned six rate cuts may be looks unrealistic. is there a possibility that the fed has to hike rates in 2024? >> obviously that didn't happen. i think from here the messaging has really changed. they've talked about rate cuts being not if, but when. the more likely scenario to me is if we get inflation data they

would instead just hold rates steady here. i think it is important to harken back to the mid-90's. over 40 years, we do not have a good roadmap for non-recessionary rate cut scenarios. and the mid-90's is one of the only episodes that cut three times over eight months, and then they waited almost a year and they raised again. we have to be really careful. we just do not have a good roadmap. history is never a perfect guide but in this case we are really in much more uncharted territory than markets believed today. >> flying blind some extent. clearly a communication challenge for the fed. let's talk about the balance sheet, one of the questions.

powell did get asked about this at the meeting. what happens to the balance sheet? if they do this fine tuning rate cut and continue to roll off the balance sheet, from the outside looking in, it appears that the fed is working across purposes. however you thinking about the balance sheet in relation to the primary tool of interest rates? >> i think you bring up an important rate which again speaks to the unique nature of easing monetary policy when we don't have a recession. first of all, the fed would like to get out of the balance sheet manipulation game. they would like to deemphasize that as a policy tool and i think that is what they are trying to do right now. but i also look at the broader treasury landscape because over the coming year, we need to roll to almost $10 trillion.

$9.7 trillion of treasury debt in the next 12 months. three years ago, that was only $5 trillion. so when i look at long-term interest rates, my expectation is that we will continue to hold this drift up pattern throughout the next year, sort of holding the same range that we held this last year, and the reason for that is because we think about the yield curve today, deeply inverted. but if we do get a soft landing, that will probably correct at some point through some rate cuts, but also some drifting long-term higher interest rates. >> 20 seconds, are you pulling out a recession for the u.s. next year completely? >> i'm not completely ruling at a recession. so many of us tripped on the landmine and now feel a little bit shy to come out and talk about a recession next year. the risks are still elevated. we need to look at traditional

bank lending, the effects of higher interest rates. my forecast is for slower growth, not a recession. >> on that note we are going to say happy new year, always appreciate the time you give bloomberg. breaking down the weekly jobless claims number, giving us a bigger and broader picture for the economy of 2024. we are a little less than one hour from the open on this thursday. looking at s&p 500 futures, it has been heavily quiet morning as we continue to track what is going on globally. you talk a lot about this global bond market rally on track for two months. having said that, back the u.s., sv futures just up 0.03%. having said that, are you going to bed on a record today? >> i think she is quietly going to that on someone. >> by the time the closing bells

ringing, we will be long gone. we are very, very close. you think about where he settled up. the record closes just below 4800. it has been painful. >> i think it is an interesting point that we just had, $9.7 trillion of u.s. government debt maturing in 2024. they are probably going to be asking themselves what is the refinancing cut? this is the fiscal worried for the world in regards to the united states of america. globally, but you've got the biggest issue. and i think that is a really under-talked about point that we probably would spend more time talking about in the new year because we got two fiscal deadlines of potential government shutdowns in january in washington. >> that deadline is quickly approaching but bringing it back to the fed, that is a really interesting point that we don't really have a roadmap what the fed is trying to do.

just get out of restrictive territory but not actually ease policy. >> we haven't done it softly or gently since 1995. >> it has not been an easy course. >> society has here vocally changed. whether you are back working in the office but work from home, productivity, ai, all of those things will come into play. >> jomo. i am ok with it. you're not going to want to miss our next guest, aaron david miller. this is bloomberg. (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? ♪

>> really, the group that has been most engaged in both threatening israel with missiles and drones as well as the red sea has been the who these clearly at iranian direction.

there is a very, very significant risk of escalation there. the american announcement of a task force is a good thing. it may not necessarily ward off. >> senior fellow for middle east and africa studies and certainly the middle east for manning on our radar on this thursday. a little bit of an uptake higher than what folks were estimating, but nonetheless maybe not to worry some. companies holding onto their workers. having said that, your market set up on this thursday, just a slight uptick. s&p 500 futures continuing to be unchanged. we talked about energy, very important as we watch what is going on overseas and really looking at stockpiles around the world, new york crude down just

about 1%. geopolitics has really been front and center for us and the team this week. aaron david miller, good to have you back here on surveillance. as you look at the outlook are you more hopeful about what is going on in the middle east or are you more sober in terms of a potential outcome here? >> we've worked on this problem for 25 years. wherever you look, there's a headache. potential regional war. i'm not predicting it but it has got to be watched carefully. 33 attacks, 100 drone and missile strikes since october 7. a problem right now without a good solution.

