>> i am a believer that we are going into a soft landing. i think there's a lot of cash on the sidelines today that even at these rates is going to come back into the system. >> the markets have priced in what i think is probably excessive interest rate cuts in the u.s. >> if anything, it will err on the side of rate -- >> that is not happening. >> the market is not coming for 175 basis cut fed by the -- basis cut by the fed. >> this is bloomberg

surveillance live from the world economic forum in davos. jonathan: live from davos, switzerland, good afternoon. this is bloomberg surveillance alongside lisa abramowicz i am jonathan ferro with anne-marie. the title of this forum is rebuilding trust. it should be operation pushback from central bankers worldwide. lisa: that seems to be one of the biggest themes, whether it was christine lagarde or dan pinto from jp morgan saying, stop it. we are going to cut rates that much. the tension is either you don't have the soft landing or you have the soft landing and no rate cuts. pick one. jonathan: the last one he for hours has been fascinating. you had madame lagarde pushing back. not on the idea of rate cuts this year, we should say that upfront. this is about the timing and how much they deliver in 2024. lisa: and their commitment to bringing inflation down.

chris waller talked about how they won't cut as aggressively in the past because of the instructional inflationary forces. similar commentary from the ecb. what will it take for the market to believe them? where are the rate cuts going to come from? from disinflation or from weakness that we are seeing from places like china? jonathan: this has been a monster theme for the foreign. another has been if you have an american accent you will be asked about former president trump and the prospect he takes over the white house in the next 12 months. anne-marie: the elephant in the room, or this -- or the swiss alps, is if president trump will come back and the policies he wants to enact. what gets the hairs on people's backs up is he want a 10% tariff wall around the united states. jonathan: we will catch up with the british foreign secretary.

nato, nato, nato. two big issues. the war in ukraine. zielinski's arrival. and the tension in the middle east. lisa: these are two big geopolitical risks everyone is concerned about, not only spreading and creating wider conflicts, but what does it mean for the economy and to 2024? jonathan: equity futures again negative, down .5% on the s&p 500. a touch of weakness to start. you can see on the screen for the s&p. lisa: retail sales in the u.s. coming up later, we have a roster of incredible guests front and center. we talk about international policy. john kerry for climate for the united states, we believe you will be stepping down. we will have a discussion with him. dave mckay of rbc. i have to say, and walsh, the cio of guggenheim partners speaking about why she is pushing back, but maybe not in the same direction as everyone

else. jonathan: and walsh -- ann walsh , good afternoon. thank you for being here. we have had some people call it a pipedream and others call it laughable, the amount of rate cuts priced in for 20 24. where are you on that one? ann: our camp is that we still see a recession coming though i mild recession and we still see rate cuts. we are predicting that they start sooner rather than later. that is not exactly the mainstream opinion, but we see a lot of softness in the economy coming and that leads us to our outcome. jonathan: what is guiding you? anne: there are two economies in the u.s. right now. the established markets, the larger businesses, those with access to capital. then we see the 50% of gdp, small to midsized businesses, and that part of the economy, particularly manufacturing, is slowing down.

we are almost having a rolling recession already. as a result, i think that there is real risk into what i would call the real economy. anne-marie: is there going to be one moment when people say we see the weakness and understand why the fed is cutting rates? it's not because of a soft landing. will it come from regional banks like we saw last spring? anne: i'm concerned about the regional banks. i am not concerned about the large banks. i am very concerned about the small to midsized banks. they have several risks at this time. they have commercial real estate and the refinancing wall in that space and refinancing wall in commercial and industrial loans. this will cause them to really take risk considerations carefully. the lending capabilities they will have and capacity to lend will be very limited. lisa: how do you express this? avoid regional banks, commercial real estate, pile into money market funds?

anne: as a fixed income investor predominantly, it is a good time to buy investment grade fixed income. we certainly are being heard with yields north of 5% in investment grade fixed income. even in the public high-yield space the higher credit quality within the bb rated and so for this performing well. there has been less issuance in 2023. expect that to continue into 2024. as a result credit has been a popular place to be and will be a very solid place to be in 2024. anne-marie: the geopolitical risks, we have what is going on in the red sea and the war in ukraine. when i talk to foreign policy experts, they say foreign policy leaders around the world say that the biggest risks are imitating from washington, d.c. do you take that view? anne: i think there is a very

significant increased geopolitical risk. at this particular moment in the markets, tail risk is higher and it can come from any number of places. that is one area. the uncertainty. markets to a poor job of pricing in geopolitical risk until the event of whatever -- until the triggering event occurs. what we see now is a great deal of concern over what's coming. that will introduce volatility. that will continue in 2020 four. it won't be a steady rate of anything. we won't see inflation come down on a perfect trajectory. we won't see markets perform perfectly. we will see volatility. the trajectories are in place for lower rates, for less inflation, but not on an even keel. jonathan: this is the difference from shocks coming within the financial system and from outside. i joked if you have an american accent this week you will be asked about former president donald trump.

you have experienced that first hand. what do you say back to people? anne: i have as much expertise on what the outcome could be as anyone else. there are a lot of months between now and november. i expect of trajectory continues donald trump will be the nominee for the republican party, biden will be the nominee for the democratic party and it will be a repeat of prior years. i think the markets will price in based on surveys and polls what the potential outcome will be the policy. some will see that into the second half of the year. jonathan: what is pricing for another trump term look like? we will member the moment overnight in 2016 when equity markets sold off and then there was the acceptance speech and the former president talked about infrastructure investment. i remember watching futures click higher. the next couple of weeks, the trump trade. is it that over again, or is it different for a new perspective? anne: it is different because we have some sense of what the

policies look like. there will be more exported oil. there will be the regulation -- de-regulation, presumably. i anticipate the continuation of the tax cuts. as a result, i think we will have some playbook and the markets will have expectation built in. lisa: how much do you feel people are trying to get deals done ahead of that? almost the pressure getting people to galvanize their activities in the moment before november? anne: i'm not sure i'm seeing that. if you think about m&a activity, i'm not seeing that. it is picking up a bit, but i'm not sure it will be back to pre-covid levels. i don't anticipate a lot of energy to try to get ahead of the election at this particular time. jonathan: do you think the treasury market would accommodate these policies again? what we witnessed is they

are comfortable with big deficits. you think this market is comfortable with big deficits for the foreseeable future? anne: i think we are paying more attention to fiscal policy than ever before as a result of the fiscal spending in d.c. i don't think either party being elected will change that. both parties spend, the question is what on. president trump was not a hawk on spending. i would consider that to be -- the market should build in an expectation that will continue. lisa: the come full circle, you say one of the havens for you from some of the geopolitical risk, from smaller and regional banks, you are going into high-quality credit, into fixed income. at what point is that no longer the hedge if you expect inflationary types of policies to continue regardless of who's in the white house? anne: i think parts of the

economy are slowing down considerably. we also see inflation is coming down. we see rates coming down. the question is, what happens after we achieve the 3.5% we are targeting on the 10 year? we would say absent fiscal spending, absence treasury issuance you will see rates lower, but we don't because we think treasury issuance keeps a floor under the rates. 3.5% is a rally from here, but at the same time puts a floor under a further rally. lisa: you have been cautious on risk assets for a while. you have said you expect the pain to become more apparent. what surprised you the most about why we haven't seen that? anne: upon further reflection, we didn't anticipate the sheer volume of liquidity in the system. it had to be purged before the markets would become more rational.

for example, global central banks pulled $5 trillion out of the system globally since quantitative tightening started. that is an immense amount of liquidity that has exited. we are starting to feel the effects of that. i think that that delayed the impact of the tightening and rate hikes that we saw from global central banks. jonathan: favorite trade outside of credit and investment grade? anne: rates. we are positive on the treasury curve and the short end will be coming down as the fed cuts rates. jonathan: this was great, good to see you. thank you for joining us to the kickoff date 2. lisa, we need to think about the new policies that we could see from a new administration if the former president becomes the lead candidate. it looks like that now from the republican. and he wins again. do we see a repeat of 2016? lisa: christine lagarde think

so. it means more nationally focused, more tariffs, more investment in fossil fuels and things like that. at this point, do we see a rally or is there a new deficit? anne: trump -- anne-marie: trump loved to spend. 8 trillion dollars under his administration. to say that republicans want to rein in the deficit that isn't always true. the protectionism is the concern of europeans and members here. jonathan: we were super fearful of treasury markets. is that part of the campaign outside of nikki haley? anne-marie: hawks within the republican party and hotshot donors are interested in what she has to say because they are watching this and it comes back to this stat. in 12 years the united states will pay more on their interest payments within then their massive defense budget. this is a problem that washington loves to talk about but no one wants to get down to

the nitty-gritty and deal with. lisa: voters do not want their social security or medicaid cut. if you don't have discussion around that how can you have a real conversation? anne-marie: this has been an issue around the town halls that ron desantis and nikki haley are doing. 65 is way too young, and now she is backtracking because people at 65 say i want to retire. jonathan: coming up in the next hour, the founder and cio of golden tree. good afternoon. ♪

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>> last night we had a record-setting evening in iowa. it is time for the republican party to unify, come together, and move forward as one team. we have to be to cricket joe biden. we are going to win on a level that maybe could even be bigger than what we did last night in iowa. jonathan: that was former president donald trump speaking after a landslide win in the iowa caucus setting his eyes on the new hampshire primary. we should get straight to it with the next conversation. evan a brian kemp, republican from georgia -- governor brian

kemp, republican from georgia. it is time for the republican party to unify, to come together. >> i don't think we are seeing that from the other candidates right now. that was a strong win in iweb but bad weather and low turnout. we will see what happens in the next week. lisa: the next election, what are you looking to to understand if trump 2.0 will be the same? is this a different presidency from everything that you've gathered? gov. kemp: you will have to ask him about that. i have said that we need to be forward thinking. we need to tell people what we stand for, what we will do. we don't need to look in the rearview mirror and relitigate the 2020 election. the layout for the american people of what we are going to do for them to help fight the 40-year high joe biden inflation, the disaster at the border, and a lot of other

things. that is what i have been urging candidates to do and i would go for former as well. annmarie: former president trump wants to relitigate 2020. he goes back to your state of georgia. he wants the district attorney to be removed. there are a lot of questions about potentially a relationship that she had with the prosecutor. how are you going to weigh in on that? gov. kemp: i was just saying what my thoughts were. that is every candidate to decide. once ago i was warning people that there wasn't evidence to go after willis, but now there is troubling things that have been, accusations that have been made, and i think the judge will get to the bottom of that. that is playing out now. we have legislation that we passed for district attorney oversight that ended up in the courts. we will have to re-legislate that this year, which we are in the process of doing now in our legislative session. there are ways to address that. we need to let the legal process

play out. annmarie: you think that willis should be removed? gov. kemp: i wouldn't be able to speak to that without seeing the evidence, but if the accusations are true it is very troubling. i feel certain that the judge will rule in the right way to make sure that president trump, and anyone else, is being treated fairly. annmarie: let's go back to the timeline for the political space in the united states. you say a lot of candidates are not ready to coalesce around the former president. i hear everyone is waiting for new hampshire. let's give ron desantis and nikki haley some space. if trump wins new hampshire is that the time you say i'm ready to endorse him? gov. kemp: it depends on how big of a win it is, what happens. i wouldn't want to speculate. i am staying focused on the great state of georgia. every single one of our legislators is going to be on the ticket with whoever our nominee is. we are doing things to make sure that we hold our majorities and

