political antenna has gotten too short. we're a all looking at the next elections in a whole range of countries and the consequence if we carry on that way is going to be much more pain in the future and a much higher hurdle that the future politicians will need to cross. so let's start moving now, face things realistically. make sure it is fair and just and avoid piling up a large problem for the future. francine: thank you so much. you have the optimistic to 2024 and the pessimistic guide. thank you so much to all of our panelists. i would love if the audience could stay in their seats. it is my great player to welcome on the stage the president of the world economic forum for the closing remark. >> that was francine lacqua moderating the global outlook panel. this marks the end of the week long world economic forum and the meeting in davos.

i'm dani burger. "surveillance" is next >> there is some reason for optimism, if you look at inflation around the world. >> if you emphasize the word landing more than soft, we have achieved it. >> we will see more volatility, but the trajectories are in place for lower rates, less inflation, but not on an even keel. >> i believe that the fed is going to take its time, especially without a recession. >> they are going to start lowering at some point. when they are ready. >> 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: from --

they brought you back from the end of the day, and they writes erected me. scarlett: we have not done this at this hour -- and they have resurrected me. scarlett: we have not done this at this hour. manus: you look at the rate market. it has backed up the truck. up 28 basis points on 2's and 10 's. scarlett: everybody has an opinion on when they will cut. the data indicated the u.s. economy is holding up just fine, whether you are looking at retail sales for december or jobless, which shows a bedrock of restraint. there is repricing going on, and there will be a lot more repricing before the fed meets january 30 and 31st. manus: they are getting incrementally more -- the better data. scarlet: but the nasdaq is at a

record high. manus: exactly. if you look at the components, who benefited the most, it was part of those magnificent seven. just grab some of the numbers. the mag 7, you have technology stock funds -- you have got technology funds taking in $4 billion over the space of two weeks. scarlet: the russell 2000, which was supposed to extend on gains made at the end of december, what happened to it? it kinda faded. the january effect seems to have not taken effect at all. manus: not at all. it is interesting when you listen to the voice at davos. schwartzman saying the timing of the rate declines will not be clear. it is going to be baffling for investors. that is what we have at the moment, which is disinflation.

it is behaving itself, but there is this view. they are pushing back the timeline on these rate cuts, and this market has yet to really adjust to that. scarlet: certainly not six rate cuts, which is what the market had been pricing in. the other question is what will the election do or how will that affect how the federal reserve moves? if it does not start cutting rates until the second half, the closer it gets to the election, the more likely people accuse it of being political if it does start to really cut rates into the end of the year. manus: i think the favorite seen so far was the obsession in davos whether trump would run on the ticket and whether he would win and if there would be another four years of trump in the white house. and it was that moment when christine lagarde was asked paused -- for dramatic effect -- and said, i will have some coffee. then she proceeded to answer it. scarlet: she gave a very diplomatic answer.

she said, of course, it is up to the american people to decide, but you can be sure there will be scrambling in the background for how to deal with another trump administration. manus: and, of course, two wars. we have three hours to go. are you excited? we will turn up the temperature in here, because we are both freezing. let's talk about the markets. s&p 500 up 0.4%. equities continue to trade higher, even though investors dumped over $4 billion of u.s. stocks in the past few weeks. the euro-dollar, i know you wanted to talk about that. 10 year yield 20 basis points and the oil market is still "flagmatic." it means it is really not paying attention in issues of the red sea. as long as it does not take

place in the strait of hormuz, that market will focus on supply. scarlet: we see wti approaching 75, print -- brent approaching 80. opec+ is scrambling in terms of trying to figure out how to calibrate everything. manus: let's take this confluence of issuance do -- to dan. waller backed up the rates truck, bostick helped him. 20 basis points around 2's and 10's this week. has that jolted you are thinking in any material way? good morning. >> good morning. what is notable is the market seems to actually be listening to what the speakers have to say. sometimes, the market listens, sometimes they do not. we think the market is listening to what the fed is saying, not

just because the fomc members are saying it, but because they think it is important. ultimately by what the backdrop is in terms of inflation and growth, which is inflation will not decelerate as quickly or easily as the market expects, and that is why the work it will not cut as much as had been forecasted. scarlet: is the bond market hearing something different? manus and i were talking about bond markets have used -- moved higher, but so have growth stocks, making a record high? daniel: we have to keep in mind it is not only about rates. it is what is happening with rates. we have got to calibrate what the impact is with higher real yields, which should a negative impact on growth stock via evaluations, but we are also in the midst of earnings season. at times, and we saw this in a major way last year, earnings

optimism can outweigh, temporarily, what the impact is on higher discount rates. we had the big ai boom -- pushing earnings through tech stocks last year. maybe we are seeing a bit of that these as him the beginning of this year. scarlet: that coming from -- how long does this enthusiasm last? is it a temporary boost or is it something that will last? daniel: it will, broadly, for tech earnings. if you look at estimates this year, tech earnings were supposed to be in double digits. maybe it will not be quite as high as that for the year, but i think double digits earning growth out of a broad nasdaq 100 index is what investors are essentially counting on, and so far, tech stocks have been able to deliver. as long as we are in that range, it is better than any other index can provide, and that is why the enthusiasm is there, and also the valuations. manus: the question i had for

someone at deutsche bank, his target is 51. can you deliver that without 5, 6 rate cuts? he said, in my estimate, it is 5100 without any rate cuts at all. you think he can get that kind of momentum in equities without rate cuts? it is predicated on earnings. daniel: perhaps it is a hypothetical. i do not know how much is worth exploring. that has got to be a part of the calculation and returns for equities. you are right, it does make a difference if it is three cuts or six, but ultimately, if it is more rates at the end of the year than we have today, higher earnings at the end of the year than today, that seems to be a supportive environment for equities. manus: when you look at the backing up of views we had, you begin to ask the question, will there be a reentry point that

you will see bond buyers come in on the 10 year government bond? does that enrich in the bond market? daniel: certainly, if we get much higher than we are today, i think you are more likely to see some managers going overweight on the outlook for nominal yields. right now, we are probably still in a position where the market needs to recalibrate its expectations for the fed, so the risk in the near term is more higher rates than lower rates. certainly, if you get higher enough, we will see what affirmation we get on inflation, if it gets higher, which we think is a risk, we get more inflation premium baked in. scarlet: investors are betting on a normalization of the yield curve, where you get rewarded for taking on more risk of lending more money over a longer term period. what will be the catalyst for that shift? we have been waiting for a. daniel: the timing of the fed

cuts will certainly be driving the steepening of the curve. was it even realistic before to think the fed would cut in march? we do not think that made a lot of sense. so we will have to wait, but we think it will cut. manus: you pointed out the real rally in rates at the beginning of the year looks under pressure. how much attention do you think the fed is paying attention to real rates? daniel: i think ultimately, where the discussion needs to take place is where do we need to be in rates five years from now? if you look at long-term projections from the fed, the fed funds rate versus what the market has, you still have about 150 basis point gap. there is discussion to be had about how strong the economy can

grow, so we do not want to forget -- it will be these long-run discussions that will drive market equities and fixed income. manus: we spent a big lots of guests in davos talking about the risks in the red sea, the risks of u.s. politics, the risks of two and a half hot wars, the half being taiwan and china. what is in the most material risk to delivering underwhelming equity results this year? daniel: if we look back to the russia-ukraine conflict as an example of something that is political that can turn into a significant macroeconomic or market event, and what was unusual about the situation was the direct impact on energy prices because of russia's dependence on russian national gas. if you think about --

we initially go to the middle east and the risk of significantly higher oil prices. that is probably still the outstanding concern we have. manus: and as yet, we still have not seen any material or risk premium coming into those oil prices. daniel morris, thank you. it is interesting. nobody got any of the outlier risks right last year. they did not get any of the bank crises in march here they did not get the israel--- they did not get any of the bank crises in march. they did not get the israel-hamas war. you do not know what they are until they are in your face. scarlet: the other black swan event was the u.s. not going into recession. manus: my favorite line goes to paul donovan from 2023 -- never

overestimate the hedonism of the u.s. consumer. scarlet: a lot to spend. manus: a quick snapshot of the markets -- where is the clock? a different studio. [laughter] stocks are rising. bond yields are also on the march. scarlet: it has been a big move for this week. we are not seeing a whole lot right now. the big 80 points already came out this week. we will see how it all shakes out this week. manus: 7:00 a.m., we catch up with margie patel of allspring investments, to see whether she believes in the hedonism of the u.s. consumer. 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.

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>> the trump election, the first time around, we all looked around and thought about putting in hedges. >> there is no appetite -- >> when you look at the likely policies, there may be some serious concerns. >> when he was president, spending about 70% of the nato budget. this was trump's main issue, that they were not spending enough. >> there is little sign of discipline from either party right now, which is concerning.

>> we are all concerned about it, because the united states is the largest economy. >> there is too much to be decided. if you look back the first time, there was a lot of concern, apprehension, that did not necessarily materialize. >> everything changes if trump wins, mostly in bad ways. manus: that is the opinion coming from top this is leaders in davos on the likelihood of a second trump presidency. equities are higher, bond yields are flat, but they put on 20 basis points on the week. the euro-dollar start -- struggling for direction. crude is up nearly 1/8 of 1%. let's reflect on that with wendy schiller, policy director at the taubman center for american politics at brown university.