hamas wants to survive, the israelis want to destroy it. the people of gaza, half of whom are under the age of 15 to 18 are suffering as a consequence and the israelis have been traumatized by the october 7 terrorist attack. so no, i look around as 2023 comes to a close, and i guess my prediction for 2024 is it is going to get worse before it gets much worse. >> how does it get worse? antony blinken goes to the middle east over the next five days, multiple trips have now been made but first of all, characterize for us how this gets worse. is it directly in the hamas- israel conflict itself, more debts, or escalation be a proxy? >> the real concern if you want to strip it down to its essence, the u.s.'s three vital interests

in the middle east. the must-haves. number one, prevent a terrorist attack on the continental united states for assets throughout the united states. number two, maintain assets to hydrocarbons and number three, prevent the emergence of iran with a possibility of nuclear weapon and then a deliverable. those are the core interests that affect american security and prosperity. the u.s. has been relatively successful in managing all three of those. particularly, the iea is now reporting that the iranians are ramping up, and of course as you

know, entering 2024, it may well be that the policy is going to conflict with a political reality at home. so there are no solutions. maybe we can continue to manage all of these things, but there are no strategic solutions to the israeli-palestinian conflict, what to do about iran, or frankly right now trying to deter iranian proxies. >> and with that in mind, our last guest suggested that the power, the force of the international community perhaps isn't as robust as we think in protecting the maritime rights in the red sea. would you agree that it is perhaps a powerful display of force, but it lacks teeth, it could end up being a bigger issue for the west, this coalition which isn't exactly a coalition of teeth and force? >> operation prosperity guardian

announced by the secretary of defense a week or so ago. we have three options, and i think we have to face up to them. number one, change the route. it will slow down considerably by three or four weeks. that is number one. number two, go to a maritime coalition. the world bank estimated that somali piracy cost $18 billion. we were very successful then in mounting 120 ships by 20 countries. they almost stanched completely somali piracy. this is more complicated because they are distant, backed by iran. they have today been the only entity that has launched a short ranged ballistic missile toward israel. the reality is deterrence may

involve strikes come american strikes, but nobody wants that. you're going to hard -- be hard pressed to participate while the israelis and palestinians are going at it. it's a problem. i haven't seen easy solutions. >> let's turn to gaza and israel because he wrote in foreign affairs just last week that biden should continue to press israel to quickly and the intense campaign in favor of more focused and targeted operations. the biden administration should continue to press in your view. >> i think the israelis are going to make a virtue out of necessity. no israeli prime minister, not even this one wants to fight with the american president and no american president wants to

have a public dispute with the israeli prime minister. it is usually counterproductive. i think the israelis have reached the conclusion that they cannot maintain immobilization of 360,000 israelis. it is having a negative impact on the economy and they will, i think, go to a less intense campaign, more intelligence- driven operational activities against hamas. but the reality is they are going to continue to operate at some level militarily in gaza for months to come. the real question is can you reconcile that with necessary humanitarian assistance in to relieve the suffering in gaza and think about what the day after and the day after and the day after looks like. a military solution will have to deal with the underlying problems of gaza in order to address it.

that is going to be extremely difficult to get help from the biden administration, unless to the international community, they tended this to a broader solution of the israeli and palestinian problem. that is going to be a very heavy lift. >> we've only got about 30 seconds. he said the u.s. has a strategic problem, they don't have a strategic solution. do they have a strategic ally globally in the situation? >> no. i think we are on our own. these are regional parties, middle east is littered with great powers who thought they could impose their will on smaller ones. no, it is going to be extremely difficult for the united states unless they can mobilize regional partners, particularly get israeli and palestinian leaders who are serious about doing something about the region and the israeli-palestinian issue.

>> aaron david miller, thank you so much. joining us on this thursday. i keep thinking about what he said in terms of the amount of attacks and different attack points going on in the middle east. ellen talked about 103 separate attacks across the region. how do you really kind of immobilize allies or mobilize allies and get some sort of solution? it gets more. and more difficulteach time >> the coalition of 20 nations, france, italy, the united states of america is obviously exactly what the proxies want. they want to provoke the prosperity to a point of well arrays and more major conflict and that is everything that iran would probably want, which is to chide the united states of america. >> and the thing about the container ships having to make hard decisions, do they trust they would be protected? >> a massive military and story but a business three as well. coming up, gershon

distenfield.