keep our state moving in the right direction, like cutting taxes and giving $5 million back to hard-working georgians to help them battle 40 year high inflation. georgia right now got a 16 billion dollars surplus. we are working on cutting the state income tax. california got a 35 or $55 billion deficit, defending on who you believe, and they are raising taxes. it shows what is going on in the states and that's what i'm focused on to help our legislators and help us lead people in georgia and around the country see with the georgette way is and why we have been productive and why our state is doing great economically. jonathan: the last couple of days in davos, switzerland, people want to ask about who is next in the white house and what they will do. american businesses, yesterday, talking about california and the ease or difficulty of doing

business. difficulty in california. do you think that you are the next big state to attract talent the way they have done? gov. kemp: we have been doing that and we are competing with texas, florida, tennessee, and other great southern states. for the first time you have gdp in the south, when you include texas, outpacing the northeast. you have a lot of people who are fleeing places like california, new york, and chicago and coming to write to work states like georgia -- right to work states like georgia that are cutting taxes and have clean energy. we have two new nuclear reactors that we are building. one is online. we are doing solar for our size of state as much as anyone in the country. that is why you are seeing major corporations around the country in the world who want to have a presence. we have been visiting a lot of

those in davos, but great partners like hyundai and others. lisa: how much did the inflation reduction act help your state? gov. kemp: it has hurt us, believe it or not. we added the hyundai announcement, we had the sk battery plant before the ira passed. i sent a letter to our u.s. senators explaining to them that washington, d.c. is picking winners and losers with the ira. they are helping union-backed automobile producers and hurting the folks we have coming to georgia. my worry is them manipulating the market, forcing the market on people is going to hurt more than helping. look, there is a lot of money out there. a lot of corporations are taking advantage of it. we are making sure that people know that georgia is a place to be if they are going to do something like that. we have seen 40 different projects come since we did the hyundai announcement. annmarie: you are becoming almost this bastian of green

energy. how is the republican governor talking about climate change? that is part of the electrification of the american grid. gov. kemp: we are letting the market work in georgia. people who wanted to build electric vehicles came to us and said we want to build a plant, what can you offer in georgia? we told them that we can offer cheap, reliable power. a lot of it is green. we have a great workforce. we have one of the best sites in the country at the plant that hyundai chose and the east atlanta mega site that rivian chose. we have kia expanding ev lines. it wasn't the government trying to force them to do something like they are doing in california. it's basically saying what does your company want, what do you need, how can we help you achieve that goal? annmarie: you appeared with governor youngkin in virginia. everyone said that this should be the ticket. i know you are sitting on 2024. what is your future plans?

the senate or the white house? gov. kemp: to make sure georgia legislators and the state of georgia stays republican in 24. like my first point, we have to tell people what we are for. we cannot get distracted. we need to stay focused on 24. we can worry about 26, 28, whatever, down the road. jonathan: that was a politicians answer. gov. kemp: that's the truth. jonathan: best barbecue in the south is in georgia, without a doubt. governor brian kemp from georgia. we will be talking about state-level policy. i think that the theater of the white house is entertaining, but what is happening at the state level is far more interesting right now if you are running a big this nest. annmarie: especially if you look at union labor. some of the plants are driving to the south because they don't want to use union workers. they want to go to way right -- to a right to work state.

lisa: what is interesting as we talk about the national dysfunction. that is coming to a place like davos and people are saying we won't focus and wait on that. come to us because of x, y, z. it is mini countries within the country. jonathan: the world economic forum for policy, the conversation continues with john kerry the u.s. special envoy for climate. this is bloomberg. ♪

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jonathan: live from davos, switzerland -- i hope that our mics weren't hot. the s&p 500, negative again, down by .5%. negative yesterday as well. the russell m small caps, a bit of drama. down 1.3%. lisa: everyone is focused on what is going on in davos, push back on rate cutting expectations and enthusiasm that we ended the year with last year. jonathan: in the commercial break, i don't remember if it

was on or off the record, we asked secretary kerry what his next move would be. i want tell you now. joining us now, secretary kerry, good afternoon. i won't repeat that. we will start here. it is a delicate time. you are a seasoned diplomat. we have wars in gaza and ukraine. seemingly from the outside looking in, perhaps an inability or lack of willingness to restore order from the u.s. perspective. is that what is going on? can you tell us your perspective? can you tell me if you think that this is an inability or lack of will to restore global order? sec. kerry: well, i am not out of the job of climate envoy. that is my lane, dealing with climate. but i will tell you unequivocably that president biden, i think, has done an extraordinary job of holding

people together in the midst of a very complicated period of time, perhaps as complicated as any of us have seen in recent years. if you look at the difficulty of rebuilding nato, which is what he had to do after the last administration, and then holding nato together with respect to ukraine and simultaneously managing several other potentially explosive situations, which could lead to greater conflict, wider conflict, i think he has been navigating that with tony blinken in an extremely effective way. these things don't change overnight. you need a ripeness, an ability to negotiate something different. in ukraine, for instance. i suspect they could get ripe, but they are not yet. likewise in the middle east.

i think the administration has been crystal-clear in sending messages to the prime minister and his work cabinet about how they think the operations in gaza ought to be carried out. it is not with indiscriminate bombing and the level of deaths that we have seen now. i think the president has been very clear, but thank god he has the years of experience that he has from the foreign relations committee, vice president, and now as president. jonathan: you mentioned rebuilding nato. when the former president said what he had to say about nato, he wasn't wrong. there were a lot of members who had promised to invest in defense that were falling short continuously. has that changed? sec. kerry: it has changed, but it still has to be fulfilled, the promise has to be fulfilled, the 2%. look, again, we have a myriad of major global challenges.

let's talk about one of the biggest that doesn't get daily focus of ukraine in the middle east but is killing a lot of people. the climate crisis is killing, air quality alone, we lose 7 million people a year who died because of the bad air quality. you look at what has been happening last year, 2023, the single most disruptive year in the history of measuring climate impacts. fires, floods, massive rainstorms, greater intensity of storms, the heat which people cannot live in, massive numbers of refugees already. that could get worse as it gets warmer, which is going to because we are not moving fast enough to curb the impacts of unmitigated burning a fossil fuels. there's only one cause of this crisis. the unmitigated burning a fossil fuels. we in dubai, 185 nations strong,

including oil and gas producing countries, including ours, signed up to transition away from fossil fuel to do so in keeping with the science, trying to 1.5, a pretty rigorous standard, and accelerate our efforts this decade. that is a pretty big mandate. lisa: at the same time the u.s. is pumping 1.3 billion barrels of oil a day credited with offsetting some of the geopolitical risk. do you think that is a policy failure or success? sec. kerry: it is a policy necessity. you obviously cannot shut down the economies of the world. it would be ridiculous. to say that you will affect demand without affecting supply at the same time. you have to have a broad approach. that is what the administration

is trying to do. for the moment, you have to try to keep the economy stable and priced low enough that you don't have revolutions in countries around the world because gas prices are $10 a gallon. but that has to be accompanied by a very clear set of policies that are moving in the direction of this transition away from fossil fuel that are therefore deploying renewables faster, putting new technologies out there in order to mitigate. if we don't do that, it is a mistake and it contributes to the problem. i think we are going to do that, and i think we are doing that already in many parts of the world. lisa: a lot of people talk about what the future is. we have seen a lot of companies pull back from electric vehicle production because there isn't demand. you get the sense that there is a successful coherent policy prescribed by joe biden to achieve what you are talking about while pumping record amounts of oil?

sec. kerry: yes, there has been a very clear policy which regrettably has been attacked by people who are engaged in high levels of disinformation. they have been trying to scare people about the range of vehicles, there is range anxiety out there. in addition, you had some pullback because communities are not moving fast enough to give permiting to deploy some of the renewables that we need. you had windfarms that were going to be built that have taken years longer than was calculated when making the deals. people have had to recalculate. the answer is, we have to, all of us, embrace this transition. if we are going to take five to 10 years and have years of litigation over whether or not you can have a renewable plant somewhere nearby, we are in trouble. we aren't going to get there. we have to accelerate that.

that is a lot of the message at davos. jonathan: just to jump in, it is difficult to believe that the poor ev sales are a consequence of the misinformation campaign about range anxiety. let's take hertz the car rental company. they have to dump 20,000 ev cars. not just rebalancing supply and demand but the cost of carry. it is expensive to keep these vehicles come expensive to buy one. i think what we are seeing is a reality check. not only the ultimate destination but the pace that we get there. for most everyday americans, they cannot afford this. sec. kerry: the price is going down as the price of renewables has gone down. the price of renewable solar has gone down 83% in the last years. the price of wind has gone down 50%. the price of lithium has gone down 97%. we do need to send stronger

demand signals to the marketplace. we have an entity that we have created a number of years ago called the first movers coalition. we have 100 of the top corporations in the world in the first movers coalition including apple, microsoft, salesforce, boeing, fedex, ford, general motors. a whole bunch of major american and international companies. they have agreed that they are going to pay a green premium, voluntarily, to send the market signal to have green steel created. volvo said that 10% of our steel will green steel. they are making green cement. they are buying it not because it is green but because it is better. we are seeing a movement towards a rational transition with those biggest companies.

if the ceos of those companies can persuade those boards and their shareholders that this is a valuable enterprise more people will buy into this over time. this is a transition. it doesn't have to happen overnight. there will be ups and downs and bumps in the road. ev's, there is a sufficient level of penetration. 92 percent in norway, major levels in china. the front page of the economist has a big picture electric vehicles in china coming in towards the united states. those are selling for something like $22,500. it will become a bone of contention. we will have discussions about that. the point that i make is that this will even out over time. general motors, ford, mercedes, volkswagen, hyundai, these company -- companies have

spent billions retooling their plants. whoever the president of the united states is or public official is, those ceos are not suddenly going to go back and say let's go back -- annmarie: of course not, they are on a plan. but can we talk about the externalities? these materials are in africa and processed 85 percent in china. manufacturing issues, human rights issues. how do you weigh that against carbon emissions? sec. kerry: we always -- president biden more than any president in recent times -- has been fighting for the rights of workers and is constantly referring to unions and union workers and defending the rights of workers to be able to do better. those materials, sure. we are going to go through a transition. there is a lot of lithium in mexico. cobalt and nickel are what we

need. they are not all in africa.the national security council of the united states under president biden's direction has focused in on these critical minerals, and i think that you will see the balance of where they come from and who has them changed. mostly because of market forces. the marketplace will support this transition, and i think that it is irrevocable. there is no question of the world will get to a low carbon, no carbon economy. we will get there. the only question is, will we get there in time to not be ravaged by the worst consequences of the climate crisis? that is not me talking, that is the best scientists in the world who have warned us that we have to do these things now or it will cost you more down the road. annmarie: there is reporting that you are stepping down to work for the campaign to get out the climate vote, the youth vote. how successful do you think that you can be in that position when the youth to think that this is

a president who is too old and too out of touch to lead them, especially on a foreign policy issue like gaza? sec. kerry: let me begin by saying i am not stepping down in order to go to the campaign. i am stepping down because i think what we have done, in terms of dubai, is so powerful in terms of encouraging this transition that it is going to open a new set of opportunities which are important. i came for a year. i have been there for three. i think it's time. i will campaign for president biden certainly because the stakes could not be higher for our country, for the world. the stakes are as high as they get and as high as i've seen in my public service. i'm going to campaign happily because i think he has done a terrific job, shown experience, kept us from having a complete

breakout of uncontrolled war in many regions. at the same time, he stood up for american global values, universal values, america's obligations in respect to ukraine, the middle east, and elsewhere. if you have listened to secretary blinken and the president and the last days, they have been crystal clear about expectations about what needs to unfold in the west bank and gaza. i think that young people around the world will see an administration fighting for the rights of people to get the medicine that they need to have, to be safe, and for the palestinian people to have a future even as israel is absolutely protected, as it needs to be. jonathan: we appreciate the robust exchange. thank you. sec. kerry: was that robust? ♪ ays puts you first. start for free at godaddy.com