the global elite are quite literally shaking in their boots that there is a second salvo coming towards multilateralism. is that well-founded? wendy: you can argue that pulling out of international agreements, ending the iran-u.s. agreement, multinational agreement, pulling out of the paris accord, that signals the u.s. will retreat. certainly from statements trump made and continues to make about russia-ukraine does not show as much commitment to ukraine. but at the moment, congress and biden cannot get a bill passed right now, and there are questions about the efficiency of that aid and whether there is any corruption in that aid, and how long will this continue? in some ways, you see -- i can predict from the past what the trump administration will do in the future, but, like in many,

things have changed. but he will be less willing to make the united states engage in international conflict. manus: we will touch on this in just a moment, the u.s. playing its role in the red sea, launching missiles against the houthi rebels in yemen. biden's administration is walking the walk in regards to defense, but one would have to question whether these past four years have left the u.s. as that real backstop to the world in terms of security. is the biden administration fundamentally different to its global position, as trump was? wendy: trump would probably say the same thing as biden, which is really this is about commerce. this is about attacking civilian commerce ships that the international commerce has to continue, and it cannot that in commerce. the biden administration has softened a little bit on tariffs

on china but not as much as people expected. our relationship with china is probably no better, substantially, then it was under trump, even though the biden administration has made efforts. you think about outcome of foreign policy engagement, we do not see as much difference between biden and trump than people thought. the border is different. the actions were significantly different, and that is what trump and the republicans are running on now, saying when we did it, the problem was less acute -- you can debate those numbers. and now, with biden, the southern united states is less safe at the border. that used to be in the poll results. scarlet: one thing a future trump administration would have to deal with is what is going on in the red sea, the tit-for-tat attacks between the houthis and the u.s. and the u.k. we heard from president biden

yesterday about how they are stopping the houthis and whether or not has been effective. pres. biden: are they going to continue? yes. scarlet: so when you say, are they working to stop the houthis, no, will they continue, yes -- not a very help full answer. it does not give much of a roadmap of what is to calm. can you give a sense of whether there is a correct way of addressing this, or is the biden administration creating a situation that basically has the potential to blow up into a bigger crisis? wendy: i think the middle east is really hot right now, you can argue. certainly when saudi arabia and the houthis and yemen were having conflict and there were civilian casualties, the u.s. was saying, "don't kill civilians." we do not see the same rhetoric with israel, although now the u.s. is saying don't kill

civilians after many civilians have died in gaza in addition to israel. so unless we pull back full-scale, which there is no appetite for in the u.s. on either political side, what can we do? we have ships, with we can do drone attacks, which we do. by the forces in the middle east that want to be disruptive do not believe the u.s. will come back full-scale, and that is where the looming trump administration, that makes it even more certain in their mind that the united states will not come back full-scale. scarlet: it is not just the executive branch's responsibility. you have to get the legislative branch involved as well. but congress has their hands full for most of this month and the rest of next month in trying to come to some sort of agreement. they need to come up with new agreement postmarked march 8. can congress get anything done past another continuing resolution? wendy: we are all looking at

that. the issue is that there is an agreement in place. there was an agreement struck with the debt ceiling agreement, to raise the debt ceiling, and that agreement has, so-called, topline spending. how much can we spend? how much can we agree? there are people in the republican party want to renegotiate that, who want to cut spending even more, and the democrats and president biden is holding firm -- a deal is a deal. we are sticking with those numbers for the rest of fiscal 2024. that is the fight. speaker johnson has to make sure he can negotiate an agreement that can get through the house. he has done it now in the short term. can he do it long-term? this will have to do with trump. trump doesn't want the gop to look like it cannot run the country. if they shut the government down, that suggests they cannot function. that hurts trump. you can imagine trump will be on

the phone with johnson every single day, saying, "don't make me look bad." manus: johnson rebuffed at times at the last moment by the ultraconservatives. he has not fulfilled the promise he made with the mid-november, which is no more temporary resolution. will he last the mile? wendy: donald trump is only fully behind donald trump any given moment at any given day. no politician can expect he will stay loyal. you have to basically feed him. every day, they will be talking. if use doing something that makes trump look good, trump will stay him. republicans have to think in congress, going into summer and fall, where they are vulnerable, where they may lose the majority, and how popular trump is a that is the complicating factor. johnson wants things to go smoothly. as you can imagine, most of the gop wants things to go smoothly,

because they like being in the majority more than they like being in the majority -- minority. manus: very quickly, going to new hampshire, what do you think the call will be there? wendy: at the moment, it looks like trump has momentum. if haley can show closeness, haley stays alive until south carolina. manus: thank you very much. and that is an imagery, feeding the leader of the gop. scarlet: it is all about momentum for these big political nominees. right now, trump has it, desantis has lost it, haley is trying to recapture it. manus: coming up, lindsey piegza of stifel here on bloomberg. ♪ ou an elevated experience, tailor-made for trader minds. go deeper with thinkorswim: our award-wining trading platforms.

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manus: very good morning. this is "bloomberg surveillance ." alongside scarlet fu, i am manus cranny. we have got a pretty much risk on flow show for you. equities are higher, 0.4%, even though investors dumped over $4 billion in u.s. equities over the last few weeks. the mag 7 remain resplendent. the russell 2000, it lags the two peers in the s&p and nasdaq.

the bond put on 20 basis points on the short and long end. there is a narrative about re-steepening of the curve. scarlet: what the fed would have to cut rates, and nobody knows that will happen. there is a big debate -- did you know that? [laughter] manus: a quick snapshot of fx, you have a nice interest in euro-dollar. the dollar put on 1% this week. that is interesting. scarlet: and the dollar, of course, its strength has implications for other central banks. i am thinking in particular of japan and the fact the dollar-yen is getting close to that point where maybe japan would need to intervene. we heard taiwan and china also tried to bring calm to their currency markets. manus: if you look at the bank of japan excluding -- i always wondered about this -- i

understand why -- excluding fresh food. and the finance minister is closely watching -- scarlet: closely watching. i love economics, where we talk about "closely watching" being the trigger words. manus: well when -- the whole world seems to be either bailing by japan. put your money anywhere else besides asia, and the target seems to be japan. we have talked about it all weeks. spirit airlines. speculation of a bankruptcy-driven restructuring. saying the spirit is not involved in a statutory restructuring, although it is pushing jetblue to appeal the decision, blocking the planned sale. spirit is re-examining its balance sheet after the u.s.

district arch sided with the antitrust regulators, saying the deal would lead to higher fares. tier 2 airlines. where i come from in europe and the middle east, it is about consolidation, because those low-cost air carriers have to consolidate in a post-world for efficiency. scarlet: and, of course, when it comes to jetblue, it needed capacity. by buying spirit airways, that would be one way to solve that problem, because ordering planes from boeing would take years. spirit's stock has fallen about 62 percent on this doj pushback, but if you look at jetblue's stock, it is up, so i do not know it is motivated to necessarily appeal that ruling. manus: citi downgraded spirit a sell from neutral because $3.3

billion to $5 billion -- can you refinance your debt? if you can, good luck kay let's move along. youtube, spotify, they are following flicks in snubbing apple's vision pro. they will not launch the app for apples mixed reality headset. the vision pro available for preorder today, giving apple its first real taste for consumer demand for a device over $3000. scarlet: $3,499. over $3000 does not really tell you how offensive it is. manus: that is another $500 on the price. there is a $500 top appear this takes me back to when you got your first mobile phone. that is so expensive, would i spend that on a mobile phone? but this is about snubbing apple, isn't it? scarlet: this is about snubbing

apple. who is taking part -- disney, peacock, so all the streamers fighting for market share. they bought in. they will launch new apps for the vision pro. what youtube, spotify, netflix say is you can use our service through the safari app on the device. we will not bother coming up with a technology right away. manus: and they go on presale today. 300 to -- scarlet: you wonder if it will be like the apple watch, where there was a lot of fanfare, because with every apple launch, there is a lot of fanfare, and that it takes a slow build to get to some point where there is enough momentum for other people to want to get in on it. manus: geopolitics never far from this show's attention. houthi rebels firing at another

u.s.-owned ship in the red sea. president biden acknowledging u.s. airstrikes have not halted the attacks, saying, "are they stopping the houthis? no. are they going to continue? yes." then we have this statement from the state department -- that is a tacit admission what i am doing is not having major impact. but the difference in verb he has between the u.k. and the u.s. david cameron was in davos saying we want them, we warned them, and finally, we took action. scarlet: the white house, the u.k. between a rock and a hard place. the houthis are incentivized to continue doing this. the white house has now placed the houthis on the global terrorism list to blunt that group's ability to raise funds.

it was president biden who had been them off that list so they could get eight years ago. manus: let's talk about the u.s. economy to lindsey piegza. she joins us now with the latest views on the u.s. i keep getting smacked in the head by retail sales -- jobless claims, the lowest in a couple of years. this is a strong consumer, a strong u.s. economy. is there anything in the soft data, anything out there that says it is not as robust as you all think at the end of this week? lindsey: at this point, the u.s. economy is faring quite well. we continue to see a very resilient consumer, so we expect ruth to remain positive as we look for the out to the new year, but at a slightly reduced pace. certainly from the outsized rise we saw in the third quarter. as we await the final print of

q4, likely half of what we saw in the third quarter before slows further to about a 1.5% -2% growth in the new year. it is clear there is a loss of momentum. there is a sense of fatigue setting in that will keep growth positive but also positive at a slower pace throughout the new year. scarlet: and the consensus estimate right now for the fourth quarter gdp print coming out on the 25th is for 1.9%. that would be a dramatic slowdown from the 4.9% we got in the third quarter. as you wait to hear the earnings comments from the different ceos, i am wondering what you are gleaning from the big tanks in terms of the spending divide -- spending environment, the demand environment? lindsey: when we look at the balance sheet, there is still a lot of borrowing power over --

from the side of the consumer, so i would expect the consumer to continue to support growth going into the new year, this willingness to spend dollars, ramp up that. we have seen the consumer find additional factors to support the loss of earlier physical pandemic support. we have seen it turning to 401(k)s, a hardship withdrawals of double digits. this reliance on generational wealth transfers, and consumers turning to credit card debt, with the outstanding balance pushing over $1.1 trillion at this point. consumers have access to other funds and will continue to spend those funds as long as they are available. scarlet: that is the one consistent thing about the u.s. consumer -- they will continue to spend. how does this affect american consumers' perception of where they see prices? we have university of michigan numbers coming out at 10:00 a.m., and one of the points everyone looks at is the one

year inflation outlook and the 5 and 10 year inflation outlook. it is difficult to figure out what inflation will be this year. lindsey: right now, the consumer is standing relatively firm, because they have access to these additional funds, and they are not necessarily feeling that threat of falling off a cliff. that being said, higher borrowing costs, elevated prices, this is compounding the weight on the average consumer. remember, price pressures are slowly, but nominally, prices are still rising, so consumers are having to shift and make incisions about those purchases on a month to month basis. this is weighing on not only their ability to spend but their willingness to spend as well as their expectations for future prices. manus: and there is a weird bifurcation out there. you speak to the hennessey ceo, they say their is -- there is a

bifurcation in the consumer in terms of the ceos we talked to. we have been told this week very clearly by waller that the cuts will be methodical. and will be cautious. bostic reaffirms that. this is not gfc, this is not pandemic, not taper tantrum land. the cadence of these rate cuts, we really need to recalibrate. do we think we have recalibrated sufficiently, and what speed and scale do you think we will get 2024, 2025? lindsey: i think the market is still ahead of itself. the fed is clear they are willing to have a conversation about rate cuts, but the support or initiating those is not unilateral. it has to come with a prerequisite that inflation continues back down to a sustained 2% level. the data right now does not support that. the notion that the fed would be willing to engage in rate cuts