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>> we look ahead to 2024 and we expect the fed to cut first. >> 2024 will be very much the same. there's an expectation. >> i think the fed will be

forced to cut to get out of very restrictive territory. >> we are not getting six rate cuts. that's probably because the economy stinks. >> is a question of when the fed cuts and how much they cut. announcer: this is "bloomberg surveillance." >> from new york city, a very good morning. this is "bloomberg surveillance ." alongside me, carol massar and katie greifeld. i manus cranny. weaponized foam oh. we will move the things i missing in my life. katie: the joy of missing out. you stay in and put on your streaming channel of choice. you hoard the joy. manus: and the money. carol: our producer amy, jomo.

it's a new term for me. you wonder if they cannot spend stuff and do stuff. maybe you have to rein it in a little bit. katie: inflation is superhigh. we have been talking about the consumer, the miserable consumer sentiment figures in those surveys. they are still spending but maybe we are reaching an inflection point for the level of prices is a lot higher than it used to be. you have savings coming out of the same time. manus: you will have sticky inflation. we have the joy of kathy wood. we spent half an hour together and she's making some adjustments in her -- vicariously her bitcoin exposure, exiting grayscale and beefing up her positions elsewhere. she was very gracious in terms of the year she's had. up by 70%. overall, the trajectory is tough. carol: she is still down that much from her highs a few years

ago. exactly. outflows in the funds. interesting in a year you saw dramatic gains and she outperformed many major market averages. nonetheless, she continues to be such an integral part of market conversation and what is going on. manus: you meet some ceos and hedge fund managers and they become almost bigger than the fund. they become bigger than the institution they run. that is always the risk. though she still have the midas touch or she too big a name? katie: at the peak in 2020, 2021, when her assets were at an all-time high there was a concern she would not be able to invest in the stocks. carol: $60 billion or so? katie: she had too much money and was going into smaller cap companies. a prime example of getting too big for your actual fund. manus: let's check on the markets.

i don't think we will see anything dramatic or exciting. inventories are pushing lower for the ninth week in a row. bonds ticking up ever so slightly higher. we have a global bond carnival. i love the headline. katie: i want to go to the bond carnival. manus: bond traders, chamoli to reduce -- commodity traders and salad eating -- have you met your average bond trader? katie: there is probably a roller coaster at the bond carnival. carol: very nice. manus: very nicely termed. it can be litigious and precipitous. it can go up and down. we finished with the markets. let's get to gershon distenfeld, co-head of fixed-income at alliancebernstein. are you at the carnival? you look at this performance, the bloomberg total return is double-digit. up 10%. the u.s. is undoubtedly one of

the most triumphant. 120 ten-year basis point on the ten-year -- 120 basis points on the ten-year. is the carnival just getting started or does it run the risk of having already reached the dawn? gershon: from a linked perspective we have a long way to go -- length perspective we have a long ago. there's no question about it. we think rates will continue to decline as the fed normalizes policy. whether or not we go into ever session over a soft landing, those are all questions. undoubtedly, it will be lower a year or two from now. rates will be as well. you have a lot in a very short period of time. carol: an uptick in the two-year coming out the jobless claims numbers holding, a little higher than forecast. i have a question for you.

when you talk about rates where you see that two-year going if there is more room to the downside? gershon: the two-year in the not so short-term, the intermediate term will follow fed policy. i think the market is -- carol: can you commit in terms of what you think it might go? gershon: can i commit? no. it depends. if the fed cuts six times next year like markets are implying, it will get back to what that means and maybe more and yes, it will go lower. if they are slower, it won't in the short term. the long-term part of the curve can continue to rally if the market anticipates yields will be coming down. be sought on the way up. belonging to the market sold long before the fed started to move. it could be the exact opposite now and that is how markets work. katie: let's get to the psychology for the bid for duration. basically people saying there is

a growth pickup coming. there are growth concerns priced into the long end, or whether this is duration fomo. now i want to catch them before they go too low. where do you follow the argument and how does that translate into the world of high-yield credit? gershon: it depends on what regime we are in. when you look at yields today, the long end relative to the past 15 years, they look very attractive. versus the past 50 years, not so much. when i started in 1998, the ten-year was about 5.5% which is below what had been over the previous 20 to 30 years. every yout -- everyone thought rates could only go up. high-yield credit is in the sweet spot right now between the timing streams. things are ok. inflation is coming down, the economy is not going to

rollover. the fed will normalize rates. equities are going to continue to do very well. but, if we going to a recession or a hard landing, whatever you want to call it, equities are mispriced and long-term rates will rally a lot. it's the in-between space which might be the highest probability, like a soft landing type scenario. that is where credit and high-yield fits in the sweet spot. you will clip your coupon, not have a lot of default. your returns may be better than the equity market. katie: what about the private credit market? obviously, this year has been boom time for the private debt markets. is high-yield competitive with the returns investors are finding there? gershon: it will be more competitive. the premium has come down. we are probably going to see higher rates in the private market. that is not predicting disaster

but it's extraordinarily low over the past 10 years or so. it has to pick up a little bit. high-yield is more competitive than they have been in quite some time. definitely a high probability. carol: we are all kind of kicking around different scenarios in terms of how aggressive we might get in terms of rate cuts and how that impacts the fixed income world at large. maybe a couple of different scenarios play out. is there one part of the investment world in your universe you think is probably a very smart bet for investors next year? gershon: i don't have anything that stands out. fixed income investing is more about protecting the downside. we typically don't get a 30% return of fixed-income instruments unless you already had a problem that sold off a lot. it's about loaning an entity money, whether it is a government, musicality, corporation. carol: where do you find the most protection then? gershon: the higher credit quality you have the lower the

