jonathan: your equity market is slowly softer. the biggest rally coming back to the bill of november. the rebound over the last 24 hours. tom: the magnificent seven made back on the agony. it was sobering for the people out there. starting with ben laidler on the magnificent seven, the bitcoin etf stuff, speaks to the enthusiasm. jonathan: you sound enthusiastic. tom: don't get me going. jonathan: the earnings the past 24 hours, we need to talk about that. raising the outlook on abercrombie and lululemon. lisa: they had festive holiday

activewear. i was looking for pictures for it. they did increase their outlook so that is go lucky. jonathan: what does that look like? lisa: leggings, i don't know. jonathan: i did not know they did that. lisa: i did not either but they said they had good promotions. tom:? -- are they getting it done? lisa: yes but that is the thing, people are buying things that are more expensive than they should be. jonathan: everything is so personal for you. the numbers for jeffries are not good at all. your thoughts on that? lisa: jeffries takes more of its revenue from the merchant banking, m&a, buck and -- stock and bond earnings.

how much is this immeasurable we'll see any jp morgan versus the major banks? talking about a trough, a more than 50% decline in their revenues, really a bleak year at a time we are seeing a runner -- we are singleton round. tom: in january look to february to give your best people. where is the rightsizing going to come from? based on what i've seen, rightsizing seems to be in order. jonathan: shares of boeing, down 8%. biggest one-day loss back since 2022. this morning, just about unchanged but some unsettling in the last two hours from the likes of alaska air and united airlines saying late monday the maintenance -- check uncovered loose balls with united airlines saying there have been signs of installation issues in some of its aircraft.

slightly worrying. tom: george ferguson was of immense value on this yesterday and what he was speculating about 24 hours ago. lisa: you don't want to hear the screws are loose on the plane you are about to get into. that is what they were saying, the screws were loose in certain places which is a big problem and a reason you are not seeing that rebound today. tom: if you are granting x number of planes -- grounding x number of planes, you don't call airbus and say -- jonathan: we're still waiting to see how broad this investigation is going to be. unsettling stories around that particular flight on friday. the maintenance checks that were supposed to take place, did it take place? lisa: can they just tighten the screws or do they have to do something else? tom: did you notice john and i,

we are very machi -- matchy. lisa: i did notice that. i got an earful when i mentioned that. jonathan: i did not give you any or for. tk did. lisa: [laughter] jonathan: the s&p pulling back. just up a touch on the yields on the 10 year. the euro, -.1% at 1.0935. the data coming out of germany is not good. the overreliance on russian energy in german industries, in the achilles' heel. germany should stop reporting economic data anyway because every time it comes out, it does not look good. lisa: calling them the new old man of europe.

we are watching antony blinken in tel aviv after he was in turkey, qatar, uae, and jordan. saudi arabia is still interested in normalizing relations with israel. it feels like something is shifting and we are on the precipice of a new phase. 12:00 p.m. we hear from michael barr talking about banking regulation. is there going to be furthering in the aftermath of marsh and the aftermath there, especially with changes to the program? i actually am very curious to see what the uptick is because we saw yesterday the new york fed come out. the expectations for three year inflation fell low. you see that come into this or is there a disconnect between the sentiment and he market action? jonathan: this is why you wake up in the morning, for that. ben laidler joins us now, etoro.

your line "momentum is a powerful strategy." what do you mean by that? ben: out of focus on the week stocks and eject rig, january is typically a strong month. it has generated some nervousness. i think it is to be expected. we have pulled huge returns into the fourth quarter. i am bullish for 2024 but i think it will be different than the rally we saw last year. i think it will be smaller, more cyclical, and more global. i think we are looking for the rally. it is well supported on the twin pillars of breakouts and earnings. i think it will be very different. tom: etoro is wedded to the idea of crypto as an asset of

investment. crypto, stocks, and beyond is your banner. as you see crypto etf's come in here, are they going to be part of your market? is bitcoin an investable asset? ben: i think it is. everything in moderation, but this vifor pharma was the best-performing asset class last year after a miserable 2022. the thing about an etf now is it broadens the access to that asset class and the first of many capitalists out there. with the bitcoin army coming and the incoming rates, we make it is a two by crypto. i can go on and on. this is by far your smallest, youngest retail dominated asset

class and i think it is sensitive to any of these growing instruments physician -- growing institutionalization. tom: can it become a member of the magnificent seven? you see that kind of three year or five year appreciation? ben: we saw 115% last year. it is a $1.6 trillion asset class. it is similar size to any of those names with a laundry list of capitalists ahead. a big institutionalization story. from supply and demand perspective, we are constructive. lisa: we are looking at is an area where people see big tech leaving were not falling behind and that is going to be a big part of the back and rally. how much are you adjusting and leaving in right now into any

dips whatsoever? are you buying or are you waiting to get in at a better time? ben: the big story for this year, bigger than the market direction story is the direction story. out of last year's winners, penny stocks come into the out-of-favor assets that are most sensitive, the base case for an economic lending and base rates cuts, that is europe, that is emerging markets. it is not big tech. big tech is growing earnings. we are not looking for the big earnings recovery. valuations are already high. that is coming elsewhere. hold on to some of your tech stocks. i think the action this year is coming from somewhere else. lisa: i have never heard tech stocks referred to that way. we have jeffries earnings.

they express hope that things will get better. there is a feeling m&a can only go up. ipo's can only go up. how much is that part of your bullish thesis on financials and how important are jp morgan's earnings on friday? ben: for this rally to keep going, the reason we say it is back and it is because the twin pillars of rate cuts, how many, where, etc., they will be started by the second half of the year. this earnings exhilaration, these idiosyncratic accelerations are going to come as the economy slows. it is a second-half story. i expect bank results to be miserable. their to take low provisions, not seeing any capital markets activities. it is darkest before dawn. we are going to start flapping that as we move into next year

as interest rates start to come down. it is the earnings delta i am looking for. europe, which is financial's biggest sector, earnings were down 2% last quarter. by the end of this year they should be up 30% or 40%. you are saying that earnings data across all of his uncles and i think that is what people should be focused on. jonathan: do you think that kate has already begun, maybe even close to completion in europe after the rally we have seen? ben: it has started but has a long way to go. the valuation gap is enormous. earnings are still very depressed. just a huge swing which i think is underappreciated. these assets have underperformed for literally decades. they are also tiny. a little bit of money coming out of supersized u.s. markets comes

a long way -- goes a long way in the smaller asset classes. jonathan: you have to give up the teddy bears which is difficult. i have never heard that either, but i like it. teddy bear stocks, you hold them close. cuddled them at night. tom: liz saunders is good at it a perfect or. steve ross out of m.i.t. when he did factor analysis, momentum, value, one of these sectors is a teddy bear sector. jonathan: that is a real deal. now i understand. i have read that chapter. lisa: what are you talking about. jonathan: tom could say anything with a straight face and anyone would believe him. on the next hour, emily roland. catch up with emily later. tom: he rode a on the declaration rush wrote -- wrote

a big signature on the declaration. jonathan: what does that have to do with anything. tom: the signature of john hancock. you learn that as a kid. a tragedy is that were down his house in boston. jonathan: argued on -- are you done? tom: i am done. jonathan: terry haines of pangaea policy coming up. janet yellen wading into the debate about rate cuts, rather tax cuts and rather -- and whether they should be extended or not. this is bloomberg. ♪

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>> our strong preference is that the who these -- huthis get the message from around the world. is not in the interest in the world, israel, lebanon, hezbollah, to see this escalate. the israelis have been clear that they were defined a diplomatic way forward. jonathan: that was antony blinken addressing situations in the red sea and the rising tensions in the middle east, continuing his poem ctrip in the

region. we cannot talk about that without talking about this, the disappearance of the defense secretary. susan collins saying this, given the situations the united states is dealing with, the war in the middle east and the aggression by russia and ukraine, it is inexplicable the secretary's condition remain crowded in secrecy. seth moulton saying the fact that this occurred with the secrecy of defense at his own presidency -- and his own -- the fact that the president did not know was astounding. tom: is going to get worse and the worse continues. i don't understand how this goes away for the president. lisa: i want to read the play-by-play, especially as we were hearing the attacks taking

place in iran at the celebration or memorial. why was the defense secretary not in conversations with the white house? if they weren't, who was? how was the communication getting transmitted? if they don't get this information, how does joe biden continue to stand behind him and say he has faith in the individual? jonathan: if you go back to the play-by-play, there was the terrorist attack on wednesday. i find it difficult to believe no one at the white house reached out to the pentagon trying to get details. and it was only thursday the president realized they did not know where the defense secretary was. tom: to get back to woodrow wilson. it is part of our fabric, what do you do in terms of the chain of command of the nation? terry haines, the founder of pangaea policy.