>> i am very concerned about the regional banks. i'm not concerned about the large banks.

i'm very much concerned about small to midsized banks that have several risks happening. they have commercial real estate and the refinancing wall in that space and the wall in commercial and industrial loans. this will cause them to take risk considerations very carefully. i think the lending capabilities they will have an capacity they will have to land will be very limited. jonathan: still very concerned. that was the cio of guggenheim partners investment management. bramo, concerned about regional banks. for many we have spoken to so far this week, they feel that was the story of last year and the banking sector is in a better place. lisa: whatever we hear, it will be an amazing year for the banks. you will have a strong recovery even without rate cuts. some people are still worried about commercial real estate, about smaller businesses. that is still a question mark. jonathan: the market now, equity

futures on the s&p 500 are lower. a soft start to the week down 0.4%. yields around -- to start the year on a 10 year, 4.058%. lisa: the yield curve compressing, kind of de-inverting. what does this mean? we don't know yet. this is one tipping point in terms of economic data. jonathan: i want to reflect on the brilliant exchange earlier on today in davos between the ecb president christine lagarde and francine lacqua. the market might make it harder for us because they are pricing and cuts before we would like it too. we have been talking about this for months. lisa: they talked about if the markets get too restrictive that is a rate hike being implied. does it work and the other direction? if the market is pricing and rate cuts does that resolve their ability to move because

they are looking at a market that has already moved for them? jonathan: we can continue with the chairman and cio of -- financial. you told investors that it is like groundhog day. is it groundhog day in switzerland? >> last year was. i had five earnings calls in a row where i said the same thing that i said in the previous call. the market is going to get better, everything is great. i woke up one day to sonny and c her the song and i knew that i was in groundhog day. jonathan: what do you see in changing? >> the market, i have been listening to some of your guests and it is interesting the diversity of opinion about rates. where we stand is we think that earnings are growing. the street thinks that rates are going to be cut six times in march. i am not there. we think two to three times. that is the definition of a soft

landing. cutting rates into a growing market. every hard landing starts with a soft landing. if some of your other guests are right about recessions that changes the game. lisa: anne walsh thinks that we are headed towards a harder situation and that is why we will get rate cuts sooner. she is concerned about regional banks because small to medium-sized businesses are not doing as well. do you share her concern? ronald: not really. the banking system has gone through a difficult 500 basis point increase. the related deposit sorting, some of the credit concerns. there are always credit concerns but today the regional banks are stronger. of course, if you have a real credit meltdown it will impact a lot of people, not just regional banks. lisa: who talk about credit

meltdown. i noticed having the busiest -- bonds going back to 2017. how much our company's front ahead of the election, frontloading all of their dealmaking ahead of foot they are expecting later in the year. ronald: we have been in a recession in investment banking, equity investment banking and the united states for almost 18 months. the inverted rate curve, all of this, put an absolute damper on capital raising, whether it be debt or equity. today there is a little bit of uncertainty back in the market. what you are seeing is activity picking up. i'm telling you the next year -- jonathan: coming out of the pandemic, things were busy. people were gearing up for activity and they were hiring. we talked about a recession in certain parts of banking. are we done with the rightsizing because it means job cuts?

are we done with that? ronald: on wall street? i do. in fact, you are seeing a lot of people hiring. some people are hiring and are very optimistic as to the rebounder that i think we are going to see. i think that the rightsizing is done. in the overall economy what has happened is we are burning through the job postings versus the overall employment is changing a little bit in terms of the economic activity. most things point to a rather sanguine environment, which is good for my business. take some volatility out. lisa: are you hiring? ronald: we are always hiring. lisa: as you look forward, what is the potential risk case that you entertain aggressively, a soft landing, business coming back up, that the certainty

people have now gets shattered a little bit? ronald: the market is being aggressive on rate cuts. i believe that the fed is going to take it's time, especially without a recession. we had rate cuts, 11 straight rate cuts, five going the other way in a matter of months. sorry, hikes. yields go up, prices go down, something like that. anyway -- lisa: carry on. [laughter] ronald: i can get that right. the point is i think the market is pricing in some aggressive rate cuts and that supports pes and valuations. if you don't see that you could see some pes and tech stocks get hurt a little bit. the real risk is probably geopolitical.

all they are talking about in davos is, it is my first time, is that this is the epicenter of globalization. if anything, we are fraying at 80 years of mobilization. that could have geopolitical and world tensions have an impact on the market that it is not discounting today. ronald: where do you see the biggest -- lisa: where do you see the biggest growth for you this year? ronald: we are going to grow everywhere always. i have been the ceo for a long time. when i started we had $100 million of revenue. today, we have $4.5 billion of revenue.we are gaining market share. we were just named jd powers number one advisor and that is a big deal for us. as i look forward, i see

continued growth. jonathan: the startup economy, if that like it got decimated in the last couple of years. we saw svb go under. have you seen the startup economy pick up? you talked about a rebound in 2024. is that happening? ronald: svb didn't help. week, for example, have hired 40 or 50 people to service that market, so we have a big presence in both the valley and east coast and are feeling that vo -- filling that void. all of the money that came into the economy in 2021 got pushed to a lot of companies that didn't need it at valuation levels that were not sustainable. we are working through that as the company's cap stocks get redone. look, i am optimistic.

have me back and then you can tell me how wrong i was. i won't come back. no, i am optimistic. jonathan: good to see you. fantastic to get the education from ronald kruszewski. coming up the founder and cio of golden tree. equity futures pulling back a little on the s&p 500 for a second day. lisa: the biggest risk coming to fruition a bit, some of the fed and ecb officials, maybe not as rate cuts. jonathan: a real pushback in the early part of the forum in davos. stay tuned for plenty more throughout this afternoon. we will catch up with the dutch prime minister and british foreign secretary later on bloomberg surveillance. ♪

jonathan: live from davos, switzerland for our audience worldwide, good afternoon. this is bloomberg surveillance, the second hour. it is day 2. the last 10 minutes, a bit of optimism. lisa: it is interesting because

he is exposed to a lot of the economy that anne walsh of guggenheim was talking about and saying, absolutely not. he feels like maybe this is going to be a better year. jonathan: it is hard to be optimistic when you start talking about policy. annmarie: absolutely, especially geopolitics. president zelenskyy come his last shot at begging the business world to rebuild ukraine's economy. also, the u.s. secretary of state and jake sullivan, the president will make his own pitch to the republicans in congress for this. jonathan: a big push with zelinski in town. the foreign policy issues and how market it is think about it. a lot of people are frustrated with it. tell me what that means. what are you doing with that in mind? lisa: it is essentially a deep uncertainty. it was oil prices that have fallen. if you look at other issues,

whether it is gold that has been a mystery asset class for quite a while. disruption to risk assets. at what point are you looking at something that is a risk that you can plan for or you simply ignore and hope for the best? jonathan: i want to turn to the markets briefly. looking at equities down again on the s&p 500, down yesterday, pushback from governor waller and madame lagarde. lisa: instead of an 80% we will get a margin rate cut we have a 62% chance. it isn't getting priced out of the market but more anxiety is coming out as people parse through how much of a price perfection market we are looking at. jonathan: yields up by not even a basis point. we are unchanged on the 10 year. a bit of a shift in the last 24 hours. we aren't going to sweep that to one side. the treasury market in the last

couple of weeks relative to october in 2023 -- lisa: today we are going to be having fantastic conversations. we already have. we will be speaking to chuck robbins. right now, steve tannenbaum, i am really excited to get his view on the private credit craze that we have been hearing about as well as where some of the incredible opportunities are. jonathan: did you hear the whistle of the train? lisa: that was pretty wild. >> i thought that that was the craze that you were alluding to. lisa: sound effects? jonathan: the golden tree founder. it is good to see you. let's talk about a massive gap between markets and what the federal reserve seems to be implying what their plans are for 2024. everyone is weighed in on how we will reconcile things. how do you think we will?

steve: starting the year it seemed you could at best get two out of three. unemployment below four, growth in the u.s. in the mid-ones, and rate cuts. that is against a backdrop of a deficit of 5% to 6%. it didn't seem to make sense. then you had a melt up into this belief. we are having a walk back. if it was close to 80% at the beginning of the year and now it is 60%, there is a walk back. we are probably halfway through the walk back. so, i think there is more to go. you certainly have the easy move now. jonathan: equities close to all-time highs, credit spreads are pretty high when you look at yield any given day. steve: credit spreads, i am fine with them. in terms of single b or double b you are getting pretty good value. when you are on spread versus expected default, at 350 seven and three quarters, given the

default rate you are still getting around 200 basis points of access yield. i think that you could be 50 to 75 tighter in a more benign environment. the actual spreads don't concern me. lisa: a sickly, you're talking about how people are saying that the biggest risk is the fed won't cut rates as much as people expect. you disagree and say it is because the economy turns down would be a bigger risk? steve: there's always stuff to do. right now it was priced on a nevada perfect environment. if the economy slows down there will be winners and losers. right now particularly ending the year with a melt up, there's too much broad optimism. lisa: everyone who we talked to has been talking about alternatives, private credit. jon did a whole form on how everyone wants to get into private credit. does it concern you that

everyone is piling in without the same kind of quality checks that you might get in a public and more transparent market? steve: the short answer is yes. the historical returns that you've gotten around 300 basis points of excess return, i am skeptical you will get that in the future. in terms of what is private credit, first it used to be enterprise values of less than one billion or half a billion. that has expanded. it is about half a billion dollars and enterprise values of three to $10 billion. it is a much larger market. when you look at who issues on private credit, it is private equity is the largest issuer. the idea that they will leave excess basis points on the table long-term doesn't seem -- it is nonsensical.

we don't expect that to last. there is a lot of competition. when we look at our private credit returns we had a great year last year and we are seeing interesting stuff. solution providers providing acquisition, financing, providing asset liability, financing, reliability financing. i think that there is where the most innovation and credit is. it is an important point when you look at structured products in the 90's there was a lot of innovation. tyvek credit has a lot of innovation but generically i would be surprised if the next five years resembles the last 10 years. jonathan: you are a solution provider, and you were last year. it sounds like that market may have been killed off by swiss authorities. you took a different view and it paid off big time. can we start there before we talk about contrary and for 2024? what did you see that others

didn't? steve: having owned banks, and we have owned the couple of banks, we have been large equity holders it is private banks, it is an important financing alternative. particularly when you have situations that are precarious and you don't want to put down more equity, having a hybrid security is a valuable alternative. the idea of eliminating that and having the hybrid security actually be a heads you lose tales i one type of investment -- i win type of investment because if it doesn't work you don't have any protection and if it does your upside is less doesn't seem like a good alternative for the regulators. our view was simple names are already working, this market will come back. the regulators, we had a strong

view since some of these things have already been regulated that they are very much in favor of having a lot of choices. we felt that was a relatively easy trade. i felt that my biggest mistake was thinking that it might last longer than it did. jonathan: it sounds easy but looking back it wasn't easy. it felt like we would see a real loss of faith in some of these products and securities. lisa: i remember seeing the valuation tank. the idea of easy money being made. it is easy to say that in retrospect. jonathan: there is nothing easy about it. steve: this was against a backdrop where the return on equity of european financial stocks was going to be the best that it's been since 2008, the crisis. that was also another nonsensical. you have really good earnings on the profitability, whether it is through picking up the balance sheets that we saw during the pandemic to being levered to

higher rates. the return on equity had gone from the mid-single digits to the double digits. the et ones weren't going to work. that didn't seem to make sense. to put it a different way, i've never seen that happen in my career where the junior securities haven't done well when the underlying profitability is improving. lisa: is there anything else like that right now? you can tell us, there is no one else. steve: i think the strong single b and double b is reasonable. directv just did a deal in the high for hundreds -- 400's. i think that is reasonable. i think that there's a whole bunch of names in the high single digits value below 50% that i think are very reasonable compared to equity values.