loss rates are going to be. i do think anything stands out particular today. we believe of a barbell approach. fixed income, most of the time it stays to combine the securities, be it credit, emerging markets, with duration. that tends to pay off over time because they are not perfectly correlated with each other. manus: investment grade is 11% over the last two months. his had the best run in nearly 20 years -- it has had the best run in nearly 20 years. what portion would you prepare to take on the left and right hand tail if i looked at it in that perspective? leveraged loans. what is left behind? what should i look at? gershon: i don't think -- we

have a more boring market you might think in 2024. despite all the volatility, 2022 was a market where everything had horrible returns. 2023, almost every think a great returns. 2024 is more of a clip -- coupon clipping. year. people are looking for 15% return of fixed income, they should look elsewhere. i'm not saying a disaster is on the horizon. they should get single digits from fixed income as a whole. manus: we are talking about a global bond market rally. joshing that there is nothing else as opposed to the u.s. bond market. if you had to choose a bond market overseas for full return next year or good return, what would it be? gershon: i think it's possible

we get it in europe since we did not have as much of a duration rally there. on the credit side valuations are way more attractive in u.s. and -- in europe than the u.s. today. the economic upturn is not as rosy. you like to have some provocative stuff. i don't think there is any region of the world i would recommend to investors if there investing in the bond market. it's always important to remind investors when you invest outside the united states, the u.s. investors, there is no risk on the currency. do it on the hedge basis. manus: it could go to parity. gershon distenfeld at alliancebernstein this morning on the bond markets. if you're just running the show, wow. it has just turned red. 48. s&p 500 at -.7%.

carol: it feels a little tortured. katie: we will see the cash trading session goes. we are very, very close. we are a whisker away from the all-time high. we will see if we get a by the end of 2020 three or if this is a 2024 conversation -- 2023 or if it is a 2020 for conversation. -- 2024 conversation. manus: the lead story is about the global bond market rally. is there a sense of exhaustion? no, but perhaps the pace and speed in which they trade to the downside perhaps slows down. there is a growing -- that you will get six rate cuts going into 2024. is it seven's or fives? quite a big move in fives and

30s yesterday. the auctions have not caused the indigestion. nearly $10 trillion will be rolled over next year. that's a big piece of turkey. katie: a big chunk of change. i don't know how the fed is thinking about everything. you talk about the balance sheet. i think that will be more of the conversation next year. carol: i wonder how much it will pull forward from expectations from the u.s. central banks and other central banks. if it doesn't happen, what is the correction receipt and 2020 for -- you we see in 2024? manus: where do we want to be in the ai conversation? we will continue that narrative with fred havemeyer who joins us shortly. ♪ they save me a trip to the mall. it's easy: i share my style, size and budget. and they do the shopping for me. stitch fix sends me things that fit and make me feel like a more stylish version of myself. i keep what works, and send back the rest. no subscription required.

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was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com >> in our private portfolios we are already exposed to a major beneficiary of the drama around

openai that we all witnessed a few months ago. we are so impressed at how open i has led the industry. we are impressed that the open source models and we would like to encourage more of that movement. manus: cathie wood with us on "surveillance." cio at ark investments. it was a good conversation. we did not quite get her right call but she said it should be a 2% in the u.s. there are models suggesting it's unlikely we will get to that level. we are still a little too high. the markets are pricing and 170 basis points and still probably too rich for cathie. carol: she's been concerned about the fed overdoing it and concerned about the impact that would have and what that means in terms of a inflation area environment. -- deflationary environment. katie: something else we did not

get to is china. it feels like never enough time with cathie wood. we did get to ai, one of the dominant market themes in the tech sector which is where she finds her home. i would imagine it will be dominant in 2024 as well. manus: i would say it is inescapable. let's go to fred havemeyer, head of u.s. ai and suffer research at mccoury. the nasdaq 100 is heading for its best year since the dot-com bubble, of 55%. that is if we go to the close on that. how much more ai, how much more flow of money deep expect to see into the ai space in 2024? or, is there any hand at all that perhaps we have expended a little too much energy in the magnificent seven? good morning. fred: good morning and thank you for having me on. i think going into 2024,

genitive ai specifically is the key theme we are highlighting. the number one of the four themes to drive investments. we think going into this next year this'll be the first year we see really strong material signs that enterprises are adopting genitive ai. we think there is room here for these companies like openai and microsoft through his copilot partnership, his products in partnership with openai to begin to materially monetize on genitive ai through commercialized enterprise focused products. we have taken a look at this ourselves to look at the revenue and profitability opportunity. at the end of the day we are trading on fundamentals, not just type in the ai cycle -- hype in the ai cycle. microsoft can generate about $9 billion of sales by the end of fiscal year 2026, the year end for microsoft. that corresponds to about $.47

on the back of copilots which we don't think is priced in at this point. considering we are looking at companies two fiscal years out to 2025 and 2026 we think there is upside here in fund minerals that we don't see priced in. when we look further into the landscape we introduced our new genitive ai thematic bucket. a look at companies that we think will benefit from enterprise spending on genitive ai. we assembled a group of companies that include microsoft, service now, salesforce, crowd strike and power school which we think are set up to actually benefit from anchor mental and new spend on genitive ai products. carol: is it for the folks involved in the backbone of creating ai, that is the play you want to do? we don't fully know exactly where it will lead to productivity or benefits financially for individual companies. fred: you are quite right.