you and i learned it started with mrs. wilson. woodrow had a series of strokes and then there was a penultimate stroke in 1919, he lost sight on his left eye and onward. we have a history of this and critically we have a legal process for the president, the 25th amendment, that does this. what should be secretary of defense to? -- do? terry: fundamentally his duty is to resign and his duty is among those white house staff that are involved in the chain of command to stand down. the word astounding is absolutely the case. for markets, regattas of what you say about biden's age, people are comforted by the fact

-- by the idea that there is a competent professional staff around him. if neither of those are true, that is a geopolitical risk and a problem all by itself. tom: mi correct that there is a comfort to resignations at the administration or in other parts of government because we are so near the election? now is a good time to exit, isn't it? terry: i think so, probably. secretary austin could do other things similar to what retired military officers do. serve on boards and lecture and they like. someone will have to take opportunity -- tape responsibility for this. it has been reported that biden is loyal, he is going to stand by his guide. they should have figured out already that that is not good to stand and they need to place a

different look on this. if you wonder why the israelis are not paying much attention to white house preferences on how the gaza war is conducted, look no further than the white house and secretary of defense situation. jonathan: i think -- this is a question conspiracy theorists like to probe but i think it is important. who is actually running the government? terry: we don't know, do we? that is a little disquieting. it goes farther above those viewers who have not seen this. the secretary of defense is out of action, the chief of staff is in the post, the deputy is on vacation. is not just austin. the idea that the white house had no idea, the white house supposedly has tracking systems, no idea where the secretary of

defense was is mind-boggling. that is not a word i use frequently. lisa: you are talking about lloyd austin and how you think he should resign. who takes his place? is there another person who has familiarity with what is going on to have the continuity necessary to engage with difficult international issues? terry: there are a lot of potential candidates. there are a lot of four stars, people on active duty. one person, i don't want to put him out there on his own. one person who comes to mind is somebody who does work with bloomberg -- who fits that template very well, who has been a flag officer but understands very well the geopolitical challenges faced and would bring a command posture to the position. jonathan: the contours of the

policy debate coming together in election season, secretary yellen weighing in. others was interesting. -- i thought this was interesting. she said the tax cuts by president trump would lead to serious concerns of the deficit. have we set the stage for that battle to take place? terry: where setting the foundation for the election and a 2025 battle. you should not look at janet yellen as an independent after. she is a biden soldier. her political capital that she had when she was an independent actor is no longer hurts, it belongs to biden -- no longer hers, it belongs to biden. she is being a good soldier and sink we could not have tax cuts. that is democratic orthodoxy. jonathan: sounding like a politician. thank you sir.

weigh in on that, janet yellen saying all the 2016 tax cuts would lead to several concerns over the federal budget deficit. lisa: what else would be okay series -- be a serious concern? borrowing costs stay at the level they are now would lead to a surge in -- expense. what is the threshold between sustainable and serious concern? that is what i want to understand. tom: as secretary of treasury, this is revealed. she is supposed to comment on things like this. if you have a central banker commenting on policy or jerome powell commenting on fiscal policy, in the old days that was confusing. lisa: i think she was smart in the way she adjusted issuance and staved off response by issuing more people's rather

than longer-term debt in order to not flood the market with coupons. this. the changes. the government has to face off much higher expenses. tom: they had the confidence to go short-term and now what is a huge mystery. jonathan: i'm sure there are people screaming at the television set saying what happened to issuing long-term debt when rates were near zero? i am not sure we should give the treasury a round of applause for its maturity profile management. lisa: 100 year debt, where was that? jonathan: from new york, this is bloomberg. ♪

jonathan: biggest one-day rally on the s&p 500 until the middle of november. this morning pulling back by 0.4%, it is softer on the s&p. on the russell, the small caps getting honest, down a little more than 1%. cbi thursday. or next on friday. the numbers out of jeffries are not great. lisa: you saw a drop in the earnings revenue compared to the earlier. they say this is the trough and it looks brighter head and you can see the resurgence of deals. every thing has to get better.

great. jonathan: ben laidler of etoro, teddy bear stocks. the ultimate teddy bears stocks of the last 24 hours, 12 months for that matter, nvidia. lisa: yep. jonathan: you don't even have to say what, they just say new product, bye. terry: -- lisa: nvidia the cans yesterday, they rolled up new chips. they talked about more processing abilities. tom: my best conversation in the new year is anna of bloomberg intelligence. the phrase for all these companies that i don't understand which is the guesstimate of what the future market is in five and 10 years. the fancy word is gentleness. jonathan: a few more asset classes.

euros on treasuries up a single basis point. up 4% on the 10 year. foreign-exchange, it is a snooze for the euro. 1.0931. the data out of germany, i know it is november, industrial production. the trend is clear. it is not great data. lisa: i spent time thinking about this last night. what is the expectation? what is being pressed in? we are is under pressure. we know there are issues with injury -- with energy. what is being pressed in? i think that is why the europe have an dollar has been so -- the euro-dollar has been so no. tom: wonder with a blistering note this morning that has to do with your trip to davos. he says they are at 1.89%

inflation, they are way behind. weinberg mentions no notice for lagarde to pivot. is it time for her to make a statement? jonathan: next week you will hear a lot from the ecb president. let's get to the top stories. boeing suffering its worst day of the year as the investigation into the alaskan air incident continues. maintenance checks on other aircraft uncovered loose bolts. united sank there had been signs of installation issues. the national transportation safety board not opening a wider investigation into the aircraft. yesterday the stock was down about 8%. really unsettling reporting from a few of these companies. lisa: especially because the light had been on and they did not know what happened. one of my favorite parts of this story is a physics teacher who found the plug in his backyard. he was talking about how the 50

foot trees acted as air cushions to keep it intact, as well as the iphone. that is the reason why those things did not explode. it is such a blessing if nothing else that nobody got seriously hurt. the question now is where does -- how does boeing go forward? whose fault is it? how do they reignite confidence? tom: use electronic was their satellite company to bought years ago. this was 1997 and a shocking merger of boeing and donald's douglas. i did a fancy chart on this. here is the question, what has happened at boeing since 2016? i cannot answer that, but something changed in the pixie dust about 2016. jonathan: you are not the only one asking that question. let's turn to that aircraft. if you knew an aircraft you are getting on should not be flying over water to places like water

but okay to fly domestically overland, would you get on the plane? lisa: here is the leap of faith of flying, you have to kind of trust it. everyone is going to say i am sure they signed off and it is fine. you are right, if they're going to sit you can only go up to 15,000 -- this one might not make it. tom: the video here on television of the duct tape and the plastic around the hull is like something at home you are try to hide. jonathan: the more concerning it is. it is not funny at all. it is only funny because there were not serious injuries but we are this close to having a real accident. lawmakers demanding answers as the absence remains around the disappearance of lloyd austin. lloyd austin feeling to notify

the white house after being hospitalized four days. the defense department has still failed to -- the white house ruling out any possibility of him losing his job. terry haines said the man should resign. more to come on that story. some good news for the people of michigan. a 26 year drought is over. the university winning the national to bishop game, beating the huskies 24-13, the 12 national title, the first since 1997. tom: they have the microphone in the huddle like they do and the quarterback says, let's do this. it is not australian football rules. jonathan: will probably was

there. tom: we are going to move on from college football to the excitement of foreign-exchange. jane foley is never quite, the head of foreign-exchange strategy at rabobank. where is the movement in the next 90 days for a foreign-exchange pair? jane: euro-dollar has been exciting today. what about the swiss franc? it was back to the stress levels it has seen since the amazing dates of what years ago when the s&p stepped away from maintaining that 120 floor. there is some action here. it is disappointing that euro-dollar is not as broad as we anticipated. tom: i am triangular links was every day, euro-swiss, dollar-swiss.

what do you suggest the s&p will do if we break through strong swiss franc? jane: that is an important question and one not being asked enough. we are in danger of looking at switzerland the same way we are looking at the rest of europe. i think it is important to remove for switzerland like japan that they have had issues with disinflation. right now it is in the sweet spot. they're going to be nervous about going back to sync too much disinflation and i think the swiss franc does continue on this course of strength and that will potentially become an issue. in contrast to what i am saying,

i think there is a risk the s&p will bring forward rate cuts at a time when i'm so just enough for other central banks. lisa: the value of fed s&p -- at a time of uncertainty, edit time when people are ignoring the signals and the worries the central bankers are saying, we did hear from central bankers, including rafael bostic of the atlanta federal reserve, shall woman who said she would be listed in cutting rates saying if inflation stays high they might have to hike again. did you pay any credence to the hawkish rhetoric in the bush that we have been getting on the markets from the fed? jane: i do. the s&p -- we do have to pay attention to these threats.