if you look at the preferred stocks, also very reasonable for some of the larger issuers trading around 9% to 10%. lisa: do think that credit will outperform equity this year and has the potential to for a prolonged time? steve: it usually does early in the cycle with the pandemic being the one exception. if you look at the past few cycles, i think that it is certainly a reasonable asset class still. it is a higher-quality asset class then the double bees versus triple c's and single b's. it is not to say that you won't get better opportunities but as an entry point i think it's reasonable. lisa: everyone in davos has been talking about the former president potentially coming back into power. how are you thinking about business if that was to be the case? steve: i view this as game 4 of

an nfl season. it's hard to think about who's going into and winning the super bowl win it is only the fourth week. i think that there is too much to be decided. if you look back, the first time there was a lot of concern and apprehension that didn't materialize. there is a lot of data points to look at. who the running mate is, etc. also, he has proven to change his perspective. so, it is really hard, and the fourth week of the season, -- in the fourth week of the season, to place too much conviction in anything. jonathan: he said in between he 16 that it's difficult to divorce your political bias from your market views. when it came to 2016 the successful playbook was try to

divorce that and focus on the policy and not the volatility that comes with the man. can you do that this time around? steve: it is always easier said than done. my guess is -- it is only the fourth week and we are tired about hearing the scenario analysis played out. my guess is a lot of these will be beaten. it is unclear what the independents, the largest group that they've ever been in terms of the electoral body, of the u.s. population, so i think it is hard to focus until you are 60 to 90 days out. jonathan: monday night, october, you can't talk about the super bowl yet. lisa: i think everyone here is just sick of it. jonathan: congratulations on the success in the last 12 months.

steve tennenbaum taking the contrarian view on convertibles in europe. lisa: i love that you asked him about it. it felt like the sky was falling and everyone said that it looked like the swiss regulators killed the market single-handedly, get out. you saw all of the asset managers do that and who is on the other side? this guy. jonathan: the governor of the bank of israel come the dutch prime minister, and the u.k. prime minister is still the come. live from davos at the world economic forum, this is bloomberg. ♪ how am i going to find a doctor when i'm hallucinating? what do you think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options. but dr. xichun will take your sketchy insurance.

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>> it is up to the american people to decide what they want with their politics, their government, their future. obviously, we are all concerned about it because the united states is the largest economy, largest finance country in the world and has been a beacon of democracy, with all of its upsides and downsides. we have to be attentive and anticipate just like we do with inflation. jonathan: that was christine lagarde speaking with francine lacqua on the potential concerns of a trump reelection. earlier today governor brian kemp, a republican from georgia,

spoke about trump's win in iowa. gov. kemp: it was a strong win but bad weather and low turnout. we will see what happens in the next week. lisa: what are you looking to understand if trump 2.0 will be the same as 1.0? will this be a different type of presidency from everything that you've gathered? gov. kemp: you will have to ask him. i have said we need to be forward thinking when we tell people what we stand for, what we are going to do. we don't need to look in the rearview mirror and relitigate the 2020 election. lay it out for the american people what we are going to do for them to help fight the 40-year high joe biden inflation, disaster at the border, weakness we are seeing in the world and other things. that is what i have been urging the candidates to do and that would go for former as well.

lisa: former president trump wants to relitigate 2020. it goes back to your state of georgia. he wants the district attorney to be removed. there are lots of questions about a potential relationship she had with the prosecutor. how are you going to wade in on that? gov. kemp: my thoughts are for every candidate to decide. months ago i was warning people that there wasn't evidence to go after willis, but there are troubling accusations that have been made and i think that the judge will get to the bottom of that. that is playing out right now. we have legislation that we passed for district attorney oversight that ended up in the court. we will have to re-legislate that this year, which we are in the process of doing in our legislative session. there are ways to address that and we need to let the legal process play out. lisa: do you think willis should be removed? gov. kemp: i haven't seen the

evidence, but if the accusations are true it is troubling. i feel certain the judge will rule in the right way to make sure that president trump and anybody else is being treated fairly. lisa: let's go back to what the timeline will look like for the political space in the united states. you say a lot of candidates are not ready to coalesce around the former president. i am hearing everyone is waiting for new hampshire. let's give ron desantis and nikki haley some space. if trump wins new hampshire will you say i'm ready to endorse him? gov. kemp: it depends on how big of a win it is, if someone else wins, or what happens. i'm staying focused on the great state of georgia. jonathan: very diplomatic, governor brian kemp weighing in on donald trump and the prospect of him taking back the white house. let's have that conversation now with mark, joining us from

london. a lot of conversations here about the potential of the future president being donald trump and what that would mean for european defense. can you help us understand what the europeans have been doing for themselves over the past four years? are they in a position to depend on their own military? mark: that is a slightly graded answer. first of all, they have been increasing defense spending, more or less since 2014 with the first annexation of crimea by russia. the question is if they have been doing enough. that is a different question and there was a huge wake-up call in 2022 with the invasion of ukraine. commitments to do huge amounts. $100 million promised by germany for defense here the actual delivery has been much, much less than that. it has to be said that in the last year the u.s. had been taking the lead in arming and

financing ukraine, but by the end of the last year the europeans have overtaken the u.s. handsomely and were doing the lion's share of the work. it is a fairly complicated question. one thing that is clear is that the europeans will know what to expect when donald trump is elected in that sense, if he is elected. they will know that he is no great friend to nato or ukraine or theirs. lisa: let's talk about the billions of dollars in aid going to ukraine. $100 billion stalled in brussels. president biden will make the pitch to house republicans that they need to sign off on this. you spent a lot of time in ukraine before and after -- entering the war. how much longer can ukraine go

without aid from western allies? marc: the ukrainians will go on fighting no matter what, it will just be a lot uglier. they will lose a lot more people. eventually, if they don't have artillery, artillery shells or the barrels to replace on the guns, they won't be able to compete and the russians will be able to push forward. probably slowly, but it will be brutal. the great thing to understand is until the russians feel there is no further that they can go the war will continue. lisa: we are talking about global kumbaya at a place like davos that celebrates cooperation. how much when you look at the individual countries in europe are they struggling to really get on board with ukraine aid and struggling with how much they want to get involved with the red sea, the houthies and

say that we need to focus on our own countries and make sure that we can compete in the new era? marc: the problem in europe is you have one country standing in the way of the release of 50 billion, and that is hungary. in the coming weeks that will probably be sorted with either hungary coming around or that can be circumvented outside of eu institutions. one way or another, that will probably be done. but these are perennial issues for europe. with the red sea, the french said they didn't want to be part of the coalition where they might be led somewhere that they didn't want to go by the u.s. broadly, the french have been pushing for a long time for an autonomous, strategic strength for europe where they would be able to act without the u.s. that is still such a long way

away from getting to that point. jonathan: mark champion, thank you. kumbaya. i get the feeling this time around i don't feel that anymore. i have been coming here for the last decade or so. i haven't been since the pandemic. i get the feeling they have had a massive reality check. the globalists who come to an event like this have seen their model fracture, and they have seen in many places not just fracture, but views that they have break because they have been so challenged. for a lot of people in society the credibility of these people is shot. trying to rebuild trust. the theme is interesting. i know what it is meant to be but rebuild trust with who? i think society at large between the establishment and the people. throughout the pandemic, that broke big time. lisa: it seems there is the establishment and the people and that is the political angle.

then there is the business angle. the politicians here are also here to do deals like governor kemp looking to meet with auto manufacturers more globally. to me, this has turned into what the meat of it was which was a dealmaking opportunity to meet a bunch of people at once. it seems more transactional and focused. jonathan: well said. i think that the conversation that we had with chevron was a great example. we have seen that time and time again. governor kemp of georgia is pushing his state to have a bigger role in the u.s. economy. from davos, switzerland, this is bloomberg. ♪

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jonathan: live from davos, switzerland, good afternoon. the s&p 500 soft or yesterday and lowered again today. mastec by .4, s&p 500 by .3. the small caps by one full percentage point. some pessimism the first couple of days of the week as central bankers push back against rate cut expectations. in the bond market 10-year, ready-year, the scores changing up as follows. the 10 year on a four handle and on the two-year, let's call this

4.28. lisa: this is not moving compared to november and december. wallace reiterated what we heard from every single person who came on the set the past couple of days. at what point do we price out something more than just a 62% chance of a fed rate cut in march but maybe something less than half percent? jonathan: let's get those comments from governor waller, fed governor waller calling for rate cuts later this year, saying "when the time is right to begin lowering rates, i believe they can and will be lowered methodically." more cuts will be coming from babar williams. they are on the same page, very and different ideas of what we should do this year, when that should begin but the pushback is marches too soon and six is too much. lisa: this time is different and this stood out from chris

wilder's comments, he said with labor markets in good shape and inflation down to 2%, i see no reason to cut as rapidly in the past but this time is different because they are not facing a crisis, which means the soft landing everybody is looking for does not come with six rate cuts, five or four. jonathan: it is not just pushback on that side of the atlantic but this side, as well. christine lagarde had a few things to say about ecb policy, and what she has been saying is what we are asking, when the market tells you this is how much to cut by, the market makes it difficult to achieve inflation objectives for the easing of financial conditions, it is a story for europe and the ecb. lisa: the fact that she said the quiet part out loud, does that mean people believe it? you see yields creep up, but not significantly, and you do see deals getting done. like what davos is about, deals are getting done and it feels more optimistic than it did the past couple of years, much to

the chagrin and may be moving too quickly. jonathan: i think this conspiracy theory that people have the world on strings, they wish they had the world on strings. they don't anymore at all. annmarie: when you look around with the decisions made or the lapse of judgment or the missing of the secretary of state to think there is some conspiracy theory and cabal going on in davos just go thrown out the window, but to lisa's point, deals are made on the sidelines but this davos has become a foreign policy forum in some ways. almost every single foreign secretary is here, and president zelenskyy is here, really trying to rally the west once again is to go into 2024 and get the money they need to continue to fight russia. jonathan: meeting with leaders in davos to shore up his country's defense against russia, and usaid continues to

stall on capitol hill with the focus on israel and the middle east. solesky is having more direct conversations with ray dalio and steve schwarzman. lisa: he went up to zelenskyy, and jamie dimon said i and ceo of jamie -- i aam the ceo. those conversations are important because he's trying to rebuilt the ukrainian economy. president biden is hosting speaker johnson and the topic is you have to push ukraine aid through. johnson says i cannot do that with my republican caucus if you are not going to get on board with a border deal. i love that republican officials cannot get things done and people look -- when public officials cannot get things done, people look to private officials. on one hand, we see disagreement on whether you can pass aid in washington or europe, and then it goes straight to the richest people in the world and just say, can you help out?