we have a diversified approach to look at the companies selling the picks and shovels and have access to microsoft's partnership with oopen a -- openai and the effort structure. there's opportunity for business to monetize. it is early days admittedly. if with look at companies like service now, last quarter they had four significant deals signed on the first day that their new genitive ai products were available. we have seen microsoft. we estimate as a last quarter they are jittering about $1.6 billion in annualized revenue related to genitive ai products. no couple lights -- not copilots. it is early days. we are watching carefully to see where productivity uplift might emerge. we are really optimistic about where this will go next year. katie: the picks and shovels and focus. i want to switch gears. there was an interesting new story breaking yesterday that the new york times is suing

microsoft and openai for copyright infringement. basically alleging it is using its content to help develop its ai services. i'm wondering what you make of that. is this basically a sign of what is to come when it comes to lawsuits over ai and copyright? fred: we have consistently fought and argued that copyright will ultimately really define how the genitive ai ecosystem may evolve. many of these models are trained on public web, which contains various different amounts of data which may or may not have copyright concerns. we have consistently believed that hyper scalars like microsoft are some of the best positioned to navigate this. either through mounting legal defenses or through their ability to have very deep, well-capitalized pockets and networks that strike data licensing agreements. carol: that is a legal argument. i get it. they have deep pockets.

we talked about the regulatory oversight and figuring that out. we have learned in a rough way by not having the regulatory barriers when it comes to social media. i do wonder. this is a big issue. genitive ai gets smarter, right? by the information that gets into it. that data does not necessarily belong to microsoft or openai. will regulators have to come in and figure that out? is there some royalty that gets to the data providers? fred: it is something we are watching carefully. to the point of this new lawsuit, the new york times from the your complaint against microsoft and openai, we think this is the lawsuit to watch to determine how courts begin to understand the concept of copyright in the era of genitive ai. to your point on regulation, we are in a bit of a frontier here in terms of regulatory oversight for genitive ai. the white house with its

executive order on ai revelatory framework, we are not just beginning to see the follow-up to that with federal organizations implement and what the white house mandated. to the point on copyright, the eu with its ai act has been taking more strides in that direction, also mandating companies producing models to have and understanding of what copyrighted data when into a model. it's it's a big picture of what we are saying is a potential new risk and source of volatility in 2024. with abundant genitive ai either available through commercial means or downloaded on the desktop we think there is a real risk into the 2024 election cycle of new ai driven propaganda and deepfakes becoming a significant societal problem. it will almost certainly require new ways of understanding --

manus: that takes us to what your big concerns. you talked about cybersecurity. i don't know how much geopolitics is in play but the landscape has shifted from unfavorable environment in 2023 to a highly hostile environment in 2024. what i'm really trying to get to is how do i position around that scaling up to that environment from an echo the exposure point of view? the politics of cybersecurity. fred: from our point of view we are choosing best-of-breed software companies. we want to have exposure to both endpoint security markets, one of your most critical and last lines of defense as well as network security. real-time risk analytics, which is what we think we get through z scaler and crowd strike. why do we think it is increasingly hostile?

we are certainly seeing dynamics. one point we think is fascinating in 2024 is the digital world and physical world appear to be converging incrementally throughout 2023 and going into 2024 with the emergence of cyber criminal organizations that are engaging in more cartel-like activity. carol: i'm just terrified. we have to say goodbye though. manus: on z scaler, a $244 target. thank you for joining us this morning. coming up on the u.s. market open we have mona mahajan of edward jones joining us with her views on the markets. ♪

manus: it is a special edition of "bloomberg surveillance," alongside carol massar and katie greifeld. we are moments away from the start of your cash trading session. you see the s&p desperately trying to hold onto some kind of movement. there is the opening bell. it is the nasdaq that will take that banner up 55% of the year as we close out on time. we are just shy of that record high on the s&p 500. the euro-dollar trade at 1.1092. the dollar is slightly better bid this morning. prude down 1.2% -- crude down