think about shipping that is now going around the cape of good hope rather than the suez canal. who is going to pay for that? who is going to pay for the additional insurance premiums? who is going to pay for the fact that for months we have had limited shipping to the panama canal because of water shortages? who is good you pay on premiums because there has been flooding, drought, climate change issues? supply chain disruptions as wendy witt in 2020 is gone, but supply chain disruption because of geopolitical risk is still here. that is inflationary. we also have in the aging population. that means their labor market shortages, opportunity for more labor market strife and higher pay increases throughout the u.s. and europe where the population is aging. i think we are in a different

economic environment then we were 10 or 15 years ago. i do pay heed to those hawkish comments. i think the market is too optimistic for a majority of the g10 central banks. lisa: do you think there is any chance the fed or the ecb could hike rates further if there are supply chain disruptions or if oil prices are higher? jane: i would like to say no but i think it would be foolhardy to rule out that chance. we don't know what is going to happen on the geopolitical front or the climate change front. i would say the answer is probably not but there has to be a slim chance. i would not want to say 100% certain they would not hike interest rates. jonathan: favorite rate for the year ahead, what is it? jane: i think sterling is going to do better than the market is

anticipating. there is too much gloom oppressed into the u.k., it has almost become habitual for people like me to become bearish on sterling. i don't like the euro. this is related to problems aside from the dollar, aside from the german economy. if inflation can be kept in check, the euro needs a softer euro. that will be the case just to increase its competitiveness because of these issues with higher energy prices, salary. the yen is interesting and less to everyone was saying the yen is going to be strong. i think it will strengthen but i think it would disappoint the balls -- will disappoint the bulls. jonathan: does not like the euro. going back to what we heard this morning on the german statistics office, they should stop posting economic data because it has been dreadful in germany.

lisa: they should have the communist party of china response to it. just use unemployment, german fundamental economic data. the issue is how much of this is priced in. how much people are expecting a resurgence in production. where is the growth going to come from? has that been pressed in or are people going to expect that to shift back to the normal relationship? jonathan: the german business model celebrated for so long has failed on several fronts repeatedly. tom: the keyword is several, it was not just one thing that made this unravel. what i hear from our experts as they continue to go back to the china debate, the idea of the linkage of china to europe is different right now then the u.s.. jonathan: did you see what bramo did? she drop her hot water. lisa: it is seltzer.

jonathan: it will drive -- dry. i am very cool, relaxed. brooke sutherland this coming up. is not that bad. tom: i have tang here. jonathan: a drop of more than 8%, boeing's was today in over a year. for spotlight, they cannot get away from it. that conversation up next with brooke sutherland of bloomberg. ♪

>> we need to first and foremost figure out what happened here on this aircraft. if we have a bigger systemwide fleet issue, we will issue a

city recommendation -- a safety recommendation to push for change. we don't know if there are ports -- issues there or aptly started. jonathan: the more they talk, the worse this sounds. that was on the lord of the boeing blowout. united and alaska air finding loose votes from their fleet after preliminary checks. boeing yesterday, bad day in this equity market. the biggest one-day drop since 2022. boeing is negative. you from the airlines, it is not sounding great. you hear from the investigators, it does not sound too good. it is going to take a while. tom: there is going to be an investigation and always new things come up. critically things we think -- we

assume are pushed aside by adult engineers. there is a history of us doing better than good at this. jonathan: the companies we need to talk about our boeing, spirit air system, and alaska air lands. there was a red flashing light coming up on that aircraft. what was done about it? it is responsible to make sure it was addressed. tom: the first person i thought of when i heard about this serious engineering failure was the gentlelady from kansas, brooke sutherland's nose is cold. she is a bloomberg colonist and she knows clyde cessna invented our aviation world in wichita, kansas. we are going to go to wichita and talk about how we build the things we take for granted. how shattered is aviation kansas? not afraid, but how is their

confidence broken? brooke: you have to be concerned in wichita. that is the home of spirit aerosystems which makes the fuselage on the boeing max. it is not clear if this is a spirit issue but they have had a history of quality-control glitches in this past year. there is scrutiny over the relationship between boeing and spirit aerosystems. this used to be part of boeing until 2005. executives decided they could boost profit margins by focusing on the design and outsourcing manufacturing. this was never meant to be an independent business. this relationship is going to get scrutiny. there are questions of if boeing could buy spirit which could become located since spirit has diversified. boeing and airbus are going to look at vertically integrating

more of that because it is not a tenable relationship. tom: is this enough for airbus to get a legit foothold into american aviation? brooke: i think they have one. airbus has remained much more vertically integrate -- vertically integrate -- ingrained. jonathan: by monarch -- lisa: i am wondering the decision of airline companies of which plans to buy. why did united and alaska air have a disproportionate number of these jets? was that availability? was it the cost? brooke: it is both. we have a duopoly, it is boeing and airbus and airbus is sold out of its jets into the 20 30's. fuel efficiency, engines are also a concern. the max politics the engine from

cnf international. airbus, you can choose between that engine or a variant of it or the gtf from rtx which is having problems of its own. they have had to do a costly recall of that engine technology because of a manufacturing glitch. if you are an airline, i don't know what your best option is because you're having a problem with both of these aircrafts. so far all the investigations, the grounding is focused on the mix nine -- max nine. the max 8 is really the workhorse of the boeing family of jets. that so far has not come under scrutiny. it is a fair question as to whether it may. lisa: george ferguson was on yesterday and he was talking about there are serious staffing issues since the pandemic and

that can play a role in the supply chain issues or the assembly line issues and the lack of tightening the bolts. do you buy into this? is this something you have been hearing from executives of other industrial companies that they do not have the number or quality of staffers to make sure things are done properly? brooke: absolutely. if you look to the pandemic, we build out the airlines but not the aerospace manufacturing supply chain which created a lopsided dynamic where these companies laid off and then they could not hire people back when they needed to. i put some of the blame on these aerospace manufacturing companies because we have long had supply chain issues in this corner of the world. struggle use -- companies were struggling to meet demand. you think these companies might have had presence of mind to hold onto the workers. i wrote about the railroads making structural decisions

about nothing of workers when times get tough and whether we should see a similar mindset in the aerospace world. i think that would be necessary. brooke: i talked about -- tom: i talked about boeing and looked at a fancy chart and says something happened on or around 2016. did they lose the culture? did they lose the engineering discipline when they exited seattle? brooke: you have to look at deep-rooted cultural issues at this point. it has been one problem after another. dave calhoun has resisted sweeping overhauls at the management ranks. what is needed is a true reset. i go back to ge because there are crossovers between ge and boeing management. that company went through a proper cultural reset. is on a healthier path, it is breaking up but it is making

money. is generating--flow. is overall -- it is overall a healthier company. when you have something as basic as the screen and 80 bolts in a door, you have to look at how did we get here and what cultural norms are in place to allow this to happen? jonathan: how resistant are regulators to that conversation? brooke: i don't think they should be resistant because their reputation is on the line. the faa is supposed to be inspecting every plane before it is headed over to customers. that was super competent place in the wake of the cisco bital crashes when it came out that the flight control software was much more prone to being triggered by malfunctioning functions. they took a hit in that accident and this was meant to be part of their response.

the faa missed something here. it should be in their interest to beef up scrutiny of boeing and the overall aerospace safety infrastructure. this is not the only issue we have had. we have had close calls on the runways. we have been lucky enough not to have very many fatal accidents in recent years. we cannot get complacent about aerospace safety. jonathan: where is your focus, boeing, spirit aerosystems, the makers of the 737, the faa? brooke: i would say all of the above. boeing is the most important story here. how do they react to all of this? weather that involves their supply chain, whether it involves management. in mid 2022, there were an unusual number of customers calling for management changes.

that has quieted down. i wonder if that will start to pick back up. boeing did name chief operating officer. they started making her the heir apparent to dave calhoun. i would keep an eye on whether management changes happen sooner than later. this is a company that could use fresh eyes rather than promoting within. it might raise more eyebrows. jonathan: brooke sutherland there of bloomberg opinion. tom: maybe there is a general in a hospital somewhere in washington that can find -- take lloyd austin out there to boeing. jonathan: i am not going there. we all wish him a speedy recovery. the problem is we don't know what recovery is from. coming up next, emily roland of john hancock investment management. we are done .5% on equity

futures -- down .5% on equity futures. this is bloomberg. ♪ hey you, with the small business... ...whoa... you've got all kinds of bright ideas, that your customers need to know about. constant contact makes it easy. with everything from managing your social posts, and events, to email and sms marketing. constant contact delivers all the tools you need to help your business grow.