frankly, it does not matter where it comes from, and they would like to stability to continue. jonathan: ukraine is not in the front page anymore, particularly after the tragic events in early october and the tragedies that unfolded since then in the middle east and gaza. they are not in the front page as they were. lisa: how many articles have i read about who was to blame if ukraine loses? what happens? who fills the gap? does russia start invading other countries? all sorts of theories are being thrown out. that is even more so with trump potentially becoming president once again. jonathan: can we finish on this lighter story? apple surpassing samsung as the world stop phone maker for 2023. samson losing the top spot for the first time since 2010. they took the top spot over all, despite a recession to the iphone 15 in china. i was surprised, given the difficult year the iphone had, particularly in china.

i lisa: i'm looking forward to speaking with the qualcomm ceo, and the whole smartphone recession we have been talking about has hit everyone. we have focused on the iphone because of the apple stock performance, but they are taking share, and this goes to the heart of the question of their china role and if you can see competitors push up and it raises the question, can you diversify away from the iphone if that is the product they are associated with most of all? if you look at what apple is doing in china, they are cutting the product by 5%. when you buy an iphone in china, it will be 5% cheaper because they are concerned with huawei. maybe this becomes the apple huawei in china, much less than samson. jonathan: as long as the battery lasts, i will stay on the iphone 12 for life. it is still going and doing ok. lisa: i was about to say, you are like this. jonathan: let's kick off the conversation with steve

chiavarone over at federated global. great to catch up. we are hearing a lot in davos about people pushing back against rate cut expectations. are you on board with them? steve: we sat down the first or second day of the year and said six is not going to happen. not according to our view. you have to have material economic weakness to get six. we only thought that number was more like 1, 2, particularly because people forgot and got reminded this week that this is a presidential election year. historically, the fed does not like to move between july and november of an election year. that only leaves may, june, maybe december for cuts. that is fine, and i think that is positive for the economy, but the market is not going to hit itself in the fourth quarter. lisa: what is to reprice? when we hear that stocks seem overvalued, steve tennenbaum

says that stocks seem fine, do you agree? steve: yeah, bonds are what got ahead of themselves, if you look at the bond markets and how tight credit spreads really kind of came in, it is the riskiest parts of the bond market that are most expensive. over the equity land, its opposite. the cyclicals week priced in recession last year are still cheap relative to the broad market. the dividends are still cheap to the broad market, and look at the eidetic areas like small caps with the data of china today. those are as cheap of they have been in years. we think there is still relative value much more so than the bond market. lisa: do you think now is a time to sell treasuries and buy stocks? or consumer cyclicals and things leveraged to the soft landing? but maybe not going to be as vulnerable with the non-rate cuts?

steve: that is how we are positioned, neutral in cash in our portfolios and underweight fixed income and overweight stocks by the tune of 5% for that reason. at this point with bonds, the 10-year over 4%, we are neutralish. we could see the short run on yields moving higher, but if you go out 12 months, once rate cuts start, even if they are modest, we will see yields fall. we made that move when we had a 3% 10-year yield and now we are looking more neutral on making a new move. jonathan: we spoke to guggenheim , and walsh -- ann wallace, and she said the problem may return, where are you on financials and how do you feel about smaller banks given the past the last few months? steve: before i answered that, just be aware that your phone

battery is going to get much shorter with those comments you are making. i just wanted to make sure you were clear on that. look, i think our view on the economy is one that slows but not one that begins materially, just like our view on inflation is one that eases but does not go straight line 2%. that does not mean all the banks are out of the water here, but our view is that they are going to be ok and the pressure on deposits is probably peaked. one rates fall, that should ease some, but there will be some credit stresses in the economy, generally around lower quality borrowers but not broad. not some massive credit deterioration or rapid rise in unemployment, so we think we will be ok. we are watching financials closely because if you have a market that is led by financials marching to new highs, that looks a lot more healthy than a market marching to new highs and by your most defensive names.

that is what has happened since october and november. we will see that if that happens the next couple of months. that is the key thing to watch in the coming months and weeks. jonathan: do you see good reason for that to continue in a world where you might get softer growth? in that kind of world, where do i want to be in the equity market? steve: my motto for the year, better is better. when you look at where the rate cut expectations are coming from or where those names are priced, it is not one cohesive market deal. there are folks in our camp that sees a modest slowing, and then you have folks pricing in your session. you are not getting -- i think folks who seek more modest view as it does, i think what you are looking at in this market is on the headline level, it is pretty normal. it is 5% cash deals, it is bonds

earning their coupon, equities growing with earnings and it is underneath the surface or you see real action. it is those parts of the market that were priced for recession where rates are higher forever, cyclicals, small caps, dividend payers, and at one point, there was a time when it got beat up so much that you have to take the valuation flyer and that is why we are modestly overweight there, as well. lisa: is this an exciting year of getting single-digit returns? steve: it depends on which parts of the market you are invested in. you have seen headlines on the scenes move 20 percent plus or minus the last five years. we do not expect that. we think it is more likely hi, single-digit, may be low double-digit return at the index level. underneath, look at those small caps, 30% off of their high of 30 years ago.

to 50% move to get back to where they were two years ago, so it is exciting underneath the surface, but service levels look calm her then they look underneath. -- calmer than they look underneath. jonathan: as we started, the battery is already low. steve chiavarone, thank you on apple, tech, necheles, no drama seems to be the message from steve. do not make it worse than it is. lisa: do not be overdramatic and enjoy it. even bonds, they might sell out, but we will come back down eventually. what is interesting to me is the small-cap and regional banks, basically leaning in a stun how much they have sold off. jonathan: if you get leadership from a different part of the equity market beyond big tech, most would agree with steve that is good news and speaks volumes about the economy. if you get leadership from a narrow set of seven companies, that is not a reflection of the

broader u.s. economy, is it? lisa: which is a reason a lot are saying we have already seen a recession. in 2023 2023, it was a bad year, even though it seemed like a great year. jonathan: are we going to talk about donald trump year and davos? it is not happening, is it? earlier this hour, it is the fourth week of the football season. we were talking the super bowl. annmarie: the europeans are trying to prepare, running around panicked. jonathan: without a doubt. david mckay coming up next. this is bloomberg. ♪ how am i going to find a doctor when i'm hallucinating? what do you think, fever monster? what about zocdoc? zocdoc? dr. castell has a great bedside manner. so many options. but dr. xichun will take your sketchy insurance.

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below 2.5%, core cpe by the end of the year. jonathan: that was dan pinto, the jp morgan chief operating officer on the outlook for inflation. policy views coming from dan pinto. everyone has a view and they may likely start cutting interest rates this year, maybe not march and six is too many cuts. on the s&p 500, price action low yesterday and again today. we are off by .3%. yields up one basis point, not even for .1% today. lisa: there is not a lot of drama when it comes to economic indicators. really, some of these macro questions will not get resolved in a week or month. right now, it seems people are trading sideways and adjusting around the edges. jonathan: right now, we will speak to the president and ceo,

great to catch up with you. we have seen difficulties in banking, and we saw it play out in the u.s. last year. some went on offense, jp morgan went with first republic and you have taken over the business of the bank in canada. tell me how that is going and why you seem to think and operating from a position or strength for 2024? david: our currency is strong and we are incredibly excited about seeing the regular torrey approval in december. we just announced that we will close a transaction at the end of march, so we convert the entire client organization onto the rbc platform at the end of march. we are excited about that. it continues the growth story for rbc. we have one of the strongest valuations of any bank in the world on a price-to-book ratio, one of the largest in the world. so that capital strength allowed us to take it manage of hsbc's decision to leave canada, the seventh largest bank, roughly 80

billion in assets, 750,000 clients. but what they do really well as they are a fantastic global internationally connected bank, cross-border bank, multi-currency accounts, trade finance capability, global view area that capability comes over to rbc -- view. that capability comes over to rbc. we bring over the clients and offer that ability to 59 of our existing clients. second thing it does is we take that franchise and put it onto our text stock -- tech stock. we are able to offer all the investments we made, whether online or mobile banking, trade finance, treasury management and cash management, the hsbc clients will have access to a broader suite of capability and more channels to access. from a client perspective and employee perspective, it is a big win, and from a shareholder perspective, it is a 14.5% ct

one ratio now will be roughly 240 basis points of capital, and it boosts our rov around 60%, significantly in the target range. so it is good for clients and canada. people will pay more dividends to shareholders. we are really excited about the growth story that this presents for rbc. jonathan: two things you said repeated, trade finance global view. here and davos, how challenged is trade in taking a global view at the moment? david: trade will always exist, it is original view of trade, and there is a lot of geopolitical commentary on supply routes, transit routes being challenged. we will figure that out over time as we think about our trade partners and we rebuild and rethink trading, trade will exist and may look different today and some components of the world today and tomorrow, but we

have to take advantage of our relative differences. we have to keep inflation out of our economies. and global trade and global access to trade has allowed us to operate our economies much more efficiently, so we will find a way. it just feels a little cloudy. lisa: literally. you talk about hsbc and the idea of integrating the canada business. what is next and who else will require? -- acquire? david: we just acquired dolphin in the u.k., and we are the six largest wealth manager in the u.s., the number one wealth manager in distribution of asset management in canada, so we are building this fantastic global franchise. when we think about acquisition and m and aa, are global franchise is part of it, whether the u.s., europe, or whether our

fragmented opportunities in the u.k. so building out that global franchise is important over time. it will generate excess capital, even more so with the hsbc acquisition and the ability to do cash transactions. so wealth management is a major focus. lisa: you said it was not investment banking and you are interested in further wealth management target acquisitions, but people are wondering what will happen to regional banks. there needs to be some sort of roll up. you are not involved, that's what it sounds like. why? are you concerned about some of these banks? david: we have a fantastic regional u.s. and citibank in california, a $75 billion bank by deposits. it has been a challenging year for citibank, with deposit data changing, our profitability perspective, we missed our targets, and i expect us to reach our proffered when by early to next year, but the

regulatory environment is uncertain in the u.s. the rules on liquidity and capital, probably a topic on the show all week, when those are resolved, we are looking for a level playing field. canada has already moved more aggressively, so we are looking at our rate, pulling up to where we are coming down to other global players and global economies. that is important when you value organization and understand the deposit flows on where they're going to deposit in the u.s. is still challenged, as well. i think i would need more clarity on those outcomes before i could really value u.s. franchise. lisa: are you interested in expanding in the u.s. at all right now? or are there other places in wealth management that are more fragmented where you see a greater opportunity? david: we have significant opportunities to grow in the u.s. organically, whether it is the ninth largest capital market business in the u.s. we are seeing greater ecm and

dcm activity. the rate environment is becoming more constructive. and capital markets operation is doing well, hiring teams in the u.s. franchise. we have 500 -- we have the six largest franchise, national franchise, in every market, so again, organic growth, we brought in tony $5 billion last year alone through team lift outside clients coming in, and growing the national franchise. that is a focus on the entertainment business in california. selectively growing that business, so we see significant opportunity across those three franchises. we have 4 billion revenue in capital at $500 million p&l in are wealth franchise and we have another opportunity to do something at city national. so growing those is our core focus right now, but once we digest hsbc, we will come

first and tell you. jonathan: i have to say, when rates went from zero to five, we celebrate hikes in cycles like canada, the u.s. and australia, what does that do to housing markets and where does that leave the banks? what is happening? david: there has been a payment shock to canadians, and the difference between canada and the u.s. is we don't have a 30-year fixed mortgage, we usually have 5, 4 more terms, 20%, you see a payment shot to 30% of canadians, and there is an increase and that has been challenging. it slows the economy much more quickly. unlike the u.s., there is no payment, unless you rank your mortgage or sell your house. the u.s. economy struggled to slow the consumer.