1.2%. the api inventory up 1.8 million barrels. a little bit of a bleed on rates. rates higher this morning at 3.82%. we had a couple of pretty good auctions this week. how will we get away with the seven-your auction tonight? -- seven-year auction tonight? we are building the narrative of peak fed. abigail doolittle alongside us with the open end movers and shakers. abigail: the surface barely moving. let's start with what is working. up 33% this month into today. this is billionaire buying lg portugal, another entity back by patrick draw heat. there was a report they make on load cheddar to a pe firm. penn entertainment. 11% stake.

i greater than 80% economic stake, including swaps. they are seeking board seats. the company is down 40% over the last for years. down 15% this year. that could be one reason. tesla up at their day despite china's shall me revealed their first ev. there is chatter of an india factory announcement to be revealed soon. we were talking about yesterday. one company up more than 100% on the year. to the downside, what is weighing is the crypto space. we have some weight with bitcoin down within 1%. before we feel too badly for the stocks, speaking of a casino up 350%. marathon up 800% on the year. if only we had no. katie: hindsight capital. always outperform.

abigail: always. carol: i am glued to the s&p 500. we are six points away. manus: tick tock. we have two sessions left ago. abigail, good to see you. thanks for the roundup. abigail doolittle with the latest on equity movers. mona mahajan standing by at edward jones. good morning to you. the nasdaq up 55%. s&p test really trying to make a new record high. do you think we will shift a little more aggressively into the new year to a full full mode -- bull mode or will he pull back when powell and the members get into jawboning mode in january? mona: certainly, you brought up one of the key points we have and thinking about. this has been a phenomenal eight weeks or so for the s&p 500. you have -- you can't ignore

the fact that the nature of the rally has shifted. we start of the year driven by the magnificent seven, large-cap technology trade. in the last few weeks we have seen a broadening of participation, whether it is cyclical parts, small and mid-cap parts, bond markets. all of which played some catch up recent weeks. we think that's a healthy sign. a lot of ingredients came together to drive this rally forward. that included not only inflation moving lower but of fed that is likely to pivot next year. bond markets and bond yields moved substantially lower. to your point as we head into the new year, we know markets cannot move up in a straight line indefinitely. two, you give the markets and inch, they take a mile. markets are pricing in six rate cuts or next year. we think as we head into the new year there could be some sparks and bouts of volatility, especially as the market and fed head-to-head on this. we think the fed will push back. keep in mind the first fed

meeting is january 31. there will be speakers with between now and then as well. we think they take the opportunity to push back on the six rate cuts that haven't priced into the market. our view is we have three to four rate cuts next year. they don't start until later in the year, especially as the fed does want to see the core inflation number move lower from 4% to probably sub 3%. carol: a lot can happen in a month. i wonder how we have been spending so much time this week. it has quieted down but we haven't watching what's going on geopolitically. how does that potentially complicate what the fed needs to do here? mona: it's been an interesting year in geopolitics. certainly, one way that manifested is through oil and energy markets. the israeli-gaza conflict first hit, we saw the immediate move higher in oil prices. we have seen since then a real cooling in oil and energy. perhaps part of the reason is those players alone are not

substantial oil producers. two, maybe there was a hope building the conflict would not escalate. we did see and easing in oil and energy prices. that is probably the closest asset class we are watching as geopolitics unfold in 2024. our hope is the direction of travel does continue to go towards de-escalation rather than re-escalation. that would be positive for stability in the oil and energy markets. it is something we are watching closely. the fed will be watching from an inflationary perspective, especially as oil and energy plays a key component of headline inflation. as we think about volatility heading into the new year, for those investors that had not quite participated in this last few weeks we would say any volatility provides an opportunity for investors to get involved and positioned for potentially a continuation of the broadening of market participation. carol: also important is what the consumer does. we see a relatively tight labor

market. we have a read on weekly jobless. the weekly uptick. we talked with lera raymer who talked about companies holding onto workers. can the consumer, as we talked earlier, moving from fear moving out to jomo, joy of missing out. can the consumer continue spending in the new year? mona: it is a critical question. i heard the jomo phrase and i loved it. we are in the camp that the consumer is facing headwinds into the new year. keep in mind we are coming from a very strong position of strength from q3 of this year where gdp growth was 5% and consumption was 4% roughly. from that high level do we think there could be a potential for a slowdown? yes. for the consumer excess savings haven't worked down. we are seeing -- have been worked down.