in the first quarter very much seems unjustified. looking at the data, with ruth accelerating beyond earlier expectations, and as we just talked about, a solid consumer, the expectation for even a second quarter cut may be too early to price in. the fed sitting on the sidelines until the second half of the year, with a very tempered pace of reduction. the market is anticipating 25 basis points a month. i think it will be more about 25 basis points a quarter, keeping us well above mutual as we look out to 2025 and beyond. scarlet: there is also concern inflation will accelerate. given the data we have seen from retail sales, jobless claims, it is clear the u.s. economy continues to be resilient. what part are the market overlooking? mohamed el-erian says -- that

could be another source of inflation? lindsey: goods inflation has come down precipitate was -- precipitously. it is the service side of the equation that continues to be a problem for the fed, particularly when we look at the underlying component of wage inflation or wage pressures. right now, when we look at the unevenness of the data, the painfully slow pace of disinflation for the overall key metrics of inflation, it is not convincing that we are on a sustainable downward trajectory. the fed wants to see more evidence. with a number of risks, including geopolitical risks, shipping costs up to 1%, which could lead to a spike in goods costs, the fed is simply not willing to begin to unwind all of the work they have done to slow inflation prematurely. so the fed will be very patient and likely on the sidelines for significantly longer than the market is anticipating. manus: unfortunate the bond

traders have not acquire that kind of patience and deliberation. lindsey piegza there of stifel with her views on the market. we will talk about jamie dimon's pay rise in a minute. scarlet: dimon got a pay raise a little bit better than inflation. manus: of course it was skewed towards delivering on the incentives. scarlet: deferred compensation, i believe. manus: anybody want a snapshot on risk? there you go. equities, nasdaq higher. risk on for this friday ahead of the university of shaken numbers. coming up, this is bloomberg. ♪ bloomberg's lisa abramowicz with the highlights of the world economic forum. ♪

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manus: bloomberg's lisa

abramowicz has been in davos this week, speaking to the business and political leaders around the world. looks as if you and the team had a mighty week. if i were to say how would you encapsulate that we, what would that be? what would define the week of davos 2024? lisa: i will say the one word that would encapsulate 2024's enthusiasm. incredible as he has him -- enthusiasm and optimism, which sometimes you can say they are talking their book, but this time it felt like their economy was rounding the corner. >> the market may be a little bit ahead of itself. i have no doubt we will get to rate cuts at some point. >> the markets have now priced in what i think are excessive rate cuts in the u.s. >> the market is being aggressive on rate cuts. i believe the fed is going to take it time.

>> six rate cuts, that is a pipe dream if we have a soft landing. >> the market is not calling for a 175 basis point cut by the fed. no way. >> by the end of the year, they will start cutting. >> our core team has four cuts. lisa: this basically comes to the fact that if you have this incredible enthusiasm from all of the witness executives and you end up with a question of why even cut rates, which definitely was one of the big take a week's -- takeaways from davos. there is also the geopolitical overhang, especially with these hordes of police officers and snipers on every rooftop to try to protect these leaders of different countries that are at war with one another. a real hang here with this question of what will have it, to clearly in the middle east among why there has not been a bigger influence on oil prices, how long it will take for we see that.

take a listen. >> in the u.s. is pumping more than 13 million barrels of oil today. do you think that is a policy failure or policy success? >> it is a policy necessity, because you obviously cannot shut down the economies of the world. >> we have not made fundamental changes to how we have been moving ships over the last few weeks. lisa: are you surprised we have not seen any influence on prices whatsoever? >> i actually after that is an important part of the world for oil supply. traditionally, when risks elevate in the middle east, you see it were affected in markets. >> it is absolutely vital we send a clear and unequivocal message to iran -- its behavior is an acceptable. >> 2024 will be about throwing russia from the air, because the one who dominates the air will determine the timeline of the war. lisa: those were some of the takeaways we heard.

honestly, it has been a long week. i think everyone is happy to go home after a week of not a lot of sleep and not a lot of personal time. at the same time, it was productive. it seemed like a lot of things got done. it was not so much highfalutin ideas as, in practice, what can we get done? manus: you have john kerry talking about the necessity of oil production get i listened into your conversation with mike worth -- mike wirth, and he was surprised about the lack of geopolitical pricing that was in the oil price at this time. that is something that goes on and escalates on a daily basis, isn't it? lisa: i completely agree with you. rankly, what mike wirth's point -- frankly, what mike wirth's point was is how much more can the u.s. pump?

how much is there elasticity in terms of compensating for further disruption? how we resolve this is not clear to me. scarlet: especially with the u.s. -- demand looking better than what people anticipated at the end of last year. we know that the chinese premier kind of gave away the china gdp number at davos, saying the economy grew at two point 5%. there are a lot of negative headlines when it comes to the chinese economy overall, moody's downgrading some banks -- to what extent are people talking about china the way they once did? or have markets kind of decoupled themselves from what happens in china? lisa: that is a great question, because i would not say they have decoupled. it is the understanding that it will be difficult, and the businesses that need to do business in china will keep doing business in china.

qualcomm's ceo survey continue -- will continue working with them. on the flipside, what was interesting was china sent their biggest delegation here since 2017. officials met with a whole host of business leaders to try to basically convince them it was safe to come back and invest in china. but there was resignation and most people that the tensions between the u.s. and china are not going to go away, that you will have a problem going forward in terms of ongoing divisions. trip.com's ceo came on with us. it was interesting about how she said travel is picking up and there is the appetite among the chinese to come to the united states, but they cannot because of the visa issue. they are not able to get visas. there is a talking of a book that i think we have to understand. at the same time, it was interesting to feel the tension of china present here but understanding things have changed. scarlet: and i am glad you bring

up the missing chinese tourist, because today's big take on the -- folks should check on the terminal. one thing you mentioned about rising u.s.-china tensions as it has been consistent from president trump's demonstration through president biden's administration, and whatever happens in november, it will continue to be a theme. what are people saying when it comes to the possibility of trump 2.0? lisa: we asked a lot of people about this. it ranged from a real sense of resignation to frustration to anger. -- with respect to the nato spending and european countries pulling their own weight. the real take away the idea of the policies on trade under trump are not as fun as they are

under biden. the big change with trump 2.0 is the uncertainty factor, because, frankly, that is the hallmark of donald trump. it is the unpredictability. manus: i think the me for your medic affect those to christine lagarde, when she was asked what do you think in terms of trump coming back to power, and she just paused -- "i will have some coffee." scarlet: i would give her the me for that -- the emmy for that. manus: and she said the best defense is a form of attack and pushing the strengthening of the european union by creating a single market. we do not know who will be on the ticket, who will be in the white house, but one thing for sure is we have two hot wars.

we have hamas-israel and we have ukraine. the ukrainian foreign minister was with you. i thought it was pesci and when he said it was not that they do not want to give us the money, it is domestic issues are a higher priority. this is a critical issue. did it rate at davos this year? lindsey: it is a good question. ukraine certainly not as present as it was last year. last year, it was front and center. this year, it was sort of the drumbeat underneath as another one of the hot wars. i think people perhaps have moved on a little more then ukrainians would like. but president zelenskyy was here, meeting with business leaders, shaking the hands of jamie dimon, shaking the hands of all the different executives. as the foreign minister, what do you want? there is this feeling, and i will say, and this is just in

anecdotal conversations business executives in private conversations -- there is a feeling officials are going to business executives for advice for the first time. they want to understand what the business escape is trying to get, to be confident. there is a sense of we do not know what to do among public officials. to me, that was a noteworthy revelation at a time of so much uncertainty. manus: it is an interesting moment when you have foreign minister's sitting down with jamie dimon, looking for advice when political leaders are perhaps less present. great coverage, you, the team in davos. this is bloomberg. ♪

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>> this is "bloomberg surveillance" with jonathan ferro, tom keene, and lisa abramowicz. scarlet: good morning. this it is manus and myself we have plenty of news. we know the doj blocked the merger deal and spirit airlines is having some headlines about assessing options. we knew this was an issue but more relevant to the jetblue merger is spirit airlines is still saying the merger agreement remains in force.

they have given a preannouncement of their earnings for the fourth quarter, operating revenue 1.32 billion dollars, higher than the consensus. but spirit still believes jetblue combination is the best opportunity out there. moving higher in premarket trading, of 12% for the week. jetblue meantime this week up 3%, so you know shareholders are relieved that merger is not going forward. manus: one man's pain is another man's gain. if jetblue -- if spirit have those issues, that has inherent risk. some context around the debt profile within spirit. my understanding is this. you have debt coming due in

september 2025. i found a fact. that's the one line of debt coming to maturity in september 2025. in the broader context of what is the debt pile for spirit, citibank's note gave me this data. they said the debt sheet has risen from $3.3 billion to $5.5 billion. that's the weight of debt that needs to be resolved. they have modified the revolving credit line in november. we need more detail on that. will your credit lines help you through? what do you pay to refinance and will you make it through? it is not just spirit that will face this. scarlet: spirit is facing this first. the big issue is that a lot of analysts anticipated, if the deal did not go through, it would have no choice but to file for bankruptcy protection. spirit have 1.3 billion dollars

of liquidity as of the end of december last year and it's taken several steps to shore up its liquidity during the fourth quarter. we will keep you posted. jetblue has not made a comment and we will bring it to you when that happens. if we broaden our look at what's going on in the financial markets, u.s. stocks are set to move higher or open higher and the nasdaq continues to lead the way. manus: so much for the death of max seven. so much for breadth/ that's two weeks ago. scarlet: the markets have a short-term memory. manus: tech is on fire. carol: it is. what is not on fires the pound, lower by .2%. we did get a retail sales report that was disappointing. it was the worst in almost three years and does increase the risk of recession but the flipside is that the dollar is in

resurgence. the bloomberg dollar index up to percent -- up 2%. manus: moving the dollar higher. it depends on how you write the story. one week we are writing a story that is risk off. the following week it is risk on and yields backup. either way, up 1%. that king dollar narrative remains very much intact. it's strong, up 1% on the week. what would you want is a perfect hedge? i don't know. do you want the dollar? the yen is not doing the job as a backstop. scarlet: if you look at oil prices, they are holding year a three week high, wti approaching $75, brent $80. keep an eye on developments in the red sea. the u.s. in the houthis trading strikes.