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>> the market is probably a little bit overdone into the end of the year. class people -- >> people dash into the market. >> the idea that the market has five rate cuts price day -- that might be wildly optimistic. >> i think there are a number of

things that could come in and shipped the market up a little bit. jonathan: good morning to our audience worldwide. alongside tom keene, i am jonathan ferro. following a pretty decent day as gains. tom: a lot of distractions. absolutely outstanding with it. we underplayed it in the last hour. the market is one word, extraordinary. it was a true surge, refuting a lot of the negativity. jonathan: on the discretionary side of things, lululemon saying things were better in the fourth

quarter. nvidia has to come out and say new products, and then we get a big rally. lisa: it's east of the fact that everyone is looking to buy. everyone is saying it will be turbulent and it will o'malley hired into the rest of the year. basically upgrading the outlook for the whole year. even if there is going to be a selloff, all of the upgrades are coming out. [laughter] jonathan: about that forecast for next year, legal pump that up again. tom: it is not just one or two opinions. i'm going to say that the consensus is wrong. single-digit. middle single-digit. lisa: when you take a step back,

people do not see a reason to stop. if the fed is going to be cutting rates, isn't it time to party? the only thing making people nervous is that maybe things are getting too easy with condition, but that is why people are ready to come back in. tom: how can you have it too easy? but year point, we are not in recession. it is an important listen -- litmus test. jonathan: still a 1000 point spread. it is a massive spread. a lot to look forward to. we have cpi on thursday. a ton of banks the following week as well.

session lows down about .5%. bouncing back this morning. lisa: oil is an important one to watch. today, secretary of state antony blinken is continuing his tour. he is in tel aviv today. a key question about what potential escalations there are. 12:00 p.m., we will hear from michael by and i do want to hear what the evolution of this kind of program is. the short of short-term funding that has helped to keep up the banking system. do they continue that?

does that continue some of the disruption that we saw earlier this year? it is the reason i am watching the options. we get 10-year note's tomorrow. how much appetite is there, at this point, especially given inflation expectations falling to the lowest since the pandemic started. jonathan: let's kick off this conversation with emily rowland. emily, great to catch up with you. we spoke to the -- ben, during the last segment. emily, do you still like those teddy bear stocks? emily: we were long tech last year as well.

we were looking for companies with great balance sheet, low interest burdens. we still like tech stocks, but we have to recognize that the s&p 500 growth index is trading at a 44% premium. tech stocks were up about 58% on about 5% earnings growth. 5% earnings growth was of the best globally in the tech sector, but it makes sense for a tech to take a little bit of a breather. we are not downgrading it, but i do not know how much you can expect after an extraordinary 2023. tom: what are you doing on 60-40. i've seen target benefit programs and the rest of it. what do you do 60-40 forward? >> what an incredible year for the portfolio after a horrible

2022. everyone was calling for it to be dead. clearly very much alive. we are modestly adding and you look at the stop sign and sitting at 19.5 forward earnings. earnings growth penciled in, and it is a tough starting point. we are not saying that they will do horrible this year, just at the bar is really high. 4% to 5% on quality bonds. we still look at the income on high-quality bond as a great way to sit here and get paid to wait as we might experience some more volatility. it does cause cracks to form in the labor market. tom: is there such a thing as growth value? if i am upset with multiples,

where is that growth value where i can hide? emily: absolutely. on the value side, you have to be really discerning because there is a lot of locality. we are looking at areas that have a high quality element to them, so health care, one of our favorite sectors, a lot of people have been coming on here and talking about health care trading at a 10% discount and we think it will benefit as behavior shifts. i know we were talking about leisure earlier and i have an 11-year-old daughter. athleisure is alive and well. people are going to do what they need to do. another area that got hurt last year, everybody left it for a dead. we could see a rotation into

those dogs of the dow as tech takes a breather. lisa: what is the biggest risk? emily: that is the question of the year. this is going to be one for the history books. was the fed to dovish suggesting that cuts are coming in the summary of economic projections? it has caused a loosening in financial conditions, spurring this pivot party on the show. right now is feeling a little bit like a hangover, like maybe we are trying out dry january. it is causing yields to backup, kind of bad news on the equity front. i think everyone is tired of

talking about it. we do not really get paid on whether it plays out or not. maybe -- if we are prepared for and can -- for an economic contraction to take place, looking at income and then rotating into these defensive parts of the market. if something breaks and we see that contraction play out. lisa: leaning into high-quality income producing fixed income. does this really get offended, if the economy is hotter than expected? emily: there is a potential here for rates. we are watching it closely. the data on thursday on cpi is going to be critically important, so there is a risk for the acceleration -- for

acceleration again. it is hard to believe it will go back to 9%. there are some pandemic era issues there. we think we go back to a low growth, low inflation environment that really permeated the market and the economy for the last decade. nothing changed except we pump $5 trillion of stimulus into the economy. we think over the longer-term, that is where we will go and we are headed in that direction. jonathan: is it still u.s. and america stocks? emily: it is. you have been talking about how horrible the data is coming out of germany and it is hard to see stocks not really reacting to that in europe.

there has been buoyancy and participation. when we look to the u.s., we are holding up the best around the world. our labor market is undoubtedly the strongest in the world. earnings are more robust than in other areas. have more high-quality stocks in the u.s., so we have a preference where we think china will be challenged into this year. jonathan: thank you. almost the total opposite of what we heard yesterday. it much more constructive on europe and the global glue -- global growth backdrop as well. lisa: it is the slowdown that everyone knows about. have we really understood the ramifications of that? tom: smartest thing i have heard is a guy named scott galloway

who is pretty good about thinking about this and he extends the timeframe. these cycles, these moves -- guess what? the optimism on tech is a phenomenon. jonathan: welcome to the program on the s&p 500. we are negative by .4%, following a really decent day of gains. last week was pretty rough. people like lisa talking about sober january and the equity market. lisa: we heard it from her. dry january, the feeling that we are depriving ourselves from the joy of last year. jonathan: i was just giving you your props. just looking out for you.

tom: i did not notice. lisa: you were talking to me like why are people hysterical? at least they wear declines. it tells you my first weekly decline since october. exactly. jonathan: we will be breaking down this market for you. bloomberg's anne-marie is here in new york city to try to help us find the defense secretary, lloyd austin. good morning. ♪ as the head of hr, i help lead a successful home security firm.

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president biden: i understand their passion and i have been quietly working with the israeli government to get them to reduce and significantly get out of gaza. jonathan: president biden facing protesters during a speech in charleston. i want to touch base. -5.4%. really decent gains yesterday on s&p and nasdaq.

there is some data this week can talk about. cpi inflation data. summer earnings to talk about as well. all the other banks taking off next week. tom: a deserved vacation for our correspondent. getting ready for the festivities to begin. we are thrilled she is back with us. anne-marie, i will cut to the chase and say that there's many different stories about this war, that war or both wars and it just will not go away for this president, will they? anne-marie: they will not go away. you do not just see it on the international pages of the newspaper anymore. they are trying to shore up a key voting block. softer numbers in the pulling

when it comes to the african-american community. while he begins that speech, he is hit with protesters talking about gaza and what is going on in israel. it is a huge concern for this administration and for john mentioned shining a light on the apparatus because there are a lot of questions about what is going on with lloyd austin. his deputy is money the government at the moment. he is now out of the icu and he will be running it, but for two days, it was the deputy and not everyone knew that. only a small group of people in the pentagon knew that until the chief of staff told the white house and told top members of congress about lloyd austin's condition. jonathan: it is unbelievable.

he was basically calling for the resignation of defense attorney. where i find things to be really confusing, and wondering if any of your can give us some color on this. when you can't -- when you have the kind of terror attack like that and people are talking about things escalating, are we sitting and can putting that the likes of jake sullivan, that they did not speak to the pentagon on wednesday, and if they did, they were not aware, even then where the defense terry was? anne-marie: that was a strike in baghdad and that was a discussion that lloyd austin had with the president before he went back to the hospital for this emergency. but yes, 48 hours, they -- the question was, who were they speaking with? there are a lot of questions regarding how the operation

operates. there was a lot of talk about different parts of the administration. it seems that potentially, they did not learn those lessons. a lot of criticism about how they are very insular. lisa: i hope that we learn some more. there is a question about lloyd austin being a very private man. he was seen as trying to keep a lot close to his chest. is that a thing? that people close to the presidency are private people who are not present enough in the public eye? anne-marie: you can kiss your private life by. there are some things that are private, but undergoing

anesthesia? we do not even know what this procedure that he had done was. i'm assuming he went under him anesthesia. lloyd austin has come out with a statement about this, but there are growing calls and congress. stefanik once his resignation. to some are saying that there should be an impeachment. even democrats are saying that there is more that needs to be done. there needs to be a full understanding and accountability of this. lisa: there is a question of where the buck stops. this is a problem for the white house? anne-marie: i think it is both. voters will be going to the polls this november and if they see something they do not see, they will be voting on it.

tom: this is not just another senator. describe the importance of him. anne-marie: this is a democrat. tom: but he served the nation in the military. anne-marie: he understands what a dereliction of duty truly means to somebody who has served. tom: to me, it is extraordinary. anne-marie: the questions are not going to stop. it would be an easy point for members of congress to deflect when they do not want to answer questions about funding the government and whether or not they will get a broader deal on national security concerns. republicans will want to reflect on this. jonathan: it is an unpopular war

between israel and hamas. the president stood shoulder to shoulder with the leadership. how is he going to address that in the coming months? anne-marie: you will not see that bear hug ever again. he said, i have been working with the israeli government to get out of gaza. all of these conversations that we have been talking about that are quote unquote private -- i think a lot more details about that will become public. jonathan: way and on the latest in washington. tom: i cannot emphasize enough the democratic response to this. this is a bipartisan, nuanced outrage. lisa: everybody in the white

house keeps saying, stop talking about it. it will become something serious heading into november, given some of these polls and where we are. jonathan: there are occasions like these that are absolutely desired. lisa: we are going to give you these details at this time. jonathan: it is the way that they behave. we are not them, say you should be satisfied, which means we have a different set of standards. you are in the white house now and this is what we expect. it is kind of weird. tom: it is the same kind of equivalency.