the canadian economy slowed the consumer significantly, and we have seen that in the credit card business. credit card spend is off. they are handling the payment shock well, so you are not seeing that migrate, but you see the economy slowed quickly to the point where we already are at a quarter of negative gdp under our belt and looking at another negative quarter. be in a soft landing recession technically this year. inflation is still a little bit sticky, about 3%, but there is still a 70% of that that will reprice the next two to three years. 15% this year, 25% next year. unless we get rates down, there are more payment shocks coming but consumers are handling. jonathan: thank you. david: thank you for inviting me. jonathan: david mckay. live from davos, switzerland, this is bloomberg. ♪

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>> geopolitical tensions are on the rise and we are seeing signs of regulation. >> we have an escalation of geopolitical risks and the

deterioration of the political situation. that will have a negative impact on the economy. >> the tensions carrying over from last year are still there. concerns of that will spread. it seems manageable. >> it could get to be a hotter cold war and that is destabilizing. >> markets do a poor job of pricing in geopolitical risk until the trade deadline occurs. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. -- this is "bloomberg surveillance" live from the world economic forum in davos. jonathan: good afternoon, good afternoon. this is "bloomberg surveillance" on day two of the economic forum, alongside lisa abramowicz, i am jonathan ferro, together with henry for door -- annmarie hordern. if you have an american accent, you will be asked about donald trump. >> the trump election, we all

looked around and thought about pulling at hedges, i hate to predict anything. >> t is completely unpredictable. -- he is completely unpredictable. there is no appetite for that. >> when we look at the policies, there may be serious concerns. >> it is a great concern. you know, we have been there before. we have survived it. >> we are all concerned about it because the u.s. is the largest economy and anticipate it, just as we do with inflation. jonathan: this is dominating conversation the last two hours on this program and the last two days at the forum. that question is not going away anytime soon. that conversation, behind closed doors, off the record, live. they ask on the economic forum or there are conversations on the set, and they do not want to talk about it too much. lisa: they don't.

i don't know how much fear there is if they are not a global player looking for cooperation with the u.s. from a business perspective, it seems people are taking it more in stride. when it comes to general uncertainty and international partners, a whole lot of concern. without a lack of cooperation. annmarie: part of that is they have not prepared. they had four years to prepare. they know the playbook and his policies. and if he is to be reelected, there is good sense of what he plans to do. jonathan: we have a fantastic line of this hour. we catch up with the dutch prime minister, and we speak to the foreign ministry, david cameron. a difficult time with two wars ongoing right now, one in ukraine and the other in gaza. lisa: we will speak to the qualcomm ceo about the business environment in a split world. right now, we are speaking to the bank of israel governor, which is a fascinating position at a time of such conflict,

where it is so hard to piece out where the income is going to be coming from in an economy mired in war. jonathan: let's start that conversation with amir yaron. governor, good afternoon. good to see you. a delicate situation you are in, so let's talk about it. early october, the playbook changed. what has changed for u.s. a governor in the economy? gov. yaron: when the war started, the first and we focused on was financial stability. indeed, we put up a $30 billion selling of reserves, $15 billion of swap, making sure the markets function. we all know what happens when market starts being in a negative dynamics. indeed, we achieve that, the markets, sell them after it did depreciate, but there was enough confidence. there was some stabilization vis-a-vis the north and the shekel went from 386 down to 36

and now 379. but we were primarily focused on that, and that is why we did not touch interest rates, and we made that message clear. we lowered interest rate our last meetings because we felt the markets have stabilized, and we saw inflation decelerating. indeed, we just saw the cpi. the target is between 1% and 3%. it happened to land on 3%. we lowered the rate. it is still restrictive, but we think that was necessary and needed giving where we were. , given all the financing, but going forward as the committee said it is going to be cautious and moderate, depending how far there inflation decelerates and how economic activity develops. jonathan: this is a seven dimensions, but we talked about

the fx channel and i think we were all with you in the immediate aftermath, thinking about what this could develop into and inflationary shock for the economy. what are your thoughts on the trajectory for inflation and what is the outlook look like? gov. yaron: initially, we saw negative demand shock outweighed the negative supply shock, which is primarily the construction industry, where one third of the industry is from the west bank and that could show half a year from now where prices go back up, some in agriculture and rentals, but the negative demand is overweight, and indeed, it could inflation into the target faster than we initially anticipated, and prior to the war, we were on a path of a supersoftish landing, growing at 3.4% in 2023, probably slightly above 2024, and inflation would go down into the target anyway, now we anticipate a 2% growth in

2023 and 2024. if everything is according to our scenario, which is basically military, primarily focused in the south, intensities will go down somewhere around the first quarter. in that scenario, it is the 2% and then resuming back to israel potential growth of around 4%, 5% in 2025. that is in terms of growth. the big challenge is the fiscal side. the fiscal, the war is costing us directly. this is give or take 10% of gdp and another 2% in lost revenue. i call that the temporary help of the war --hump of the war. growth will take care of that in terms of what it will do to gdp. the other side is the permanent component increase in spending on military, in the more

expensive debt, and the revitalization of the south. that is another 1%, and we were able to compress it from now for 1%. what i want to point out is this week there was a new national budget, and the government went through in a short time some significant -- making significant steps to offset that one permanent percent increase. that process probably on a trajectory of stabilizing debt to gdp at around 66, 60 7% in -- 67% the next coming years. lisa: we talked to officials, the fed, ecb, and they talk economic projections. i would talk about varying degrees of angst around trying to migrate into recession if you see inflation picking up or cutting rates at a time when inflation is not coming down. you have a difficult situation. how much certainty do you have around economic projections that are made at a time when there

are hundreds of thousands still serving and they are not able to fill their jobs, where you have tourists not coming to israel we don't know when they will come back? all kinds of questions over that outlook. gov. yaron: this scenario that i out late in the numbers i have given are obviously around an analysis of a model, and these models usually have large uncertainty around them, and now expand that by one mile. of course, if there is a north border event, that means the numbers are very, very different. but you have to basically analyze -- we know what is going on in terms of the different segments of the market. we saw actually huge recovery towards november, for example, credit card usage dropped to 70% when the war started. it is over 100% right now.

we saw once missiles stops and many families were in the house and the education system was not on, that meant many people were not working. that has come back. lisa: you look at the cross-country flows, how much flow is from other middle eastern countries have resumed at a time when there is a fear of widening out the war? is there still the same kind of international commerce that can see the economy in a supportive way? gov. yaron: first of all, as you know, the high-tech sector in israel is very important for our economy. the companies are still working. there are still some workers that are in reserve, but generally, they are working. the big issue is going forward, not to lose a quart of new, young seeds that are well-known, and revenues will continue to do that.

hopefully, the new relationships that we are just beginning to establish, whether it is in the uae, etc., those will continue. and the challenge will be to bring a day after in which there is a mechanism, security to israel, security to the people in gaza and some prosperity there, and, you know, that is obviously a challenge. it is not really in my hands, but i think if you look at israel's, you know, talent, it is there in terms of high-tech, there is a lot of demand for, you know, home security, economics, so i am pretty confident those things we are monitoring will be there. obviously, this is a big shock, and we are monitoring all these developments, as you say, segment by segments.

and all this analysis is predicated on the best information we have right now. lisa: it is a big shock. annmarie: you are a wartime central banker. how are you planning for a potential response if this was to expand either to the northern border or potentially more skirmishes outside the red sea, etc.? gov. yaron: as i mentioned, we first took our main course of action was to make sure there was financial stability. once that settle down, we went back to the interest rate tool. even there, i said it is going to be moderate and cautious. it is going to be partially a function of inflation, economic activity, and further developments, even on the physical side. and, of course, on the geopolitical side. if things develop, we will need to readjust our assessment and maybe go back into a mode of, you know, focusing more work on the financial stability. jonathan: do you feel like you

are constrained to some extent if this war did spread and it increased the shock to the is really economy? do you feel it constrains your ability to reduce interest rates from here? gov. yaron: either way, the process probably would have been a slow process. i don't think interest rate, just in israel, i think around the globe, when the cycle is over, it will be in a higher zone than before. so the path here is not going to be at a rate of hikes that we did upward. it is going to be slow and moderate. it probably will stabilize with higher interest rates, which means higher nominal interest rates. i don't think we are constrained except the fact that we are going to be cautious anyway, and we are going to be on the lookout for any financial issues or developments.

as i mentioned, we do not often mentioned fiscal policy in our forward guidance, but as i mentioned, i think there were significant steps to upset the permit component, which means our debt to gdp should stabilize and not diverge. i view that as a very important statement to the markets. jonathan: we appreciate your time today. gov. yaron: thank you. jonathan: amir yaron, the governor of the bank of israel. coming up, chuck robbins, the ceo and chair of cisco systems. from davos, switzerland, this is bloomberg. ♪ fresh, warm hot dogs! when i'm not selling hot dogs, i invest in a fund that advances innovations like robotics. fresh, warm hot dogs, straight out of my torso! one for you, one for you. oh, you're a messy one. cool, right? so cool. anyone can become an agent of innovation with invesco qqq,

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>> ever since we started this journey of bringing the u.s. and eu checks, it was about supply chains. everything digital, semiconductors. pre-covid, saw the fragility of supply chains. because of that, we said we needed a balanced supply chain for the world. we are off to rebuild the americas and european supply chain for semiconductors so we are all better off. jonathan: that is the intel ceo. we have spoken to folks here at davos, swiss, who have met us time to time, and pat was one of those. lisa: i was curious of his scarf

was a qr code. i tried it, i took my phone, and it was not. jonathan: he did say he would try to transform it into one. lisa: something to work on. jonathan: let's go to the price action. yesterday, down on the s&p 500. today a down morning in new york, get it by 0.4% -- negative by 0.4%. 4.08% on the 10-year. the pushback the last days has been overwhelming. lisa: it is not a matter of people betting on six rate cuts but on a soft landing where you don't get as many rate cuts and session, where you get a lot more rate cuts. that is the divergence you are seeing expressed. we have heard a lot of optimism. that is the reason why that not as many rate cuts is the story that gets the grid's attention. jonathan: let's talk about whether optimism is backed up

artifacts and the growth and what it means for -- about the facts and the growth and what it means for cisco systems. chuck robbins, good to see you. let's get into it, engines for growth. ken of harvard said he is not sure where the growth will come from. where the growth coming from? chuck: that's the difference between an economist and someone who runs a business. we have talked about ai all week. a big opportunity for us. you will continue to see new opportunities emerge, things we don't understand yet, applications we have not seen that we will take advantage of what is going on in ai the next 24 months. cybersecurity is an incredible area of investment for our customers, particularly as generative ai helps the bad people and worst people and make them better at what they do, so we have to come together as an industry to protect our customers. cybersecurity is a big one.