joining us, margaret patel of all spring. for years, you are known as a bonds expert and of course you still are. no one ever stops. most of your assets that you manage now are equities. 75% to be exact. i am curious to get your take as a former bar in person are the bond and equity market looking at the data and what the fed does next in different ways? margaret: i think the equity market is looking at the strength of earnings. that is number one. and rates are so low across the board, i would say it's almost irrelevant for corporate planning, and many corporations raised so much money. what the fed does is irrelevant to their operating. so we think there's a disconnect. scarlet: equity investors can key off earnings and whatever optimistic comments the ceos are

making while bond investors are obsessed with what the fed does next and how it is signaling what is next. what is your thinking in terms of rate cuts? are you on the first half bandwagon, the second half? margaret: i think the fed is searching for relevance to show it has the ability to affect the economy and financial markets, which it has not much since they started to raise rates. we will see rate cuts, maybe one or two come in the second half. i don't see any reason to expect them in the first half. if they don't act by summer, they will be in a holding pattern until after the election. manus: good morning. lovely to meet you. you talk about you are not too stressed about whether there's material rate cuts for the corporate balance sheets, but to what extent does the consumer, the average person, need to see rate cuts to underpin our confidence to spend? we have got jobs and are being

paid but what material difference will those rate cuts make to the consumer equity side of the trade? margie: i think very little, because we have had the fed raise rates at historically -- rates faster than they ever did historically. what's more important for the consumer is what are their real wages and it looks as if they are more or less keeping pace with the stated inflation level. the top 60% of consumers still have some liquidity. they don't need to borrow. it is the lower tier that are hurt and they are a smaller percent of the whole economy so consumers look decent to me. manus: with that in mind, certain parts of the market, there's the narrative you want to go for breadth. so some of these consensus phrases we use all the time are being beaten back.

when you look at the earnings sheet, where am i going to see the strongest earnings growth? margie: i think the trends we saw last year are still going to be in place. that says to me we will see a small number of leaders in the marketplace, as last year. i think tech will have relative strength to other sectors. economic growth will be more or less modest so we think tech will be well. certain industrials that have a lot of capital expenditure attachments. and maybe even health care might be near turning around and doing better in the second half of the year. manus: so tell me, then, when you see big notes come on against big names like apple, and they have issues around some software, etc., when you see significant repricing in any of those really high end seven, do

you see that as a reentry point? is it a buy the dip mentality will adopt when you see moments appear in the mag seven? margie: i think we may see those magnificent seven go there and way, and again, the reason -- go their own way, and again, the reason is they have had better growth. we may see them not really part of the group because they don't have the growth the other six still have. so i think it will be fundamentals whether they maintain the lead. scarlet: it will be fundamentally driven, which brings us to the tech earnings. we will hear from netflix. even though their business model is different from their other that from the other mag seven companies, it -- from the other mag seven companies, it sets the tone. will we get another year of the

theme of efficiency from the tech companies? margie: i still think they will be one of the fastest growing sectors and i think it is simply because these big moves, artificial intelligence, the cloud, will still be in place and that will keep companies having above average growth rates compared to other sectors. it's not what a lot of people would like to see so i think this broadening will be limited, just as it was last year. scarlet: we are talking about workforce consolidation. wayfair has announced a workforce realignment plan. there's a buzz word. it will lay out percent of its workforce -- layoff 13% of its workforce with an annualized cost savings of more than $280 million. wayfair shares moving up in the premarket by 11%. i want to come to you on dealmaking.

lisa abramowicz on -- and the surveillance team have been in davos. there's been talk about lubricant for m&a this year and optimism about that happening. we got news from spirit airlines saying the jetblue merger agreement remains in effect even after the doj blocked it and how this creates a conundrum for these second-tier airlines on how they move forward when they don't have the scale or balance sheet to necessarily do that in the face of a government that does not want to reduce competition. what does a second-tier company like spirit airlines do? how are you thinking through m&a in 2024 when there's so much government pushback? yet you had the tailwind of lower rates. margie: i think looking at m&a, what you often see is the best companies are required.

smaller or specialty companies are required by larger companies. typically we don't see the weaker companies being acquired. that agrees with the kind of thing you see in private equity, where they look at the spread and cash flow. they will have a better bid then companies looking for a strategic addition to their earnings. manus: appreciate your joining us, margaret patel of all spring global investments. scarlet: i look at the spirit airlines and jetblue airways merger that is still on according to spirit. interesting development given the hard opposition from u.s. regulators and a court decision. manus: and they say there's a line that the merger remains in effect even though you have had that judgment against it. we have seen jetblue open up 1%. this will be a tussle through the morning. can they refinance, how much will they refinance, and what will the demand be for the debt?

this was something we talked about in october and november, the wall of maturity, which never came to pass. you heard from margaret talking about a lot of corporate's. a lot of people have refinanced. scarlet: but all the people with their below 3% mortgages. manus: have you got one? are you going to turn me green with envy? scarlet: i do but i am locked into it. manus: in the u.k., i have a mortgage at libor -- that's a thing you all remember. never in the history of money will you get a mortgage like that. i cannot say what institution sold it to me. scarlet: more coming up. maya macguineas from the committee for a responsible federal budget is next. this is surveillance on bloomberg. ♪

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>> ukraine does not steal any money from the american taxpayers. it is to say the least a little part of the overall defense spending. moreover, a vast amount of this money stays in the u.s. because it's invested in the production of weapons that go to them to ukraine. it needs to be explained to american taxpayers that they benefit from it, that new jobs are created. scarlet: that was the ukraine foreign minister. ukraine officials in davos

making their appeal to u.s. leaders and u.s. taxpayers to send some aid their way. when we take a look at what's going on in the markets, it's been a while since the war has affected markets. what is affecting markets for crude oil -- and he would be surprised that it is not doing it more -- are the missile strikes in the red sea. manus: it's about the oversupply. the exports from russia are on the rise. the demand level is firm but the supply level, you heard the conversation with john kerry. 13 million barrels a day. but in terms of total production, it's over 21 million barrels, gas, oil and all completo together -- all comp elated together. the quantum from this country is in many ways what's creating that. russia is part of opec-plus and there pumping a lot -- exporting a lot. scarlet: and of course demand

has not been as strong as you might have expected from the likes of china, which would tend to absorb that extra supply, but that is not happening with that economy struggling at this point. when it comes to futures, gains for u.s. stocks heading into the open. the 10-year yield not doing a lot now, but it's had a pretty big week. you talk about a 21 basis for the 10-year yield. no change. manus: short end of the curve, 20 basis points. the question now is if this u.s. economy is robust, firing on many cylinders, the consumer is strong and healthy, this is the point -- scarlet: you are not part of it? manus: i am. multi-faith in the retail. they say the markets of overpriced the speed and depth of fed cuts and he would not be

his prized if they -- not be surprised if they only start in the summer. scarlet: markets have been pricing in from five to six cuts for a while now where the fed itself sees more like three. let's bring in maya macguineas. we did have congress actually get to work and do something. they have managed to avoid a shutdown. they have passed some bills president biden will have to sign that will let us stay funded through march 1 or march 8. does congress get anything done between now and then other than negotiating the same things they cannot agree on? maya: the starting point is good news, we are not shut down, but no one would make the case that washington is functioning by any account. between this continuing resolution and the previous one, basically no real progress was made on passing appropriations bills, things that fund the

government that should have been done by the end of the fiscal year. and there's no reason to think there will be massive progress over the next six weeks. i hope there will be but there could have been for the past six weeks so the concern is if we are limping along from one almost crisis to the next, when does everyone settle in and do the work of funding or re-appropriating or more broadly creating the budgets that guide the government? last year, the senate budget committee did not even bother to suggest a budget. it's as though this is all pretend at this point. there's clearly the need for a big overhaul in how we budget. scarlet: absolutely. the concern now and maybe not even a concern but reality is that we will lurch from short-term spending bill to short-term spending bill creating this nonstop cycle and we cannot plan for anything, let alone something like figuring out aid to ukraine for israel. maya: lurching is the word of

what is going on. the question is politically how will this affect things. who will vote for speaker? but there'sfor focus on strategically what we should be doing -- but there's no space for focus on strategically what we should be doing. it's an important document. so much is going on in the world. the geopolitical situation has changed. social security and medicare are heading toward insolvency. if ever there were a moment to say what are our priorities and how we ought to fund them, that would be where we are now, but instead, it is that lurching, and if we end up funding the government at a flat level or a small cut, none of the decisions about what makes sense to fund and what we should get rid of will have an address, and all of this with the backdrop that

this budget we don't have focuses on just one third of the government. two our automatic pilot programs that are getting no attention as well. so while we had these huge issues of the supplementals, ukraine, israel, we need to think what are our priorities? this will be our going. how will we handle it? manus: for an irishman transplanted from the middle east that grew up in the united kingdom, your politics makes the brits look like a walk in the park. i have to hand it to you. i don't get to vote and a lot of our viewers will be happy to know that. what goes through my mind is what gets washington to wake up and actually realize you are living on, as the french finance minister said? the u.s. has an exorbitant privilege so what gets washington to wake up? do you need a downgrade, a buyers strike? what is it that gets politics to wake up and go, actually, we

have got to run a country? maya: one of the quotes i mostly advise from our co-chair, leon panetta, who has said fiscal change will have to happen. it will either come from leadership or crisis. i have always believed it will be from leadership and i'm starting to believe it will be from crisis, that nothing else will cause us to act. the question is, what crisis will that be? the downgrades should have been wake up calls. there are now many policy problems that we know we need to address whether it's social security or the border. take your pick. and yet you have politicians from both parties making the case don't solve these issues, even if there's a possible compromise to be had, because we want them to fight politically. i say this as an independent but when you have two parties more intent on killing each other than running the country you have problems on killing each

other than running the country you have problems. i think you are stuck there with huge levels of polarization. scarlet: so a bipartisan tax deal is a pipe dream at this point? maya: i think there's a chance it will move forward. there's been a lot of good work done on it. when i look at it from the perspective of a fiscal hawk, it's intended to be offset. it gets a lot of credit for that. the policies are temporary and that makes no sense. it creates cliffs. still very expensive over time and not fully paid for but the attempt to pay for it is important incredible. i will say i don't think we should have big tax cuts on the table until we have passed a budget and figured out how to deal with the overall debt situation, because those pay fors might be better used to get our debt on a sustainable trajectory. i think there is a chance that this bipartisan tax cut will move forward. scarlet: it is an election year so there's that to keep in

mind. maya macguineas of the committee for a responsible budget, thank you. forget about the long-term plans, the sequencing. manus: they don't have the capacity to think long-term. scarlet: now. it is a two year increments, especially in the house. manus: the deficit at the moment, $510 billion. 21 percent of that is interest. scarlet: it's only gone up. speaking of interest, we will speak with anthony crescenzi. this is surveillance on bloomberg. ♪