interest rates and mortgage rates despite the recent cooling and bank lending standards remain high. we are seeing early sings of delinquent -- signs of delete quincy as well -- delinquentcy as well. the consumer likes to spend and doesn't can remains resilient in the face of challenges. manus: right until the very end. katie: hard to bet against the u.s. consumer. i want to bring this conversation back to the markets. you mentioned participation. something we have been talking about all week is $6 trillion sitting in money market funds right now. many a bull case built on the idea that you see the cash come out of money market funds and venture into risk assets, and equities and fixed income. is that your view as well or maybe a little bit of caution around that one? mona: we do think that part of the money that has -- it's been

a tremendous inflow. you mentioned that $6 trillion figure into cds and money market futures. some of that money is starting as the money comes due and investors are thinking about reinvestment risk we think there is a case to be made that the money that would have flown into the cd and money markets will now start to flow into a more traditional asset classes like equities and bonds. there are a couple of reasons for that. as the fed is potentially embarking on a rate cutting path we will have investment risk. there's an opportunity cost of sitting in cash. hopefully, investors are seeing with the s&p up 25% and the bond market rallying close to 5% in recent weeks it gives you a run for your money for traditional cash assets. thirdly, over any 30-year period we have seen historically that cash -- sure as we are thinking about our portfolios that we are not too overweight cash and cash

like instruments. we are strategically allocated so we can meet and exceed long-term returns. we think this year in particular will be a great one to complement. we understand the reasoning to get into the cds. rates are higher than our recent history. that could start to be trending downwards and a good time to think about consummating cd money with traditional equities and bonds. katie: just to sit with this thought longer, the pushback to that argument basically that you will see cash come off the sidelines that we have gotten is you think about that $1 trillion that is coming in the money market funds just from march and the banking struggles we had then. maybe that will be stickier than usual. there won't be this additional fuel that for equity markets and risk assets that maybe we have seen in the past. what is your thinking? does that hold water with you? mona: i think we are going to see a different portfolio construction in the next five to

10 years even given fed funds rate are likely not to move back to the zero balance. you are probably looking at a fed funds rate of 3% over time. that environment, treasury yields are probably somewhere between 3% and 4% themselves. the idea that you had to be all in inequities or in growth even probably does not hold over the next several years. we think there is better balance between your equity and bond portfolio. there is more room for cash-like instruments that are yielding attractive values. we say make sure you are thinking about not only equities but thinking about investment grade bonds to complement some of that money market cash-like instruments. we think there is a place for cash and cds. we think it's important to think about investment grade bonds. not only are you locking in longer -- better yields for a longer period but potential for appreciation of yields move lower. manus: just on this investment

grade bonds briefly here before we go, is that perhaps an alternative to equity exposure in the -- if you want to diversify away from mag seven? look on the bond side as perhaps a slot on the board that the ig component makes up? mona: that's a very interesting call out. that's a way to played as well. if you're thinking about some of the growth parts of the market and want to play for the bond perspective, these are the companies that are very cash rich that will probably make good on their investment grade bonds. they will likely not often need the bond market to raise the cash. when they do it's a great opportunity for investors. we would say investment grade bonds in the magnificent seven or broadly in the technology space is a great way to complement your portfolio as well. manus: thank you for being with

us this morning. let's see what the start of 2024 brings. mona mahajan from edward jones. if you're just joining bloomberg this morning at 9:42, the s&p 500, 4790.51. what is the number? katie: just below 4800. carol: not 4796 which would make it record. you have to go about that. manus: six pips away. katie: what did you say yesterday? you could just about smell it. manus: i can smell the weekend. why not? whether you get 55% and 23% next year, you probably need a lot of work from the fed the get that. carol: he keeps going to 4790 and backing off. manus: you need more fresh money to come into take that. coming up, aaron kennon of clear

harbor asset management can help us understand whether we can take out some of the -- good morning from new york. ♪ ♪ and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

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. >> i don't think we will get away with a truly soft landing but we will see a bumpy type of landing in the first half of the year. it will be quite brief and that we can get that out of the way and look towards a

re-acceleration in the back half. manus: christina hooper, chief market strategist at invesco. it will get bumpy into 2024. we have two sessions left on 2023's scorecard. still have not managed to eke out a new record high. disappointing on the team on surveillance this week. katie: we like the bears. carol: we just want to get over that much. katie: how fund when we hit it on we are on the air? we have the closing level but we are close. manus: we are perilously close. the euro-dollar this morning. jeff healey thinks we will hit parity on the euro-dollar. be careful which shorts you pick. the european landscape is much more susceptible to harder recession than we are here in the united states of america. 10-year yields tick higher. the auctions have gone fine but

there's nearly $10 trillion worth of u.s. government debt to refinance. we have a global bond carnival. that is the talk of the town. katie: the roller coaster that is treasury yields this year. we have crude moving little lower. that supplies to we still front and center. both go back to the equity market and what we are expecting from the fed. we will do that now with aaron kennon of clear harbor asset management. aaron, don't fight the fed is the law the land. markets have been fighting all year. looks like we have another fight brewing in 2024 when you think about six rate cuts priced in by markets. you have the fed penciling and 75 basis points of rate cuts. who will win this round? aaron: i think the market through in the towel in october as the fed signaled through economic data the pce data in october marked the high