all of our customers will continue down this journey of thinking through how their applications are architected. are they in the cloud, a private or public cloud, which public cloud? and hybrid work is still in place. there is a lot of positive. lisa: how many years have you come to davos? chuck: 11th. lisa: this one feels a little different, like people are trying to get more deals done and figure out what to lock in, do you get that feeling, too? chuck: somebody asked me earlier whether this felt like a normal davos. it seems busier, first of all, this year. i do think there is a lot of -- there is a lot more tangible business discussion going on then you might see normally, but there is also a lot more to talk about with all the complexity going on. you have elections, you have got the middle east situation, you have got ukraine, you have are we going to cut rates? you have got ai.

it goes on and on. lisa: what is going to affect your business most? are you expanding more in certain regions to avoid some of the complex you keep seeing? are you basically just keeping an eye on all of this and then chugging forward with continuing to hire the best cybersecurity people and move forward with all the programs you have worked on? chuck: we are investing in areas where we do see growth. we are investing a lot in ai, cybersecurity. lisa: in which regions? chuck: it is pretty much -- i would say it is well-balanced. the ai specialists has engineering hubs, so that is first and foremost, but also because of what we saw in the pandemic, every company has been diversifying geographically relative to their supply chains. as we have talked about before, no one ever designed a supply chain expecting an entire country to shut down. we had to make some changes, and we continue to work through

those things. jonathan: you think that is a big transition for quite a while going towards software and recurring revenue, we have talked about this for years, is that transition complete and are you comfortable? chuck: when we get this flunk acquisition come -- splunk acquisition completed, we will surpass 20 billion in software, which puts us in the top six or something like that, but there is still more to do. there is still more software assets and probably some inorganic stuff he can do, but at the same time with the ai explosion, we are at significant recipients of the infrastructure benefit underneath the gpu's in the web scale and enterprise. so our hardware business, which in some cases has subscriptions associated and in some cases do not, we think both can grow the next few years. jonathan: do you think investors are fully internalized your view on where things are going and your message? chuck: i think they have

internalized the message. one of the things we are talking about is this transition of software should give us more productive ability and less volatility. we have seen that come into play, but we still probably have a little bit too much. we have been rewarded for what we have accomplished. but as we continue to do that and deliver, you will see that in the future. jonathan: from being here couple of days, everybody wants to be a part of the ai story. what surprised me last year is how quickly it became real. it was not just a story companies were selling but something they were monetizing. and the growth was exponential. nvidia is a great example. can you walk us through whether you see real, tangible growth off the back of what is developing? chuck: i told my team you are not allowed to espouse about ai unless you follow it with a tangible way of working and implements you what you were talking about because there is so much noise in the system.

we are building the infrastructure that will support underpinning all the ai networks. so that is happening today. we are running pilots right now. we are working on a lot of design around future integrated stacks that we are going to take to the enterprise to help them do it. secondly, we are looking at how we can deliver better customer experience for customers by leveraginggen ai, which every company is or should be doing. we are building security assistance is as an example to help customers navigate security tools and make sense of a lot of it rapidly. we are doing the same in collaboration, transcribing meetings, and there is a lot of stuff going on. but i do think some of the greatest applications, we have no idea what they are yet. lisa: which is a theme. chuck: it is early. lisa: one thing that is early may be is that hpe is coming for you more aggressively.

they brought in jennifer networks last week, and they said they could compete more directly with you. what is your response? chuck: we love good competition. lisa: what is your way of gaining some of the market share in a highly competitive market? chuck: look, we have competed with hpe and juniper in the past, so i don't know that it changes a lot for how we think about competing with them, to be honest. jonathan: good to see you. chuck: thank you. jonathan: diplomatic. very careful about answering my questions. lisa: same. jonathan: chuck robbins, ceo. i think chuck is right to draw a line between the noise where everybody says ai, ai, but the other part of the story is the tangible things materializing in front of our eyes, those are two important things to look at. lisa: not only on benefits, but the risks. i am not just talking

misinformation, but i was struck by this one line we have heard repeatedly. financial disruption and in new types of waste that could be of the medic that people are not thinking about. these are things people are trying to hash out. jonathan: confronting an era of misinformation. one of the good things we might do is focusing on some of the bad things. in the next 30 minutes, a must watch television, the prime minister of the netherlands and david cameron, the former secretary of the u.k., coming up in the next 30 minutes. this is bloomberg. ♪ you can't buy great conversations or moments that matter, but you can invest in them. at t. rowe price our strategic investing approach can help you build the future you imagine. t. rowe price, invest with confidence.

jonathan: economic data in america seconds away, on the s&p 500 and in the bond market, equity futures negative by 0.44% , yields higher by a single basis point at 4.07%. as we went through retail sales, conversation continues on how many rate cuts we will get in 2024. let's get to michael mckee. michael: good morning. we are looking at a good month for retail sales and i'll get the breakdown in a second, but right now, .68%, and i will wait

for the revisions. x autos and gas up .6%. we know gas prices fell, so that is still a lot. retail sales control group, which goes into gdp, up .8%, after an initially reported .4% in november, so double what was seen last month, and it is four times what was expected. looking at import prices, they were flat on the month after a decline in november, and x petroleum flat on the month, so no inflation pressures coming in from those. one other data point before we get to the breakdowns of this, mortgage applications, we have not paid a lot of attention to that for obvious reasons, they were up 10.4% last week after 9.9% the week before, so we have seen a backupin rates, and

we are seeing some results in the mortgage market. jonathan: we have seen some moves in financial markets, so let's go through equities, bonds, and foreign-exchange. large rate cut -- march rate cut, what march rate cut? we said this a few fridays ago. let's look at the equity market. equity futures near session lows on the s&p 500, pulling back. in the bond market, yields are much higher. two-year, 10-year, 30-year, up 14 basis points on the two year after that how to than expected retail sales growth. 4.11 on tens, and the dollar strength is stronger, euro weaker, 1.0856, so that data endorsing governor waller's view of the world the past day or so. lisa: people are pricing in, and that data suggests, and that is what the market is hearing.

we are seeing still a 58% chance of a fed rate cut in march, but it is edging lower. jonathan: you have had a few extra seconds to chew over the number, do they look as good as they do on the surface? michael: they do, all of those pretty coats you are wearing and davos, you probably picked them up in december. clothing and accessory stores were up 1.5%, the leader during the month. so you did your part for the u.s. economy. gasoline stations down 1.3%. no surprise. gasoline prices continue to fall and take away from inflation. we saw motor vehicles up 1.1%. but even without the motor vehicle component, retail sales were strong. food services up .6%. so that is also good. building materials of .4%. i keep saying also good. pretty much all are good, except for health and personal care,. down 1.4%

department stores were up 3%. that is a strong number after the expectations were that people were not buying as many goods at the holiday time. your amazon's, etc., 1.5%. food service and drinking places were flat on the month. no increase. iam not sure, maybe you bought coats instead of drinks during the month. lisa: i would like to finish up because we were talking about what of the most important indicators? was it the jobless claims that are going to be the leading light? or is it going to be retail sales and the consumer continuing to spend? do you hear more economists paying more attention to indicators like this that are coming in much stronger than many people expected? michael: there has been talk about whether the economy is slowing down or picking up. this fits into the picking up camp. we will see whether that starts to get incorporated in people's views of gdp for the quarter and

future. should get an atlanta fed gdp number reasonably soon this morning, and it should go up. i want to point out that the retail sales control group i said was up .4% in november, but .5%. so it gives everyone something to look at. chris waller said six rate cuts were ridiculous yesterday, making a lot of noise. this is kind of supporting that view at this point. the fed is not going to be cutting rates if the economy is brisk strong. -- is this strong. we will see if when we get cpe numbers, they will add in service to the spending numbers. we will see how strong the u.s. consumer's overall. jonathan: thank you. michael mckee a hot retail sales report. it is time for price action. equities going into the opening

in about 55 minutes, pulling back off of the back of better-than-expected retail sales. equity futures negative by 0.5% on the s&p 500. yields are higher on a 10-year by four basis points, 4.1%. on the two-year, double-digit's, up by 11 basis points. 4.33. lisa: this confirms the city grind we have seen as you get better-than-expected data and as both surprised the upside. if you get the true belief of soft landing, that means we will not get the rate cuts we are going to expect. is this inflationary? that was something michael talked about, when can we think about immaculate disinflation if we start to see the inflationary put off, as well? jonathan: we will speak to the ceo of qualcomm, good to catch up with you, let's get straight to it, the smartphone business, what is happening with that the

last 12 months? that core piece of hardware seems to have gone x growth, have we reached the saturation cristiano: cristiano: or smartphone sales? i will take a step back -- saturation of smartphone sales? cristiano: i will take a step back. we did see in 2023, a correction, we had demand, but we had a sturdy call and i think we are cautiously optimistic, so i think we have the normal rate of the market, which is a replacement rate market, but this gen ai transition could create a new upgrade cycle, so we will see. lisa: let's put tangibles around this. when do you see the smartphone market returning to growth? how long before we get there? cristiano: it's hard to predict, especially because you look at the market today and the market

used to be much bigger, even when you think about prior to the pandemic but we know it is smaller, and people were looking at the current macroeconomic environment, but, however, the growth sector is related to new functionality. we just, like today or tomorrow, samsung is launching a new device, talking about the galaxy s 24, and things you can do with gen ai on the phone, and as we get to the transition, i hope everybody will have a new phone. lisa: i and curious from your point of view, how concerned are you on apple creating its own chips and hardware? they basically had issues with it and prolonged replacement chips, but how much does that

worry you? cristiano: apple has always had their own on the iphones, and are relationship with iphone is providing the chips to make their cell phone and i to cellular waves and make sure you are connected. that is our job. they have been focused on trying to develop their chip, but, recently, we just renewed our agreement with them. it covers through 2026. we will see. right now we are focused on being a good supplier the next three years. and as long as cellular remains important, i think there will be a room for qualcomm. annmarie: you have been safe on the tit-for-tat between beijing and washington, but how do you look at navigating that going forward, given what other companies are dealing with? cristiano: we are fortunate that some of the things we have done today, we have not been impacted by restrictions. in one way, sd peak of tensions

between the two countries, i would say our business in china increased. we are trying to diversify our company, not only into phones, but cars, and industrial, and we expanded our relationships with china. here is my simple answer, any company with a leading technology product and is a product that becomes important for the digital transformation of many industries, like automotive and others, you will have a big business challenge. it's a function of gdp. i think we have been so far in a stable place. we have to monitor the situation, like any other company. i will continue to believe, and that is what i had said, that at the end of the day, strong commercial relationships between american enterprises and chinese counterparts will be one of the things that could bring stability to the relationship. lisa: does that monitoring get

more challenging of president trump wins back the white house next year? cristiano: we are just focused on technology, and week one to have our markets. at the end of the day, one important thing to understand is certain technologies are globally interconnected. so you are going to have customers in different locations, europe, japan, and they will have a business in china, azul, and you want to be a supplier to them -- and you want to be a supplier to them. jonathan: i would like to talk about the direction of travel and the global economy. for a chipmaker, for the industry, do think it comes to the point where they have to pick a country, choose a side, where we supply china or europe and america? how close are we to that moment? cristiano: i don't think we are right now at this point in the industries that we serve. it is one of those things that, yeah, if it changes, i think companies have to adapt.