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good morning. this is bloomberg surveillance. team surveillance is in davos attending the world economic forum. taking a look at futures indicating a higher open for u.s. stocks in two hours. s&p futures up .4%. nasdaq 100 made a record high yesterday and is leading the way among the futures indices up two thirds of 1%. the laggard continues to be the russell 2000, higher by .2%, but

what happened to the whole market breadth will come back in 2024? manus: everyone got off that bus and just said -- there's a couple phrases i have learned on this show. one is weaponized fomo. one is jomo, the joy of missing out. what we have now is weaponized fomo. breadth was the narrative for the first couple weeks of the year and everyone went on not on this bus. scarlet: let me get back on the maga bus -- sorry, the mag seven bus. manus: you cannot go wrong. scarlet: how are bonds looking? manus: waller and bostic saying back it up, boys and girls, you have gotten far too presumptuous. higher by 21 basis points. there is this building narrative of soft landing, strong consumer, strong u.s. economy.

why is the yield curve not flipping from inversion to something more stable? we can debate that with our pimco guest. this was a virulent week for bonds. we will go along. rlet: no economic data at 8:30 a.m. this morning. we don't get it until 10 a.m. after the market opens. oil climbing from a three week high. escalating tensions in the middle east continue to keep us on notice. under surveillance this morning, the ceo of jp morgan, jamie dimon, getting a pay raise is the bank posts the highest annual profit in the history of american banking. according to regulatory findings -- filings, he was paid. that's a 4.3% increase. you can compare that to your own salary increase he may have gotten or not. manus: have you filled in your e

val yet? there's a bloomberg evaluation period. 4.3 percent sounds reasonable in the inflationary environment but it's about delivery. they put in $49.6 billion last year. there was something for everybody. mary erdos got $27 million, the global head of wealth management, so it was not just for the dom -- the don juan of wall street. scarlet: in coming days, we will hear from -- look at filings of how the other banks are paying their ceos and we will bring that when it comes. one thing when it comes to jamie dimon in any conversation is what will happen next? he's been atop the jp morgan management chain for 18 years now. he has the longest tenure of any big bang ceo. is he going to see -- going

to step down anytime soon? when asked, he says asked me in five years. manus: he swerved a question elegantly. you look at the comeback of sergio at ubs. there is an enduring sense of, i suppose, support, when you see the figurehead at the top of these banks, brian moynihan, jamie dimon, you know and understand what it is there policies are, one being a real determination on return on dividends. we will review those numbers at ubs in 10 days. good morning, sergio. scarlet: let's move from the big banks to the retailers because macy's is cutting staff and closing stores. the chain says about 2300 employees will be let go, mostly in corporate roles.

five stores will be shut down. the moves will help it become a more streamlined company. we also know that in terms of timing, this comes as the firms have made a $5.8 billion offer to take it private, and there will be management change at macy's, because the ceo is retiring in february and making way for the president to succeed him. manus: this is about structure change. we have talked about it at nausea and for the past five or 10 years in the ever escalating onslaught of amazon in your life and other delivery mechanisms for shopping. that's only in its infancy so this is more about how do we actually transact and buy and do you want that level of real estate? this goes back to a broader conversation about commercial real estate, not just retail but on the u.s. and global basis. scarlet: you have gone to the

bloomingdale's next door to the bloomberg office. manus: i am a keen shopper there. scarlet: that is some prime real estate in midtown east. our final story we are focusing on is congress averting a partial government shutdown set for this weekend with both chambers passing a short-term spending bill yesterday that pushes new deadlines to march 1 and march 8. we get a reprieve but not for very long. president biden expected to sign the legislation, which, interestingly enough, in the house, nearly half of the republicans opposed. manus: the question is mike johnson -- i think we had a conversation earlier in terms of he's himself on -- he has put himself on a sticky wicket because he has acquiesced to a temporary extension. scarlet: i am still stuck on sticky wicket. what is that? manus: for an irishman talking about cricket terminology, it's always dangerous.

a sticky wicket is where the wicket sits on top of the stumps. you have to help me know. >> i know everything about it. manus: it just wobbles but doesn't fall. they can send in a correction on that. thank you. scarlet: we were talking to tony crescenzi, who has been sitting by patiently, pimco portfolio manager and member of the firm's committee. does the move by congress to actually pass a short-term spending bill over -- bill and avert a shutdown do anything to the market? tony: the market had little expectation anything would change regarding the trajectory for u.s. debt. it has not changed in a number of years. i would say, though, that in 2025, we may begin to see what you could call a read my lips moment. read my lips for the george bush

presidential candidate in 1988. what her speed -- what the speechwriter said was the best line of the convention. read my lips, no new taxes. he ended up breaking that pledge because interest payments on u.s. debt had grown substantially. that's a level that has not been breached since. today it's about 2.5%. it's been up because of high indebtedness and interest rates. it will breach the george bush number in a few years. interest payments will be over $1 trillion, more than defense spending. then the bond market and investors in the public will begin to say what is happening here? we cannot take much more debt. just like in the u.k. one point five years ago when prime minister trust was pressured out because she had a death proposal the market projected -- prime minister truss was pressured out because she had a debt

proposal the market rejected. the way it would likely play out, as it did under the truss government, is the bond market would react to proposals to raise indebtedness further in a very negative way, meaning interest rates would rise, but that raise would stop the legislative process in his tracks and prevent the indebtedness from worsening, so i would not worry about it too much but would expect some volatility if there are proposals to raise indebtedness more, because think about it. we are reaching certain endpoints. we will call it a keynesian endpoint. manus: i love that. the keynesian endpoint. where do we get to in that? tony: it's a practical limit. we had spending during the pandemic and inflation. the bond market would be safe stable that would be self

stabilizing -- the bond market would be self stabilizing. scarlet: they are just quiet now. tony: because this is an election year and nothing will happen. scarlet: this is an election year. well happen on the fed front -- what will happen on the fed front? because if they move too close to november, they will be accused of trying to influence the election. so they are bending and had --so markets are betting it has to start in the first half. tony: the trajectory that the market thinks is sooner and deeper.

what greenspan defined it as that. we may not get to 2.0%. we will get to two point something. but the fed is not there yet. it has to be cautious about acting too soon. a key lesson of history is to keep at it, as paul volcker said, until the job is done. manus: we have recency bias. we will not have a cutting cycle we had in gfc, the pandemic, taper tantrum and others. you say there are three d's, don't try and time the bond market, don't catch a falling knife, but do catch today's

youth. this is rich enough for you? tony: timing moves in interest rates in terms of picking yields is -- picking the top in yields is difficult. some investors are probably thinking maybe i wait longer to go back to 5%, but that timely decision, many investors are historically poor at it. maybe you are worried about catching a falling knife, falling bond prices. watch your scaling but catch these yields while you can because look at the aggregate. 40% say -- by the way, it is like the s&p of bonds -- 4.75%. in the last 20 years, it was 3.25%. you are getting yields above each of those long averages so

relative to history and expected inflation in the two's, expected volatility, the aggregate tends to move. the bond market will say no to inflation, etc., and the fed will get the job done. don't fight the fed. believe in its ability to foster price stability. it will give you confidence in owning bonds today. and again, this is a good time to be investing in fixed income. scarlet: tony crescenzi, with the three dos an do not dos, thank you. fortis cutting its lighting production -- ford cutting its lightning production. about 1400 employees will be impacted.

it sees growth in 2024 of sales not surprisingly given the headlines here less than anticipated. manus: this is actually a much bigger and broader conversation then the idiosyncrasies of ford. this is about global demand for ev's. tesla has had problems. they have been consistently cutting prices in china. this is about the whole philosophy of transition and that is being challenged. i don't know enough about the f-150 except they are big. scarlet: it's a short-term pain point for all these automakers. tony: i will have a cyber truck within two months. scarlet: send us pictures. we will soon speak with mandeep singh.

>> google, facebook, they all

want programming for people to watch content. some content is more valuable so they are fighting over that. you will see consolidation because it's inefficient to have multiple software systems so you will see a reebonz laying but -- see a rebundling. scarlet: that was steve talking about consolidation in the streaming space. it has yet to happen despite paramount's best efforts to put itself on the sales block. no one has emerged. maybe it's more of a price discovery effort. we will continue to watch for any kind of dealmaking in that space but what we want to talk about now is the apple vision pro, the headset thing they debuted a few months ago where it looks like expensive ski goggles, $3500.

manus: this is about transporting you into alternative universes. scarlet: good marketing.transporting . manus: i will come back as a marketing guru at apple. this is about transporting you into another world and time. it's about maybe having an experience -- may be experiencing all forms of media going forward. it's up a double nickel just before the bell. today is the first day you will be able to order. how many will sell? let's see. scarlet: preorders begin today and the device launches february 2. let's bring a million deep saying -- bring in mandeep singh. youtube and spotify have declined to launch a new app for the operating system of this device. why is this? do they want to be convinced this is viable? mandeep: yes and these companies have the engagement now.