you have to be yourself. lisa: political crisis is becoming more and more in their focus in terms of a potential risk and i always say, yes, yes yes, but this one feels a little bit different based on what you are setting up for. jonathan: that conversation coming up quickly. yields higher. the two-year is basically unchanged. the equity market just a little bit of a balance off session those. from new york city, this is bloomberg. ♪

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jonathan: good morning to you. on the s&p 500, negative off of session those. down by .6 on the nasdaq 100. down by a little more than 1%. heard from a few retailers like lulu and abercrombie. things are not great. lisa, that he's on earnings is coming on friday. lisa: jeffrey is posted a d3 drop to their earnings for the fourth quarter based on a year

earlier. that is dismal. things have to get better but the question is how much? jonathan: going into cpi and a couple day's time. yields back above 4% and the last two sessions just about holding up. tom: it will be interesting to see what cpi is. one series is sort of flat and up and the other is flat and down. it is on europe and not the u.s., but the look back 12 months screws up the map. it is such a shock from where we were months ago. jonathan: bring up the euro. tk basically saying that your

needs a weaker euro given what is happening in germany at the moment. tom: carlos was saying that lagarde will make it. , as she always does. where else are you going to make a statement? i'm done, let's go. lisa: sharon bell saying a euro is associated with better growth because it signifies a bigger drop. there is no agreement to any geopolitical or macro trend. i think that continues into 2024. jonathan: lisa is framing things nicely for you. airlines finding loose bolts similar to those thought to be behind friday's blowout on a billing next 737 jet. all max nine jet's have been grounded for the time being and boeing has issued guidance on

what is needed to prevent another accident. yesterday, the stock was down 8%. i think we set it earlier but the more you hear, the worse it sounds. lisa: is boeing responsible for overseeing the quality control? but who is inspecting stuff? i was looking at the salary for the faa employees. is that not enough to attract people to stay long enough to make sure that we are in a good place? tom: forget about what she is talking about so early in the morning, but it will be fascinating to see what brooke sutherland talks about in the next few days about what the to do is for this huge national problem. jonathan: agreed. bill gross saying 10 year treasuries are overvalued. going on to post on next, 10 year treasury protection

securities at 1.8% is the better choice. he made millions late last year, warning that the bond market was misguided in august. lisa: is this going to be the nuance, the trading of the range or a big, bold call. a lot of people are saying to trade the range. tom: looking for a price down and yield up. there is a heated battle out there. i mentioned it earlier in the morning. going to call it one point x percent, but i believe j.p. morgan was talking about a virulent going from 180, away from the gross call.

jonathan: she was saying that just last week. a lot of people think that is a by. i want to talk about the earnings that we talked about briefly. the slump continues. posting earnings of $66 million. results also weighed down by 64% drop in asset management and declining advisory fees. the biggest banks are sent to report on friday. not a great start for financials, lisa. lisa: the global m&a was on track to follow that 20%. if you look at private equity and venture capital, it was down 40%, year-over-year. it probably punched a hole in some of the earnings.

tom: let's continue the conversation. thank you so much for joining. let's begin with a call. yields lower or higher this year? >> there are some structural changes in the market. it is influencing the interest rates. four to eight weeks of trending interest rates. tom: do you clip a coupon this year? can you redo that this year? >> it will be a lot harder. they were relatively wide. we were revealing across a range

of market, but as we sit at the beginning of 2020 four, the reality is that they are year recent height. they are above 100 basis points. it is very hard to generate big returns. we think it will be more about surfing the waves of trending interest rate and a four to eight week period. cycle and we keep hearing that this is a trade the range kind of year. is it less volatile? >> it is predominately a feature of the policy landscape. and to recall where we were this time last year, whether we were

looking at 75 basis points are something else. right now that is a lot comber. i do not suspect that short-term volatility will be a permanent issue. i would say that over time, moment trade becomes chalked up we are expecting returns from that sector but we also see capital pooling back. but right now, it is a trend rather than a range. lisa: what do think is the risk for 2024? >> it comes to days before the cpi was released. we had a big expectation and as

we have seen the last year or so, there be a lot of surprises brought about by noisy data. it could prove enough to spook markets, even if it is not all that. tom: over three years, we have had a brutal bond market. i get that. our bond client healed from that debacle or are they still living in daca -- living it? >> they tend to shade towards shorter-term. it could include things as short as many market. the reason is not just the experience of the last few years in which we saw double-digit

drops, but relative yield. if you still measure today's yield, it offers a lot more than going out. about 125 basis points. tom: is it going to be corporate issuance that makes things uncertain? or could it be janet yellen and what she will do? >> we are not looking for a huge slug of corporate issuance. in addition, when you look at the issuance plan, they really ramped up portion of the bill issuance. i think that does little bit of a limit to the supply concern. i doubt we are going to get a big increase. it will be more about bills on the front and.

-- end. more concerned about cta positioning. jonathan: we're always talking about that moment of reckoning. michael is brilliant and wrote about the boiling of the fraud between now and 2030. he talks about the projections that by 2030, all federal government revenues see an intro -- will see an interest on the federal debt. >> those comments have been part of markets for as long as i have been involved in them. i do not have any detailed opinion on that day of reckoning . i'm not even confident that it does arrive. but high levels of nominal gdp

growth through something like a big boost in productivity -- i'm talking 50 basis points higher inflation. both of those things would do a great deal to reducing the size of the deficit, reducing the size of the treasury markets. governments usually inflate it away. jonathan: thank you for joining us. lisa, we have been having that conversation for a long time. lisa: the biggest trick the devil ever pulled was convincing the government that they actually paid back their debts. not going to happen. at what point was the inflation a gift to the u.s. and how much

was it offset? jonathan: the s&p 500 is negative. yields are higher by a single basis point. coming up later, the brilliant meal -- neil dutta. and later on this morning, in the next segment, we will catch up with ian on the top risk for 2024. tom: ian is enjoying himself this year. neil, his chart is out there right now. we'll growth is tangible. jonathan: lisa, that was one of the leading the second areas yesterday. lisa: lululemon millie had a pop

and sales. what is the pricing for by stretch pants for your children? i'm not sure. it is -- i do not want to disclose anything. that is really private. it is $130 for one pair of stretch pants. you have to wonder if you have a 10-year-old who will grow out of them. i am fine. jonathan: where the sales good at lulu? lisa did not go. slightly negative. this is bloomberg. ♪

>> our strong preference is that they get the message that they are receiving from countries

around the world that this stop. it is not an interest of anyone to see this escalate and to see an actual conflict, and the israelis have been very clear with us that they want to find a diplomatic way forward. jonathan poulin the rising tensions in the middle east continuing in the region. let's see this in a commodity market. still incredibly low given what is happening in the world. remember the calls for triple digit crude? things downwards in the middle east and not better. production in america is north of 15 million barrels a day.

phenomenal. tom: jon ferro has said that we are going to stop saying happy new year. all we know for certain is that ian bremmer and others have to rewrite their risks for 2024. he is here today with the top risk. how uncertain is it to get some march or in the middle of may? ian: i do not think we have to rewrite these risks, but we do have to recognize how incapable the u.s. and our present set of leaders are, and trying to

contain the geopolitical risks and conflicts. the entry that we had -- antony blinken was saying that we need them to understand. he could have said that hamas's understand. they cannot continue to expand fighting in the region. u.s. has zero ability to actually make those messages land with the actors on the ground. tom: in his post-american world, you said the was battling itself. triangulate right now the lack of confidence you have in a geopolitical strategy.

ian: the u.s. was not going to me willing and able. but no other country would be able to step into its place. there would be more conflict. there would be more vacuums. 12 years of that gets you much bigger and unmitigated fighting. we see that with russia and ukraine. now we are here in 2024 and it is turning in a way that none of us are comfortable with. it is set. we are increasingly a tribal,

nonfunctional democracy in crisis. this man is a threat to democracy. when you have a person who is running having tried to subvert a free and fair transfer of power in a functional democracy, that would be the number one issue of the election. isn't that we are somehow getting our facts wrong or is it that the u.s. is not a functional democracy? no one else in the g7 is having the problems and legitimacy that the u.s. is experiencing in 2024. jonathan: what do you think of

this? do you think of it as a functional democracy? ian: no. we have normalized that because all of the things that are unprecedented -- we still live here in the u.s. and are saying, i guess that is the way it works now. i guess that is the way it works. you can post and say things. in a set against the context of a functional economy, maybe it is ok that the u.s. is not a functional democracy, but it will be different. we cannot normalize the dysfunction, the legitimacy of its institutions.