we have seen that some industries interface that. there are some industries were is the reality, for different reasons, whether the cloud company or a social media company, etc. we have not been in that space, so it is something we will have to worry about in the future. lisa: what industry is the biggest area of growth for you? cristiano: we are very pleased with what is happening with automotive. we are now working with virtually every car company. the car is becoming a new computing space. our job is to provide the digital part. and it goes alongside lecter vacation. -- electrification. the other one that was really happy about it, we are entering the deep-sea space. we just built the fastest processor for any laptop, and we think that could be a great opportunity for us. lisa: as we step back and we are reflecting on this ai infused

autos, are we going to have laptops? or are they going to be headsets we put on and our words just show up? how far are we going away from the models of normal existence? cristiano: i remember when laptops appear and people thought the desktop would go away. when phones appeared, they said the computer would go away. i think the reality is your phone is going to be still with you. your laptop is still going to be with you, but they will become much better and more useful. and you will get more out of them. that will be the great opportunity of gen ai and those devices. jonathan: appreciate the answer, thank you. cristiano: happy to be here. jonathan: cristiano amon. words come up when you do this. lisa: have you ever seen people were headsets? jonathan: they are lost because

they are in virtual reality. i was just curious. lisa: it could be the future. jonathan: serious face. coming up, next guest, the prime minister of the netherlands. that conversation around the corner after the break. to touch base on the price action following a better-than-expected retails report out of the u.s., equity futures on the s&p 500 negative 0.5 drive percent. in the but -- 0.55%. the two-year yield is a bit higher, up 10 basis points, up four on the 10 year. lisa: so we talked about the potential loss of some sort of volatility that seems to be coming back just a bit. i will say that there does seem to be a feeling on the soft landing, one key question is how much is priced in. steve tennenbaum said he things about half has been walked back and there is another half that still has to go. jonathan: for special guests, we don't take commercial breaks.

and it is the prime minister of the netherlands. good to see you again. mark rutte. prime minister, you are in a different position. i have caught up with you at this forum several times, we can talk about your future down the road in a moment. there is a big focus on the man you have known and can you tell us about him? p.m. rutte: clearly, he got the upper hand, and we are famous for having to form coalitions. it takes a long time to do that, so they could take a couple of months, so we have to see how long that takes. in the meantime, i am confident

that the fundamentals are outlook, the support for ukraine, nothing will change. jonathan: you don't think the zero threat to the european project? -- think these are a threat to the european project? p.m. rutte: no. as the biggest exporting country in the world, we need the partnership of nato, the un, because of our safety on the economic side and in the literal sense, because ukraine been attacked by russia's critical. jonathan: donald trump was said to be a threat to some european interests, including nato. let's talk about nato. it is interesting how the europeans frame this as america not helping, the former president not helping us, can you help us understand how european countries have helped themselves? what has happened to defense

spending the last four years? p.m. rutte: this was the last issue, we were not spending enough, and he was right. america is about 50% of the native economy. in that moment, u.s. president, he spent 75% of the nato budget, and the rest of nato was doing 25%, so he was completely right in forcing us to live up to our commitment. so we are still not exactly there, but we are almost. many other countries have done the same. i have always thought that he had a general argument. by the way, for the u.s. to be in their strategic interests, if russia gained access to this part of the world, it would be a threat to the u.s. so nato is not just a project in history, but it is also about security today, also for the u.s. annmarie: this is why you told your colleagues when trump was president that you should not criticize him.

he is right when it comes to multilateral and multinational organizations and that more should be done and we need to look inside, but you will potentially work with him again if you get the top job as secretary general of nato, which room or mill has it it is going to you, and if trump was to come back, how would you handle him? people say to me that you were a trump whisperer of sorts. p.m. rutte: no. what i have always said is that i cannot vote in the u.s., so we have to dance with whoever is on the dance floor. in the end, for the nato territory, it is crucial that you have amicable relationships with other people. in the u.s., it is not only the president's making the policies, but there is the powerful senate foreign relations committee, the house is involved, and there is a strong tradition in the u.s., and trump was right on this issue of pay up to our commitments. annmarie: was that confirmation that you are taking the job at nato? p.m. rutte: i was commenting

because i said something about it in october, and i decided to end it. annmarie: nato us still awaiting their 70th anniversary, a big year. p.m. rutte: it is. the summit is a 75 year summit, and i said something about my own future in october, and i leave it there, and i will not add to what i said at the moment. lisa: i would like to build on the idea that trump has been front and center at the conference. what do you think people have wrong when they talk about some of their fears? we have heard this again and again that a lot of people are concerned about trump 2.0, and you don't sound that concerned. p.m. rutte: of course, first of all, i cannot vote in the u.s. secondly, i don't agree with everything biden and trump are doing, and i don't have to because i don't live in the u.s. we are the most transatlantic country in europe, and one of the biggest trading nations in

the world. that relationship with the u.s. is crucial for us, and that means that whoever is president, we will work with. it does not make sense to start commenting before the election takes place. if this or that happens, well, then you should become a u.s. citizen and you should try to get yourself to understand the ballot. which is not possible if you were not born in the u.s. lisa: the reason people are thinking about this now is we are thinking, ok, how stable is the landscape that davos has come to celebrate in some ways, the globalization -- p.m. rutte: the issue is that we are always talking about globalization and we need it in the system, but, also, the strong nationstate, and what i think in davos, for too many years, we have celebrated and forgot about the necessity that you also need strong nationstates and it is you need both at the same time because

what is my task? making sure that the netherlands is safe. to have a strong economy and make sure it is safe, we need nato, and center, but it is in the international interest of the netherlands. so we need both. sometimes, this gathering of the world is not right. it has to be connected and grounded in a nationstate. jonathan: i know you have 90-seconds left, so i would like to finish, you have been in the forefront of this conversation where others have been lacking in europe, getting europe to look at what europe needs to do. the european model for many, including us sitting here, feels broken, to rely on america for defense and china for economic growth, russia for energy, it feels like we have seen a setback. as you step back from the netherlands as your current row as prime minister, -- role as

prime minister, what is the new model look like? p.m. rutte: the internal market is the biggest in history and nato is the strongest defense of line in history, so the eu is essential. trying to convince each other that the eu is broken, it is not. there are many issues that we need to solve, but take, for example, our issue on oil and gas. in 18 months, we have been able to deliver that dependency in terms of our gas supply with russia. when it comes to our collective defense, we have stepped up in terms of defense spending. most nato countries are members of the eu. we now have finland, sweden will join as soon as possible. i am not that pessimistic. i would not buy that story. jonathan: prime minister, good to see you. p.m. rutte: good to see you. jonathan: the prime minister of the netherlands, mark rutte, trying to press him there about the former president trump.

he was on fighting, but one thing that the former or soon-to-be former prime minister has said is the former president was right to push the europeans to spend more on defense. annmarie: absolutely, and what has been more of a shock for these european countries, they were not at 2%, and there is a war now on the european soil. there is a huge issue for the u.k. defense minister who said, it is going to take for these european nations to increase defense spending when there is actually more on our doorstep? oliver: we have a lot -- jonathan: we have a lot to discuss, one more fantastic conversation with ava cameron. -- david cameron. we will go to equities, bonds and foreign-exchange, going to the opening bell and 38 minutes. equity futures on the s&p 500 negative by 0.6%. the nasdaq, 0.9%. the russell, small caps, down by 1.5%. i am trying to carry on.

30-year, i have the dutch prime minister shaking my hand while i talk bonds. i will carry on. in the bond market, four basis points, on the 10-year, 4.1%. your opening bell is about 37 minutes away. now things can settle down. we are still live, i am not sure david cameron you that. how are you? david: sorry if i was in your shot. jonathan: just rambling through bond markets, insignificant. this guy worked for the markets, and talk about your world, what we are seeing in the west, and inability to restore order. let's take the red sea, for example. how have houthi rebels been able to shut down commerce in the red sea? david: they are doing it because they are backed by iran, and they have had weapons provided. between the 19th of november and last weekend, they have made 26

attacks, but we have now taken action and we have demonstrated with actions, and i believe that will make a difference. jonathan: you are part of the strikes that took place recently with the u.s. about 10 years ago, you had strikes in syria because of a vote in parliament. is that something that should be happening with the u.k.? sec. cameron: i think taking urgent and immediate action is acceptable for the government to act. you have to weigh the operational security with the consulting partner, but parliamentarians were perfectly aware of what could will happen. now there has been a statement and that is entirely right. of course, there was the situation with syria many years ago. also, we have taken action with americans and others to get rid of the isil threat in syria and iraq, and that was successful.

this is about free world navigation. it is vital not just for our economy but every economy in the world, including some of the poorest countries. jonathan: including china, just to jump in. it is interesting to me that this could have huge consequences for trade in china, yet, china is not a part of what took place. they are barely getting involved. sec. cameron: china did sign up to the u.n. security resolution that condemned the houthi attack since said nations have a right to self-defense, so that is progress. if you are asking if written is a country prepared to stand up and work without -- britain is a country prepared to stand up and work with allies, yes. because you cannot expect t for americans always act alone. you have got all of these different things that are happening in the middle east, and the important thing is to try and deal with each. i don't think it was possible to go on allowing these attacks to continue in the red sea, but at

the same time, yes, of course we have to work towards a resolution of the situation in gaza. i have been clear that this should involve an immediate humanitarian pause. we have to get paid in and hostages out, and we have talked about sustainable cease-fire because you have got to get rid of hamas and its ability to rain down terror on israel, but the best outcome would be moving from that to sustainable cease-fire without return to hostilities and destruction. for that to happen, a number of things would have to take place. we would have to see leadership come out of gaza. you would have to see the hostage situation been resolved. he would have to make sure that hamas was no longer capable of doing rockets and terrorist attacks under israel. you would have to start working out who is going to govern gaza and the new palestinian authority. that should be the on vision and plan -- ambition and plan,

moving on how to deal with hostages, a pause, and moving that into sustainable cease-fire. annmarie: whether lebanese hezbollah, hamas or houthis, these roads all lead to tehran. what is going to be the response to iran. sec. cameron: we have delivered tough messages to iran. there are a number of sanctions and other measures already in place, but it is vital that we send a very clear message to iran in their support of these, whether it is hezbollah, or the iranian groups in iraq and syria, the behaviors and except a bull, and we need to make sure that there will be consequences. annmarie: actually striking a leadership? sec. cameron: no, i think we need to look at all the tools we have in the toolbox. obviously, we have been using

sanctions, for instance, against a number of people in iran. we need to look at how to step this up if the behavior continues. lisa: you are saying there needs to be strong measures taken, and this needs to get resolved, etc., and then you see protests flooding the streets of london with all these people coming out to support hamas. to support, yes, the palestinian people, but to also protest some of these actions. how does that complicate your job if you are losing a lot of the popular support? sec. cameron: a lot of people feel strongly about what is happening in gaza and i understand that because we have seen a lot of destruction. i support israel's right to act in self-defense. i understand why they have to get rid of hezbollah, but we need to see fewer civilian casualties and thus destruction. there is a path to deal with this. we have a right to protest. people are free to join on the streets and make their views known, but we have to work out

what is the right thing to do to bring this to a conclusion. it is often tempting in foreign policy to say the easy thing, let's just have a cease-fire that is comprehensive, but it will not work unless you deal with the problem of hamas. the thing that so many of those protesters want, which i want, a two state solution where israel and palestine is side-by-side, you will never get that if hamas is still in gaza, capable of terrorist attacks. a two state solution requires bringing an end to the situation. jonathan: i would like to squeeze in another question and don't let me down because i always say british politicians have thicker skin than american politicians. there is a 20 point gap between the conservative party and labour, if we had an election now, what do you think is behind that? is it poor policy preferences or incompetent? >> i remember