if you look at where people consume netflix, spotify and youtube, it's on pc's and their smartphones and they have those billions of hours of engagement. why would they want to cannibalize that with a new device that potentially could work but what are they going to get out of it? apple is not paying for content here so there's no incentive for netflix, which does not let you even sign up on a mobile smartphone, because apple takes 30%. they were going through that drama with the epic systems case. so clearly it's a very low in terms of making this successful. manus: the lack of youtube, spotify, the lack of netflix plug-ins, can it materially hit the demand outlook? what are they penciling in for this product? mandeep: with any new apple device, you know there will be diehard fans that will buy the product. i would not be surprised if it

gets sold out in terms of preorders in the first week it sells, but the question is is this a niche category or a broad variables market like airpods? on that front, i think headset computing, in itself, is a niche category. meta has spent $15 billion since 2013 and generated $5 billion in revenue. scarlet: talking about oculus. mandeep: oculus and what they have done with reality labs. manus: why does it -- i'm not going to say not work -- why is it not taking off? is it generational, price point? what is it that's causing is not to want to sort of legally get away from it all? mandeep: they have tried at the low end. meta's lowest-priced device is around $400 so they are looking for mass adoption but i think

it's a niche category. manus: there must be a difference in quality. mandeep: meta is going for quality here with all the bells and whistles. they want to make sure you have a good experience when you put the headset on, all the processing power you need within the headset. i still believe headset computing is a niche category, like consoles. why do you want headset computing in everything? scarlet: but if anyone can make it something big and desirable, it would be apple, because it's been able to launch these product categories in the way others have not. mandeep: the apple watch gotten traction for good reason, because they combine a lot of things people want to use when you think about fitness, but it's taken nine generations of watches to get to that. it will be a grind even with headset computing and take multiple versions. still, i don't think that's a

mass category, and that's the fundamental thing people are trying to figure out. is it like pc's and mobile phones or a niche category? scarlet: does it represent a push again to keep refreshing apple's hardware line? we know services is something and has been focused on, higher-margin and recurring revenue always preferable to the blips new product launches create. you look at the stock for apple this year, down 2%, trailing the other magnificent seven companies, and it's lost the market cap leadership title to microsoft. what does apple need to do when it comes to the vision pro to change the narrative on it products? mandeep: from a device category perspective, it's great they are adding another line, whether it's a niche category or big category. time will tell. they are trailing when it comes to the ai front. that's where microsoft has taken

the lead and for good reason. it's probably two to three years ahead of everyone else right now in terms of their openai partnership, what they have done in terms of copilot launches, and that is where apple needs to catch up because they don't have a generative ai strategy. manus: it's interesting how the momentum for generative ai will be the fundamental differentiator even within mac seven. i want to talk about apple finance. it wants to open up to its rivals to get past the european commission. they have offered a 10 year to other providers for the mobile wallet. how big will apple pay be as we go forward? we have all the issues within apple but ultimately it's about transactions and banking and money, isn't it? that's where the alpha can be. mandeep: vertical integration always works when the experience

is seamless and what apple pay is doing to make that seamless but they are getting a lot of resistance from the ecosystem and the regulators. 27% to 30%, that's what everyone is -- it is sort of revolting now. there will be fee compression and that is where you will see -- scarlet: at some point, it will happen. i'm looking at the magnificent seven and how it's done so far this year, up 1.8%. nvidia far and away the best performer. chipmakers got another lift this week with tsmc's projection of growth in 2024. how does this change the narrative on a sector that's kind of trailed everything else within the tech world? mandeep: i think when it comes to hardware refreshes, everyone is waiting for that ai, pc and ai based refresh cycle. everything has been data center

driven and that will persist but i think the bar is higher that the room for positive surprises will be much lower this year than last year. scarlet: tsmc continuing to gain in trading. manus: there's asml. the one thing that europe does not have, the technology you have here in the u.s., the apple in the microsoft, but has the chips and the gear makers for the chips. apple is a premarket. amd up 1.6%. scarlet: amd is seen as the second best option after nvidia because whatever nvidia cannot fulfill because it does not have the capacity ghosted amd -- capacity ghosted amd. mandeep: that sort of demand.

even if they are a distant second, that's good enough to drive that kind of sentiment, but i still think the bar is much higher to drive those positive surprises, and that is what will probably restrict how much optimism we can have around the sector this year. scarlet: amd up 10% this year so far. manus: i made a mistake. magnificent seven levels. intel up 1% before the bell as well. they had a price rise from raymond apple had three downgrades and only one upgrade. scarlet: maybe things will change with the vision pro. preorder it now, available july 11. $3500 you will spring for me? manus: for you? mandeep: he is one of those diehard apple fans. manus: i'm trapped in an ecosystem i cannot escape. scarlet: and he's willing to spend to continue to stay in it. mandeep singh, bloomberg's

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>> as the consumer demand stayed strong, you would start to see more normal cadence two things.

>> with thanks earnings are growing. >> overall, tech has slowed but it's incredibly strong and one of the fastest driving sectors. >> we see a great deal of concern of what's coming and that will introduce volatility. i think that will continue in 2024. >> we are in a great euro where the disruptors come in and life may change. >> this is bloomberg surveillance. ♪ manus: good morning, this is bloomberg surveillance. scarlet: we are -- we came in on the bloomberg private jet. manus: they've had a great weekend davos and great team coverage. global coverage in davos but to

this morning, what have we got? equity markets can survive the momentum they have on the way up in the face of a spike of 20 basis points at the short end of the curve by readjusting your view on where u.s. rates go. that's on twos and tens and technology takes a record high. so much for growth being busted. scarlet: we talked to different people about this and whether the bond market is seeing something different than the stock market. the stock market has earnings to distract itself with. it has earnings to key off of an earnings from tsmc revived the chip sector and gave those big tech names a big boost and we saw that yesterday in u.s. trading. we saw that in asia and european trading and making it back to u.s. trading once again with nasdaq futures leading the way. manus: we look at bank of america and they tell us technology stock funds took in

$4 billion. you also saw a net outflow of u.s. stocks but technology is still the destination. if you're going to have an extension on the rate cuts until this summer, scarlet: close to the election. manus: what does that do to the water -- broader component of value? that's an international debate. tech is flying high. in terms of a quick snapshot for risk, we've got dollar resplendent this week. scarlet: resplendent, i like that. manus: a magnificent moment for the magnificent dollar. whoever said we could not do alliteration on this show. euro-dollar is flat at the

moment. yields will level out with we had a infant -- a pimco conversation and he likes the idea of buying in here. don't wait for the 5% and oil is dying one third of 1% despite flashpoints in the red sea. scarlet: because we are pumping plenty of oil. russia is supporting a lot of that. the world is awash in oil. manus: we used to make a mistake putting in order into bite dollar-yen or whatever else. double nickel, i want to buy 55. maybe it's an irish thing. scarlet: i will incorporate that into my daily speech. manus: you learn things on this show when the others are away. scarlet: i'm learning so much. manus: let's get to david left

of it, head of u.s. equities at ubs global equities. good to see you this morning. we are waxing lyrical about the robust equity market with record high for the nasdaq and yet yields are spiking 20 basis points. can you join the dots for me there? >> happy to do that, thanks for having me. as you guys were discussing, i think it's about earnings. if you look at the earnings picture, we are seeing what we think is a pretty nice re-acceleration in earnings growth. at this point, it's more concentrated in the magnificent seven then some of the other technology parts of the market but over the course of this year, that will broaden out and start to benefit more parts of the market. for tech, profits are up like 50% and we expect them around 50% in the fourth quarter so we are seeing some impressive earnings growth.

i think you have to keep that in mind when considering what's happening with other macro variables like interest rates and things like that. i would say it's all about earnings at the moment. manus: when it comes to the earnings multiple, what kind of propulsion will we see? i'm interested in the likes of mag seven. they don't need three or four or five rate cuts to continue this equity momentum. that was the conversation with deutsche bank yesterday. without any rate cuts, that's a heck of a call. earnings growth and your call off the six rate cuts? >> i think the important thing is wise is the fed cutting rates? if the fed is not cutting rates because the economy remains strong, i think the u.s. equity market will be pretty much fine with that.

if the fed is cutting rates because the economy is weak, that's another story. i wouldn't get too bogged down on the precise level of interest rate cuts that are being priced into the futures market and expected by equity investors. it comes down to will the earnings acceleration come through that the market is mostly expecting? we think it will. if fed rate cuts would help, if it's a scenario where growth is still good and that's why they are not cutting rates, then i don't think that's too much of a downside risk. scarlet: u.s. stock market can look past the delay of the rate cut as long as four a good reason like the economy is holding up and we don't need it and inflation is still coming down but not where the fed needs to move. let me bring in the corporate news we got at the end of the last hour which is ford cutting

its f-150 production. ford is not the only one. we've heard from hurts selling down the tesla's in its fleet. these ev predictions that people have been banking on are not really coming to fruition now. how does this change the consumer sector from where you sit? >> we are neutral on consumer discretionary. that's where the auto manufacturers live. i think it's pretty clear there's been some slow down in ev adoption. there's been some of the low hanging fruit that's been picked by some of the oem's and were getting into a part of the market where we may take more effort to penetrate the market. i don't think this is a broader read on the health of the consumer. we just heard from a lot of the banks. the main messages that consumer

spending is very steady in terms of growth. we are also hearing some of the retailers in terms of how the holiday season went. what's happening in ev's is specific to them and that has implications for how you allocate to that sector. i don't think this is a broader read on the health of the consumer. scarlet: there is also a readthrough for the supply chain for those ev's. it's not just in the u.s. but elsewhere. another headline we broke earlier this morning's spirit bear which is surging after reaffirming its support for the merger with jetblue even though the doj blocked it. how are you thinking about consolidation in 2024 when there is a lot of enthusiasm for dealmaking given the expectations of lower interest rates even as government regulators push back on any -- on combinations that might

reduce competition? >> all capital market activity, whether it be fundraising for m&a, it tends to be pretty procyclical. when the economy is doing well and when the markets are doing well, that's when you tend to see a pickup in activity. if you listen to the investment banks, some of which have just reported, they talk about very robust deal pipelines and a pickup in conversations, if we stick this soft landing and investors and corporate management team start to have confidence that they don't have to constantly be worried about the recession that's coming, and i think you will see some deployment in capital and raising of capital. i think it's a natural progression. we went through a tough time in 2022 and last year was a bit of

a rebound and i think you will see that extend. scarlet: it's not just in the u.s., the eu, the antitrust regulator blocking amazon's proposed acquisition of irobot. manus: regulation will come at everybody in every direction. in terms of getting your sense of the theme we've touched on but i'm looking at that ubs note. lower interest rates will reduce returns and increase the reinvestment risk or cash and money market investors. if we are going to push later and less rate cuts, is that $6 trillion that's in money market funds, will that be slower to release? will that materially impact the momentum in these markets or can we power ahead even with the flow of money in money market

funds? >> i think there is a number of different buyers for equities whether it what's coming from money market funds or whether it's corporate buybacks. broader institutional investors as well. when it comes to the equity market specifically, i think the equity investors have a specific set of expectations. there is an expectation we will see a resilient economy with resilient consumer spending and a pickup and earnings growth. that comes through, then markets can grind higher. our price target on the s&p 500 is 5000 for the end of this year. it's not a lot higher than where we currently are so a lot of this soft landing narrative, a lot of it is priced into markets at these levels and there might be better entry points at some point in the coming weeks and months. at the end of the day, if the economy delivers and earnings deliver, markets can move

higher. scarlet: is now a good entry point for small caps? the russell seems to be moving momentum to the big stocks? >> i think small caps look interesting. it's the cheapest soft landing play of any major sub asset class or segment of the equity market. it's trading at a deep discount not only to its own history in terms of valuation multiples but a very steep discount to large caps. it should benefit from a couple of different things. we will see a pickup of earnings this year. that should be a clear benefit for small caps. small-cap earnings will probably out probe large-cap this year. a lot of the small-cap debt is floating-rate. to the extent we get rate cuts from the fed, that will have an immediate positive impact on balance sheets.