watermark for financial rates. we have seen the 10-year treasury rally 10% since the october 19 peak. we have seen a long bond rally of almost 20%. i think the market, as it always has is thinking at the future, not the present. what we have seen in 2023, it's interesting sitting here a year ago. 80% of the economists said recession. that has not happened. only 20% say we will have a recession in 2024. inflation data has really come down towards the fed's target. in some cases on a three-month or six-month rolling basis it's at the fed's target. i think it bodes well for providing some rationale for why bonds have rallied and stocks have rallied. katie: let's look to the future. it feels like any conversation about how many cuts we could get from the fed has to start with

why they are cutting rates. i think it was michael purves who told this earlier in the week if the fed is cutting rates six times next year --manus: it's a problem. katie: there's probably a problem and that would make him less bullish on equities. if we get with the market is expecting, six rate cuts, is that there is for risk assets? -- bearish for risk assets? aaron: the target inflation rate is at the 2% level. perhaps even lower. that sounds out of consensus but we are seeing rents come down. it is possible that shelter peace starts to drop this year. -- piece starts to drop this year. that would justify rate cuts if it decelerates and remains positive. you could have a scenario play out where bonds rally more in 2024, equities remain positive because of the economic picture

remaining robust. ism data bouncing on the manufacturing side along the bottom. if you look at ism orders minus inventories, it is starting to pick up nicely. it augurs well for that industrial piece of the economy that hasn't really seen as many tailwinds this year perform a. the scenario where bonds rally but equities do not would be a scenario where the fed cuts maybe six plus times in 2024 and perhaps a bunch -- a few 50 basis point cuts. we could see a recession. maybe that recession is not shallow. maybe it is a little deeper. we have been talking about the possibility of a recession for the last 18 months and have not had it. often times, recessions come out of left field. i'm not throwing in the towel on

predictions this coming year but we have to be careful. carol: do we need to see the labor market really break down to some extent to get a full-blown recession? aaron: i think so. it's usually the last leg to break when you look at economic data through previous cycles prior to a recession. we are seeing evidence of softening but certainly the employment data is strong. the labor participation rate has been going up nicely and is back towards where it was pre-covid. yes, jobless claims when you look at the running trendline have been elevated on the margin. the employment data still remains relatively strong. i do think we would need to see that break. we will probably have to see something well above 4.5% type rate for us to start thinking like that. carol: it's been an interesting week with the conversations. there's a lot of different scenarios everybody is planning for an 2024 that we just don't quite know how it plays out.

that certainty is not quite there. is there any conviction you can put behind certain investment strategies right now? we have talked a lot long-term, i get it. if you're thinking about putting money to work, where you put it? aaron: the certainty is uncertainty. i know that is trite. we still go back to the building blocks of portfolio management, of advising clients about their present and future needs around liquidity. their own personal risk tolerance and their ability to financially lose capital and see a contract to a certain extent. we build portfolios and wealth plans around those dynamics. i would just say that has not changed. as it relates to specific portfolio opportunities, we continue to believe equities remain a cornerstone of most client portfolios.

particularly clients where we are investing for 5, 10, 15, 20 plus years. we are thinking if we will see rate cuts in 2024, which we do anticipate, and we see the long-term inflation expectations at about 2.2%, 10-year breakevens on bloomberg this morning, is providing bondholders and treasuries and the 10-year treasury and the overall opportunity to own fixed income here. the yield to maturity of the bloomberg aggregate bond index is about 4.5%. year-and-a-half ago it was a two handle. think about that 60-40 portfolio. you are trying to impugn with the future long-term return expectations are for major asset classes. you can lift up fixed income even after the rally we have seen since october and use that and think about that for creating portfolios for clients in a way that you could not 18 once ago. -- 18 months ago. manus: we just had a

conversation with mona mahajan of edward jones. we were talking about where it investment-grade fit in. a lot of people talk about high yield in the sweet spot. investment-grade should be part of the narrative. we are talking about tech ig. what portion is ig within the wealth management planning and where would you like to allocate that? aaron: manus, the sovereign u.s. market, the treasury market, the mortgage backed securities markets remains the ballast. when the economy tanks, if it were to tank, equities are not going to hold them all that well. those pieces will. you want to keep that in mind when you are thinking about the other pieces, including investment grade corporate. they will go down less than high-yield but you have to keep that in mind. owning meta equity is far different than owning meta bonds. that needs to be taken into consideration. one probably holds of extort nearly well in a downturn --

extraordinarily well because i have so much cash flow. on the high-yield side i would say we have a huge waterfalling of high-yield debt coming due in the next three years. about $1.3 trillion. most of that is 2025 and 2026. manus: we can push that into the longer grass. but clock is ticking down on today's conversation. we hear your warning in terms of the high-yield draft but that is not for some time. aaron kennon of clear harbor asset management. there you go. six rate cuts from aaron. something to quake about or not? katie: he's not necessarily quaking but an interesting conversation. carol: dow at another new record. manus: we have one more session to make it happen. tomorrow we will talk to the ceo of carnival.

♪ 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. was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado.

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>> good thursday morning from the bloomberg radio st