that is the reality. our allies know that and are deeply worried. and our adversaries see this as a huge opportunity for themselves. jonathan: what do things look like? ian: when trump gets the nomination, which is very likely , he will overnight become far more powerful on the u.s. and global stage. all republicans will be loyal to him. the media that is following and supporting trump, and the ability to raise money to drive that campaign. there would never be a more against israel if i were president because --

that will be the policy for trump and therefore the republicans. it becomes the policy, so what is an acceptable policy frame to be in the u.s. is going to change very dramatically when trump comes the nominee. in 12 months time, the stakes are a lot higher for both leaders than they ever have before. biting and many around them believe they will face legal jeopardy, that trump will politicize and go after them. trump, of course faces potential prison time, so the stakes are much higher.

lisa: there are real questions about the defense secretary and his absence. president biden is not very popular and is not really addressing that. ian: i was a little bit surprised. i discussed that with an official the other day and he had a chuckle about it the other day. i missed that. but it was pretty funny. we had a good joke over it. i think that biden has the intention of being the antidote. he wants to follow rule of law, but we are in the fourth year of the biden administration and the reality is that the country is more politically divided. so, he does not have the ability

to resolve the divisions. look at russia and ukraine and he would say that the he would like to in the war, but he does not have the ability to do that. these major conflicts between the u.s. and itself -- none of these cases is diplomacy an option. and none of these cases do they have the willingness to stop the fighting. that is what 2024 is. i look ahead in 12 months time, that is where we are. that is what g0 means. jonathan: the biggest risk is the u.s. itself. you won't come back now. ian: i will. next week in davos. jonathan: from new york city, futures on the s&p.

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>> we are past the peak in interest rates. investors do not want to miss out at this time. >> if you think the fed is

frustrated by this market, the market is more dovish than the fed wants. >> it's between when the fed starts to cut and the odds of a hard landing increase. >> there is no soft landing in this economy now. that is wishful thinking. >> the fed is trying to do the impossible now and my heart goes out to them. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, everyone. on radio, on television, bloomberg surveillance. lisa abramowitz was looking at bit coin and her retirement plan looks good. the market is one big distraction except it's here. potentially a bitcoin etfs there and gary gensler had an extended

thread with the risks involved. those risks overlaid in the market, it's a risky 2024. jonathan: let's talk about financial markets in the last week or so. the conflicting economic data, the conflicting earnings stories as well. you can identify a slow down. maybe we'll worry about what's happening in the broader economy and companies like lululemon and abercrombie updating their outlook. nvidia release new products. tom: six trading days here and we could go down three more days and have another january 2, 3, 4. we go up like yesterday and it shows the immense uncertainty out there on top of bitcoin. jonathan: it's soft data versus

hard data. so the survey data is not fantastic. you look at the hard data and things are ok. jobless claims are around 200 k. tom: jp morgan wrote that the job report was everything constructive and optimistic and yet half of america seems that on their back like when you look at the political debate. lisa: where at a moment where the market is moving faster than the fed would like. there is a concept that may be because people are getting enthusiastic about bonds and stocks, that could force their hand and state higher for longer. which is the bigger risk for this year -- a recession or a reignition of inflation but i don't think it's right clear. tom: i will start with the 10

year inflation-adjusted yield, 1.81%. it is elevated here with some tension. people are looking for a return to a higher real yield, challenging for corporate america or jp morgan set a shockingly low real yield. jonathan: nominal yields on the 10 year north of 4%. we've held that level over the last week or so. the euro is slightly weaker. but data out of germany was bad with industrial production not great. the s&p 500, following the biggest one-day rally since the middle of november, we go to 3.4%. tom: we got a huge response the last time he was on on what to do with your money.

the chief investment officer at wells fargo. time stopped the last time you are on had to do with the 60/40 bang up 2023. instead of the view forward, what are you hearing from wells fargo institutional and retail clients now? what are they doing with trillions of cash and the magnificent seven? >> they are still sitting on a lot of cash. they are still parked in the 5% money market fund. they haven't started to come back off the sidelines with any aggression at this. we know the 60/40 portfolio went up 10.3% in the fourth order alone. the whole year was 17%. i think they are a little cautious as we start the year. when you get below the data, you need to look at where the strength has come from and is

that strength continuing or is it deteriorating. tom: larry mcdonald walking through the dynamics of the trillions and trillions of dollars in cash. you've got a whole team looking at this. how will the cash unfold this year? stay in cash removed to bonds or move into marginal apple shares? >> there is $6 trillion sitting in money funds that we know that has to go somewhere. does it come back into the equity market or go into longer duration next income? we are starting to see some of that but it 4.0 four on the 10 year, we don't think that's a bait -- that's a goodbye. we were long-duration through the back half of the fourth quarter. people forgot how bond mathworks. lisa will remember this well.

you still have two look at where strength came from as we close out the year, it came from the labor market, the consumer and it came from small business. we got the small business survey this morning and it picked up one point below it, small businesses say they're still having a hard time finding labor and they're having a hard time fight refinancing and prices are going up on the cost of input so small businesses aren't feeling great. when you get a layer down on the nonfarm payroll report, 165 thousand new jobs average is the lowest average order for this cycle. 3.7 percent wage growth, the lowest wage growth since 2019. it is decelerating so that strength in the labor market is not there anymore. if i look at the consumer, the university of michigan consumer sentiment, 69.

the long-term averages 86 a why isn't the consumer feeling better when the labor market has held up and gdp has run above trend and they basically are able to spend money at will. it's starting to erode under the service and i don't think enough people are paying attention to it. jonathan: should i follow what they feel or what they do? retail sales were pretty decent. >> but they are on a downward projector he. the first half of this year, if you take consensus, u.s. gdp will certainly be sub 1 and if you take the consensus on bloomberg, it's 0.1 for the first quarter and 0.2 for the second quarter. jonathan: except you are not saying to buy bonds. >> we think you can be patient on the duration so you live on the short side of the curve at highest yields on the board and you play a little defense because you will get better buying opportunities into the

first quarter. when i look at sentiment and positioning, the aaii surveys a full standard deviation of the long-term average so sentiment is extremely bullish. those are areas you want to fade and be a contrarian. it doesn't mean the whole year is bad but you will get better entry points than you probably have today. we would caution and worn in favor of patients. lisa: we very rarely get single-digit returns positive or negative on the s&p 500. where is the biggest potential surprise? is it an economic downturn or the opposite or something political? >> i think it's the economic downturn this the biggest risk that's not priced into markets.

you have to be a little bit of a contrarian. the entire macro consensus is soft landing, fed rate cuts, we slayed inflation we will get 11.5 percent earnings growth on the s&p 500. we've got that builds into the consensus but if anything comes off the rails, where ever it comes from, all of those have an opportunity to change that positioning. that's what you have to be cognizant of and prepared for. lisa: one thing i picked up on is the threat of oil prices. if there is a disruption, supply chain costs go up and oil goes up and that will create a difficult situation that could spur some significant downturn. are you watching that as a trigger point? >> we've lived at $100 oil and hasn't been economically

derailing. going from $72 oil back to 100 would put a bid back into inflation. it would buy into the second wave of inflation. we probably have finished the first wave of that inflation and we will see the cpi report thursday. if history is any guide, there is often a second way behind it. more important than inflation itself, let's not think about the three or 4% rate of change, we've anchored prices at a high level that are not soon coming back down. that anchoring ends up always grinding on consumers and businesses over time. the longer you hold them there, the more it erodes things like sales margins and earnings. tom: when wells fargo took over, you got great seats for the st. louis cardinals and you got a guy named arun riker's been good

on patients in the magnificent seven. he is modeling out apple up 22% with a price target of 225. what do you say to people who say you're telling me to sell the magnificent seven? what do you do with those once-in-a-lifetime stocks? >> i don't think you can sell them. you have to dance with the one who brought you up. communication services brought you here and i think they will continue to lead. you can develop your own narrative and say is the wally trade war say it's the fortress balance sheet and the free cash flow in those types of things supporting these names but the reality is that it is you can't afford to be out of those names in this environment. we know the magnificent seven and tech's 32% of the s&p 500 and it's at a 40 year high.

you have to be there. you can trim and take some profits if you've maintained a good exposure through 2023. nothing wrong in a new tax year with taking profit and capital off the table and playing defense and using the dry power in the next 90 days. jonathan: i never heard that before. lisa: i can't imagine someone cuddling with an alexa. jonathan: good to see you and great to catch up. welcome to the program, the s&p 500 is negative .4%. neil dutta will be with us. we will talk in a moment. lisa: could you get a react seller that triggers the downturns at companies that are more fragile after having higher

rates and having a rollover in certain economic cycles? is it the same kind of risk? tom: i go to wells fargo and securities analysis and they are talking about low modest single digit earnings growth. it seems off the mark when they come from the bottom up. look at each company and there is a feeling there of a lift to where we are. jonathan: a lift in the market yesterday but we are down by 0.4% on the s&p 500. the euro is not doing much at all. up by about 3% on wti and we will talk about oil next. ♪

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>> i think you've had a lot of supply and demand is accelerating across the world and high interest rates are putting rusher on the tommy slowing down that is their baseline for the year so that combination will pull prices lower and we just cut our brent forecast for the year two 80 average with wti 75. jonathan: bank of america speaking earlier this week in crude looks like this.

still in the low 70's. even with the movable most to $'s. it's the tug-of-war between the geopolitics and on the other said, massive production coming out of america. tom: what will be next? you look at the xl spreadsheet of the different geographies of oil. there is a huge uncertainty. lisa: there is the question about u.s. production. plus there is china weakness with saudi arabia the just cut prices to eastern countries in part because of a lack of demand. to understand that and throw in a geopolitical quagmire into the mix we have the confusion we have today. tom: part of what you get is a view from a different geography. our next joins us from oslo.

what is the oil distinction of norway? it's not that much production but norway gets so much credibility within oil analysis, how does that work? >> we are a steady producer. we are a country that delivers oil. we are not at peak production in fact we are declining cry -- quite stable -- quite steadily. we are at the forefront but we are very reliable in producing and delivering oil and natural gas as we saw when this war started in ukraine. tom: is there a one price for oil now and how does the massive american production change your calculus on what brent does? >> the u.s. market is a huge influencer. it influences not only the oil

prices but shipping prices and help movements go around the world. when we look at brent, there is the north sea which is setting the benchmark and we look at the physical grids but they are relatively small to the overall picture. when we see what is the swing crude because of the opec cut and because saudi arabia lowered the official selling prices but they are towing the line and maintaining low production. the swing producer is the united states and that's why it's a huge influence. jonathan: how influential is the cartel? >> i think this was the big fear that played out yesterday. by lowering those prices, saudi arabia has been saying demand is good but by dropping it so steeply to two dollars, they are saying demand is not as strong we saw u.s. production jumped 1.1 million barrels per day.

the concern is they are going for market share but it's normal for them to cut prices in january. the market is waiting to see if they will cut in february or march and then they start to get worried. even though we had a big selloff yesterday, we fell back and we think the positioning is light on this move. jonathan: when was the market share gained? was it 2015? >> yes, when we finally got that shale invasion on the global market. we've been waiting for it for more than a year. the demand just kept growing in asia until it broke back. jonathan: will we see a repeat of that? >> we do not see that right now at all. the u.s. growth in those years, we were looking at 1.50 2 million barrels per day and 1.1 is punchy. it's not hit or miss.

lisa: when oil prices fall to a certain level, the shale patch doesn't make sense. are we close to that kind of point of the u.s. is the swing producer? are we adjusting supplies in response to a lack of demand? >> we would need to see wti trading in the low 60's before there is a change of behavior but because we have a low drill count on completed wells, we anticipate a slow down in production but we will not see that growth we saw last year. we should start to see counts increase last year that's with the markets got wrong last year. lisa: part of the reason oil prices were going down was because rates were so high. there is an actual cost to partner capital in a physical good that wasn't generating the

same kind of income that people's were. if the fed cuts rates, could that send more investors into oil and because oil prices to rise? >> it could, yes. especially the expectation that the demand will be higher. when we look at our forecast for the u.s., we are only sing maybe $100,000 per day in growth but it could be higher. for china, 400,000 barrels per day versus 1.6 last year so it's tepid. changes can drive that but the big driver this year is non- oecd asia. that's 500,000 barrels that didn't come last year. lisa: i'm struggling to understand what to look for to understand when this will influence oil prices in the middle east. what are you watching for to understand that this will have a

disruptive influence? >> we are watching crude flows and product flows. we have seen less russian crew going through the red sea but that's alongside with they were supposed to cut so no big change there. we are looking see product exports out of the middle east into your and those should slow down. though should really pump up middle distillate prices which is support oil. that's the part we haven't seen yet. tom: all that you've done in commodities, we are in god's name is u.s. oil policy in five years? do you have any sense of the dynamic we have to 2030? >> i believe there has been a strong understanding we need to maintain energy sick. he. we had a strong spr last year in the yearbook or. the investment will continue to

be and natural gas and oil. china is taking this out of the playbook being the number one investor in renewables, a big oil producer importing gas. i think we will absolutely continue to do this but when we look at these golden patches, maybe there is only 2 million barrels per day additional growth to come. it's still a massive number. jonathan: just on u.s. production, we drained the strategic reserve a couple of winters ago and when will we refill that? >> it depends on that relationship with saudi arabia. when we had this coming before the hamas attack, saudi arabia announced more oil coming back and then we had biden saying we will buy oil at $79 per barrel and they bought a token amount. we are in a happy range for the electorate.

the electorate would like it lower but we are not in a dangerous range so slow buying will continue but i think we will see policy that is supportive of continued investment in oil and gas and that will support things going forward. jonathan: good to see you in new york city. from new york city, equities just about aced -- at session lows. in just a moment, we will talk about the u.s. economy and the data to come and cpi is the highlight. we will catch up with michael mckee and neil dutta here in new york. good morning. ♪ (grunting) at morgan stanley, old school hard work meets bold new thinking. ( ♪♪ ) partnering to unlock new ideas, to create new legacies, to transform a company, industry,

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jonathan: we are talking about economics and economic forecasts. and tom wants to know when tottenham is playing. tom: it's a big deal. they have the champions thing over and europe. jonathan: this education has been going on for how long now, you should have graduated by now. tom: i need the extension course.

jonathan: we're a little softer on the s&p 500. yields are up by a couple of basis points. is that an upgrade to quality? michael mckee joins us now. let's look ahead to cpi. mike: let's get trade balance out of the way. negative for november and it's a revision from the first estimate but it tells us that the trade deficit is little changed, probably as a big impact on fourth-quarter growth. we will see what happens when we get december figures. cpi is going to be interesting this week. we talked about that we are

expecting a month over month rate that would push up the year-over-year rates. the fed will look past that and look at the core rate and see that it is forecast to be unchanged. that would move the year-over-year number down. how to the markets look at it? tom: there is a blistering note this morning about europe. he is modeling 1.9% inflation. do we have the same pressure with the fed? mike: i'm hard-pressed to judge how much pressure christine lagarde is facing because there's always pressure but i don't think the fed is fit facing a lot of pressure yet. the pressure may build is the election year goes on. democrats will want the fed to cut rates sooner to help joe biden and we know that donald

trump not shy about telling jay powell what to do. lisa: we were talking about the question of what the federal reserve will do with the short-term funding program they created for banks to ameliorate some of the risks and you didn't have to offload treasuries that are underwater. do we have a sense of how long that will continue? mike: it was done for a year and it should expire in the coming months. they haven't given us any indication that they want to change that. if you start lowering rates, it will change that calculation. we haven't needed it basically since the svb collapse. i think that one will probably just go by the boards. these days, you hesitate to make any predictions about what will happen in any area of the world jonathan: politics and the fed, thank you.

michael mckee will sit down with the philadelphia fred just fed president. tom: she is a pure mathematician of the fed. she really understands the different uncertainties out there. someone that nailed 2023 was neil dutta at renaissance macro. he had an optimism and he was correct. the chart is out there now i call it the dutta chart where inflation is down and there is a real wage out there. what do you look at on the real wage prosperity? will we see persistent real paycheck increases? >> it certainly feels that way. thanks for having me on. i think inflation is on a glide

path lower. michael mckee mentioned the inflation number coming up this week. keep in mind that gas prices will moderate in that report. this likely food prices will also moderate in that report. the important thing now is that inflation is slowing in certain parts of the consumer price basket. that's what drives expectations. you are spending your money on these things. tom: what's your 2024 gdp call? >> i think 2.5%. tom: this is extraordinary. this is added up over one year or two years or three years and it is american exceptionalism. jonathan: it takes a degree of confidence to say things out ok.

-- that things are ok. you're also haunted by what could go wrong. how do you approach that, the idea of this will turn out ok? >> the base case on society is that we figure things out. that's been my experience. i think people made -- got a lot of notoriety for getting one big call right into thousand eight and they been trading on that for a long time. i remember being a young analyst at the time and everything was wrong, wrong, wrong and then spectacularly right. it just makes more sense to stay on the optimistic side of the fence. there are times to be concerned about the outlook but right now is not one of those times. we are talking about the economy

has been doing better than most people thought and inflation is slowing more rapidly than people thought. if you are the fed, what do you do with that? there is also a disconnect in the seat i'm in which is a sell side research role versus what policymakers are in. their job is to protect against the downside. my job is to position clients to catch the upside. there is a distinction there that needs to be appreciated. lisa: you like to be a contrarian to some degree. what you are putting out there sounds not contrarian. the soft landing is increasingly the base case. >> the rest of the world does not agree with me. it's about picking your battles with the consensus wisely. most time it's the wisdom of crowds. there are times to pick your battles and times not to.

when i look at the distribution of probabilities out there, i think it's more likely we have what feels like a soft landing for the time being. there may be risks out there but there is a significant disinflation in the pipeline. we know used car prices will continue to moderate over the next couple of months and housing prices will moderate. that will be important and at the same time, you are seeing renewed corporate -- confidence in the corporate sector. small business sentiment is at a five month high. consumer confidence is picking up and households are feeling better about their personal financial situation. the idea that the labor markets will spontaneously combust i think is unlikely. my sense is we continue to see solid modest jobs growth and

falling inflation. the last year, it's always feeling like i'm trying to catch the next pivot. right now, i feel let's catch their breath and run in place for the next few months. i think the market and the economy are in a good place. lisa: how much is this predicated on oil prices remaining where they are? >> that's part of it. gas prices are down and oil production is up. to me is predicated on the fed responding to inflation as it's coming in. if inflation is moderating come i think it's important for the fed to adjust their policy stance. if they don't to that, then the

risk begin to build into the economic outlook. jonathan: in the early days of twitter, tk put out posts and said discuss. politics and the federal reserve, discuss. >> you definitely -- politicians should not be opining on the fed. i think democratic representative talked about how he wanted the fed to start cutting soon and saved biden reelection chances. i think former president trump was talking about how he wants the economy to crash. i don't need politics to make the call that the fed will cut. all i need is the data. it has nothing to do with politics in my view. if you wanted the fed to adjust the economy going into the election, they should have already been cutting.

they been talking about long and variable lags. that topic gets more ammunition that it probably should but ultimately, for the fed, it's about the economic data. how political can the fed be? markets are pricing in five or six cuts this year and the fed is saying three at the moment. maybe they go to four but they are not signaling more than the market. if they wanted to be political, wouldn't they say more than what the market is pricing in? i don't buy it, i think the fed is following the economic data and if you look at it historically, at the time of the first rate cut, core inflation is running at about 2.5% at the time of the first cut on the three month basis. we are already there. core inflation over the last six

months is below 2%. the unemployment rate is about 30 basis points off of its low historically. we are there. we are at 3.7%. if you look at it from an historical perspective, the fed has plenty of ammunition to make the case to cut interest rates. they don't have to cut a lot because the economy is ok but in terms of a recalibration, that's likely. jonathan: we knew you had thoughts on that subject and we appreciated. good to catch up. looking for the surgical cuts from the federal reserve. tom: you are in the press conference in michael mckee acid question you don't want to answer and they will sit -- asks a question that you don't want to answer. we will sit and observe until neil dutta says we can cut

again. why can we do that? why do we have to wait for a measured trajectory? alan greenspan codified years ago. jonathan: we want to see you as the next fed chair. tom: i was still put michael mckee's question last. make me chairman. i will read the financial data. jonathan: if you are just joining us, welcome to the program. the president might be looking for a future fed chair. equity futures are -.5% and yields are a little higher but basically unchanged. lisa: we are watching cpi on thursday. it's a time when things are whip sawing. i'm not sure where the compass is. people are trying to readjust. jonathan: we are always trying

to chase the next turn and neil says not much has changed and doesn't believe in the long lags. his view is disinflation could continue in real income will look ok. that's his view. tom: they are not looking at the parlor game as entertainment week by week. jonathan: we will try to get out 12 months with ira jersey up next on interest rates. we are at session lows, this is bloomberg. ♪

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to wait. the pivot party is feeling like a hangover. maybe we will have a dry january as the markets are back to this good news on the economic front which is causing yields to backup being bad news on the equity side. jonathan: we transitioned quickly there. it's been the story of the last month or so. the equity market is pulling back by 0.6% with a decent day of gains yesterday going back to the middle of november. that was a gain of 2%. it was led by nvidia but consumer discretionary names as well. financials had a difficult time for much of last year and then things turned around to the back end of the year. that was very dependent on what happened in the treasury market all year.

lisa: you would think higher yields, more income for the banks but if the fed is going to rates, the feeling is they will unleash capital market activity and reignite some of the profits we saw missing from the likes of jeffries. jp morgan, bank of america's, citigroup, very different performances. all of them reporting earnings friday so why is bank of america the laggard? is partly because of their portfolios of treasuries. if the fed ends this program, does the treasury holding of a bank like bank of america become a liability tom: tom: now? there's been a lot about the smaller regional banks. jonathan: what's more important to these banks stocks for the rest of this year? is it the guidance you get

friday, the following tuesday or whether the 10 year yield images the year? what's more important? tom: lou crandall was a giant who invented analyzing short-term paper. he has some real concern about what these smaller banks do. it's legit. jonathan: but many of their holding -- but many of them are holding on. tom: ira jersey is with us. i don't know if it's the chart of the year but i know it's the ira jersey chart. all you need to know on radio's interest rates were zero and ira jersey went out and pulls together all of the different money market fund yields into a huge 5% yield with a huge buildup in assets along the way. where are we in one year? will we unload our money market

funds and put it other places? ira: i think money market funds will continue to be the investment of choice for people who don't want to take either interest rate risk or equity like wrist because you will still probably get much more than you can from a bank deposit. most of the money market assets you've seen flow in have not been from riskier assets. they've really been from bank deposits. that's one of the reasons why you had some angst among some banks that they are losing their liability base which is deposits. that something that regulators are looking at closely now. how can banks maintain their deposit based when interest rates are so different? tom: the distinction is liquidity. it's the dynamic of bank balance sheets. are we at a solvency risk for some of our banks? ira: the better question, i

don't think so. the banks that didn't do a great job hedging or have the proper portfolios, those are the ones probably out of the way now. i think there is more confidence in the banks because it's pretty clear the federal reserve and other regulators are willing to step in to provide enough look at it to for banks that have ok assets and have only been losing on a mark to market basis as opposed to having credit losses. the banks that lost money lost to because of bad trades as opposed to bad assets which are two different things. lisa: how far do yields have to come into not be an issue? ira: if you are holding 10 year treasuries three years ago when interest rates were zero and

those same assets are upwards of 4%, you have a big mark to market loss. if you hold a mutual fund or etf on investment bonds, the worst says those are structurally lower. they are constant maturity instruments of those instruments are always buying new bonds and selling bonds when they go toward maturity. if you hold a 2% 10 year bond from a couple of years ago, that's now a seven year bond and eventually that will mature at par. you are losing opportunity cost in terms of interest but you are also not really losing principal unless you actually sell that instrument. that's always a problem you haven't fixed income if you are going to hold to maturity or not and if you don't and you reinvest that it yields now, it's not going to change your investment profile very much. lisa: i spent the last six trading days grading a narrative that will exist for the entirety

of it and people say it's going to be a range kind of year and they will try to readjust around where we are now. is this a traders market and everyone is living in it? ira: near-term that's true. i notice a headline from bill gross this morning. he says he thinks even at 4% that 10 year yields are overvalued. i think that's probably true in the near term but were talking about a380-425 range on 10 year yield in part of the reason is we are already pricing and pricing for a bad economy and now we have to wait to see if that will materialize in the near term and once we see the day to go one way or another either weaker data that will prove the fed will cut not means the 10 year yields will probably rally and if you don't get a bad economic outcome over the next couple of months, maybe 10-year

gilts stay here or selloff 20 basis points. jonathan: good to catch up. the range for treasuries. listen to this, disinflation not likely to be sufficient for rate cuts. our central view was that will take more time for central banks reached the conclusion that can reduce interest rates and look to midyear is the most likely time for central bank easing to begin. pushing back against the timing of the cuts. tom: there is an argument being made that march is rushed physically with the institutional heritage of the fed and we can get things done in june. that's one of the beliefs out there. lisa: they also pointed out that rising geopolitical rex and potential supply chain might reignite inflation. what's the bigger risk, a

downturn that's not expected or re-inflation? are they the same risk and could it come down to something geopolitical? how do you prepare for something like that when it's something that could happen. that's the sum of all our fears. i would take neil dutta and link him with the older and more experienced analysts. there is always fears out there aggregated together, the unknown unknowns. to go to business and i heard small businesses back off of some ugly numbers. the confidence, is it robust? no, but it's there and were open for business. you guys were babbling on about something a great conversation.

jonathan: colleagues that don't take off the holiday when they probably should take off when it's quiet and is no work to do and they take the second week of january off. do you know those colleagues? lisa: they are such jerks. jonathan: aren't they terrible? it's really quiet and everyone should take time off and you have that group of individuals and the second week of january, they think it's time to go skiing. we are going to miss you, lisa. lisa: by the time we go next week, it will be another narrative. jonathan: have fun on the slopes.

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manus: jp morgan -- time to the risk 2024. countdown to the open starts right now. >> everything you need to get started for the set of bloomberg trading. this is bloomberg the open with jonathan ferro. manus: coming up, markets o