it tends to be very correlated with ism manufacturing index. we think it's likely the ism manufacturing index which is in below 50 for a long time starts to improve this year. i think there is a number of reasons to think the risk reward looks interesting for small caps. manus: maybe the battle between growth to value needs a little bit more nuance. thank you very much for giving us that additional nuance. our guest this morning, we've got spirit assessing the debt refinancing and are taking several steps to shore up liquidity in the stock flies hi, up 27 -- up 28% this morning. scarlet: we will talk about the actual earnings that come out later on. ♪

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>> from a banking perspective, treasuries are starting quite well. >> we feel strong in 2024. those investments will deliver forest but the directional trough is the same. customers are still there. >> the rate environment is uncertain. >> the rules are on capital. it doesn't seem to make sense. >> they are regulating the wrong place. they are looking to over regulate banks. >> it will be an up year but more than anything else, we got

to be resilient. we've got to be prepared to react to news. >> the banking activity we have known with real cost to capital and traditional corporate finance will not come back. >> small to midsize banks have several risks at this point in time. >> today, the regional banks are stronger. manus: the banking leaders of the world sounding optimistic in davos this week. as are the markets as yields rise and equities have risen in tandem. can that endure. the s&p 500 is up 0.6%. the leaders are in tech, amd and nvidia both flying higher this morning. it's about the chips is day two of that solid growth story from tsmc. euro-dollar is flat at the moment and yields get back a little bit. we have ramped higher at the tenure paper by 20 basis points this week. scarlet: let's talk about what's

going on at banks. bank earnings season is pretty much over at this point. they finished reporting and the regional banks have finished reporting as well. the senior u.s. regional bank analyst for bloomberg intelligence is here with us. we take stock of regional banks and away we hadn't before because what happened in 2023. what are we learning from the regional banks about how they have fortified their balance sheets following the crisis? >> after the march and april episode in the banking turmoil after the failure of a few regional banks, the remaining players have fortified their capital base and pulled back on lending a bit to be more cautious given the operating environment. they try to stabilize their deposits. they increase the rate paid on those deposits so at this point, things have stabilized and we are past that turmoil. scarlet: but it's costing them to pay for those deposits and a lot of those have gone to bigger

banks are higher yielding instruments. what portion of those deposits have come back or are they still waiting? >> some are still coming back but we have largely stabilized. we are at a steady state now. thank balance sheets are not really growing because there is not a lot of loan demand either. we are looking at 2024 as a bit of a slog year where there's not a lot of balance sheet growth and we expect potential rate cuts which could help deliver some growth in the back half of the year. manus: listening to ms. walsh at guggenheim, she is worried about regional banks but nobody saw the truck coming down the highway at all. mark to market is been around for quite a long time. scarlet: you can ignore it for a while until you can't. manus: she is worried on two fronts. they got several risks happening with commercial real estate exposure and a refinancing war

in that space. are they real or perceived risks? when a lady like this speaks to me, i tend to listen. >> they are a risk and banks are preparing for those risks now. they are adding more to their reserves for the eventuality of loan losses in areas like office and commercial realize -- real estate. those a risk that a number they have to play out over a number of years. it's more of a slope moving train wreck at this point where the loans have matured this year and the year after. you will see losses but it seems like it will be fairly manageable. manus: jamie dimon and jp morgan, the institution save the banking system again last year by taking hold of those who are flailing. will there be a greater consolidation in regional? that's the perennial question. scarlet: janet yellen was

wondering about that, too. manus: she is smarter than i am. is there a real case therefore significant progressive consolidation? i don't mean crisis consolidation but real consolidation. >> that's the question that a lot of regional bank ceos are asking. what is the aftermath of what happened in the banking turmoil last year? do they need to be bigger? if you look at where deposits fled in march and april, they went to the biggest banks. the regionals see this as a potential existential issue if another recurrence happens. bigger is better. a number of ceos have talked about the need for scale to compete in these potential existential crises. banks are looking at potential m&a opportunities but it might not happen in the near term but over the long run, we will see consolidation. scarlet: everyone wants lower

rates because you've got to mark everything to the market so let's wait for rates to come down and we can get things going. >> that's correct. scarlet: given we are talking that crisis, the occ chief told bloomberg that regulators may force banks to start tapping the fed discount window at least once a year. that way banks are better prepared to respond to any flight of deposits. what with the government need to do to make are owing from the discount window more attractive? >> he mentioned it being more of a fire drill every year so it makes perfect sense to be able to be prepared for a potential crisis. the measures he's taking makes sense to me. the banks are a bit wary because of optics and signaling. if we get everybody on board and it seems regulators are resistant for banks to tap the federal home and borrowing

window as well so maybe it's a way to ease out of that into the discount window over time. scarlet: is there a contrast between the discount window and the bank funding program from the fed? it's proven to be a reliable and profitable arbitrage trade we borrow cash in part the proceeds with the fed where they earn a higher level of interest. >> it seems to be getting some uptake over the past few weeks because of that arbitrage opportunity. it's going away in march. it will be short-lived. scarlet: it's like a last hurrah. manus: mortgage rates are coming down incrementally from where they were. for the regional banks, when the rate cuts come, everybody says they will be three or six. that is going to have a material impact on mortgage lending. how exposed and how much of a

floor will that put into that real estate lending and commercial banks? what will it mean for them if rates come down on residential mortgages? >> residential mortgage lending has been tempered over the past few quarters. when we get rate cuts, you will see more that will help on the fee income side and the low growth side. it would be very much welcome on the residential side of things. manus: i'm hoping my fica score goes up. scarlet: you are waiting for mortgage rates to come down. manus: i can get a first buyers mortgage. scarlet: do you spend your weekends looking at property? manus: my brother says i have to reevaluate my life. hermann chan, bloomberg intelligence, you don't want to know about my fica score. scarlet: you've had time to roll it off -- rolet up. scarlet: open lots of credit

cards, it helps your credit score. manus: that's what i did in the late 90's, were not going through that again. the s&p 500 rallies a little bit this morning, up by half of 1%. mi fully invested? scarlet: is that double nichols? manus:, no, it's 55. scarlet: you cannot wind it up to 65? manus: one and done. we give back a little bit. scarlet: barely. manus: we can't say anymore about bonds. scarlet: they are done for the week. manus: the surprise this week has been the flat response on oil with tensions in the red sea. next up ey. ♪ >> [speaking foreign language] ♪

manus: good morning, this is bloomberg surveillance with scarlet fu. your regular surveillance team, we have it on good authority, or standing by to get home back to the united states. scarlet: private jet. manus: nothing else will do. s&p 500 is up a half a percent and the stock market is taking its lead from the tsmc. nasdaq made a record yesterday.

we've had 165 billion dollars of a chip rally so far this year. it is about earnings growth rather than rate cuts that propels this market. looking at the rest of the market, the bond market --scarlet: you are not concerned with earnings in the bond market. manus: they are completely divorced with what is going on. the narrative because the bond market to recalibrate its view on when it would get a cut or how much. you have a group of bond market participants who are buyers which is gse and pandemic. this is not where we are in 2024. scarlet: it will take a while to get that message through and everyone is looking for in the neighborhood of five or six rate cuts. manus: there was some news, for

it has announced they are cutting the production of their after 150 lightning ev. they say it will achieve the optimal balance of production, sales growth and profitability. the company is increasing the production of the bronco and ranger models which are internal combustion engines. the bottom line is what does this say about demand for ev? is it that demand is not there or we are not prepared to buy ev because we have range anxiety or is it because we are a bit more drawn to other propositions? the gas guzzler still lives to fight again. scarlet: it's a combination of all three i think but rate exit -- range anxiety exist. perhaps the people who wanted ev's got them and for the rest of the population, if you don't have a garage and can charge at home, what do you do? when you take charge and ev, it

takes 15 or 20 minutes at a gas station, five minutes you're out of there. people don't necessarily want to sit around for that. maybe the projections for ev sales got ahead of themselves. there will still be growth in global ev sales this year but not as robust as many people had anticipated. manus: you will have a few dozen workers who will be impacted at the components plants. this is about adjusting the cadence of what they are doing. in terms of other news flow, jamie dimon got a pay rise. well done, sir. he had -- they posted the highest profit on record. he was paid 30 $6 million in 2023, up from 1.5 million increase from the prior year. the bank making almost $50 billion last year. shares rose 25% so you can understand the validation. that is the highest profit in

american banking history. you can sort of understand that this is an incentive led business and you deliver the return on equity in the return for the shareholders, scarlet: and he's delivered for jp morgan for a long time. he's been at the helm for 18 years. every earnings season, we look ahead to what kind of compensation numbers these ceos get an jamie dimon scoring a 4.3% annual increase. a chunk of that will be bonuses. it's discretionary pay. manus: it's performance based incentive pay. a little bit of something for everybody at j.p. morgan and i hope it trickles down to normal levels. daniel pinto getting $30 million. other pay rises. there is munificence aplenty. that's the pay. we know pay in wages or something the fed is focused on but with congress, they have

avoided the partial shutdown. they are passing a short-term spending bill pushing new deadlines into early march. let -- president biden is expected to sign legislation to day despite half of republicans opposing it. scarlet: the only way this got through the house with mike johnson is the speaker of the house was with overwhelming support from the democrats. the house free and caucus was not happy about this. they wanted changes to the border policy which they did not yet. how long does mike johnson have in his speaker wrote? how long can he hold onto the gavel before there is a rebellion from his own conference? will it be passed march 1 when the new deadline happens? i don't know. manus: the speaker seat is tenuous at best. we have the chief economist at ey.

we've had this bullish narrative from davos. the american economy is strong. the consumer by all accounts is robust even they are dipping into the last of their savings and spending like really on their credit cards. what do you make of it? >> we still have positive momentum in one of the key tillers to economic activity remains a labor market. we have a labor market that's delivering a decent number of jobs and we are still seeing job growth around 150,000 on a three-month average. we have an unemployment rate that's well below 4%. that's what's driving income and intern, the income is supporting spending. we have to be careful with the cracks in the foundation of consumer finances. people are using more credit but if you look at credit relative to spending, it's not historically that high. it's below where it was before the pandemic. there is a little bit more use

of credit and we have to monitor that carefully because debt servicing costs are on the rise. but it's not excessively worrisome. there are some pockets of credit cards and auto loans but mortgage rates which are locked in at low rates are not excessively worrisome. scarlet: so nothing like the groundwork for the great financial crisis in 2007-2008. in terms of the data they came in better than expected, jobless claims, retail sales, how does that set us up for fourth quarter gdp we will get next week? that will show a measurable slowdown. >> i think we are going to say slowdown from the 5% pace in the third quarter. we know the 5% pace was supported by a lot of strong summer spending activity. also beyoncé and others. we are seeing consumers are exercising a little more scrutiny when it comes to their purchases.

retail sales were very strong at the end of the year with strong momentum in terms of december sales. we saw a lot of activity if you walked around in the malls and many people were buying in stores. it's important to note is there is a bit of a delta between how much people are spending on a nominal basis and how many goods and services they are purchasing on a real basis which is a little bit flatter. scarlet: we started talking how the magnificent seven is back again and everyone is all in on ai right now. you see it in the share prices like nvidia and amd. when does that start to show up in the data you track weather is gdp or any other measure? >> we are at an inflection point when it comes to the economy in terms of the cost and supply issue. we are in a globally supply fragile world. supply constraints remain very much a risk. productivity growth via process improvements but also technology is one avenue through which you can lift output but also ease

inflationary pressures. it will not happen overnight. it will take time for companies to develop the technology to integrate it into their daily processes, but that will lift economic output. we are doing a series on aim we are seeing potentially strong boosts, 1-2,000,000,000,000 dollars for the u.s. economy, over the next decade from jen ai. manus: do you think we are underestimating the speed of adoption of ai? do you remember when you had a mobile phone? scarlet: all of a sudden, everybody had one. we are using zoom and you have every app to communicate. i look back at alan greenspan and he made a speech about the internet and the bubble in the new paradigm and he was bang on the money. has ai and even bigger percent city -- and even bigger propensity be a more significant indicator for growth more than

we understand? >> in general, if you look at technological innovations over 200 years, speed of adoption is increased. you are looking at 50 years back in the 1800s to 10 years during the technology age of the internet. now maybe three years. that might be the next environment in which we see those positive benefits. the other important thing to note is you may remember back in the 1990's, bob solow quoted that essentially productivity gains from the computer were everywhere except in the stats. that's perhaps what we might see in today's environment with a lot of positive gains in terms of company activity but not necessarily visible in terms of the statistics. scarlet: how are you using ai right now in your day to day work? you do say it's helping you do some of the mundane stuff and putting you in a position to jump in at a later point than

you would have started. >> what it allows you to do is to have an assistant that allows you to speed up some of the processes, whether it's writing or data analysis, you can use jen ai in a way that facilitates your work. you still need to think about the analysis you are writing in terms of an economist and how things will evolve in terms of forecasting, but jen ai has this ability to simplify and speed up some of the early phases of the process. things that perhaps took a lot of time before can be done much faster with jen ai. scarlet: do you use chatgpt. manus: i have genuinely resisted. not so much that i am old school but i believe when you are trying to prepare and greet for a conversation with somebody, i just believe you try to do the research and formulate some kind of thought process yourself. maybe i'm wrong, maybe i should tap into questions for ey

economy usa. >> it's quite drive you do it that way but if you integrate jen ai into the daily processes which is what ey is doing and investing in jen ai am trying to facilitate processes of data control, data analysis, data forecasting as well as processes in terms of management and leadership. it's really all about knowing how to use it and that is one element we tend to underestimate. when new technologies come on board, you think about the basic uses first like chatgpt but then you have to think about the possibilities that go beyond that and how to i can help functions across the board, not just in specifics. manus: scarlet: scarlet: do you use it? no, i haven't done it yet but i know others who have used it. maybe they will use it to create a template for how they will allow everything else later on.

it gives you a starting point. manus: i may complete the lever -- i moved away from paper nice to have it for everything because i was so caught up with technology. these are all the progressive, constructive, productive value at economic ads. there will be a flipside to ai which will be less need for humans. if so, what is the quantum on that? have we thought about how it will impact on employment? >> it's not just replacement, its augmentation we have to think about. when we look at the economic impact of jen ai, we look at the infrastructure and cybersecurity and adoption in the development of software. then you look at productivity gains. if you combine those, they can have a significant positive effect on gdp growth. in our baseline, were talking 3.5% additional gdp over the

course of the next take a -- decade. on the high side, 7%. globally, you're talking about three point $5 trillion of additional output. that will also create new job opportunities, different job opportunities and when it comes to the great job reshuffling come it's not the case it will replace all jobs. it will augment them. manus: certainly different ones. we need the new oculus glass. $3500, send them in. thank you for being with us. i am there. where your amex? the markets are slipping back slightly but we are still up and stocks are rising, good morning. ♪

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rates. where we stand on this is we think earnings are growing and the street things 11% and we think half. we the street things rates will be cut six time starting in march, i am not there. we think 2-3 times. manus: heresy not believing the fed will cut six times. it's a building consensus. a cacophony of voices from davos , a quick snapshot of the equity markets. they believe earnings will go high and hard. the s&p 500 had up half of 1%. the market is up 20% this week. the fed confirming it could be as late as the third quarter for rate cuts and that's what it's about, recalibrating your view

on this rate cycle. scarlet: we do get more fed speak today so maybe that will blow those guys out of the water. daily is doing a daily double for us. manus: is the closing act because the last fed speaker will be before we go into the quiet period. we've had earnings of plenty. we delve more into that now. we have one consistent theme, no trashy tagline but one consistent in from the past three hours. earnings are strong, they will remain robust, double digit and that's what will carry us to the higher ground. good morning. how strong will the earnings be? >> i think it depends on which sector you look at. financials clearly started off the earnings season in the u.s. relatively weak. that was mostly due to charges

related to the fbi see. --fdic special situation reflecting what happened with signature bank in svb last year. when we move into tech earnings, it starts next week and the anticipation is for stronger and more robust earnings to emerge. that rose into more industrials and materials earnings which should be relatively weak followed by consumer earnings. i think you will have this rolling earnings season where we started off weak and we might get strong and we we can again. it really is a sector by sector story. when you look at the s&p 500, it's a blah earnings season, about 1% earnings growth. nothing to write home about for the overall index but a lot of sector industry stories to follow. manus: if you pull up your bio, recovery could broaden beyond the magnificent seven. you set the stage which as you

take me back to the beginning of last year and i was into by and it was halcion days it was balmy and warm. not like freezing now. magnificent seven growth was 37% and the rest of the world not so much. how will that play out of them versus the rest of the market and is that in fusing life into that magnificent seven? >> the earnings landscape was one of the biggest reasons for the magnificent seven to output the s&p 500 last year. the rest of the index had an earnings decline of 6% last year. it was clearly in a recession where the magnificent seven posted over 30% growth. as we move through the course of 2024, the consensus is anticipating that by the time we get into the second half of this year, we will have 13-14% growth for the magnificent seven and

have 13 or 14% earnings growth for the rest of the s&p 500. i think this is one of the big things to this year. will we see the modest rotation of the magnificent seven slowing down a little bit and still maintaining a double-digit pace but much of the rest of the s&p 500 starting to catch up? notable sectors produced strong earnings declines. there was house -- health care and energy that should contribute to earnings growth this year. it's a big story for the index at large. scarlet: you have easier comps in the second have given the declines were talking about. we know the magnificent seven like met a maid a lot of cost cuts. how much is themag 7 and tech over all getting a cut in their bottom line as a poster growth? >> the magnificent seven is growing at triple the pace of the rest of the s&p 500 so as not just about cost-cutting.

it was very early in 2023 and that's part of the recovery. the tech companies generally were the -- had the biggest layoffs in early 2023. we've seen cost-cutting give way to revenue growth. i think it's an important consideration. when you look at that tsmc announcement, it's about revenue growth and not just about cost-cutting were revenues are growing at a significant past pace. that's what is powering the gains for the space? scarlet: tsmc makes chips for the likes of nvidia and apple so it's business to business. they gives us an important read into corporate spending. technology is exposed to corporate and consumer spending. on thinking about companies like apple or netflix. do we presume corporate spending

will hold up better than consumer spending? >> i think we are at that stage of the cycle. what we saw last year and the year before were pretty significant spending cuts by corporate's to catch up with what was happening in the earnings stream. back in 2022, we started an earnings recession for corporate's. corporate's have adjusted. they went through an earnings recession and now they are starting to see cash flow growth again and that will be reflected in capital spending and investment trends were you see those pickup. the consumer may not we can materially but there is little to suggest the consumer may accelerate spending in the near term. everyone has been on guard for the consumer recession to emerge. maybe the unemployment rate will go higher and that may deplete income prospects for the consumer space which may result in relatively flat to slower spending with the consumer like of tech. manus: i'm drawn to that narrative around health care. many people have been saying get

involved in health care. you need to disaggregate health care. it has gotten high and ai technology imbued and it. you talk about the margins in general health care. you would say they are the lowest in nearly a decade and it's just around 7% but they are not all created equal. how do i begin to take health care part? >> i think you want to look at large versus small to start with. within the large-cap s&p 500, health care is not about technology at all. it's about large-cap pharmaceutical companies dominating the market cap of health care. you have some life sciences companies and biotech is a large share but really is about pharma and that tends to drive health care performance unless you get a riproaring gain in the rest of the segment. within small caps, it's different. small caps tend to be higher beta have more leverage.

i think it's a different story whether you look at large versus small. in the s&p 500, it's about pharmaceuticals and will they get past the charges they've had to make and start to see more activity emerge over the course of the year ahead? you got hospitals and providers in there as well but i don't think that's a tech play either. you need to pick your spots carefully. what we see in health care especially in the large-cap index is very difficult earnings conditions. this was one of the worst earners throughout 2023. it may produce earnings growth in the years ahead but it's about comps. there's not a lot of optimism and a longer term revenue recovery emerging yet. manus: we will keep an eye on that. thank you so much for setting the stage on the earnings season. his next week the busiest week? scarlet: so far it will be the busiest but i think it will be the second busiest overall.

netflix kicks things off manus: manus: her big tech. make sure you don't share your password. wayfair is spiking higher. this is a very strange phrase -- this is called workforce realignment. we are looking at 30% of the workforce cutting jobs. scarlet: 30% of their jobs globally, and 19% of its corporate team as well so the first quarter cost could be 70-80,000,000 dollars. manus: wayfair is not in my sideline. scarlet: everyone ordered off of wayfair during the pandemic. manus: when you begin to see fundamental changes in companies like that, that's where the tough parts are. this is about the truth for the consumer. scarlet: consumer spending might slow this year. manus: coming up next, the open.

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i am in for jonathan ferro the nasdaq is up. the countdown to the open starts right now. everything you need to get set for the start of u.s. trading. this is bloomberg's the open with jonathan ferro. alix: