>> are sense --our senses that the markets are ahead of themselves. >> the fed is pricing and outcome into this. >> i do not see a huge gap between the market and what the fed wants to do. >> they will be taking a read on that outlook to figure out when to cut rates. the markets might be over eight skis. >> every now and then things get ahead of itself and this is one of those times. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern.

i am jonathan ferro. the equity market on the s&p 500 totally change. it is the race for the white house and the republican battle new hampshire is down to two. it is donald trump versus nikki haley. lisa: markets are saying we will not care until october and they are trying to understand what the ramifications are. that is why people are increasingly focused on what this means for taxes and spending. whoever wins it does not matter, no government official want the government economy -- will what the economy to go down. jonathan: if trump wins new hampshire he could become a virtual lark and this thing might be done. annmarie: pretty much invincible because it will be hard for nikki haley to make up that ground. she spent a lot of time in capital. for her this is make or break. lisa: it has never happened before that a candidate has lost iowa and new hampshire and gone on to become the candidate.

that is a history. jonathan: let us get to price action. equity features totally unchanged and the bond market yields are shaping up, the tenured up just by a couple of basis points. 4.13. lisa: as people talk about the potential for rate cuts carefully and surgically you will see long-term inflation expectations ticking up. i am talking about breakeven rates and this creeping higher. when does this comfort with higher yields and a steady equity market breakdown given that people are concerned about longer-term inflation. jonathan: i am looking at the u.s. versus china. you have u.s. stocks at record highs and china hoping to spark a balance with a $278 billion plan. do you want to walk us through that? lisa: they want to make sure that stocks do not go down and it includes training hong kong of liquidity to prevent people from shorting some of the u.n..

we will get into a lot of details. what i find interesting is a divergence. does that mean that the u.s. and china have decoupled because you are not seeing the knock on economically or from the markets? jonathan: equities at all-time highs in america and china coming up with a plunge protection team to put a floor under its domestic equity markets. lisa: even though you saw a balance they are down 10% year to date. we are not even in january. just to give you a sense of how far they have fallen. jonathan: in 15 minutes we will look at the race between donald trump and nikki haley with a republican strategist. later on, the tension -- the attention turning away from financials. netflix coming up after the close. annmarie: they are supposed to be adding subscribers. i am looking at these turn rates and netflix has the lowest in terms of return rate. if you feel like you are adding too many of these streaming

platforms, disney and amazon and etc. people want to hold onto netflix. jonathan: u.s. stocks at record highs and china heart -- hoping to spark it down. fundamentals back the rally in the u.s. but staying neutral on china. "the property sector overhang and geopolitics likely way on how much valuations can positively rerate, economic support does not translate efficiently into profit growth. it contributes to excess production and lower margins in industries beijing is trying to prioritize." luke is with us. almost $300 billion state-owned enterprises to go back into the equity market. what do you make of this move overnight, potentially. luke: investors will be pretty heartened to see this expansion of the policy toolbox in the short term. i think that is a positive. zooming back you zoom out on the chart. it does not take a cmt to

realize this is a level which chinese stocks, broad offer industries especially should be responsive to anything resembling a positive catalyst. when you talk about positioning this is a reason to be neutral and underweight chinese stocks. it is a fact as you approach these levels as the equity market becomes a bit more of a concern for beijing as the economy has had. this is something in terms of longevity. i am a lot more interested in terms of looking at what the fx implications are because we have a strong dollar move to start the year. typically, you would not expect a big outperformance or a big outperformance or move in chinese equities without looking at a big downdraft in the dollar so it will be interesting to see what that correlation holds up. lisa: have you ever noticed how different the tone is on the record and off the record. there is a question of the formality of looking at the different steps. essentially when you talk about

fx they are draining liquidity from hong kong to stop out short-sellers of the u.n.. does this change the game in some capacity and make you think that after being positive on china it is starting to look a little on investable? -- uninvestable? luke: i think draining hong kong is a play that we have seen before. but that is certainly something we have seen in terms of squeezing dollar cmh in the past. so in that sense, not really that much of a new thing to have had happened. a different frontier and realm but not new of a tactic. jonathan: we talked about the difference between the fundamentals and governance issues. the economy and china has been growing steadily. the equity market has been a dog. is it about growth and fundamentals or governance issues? the unstable and unpredictable policy out of beijing? luke: a little bit from both columns.

the earnings growth story which should be underpinning equities does not happen as strongly in china. and you see that being a policy decision and some frontiers of the for-profit education and a small part of the market being the most extreme example of what is happening when they use sector is not furthering the common interest of china at large. you have seen this in the more market cap sense as far as the internet properties. you make a lot more a lot more concerns about governance when you are able to grow very fast and translate that into earnings growth. china you have concerns about governance on the microlevel and more macrolevel geopolitical concerns and then a decent history of that not having a great sharp ratio on your profits. annmarie: given the concerns in china, where will the foreign money start to go? luke: we do em x china and that

has done well. you probably get some positive spillovers. we do really like the asia or china semi story rebounding. you have seen semi prices rebounding and seeing korean exports pickups theme. so in the equities base, those look attractive. anymore the fx space, mexican peso still looks like some of the safer places for carrie for us. i think a big beneficiary not in the em space directly, but investors relative version for china for some period has been japan. the version of the corporate reform story. japan being the best play you have on a "new normal" for gdp growth following the pandemic. and the fact that monetary policy has not been as responsive helping the profits grow and the currency impact. all of that has grown japan at

the expense of china. i would be watching that closely because that will be something that is at least reevaluated as investors try to measure how much the stimulus moves matter. lisa: could you elaborate more when you say reevaluate with japan after you've seen this concession -- consensus into japan and when they will abandon negative rate policies. what do you mean that people are rethinking it? luke: in terms of looking at more regional equity positions, quite clearly there have been elements to japan that do have the feel of a lot of momentum chasing. obviously the momentum has been against chinese stocks for a while. if you have tightened up your stop loss on a japan happened china trade -- a japan-china trade you will see if those get hit or not. jonathan: let us talk about the

leadership in the equity market domestically. it has come from big tech. qc reason to believe that that will broaden out and that can improve it has the year develops? luke: we do, and a few of the reasons why are the resilience of growth. the earnings story has been quite narrow. by in large, 2024 estimates hold up very well. that speaks to the level of breadth going forward. another element is that when you talk about long-term correlation. i know that you have brought up banks training -- trading off the yield curve and that not so much. fisheries of lower yields will be the banks, in particular smaller banks. that is a place where we see normalization not easing to respond to a downturn as probably supporting cyclical sectors. when you get that in combination of this is an extremely long

cycle of having manufacturing pmi's sub 50 and any signs of pickup based on normally -- based on the cycle, they should help things and create us. lisa: will this uncouple the idea of bonds and stocks and you will still see the resilience of the stock market? luke: that is a big call for the year and it has happened a lot faster than we would have anticipated especially coming out of november and december. the soft landing has not been efficiently priced in to stocks, but it has been into bond. stocks at record highs without a rally. this is our view. we think it is consistent for what has happened so far. that doesn't mean we have to be on the lookout for what is up next. certainly i think it is and it has a lot to do with the fact that you can deliver what is priced into the curve or even less and still have yields fairly stable.

i think it is the view that as we get into this year, a big stepping back thing is that we will see what kind of economy that we have as a lot of the dislocations dissipate. it will be between pre-pandemic and gfci. this set you up for a lot of trading ranges in rates where things should be if you are using those as benchmarks. jonathan: so far it has been good news for the first couple weeks. lisa: are they paying you to say that? jonathan: based on what we said. retail sales hotter and consumer confidence picking up and yelled starting to bleed a little bit high. lisa: not to be the pessimist, but longer-term, inflation expectations pick up. i do want to watch that space very closely because if you get the idea that rate cuts now will mean longer-term higher inflation, that changes the

equation. jonathan: we will talk equity -- we will talk politics. let us get you some headlines elsewhere from stories around the world. we can cut -- we can catch up with your bloomberg brief. yahaira: the new hampshire primary is underway. he haley winning six votes. donald trump and -- aiming for a commanding break -- a commanding victory which would make a november rematch with president joe biden more than likely. the boeing fallout continues as one of its biggest customers signals waning confidence. scott kirby has reportedly been venting his frustrations with boeing management in their handling of the 737 max nine grounding to the secretary of transportation for the judge. the faa is asking airlines to inspect door plugs on older 737 models.

samsung is exploring the developments of a blood sugar monitor that does not break skin. the device would allow non-invasive glucose monitoring and continuous blood pressure checks. the company is setting its sights on ambitious health care goals against apple and google who already sell wearables with features that track your health. that is your bloomberg brief. jonathan: thank you. up next, the battle for new hampshire. >> now we are down to two people, and i think one person will be gone probably tomorrow. >> chaos follows him. you know i am right. and we cannot be a country in disarray. jonathan: that is coming up next. you are watching "bloomberg surveillance" live from new york city this morning. good morning. ♪

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jonathan: live from new york city this morning. good morning. the equity market shaping up as follows, just about positive on the s&p on 0.02%. your yield, 4.1282. the battle for new hampshire. >> we started off with really if

you add some democrats into it, with 13 and now we are down to two people. and i think one person will probably gone tomorrow. and the other one will be gone in november. >> chaos follows him. you know i am right. we cannot be a country in disarray and have a world on fire and go through four more years of chaos because we will not survive it. jonathan: donald trump and nikki haley giving their final pitches ahead of the primary. they show some holes with haley -- polls with nikki haley gaining the lead. it appears that the gop is simply not ready to turn the page on trump. we could be headed straight into a brutal, ugly and bitterly divided general election. annmarie: americans do not want to hear trump versus biden. if brian kemp was not able to beat trump then maybe nikki haley can.

only 15 states on super tuesday limit voting to register republicans. this gives nikki haley a fighting chance only if she abandons caution and wages a full throated campaign against mr. trump. that would jeopardize her future and the gop if she does not win. she has two options go quietly or go for it. she should throw her hail mary. they talk about the nuclear option to go up against trump. jonathan: joining us is matthew bartlett. great to catch up with you again buddy. why would new hampshire be any different to what we saw in iowa a week or so ago? matthew: it is unclear if that will be the case. new hampshire was the site where donald trump got his first win in 2016 and it is very possible that he will seal the deal with the nomination. the only thing i would say is that 40% of the electorate are independent voters which can eat -- who can vote in either the

democratic or the republican primary. new hampshire is a bit of a wildcard. nikki haley is the only person left in the race. she is contrasting against president trump it is unclear if she can beat him in the nomination process. annmarie: what more could have nikki haley done a new hampshire where she spent a ton of time and capital? matthew: that is a great question. no one really knows. it seems as if there were plenty of people in the race like chris christie that directly attacks donald trump and the republican base did not want to hear it. in the recent days she has tried to really question some of his statements, even his mental capacity saying that joe biden is too old and donald trump might be too old too. right now the republican party has -- views the public -- the former president in high regard. they are not looking to turn the page. beyond that, a year ago there was an opportunity.

ron desantis was even beating donald trump in the polls in new hampshire. what have we seen for the past six months? at head-to-head pulling that shows that donald trump potentially beating joe biden in many of the swing states. that has been a psychological factor that has been underreported. it is only emboldening his base to come out and vote for him. and now there is a feeling of inevitability. you have seen the republican party coalesce around donald trump. and there is a bigger buzz around who could be his vice presidential pick rather than can nikki haley beat him? annmarie: if she does lose how does she recalibrate? matthew: you go back to the old country song if we can make it through tonight we will worry about tomorrow tomorrow. it is unclear what her path is or she has a path to the nomination. if she were to pull off a

stunning and historic victory in new hampshire allah bill clinton, i think -- a la bill clinton, i think you will see national attention and donor attention and the polls move. consequently. if she does not there will be enormous pressure from the press , the voters and republican activists to exit the race. all is unclear about tonight in new hampshire we will have more focus. annmarie: a lot of people are expecting a long general election, who does that benefit, biden or trump? matthew: unclear as annmarie said. both parties are really wed to their nominee. yet the entire country is looking to move past both donald trump and even joe biden. it will be a tough and bitter election fought on issues and sentiments, attitude, and the possibility of a third party entering the race could be joe

manchin or a chris christie, rfk jr.. these are real wildcards in what would be a very close election. remember donald trump snuck past the goalie in 2016 with a margin of victory of about 70,000 votes. lost in 2020 by 30,000 votes in the swing states. it will be a close election. as said, i think the country is not looking forward to this. it made me think about what david rubenstein floated which was -- which was joe biden going to donald trump saying that i will get rid of some of these legal issues in the states if you do not run and you know what, if you agree to that i will not run either. it seems to be a bit of a dream coming out of wall street that the country would prefer, but we are heading towards the general election. jonathan: great to get your view. matthew bartlett. a little bit of a dream? annmarie: an absolute dream like

is there anyway that joe biden will cast aside kamala harris and pick a new vp, that is not how things are done. there is no way that biden was going to pop dust apart in the former president. jonathan: do the politics matter to markets? luke: it is crazy to say they would not. they have blue -- they have moved on various events whether it was brexit or the election of president trump. the one thing we are looking into does the presence of a race decided so early and the davos consensus is what it is regarding the outcome already. all i have heard is the prediction that trump will win again. does that have the ability to price and implications of the election ahead of time otherwise than we normally would. that is something we will be looking at in the days and weeks to come. annmarie: the whole idea of davos is you do the opposite of what the elite tell you to do. you look at the election isn't

the timeline on joe biden's side . the top issue for americans is the economy. luke: i would say the timing of some of the inflections that you have seen in consumer sentiment what help president biden. i think renaissance macro, a friend of the program as you previously outlined, that would potentially bold well if such a trend continues. if claims are this low. that should matter. if this is an election about the economy or is this an election and you focus highly on the states and how things will actually transpire. jonathan: we are saying he -- it is about the economy. it comes down to abortion and immigration. annmarie: it also comes down to swing states and he was getting out the votes on these issues.

democrats will want to make it about abortion poll after poll shows that americans care. if the economy is in a good place maybe they their secondary issue becomes important whether it is immigration or abortion. jonathan: breaking down the market and the politics. equity futures on the s&p 500 are totally changed. slightly negative. coming up, a look ahead to where earnings are from netflix. you've had the big players on wall street and the west coast which are just around the corner. live from new york city, good morning. ♪

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jonathan: live from new york city, check out price action on the s&p 500. negative but .02% after closing at another all-time high yesterday. the bounce of the russell continues. earnings news out there. let's have a look at eps at 229. a bit of a snooze here. no big fireworks in this one. lisa: the shares are down. even though there are basically no big fireworks, they beat by a hair or a cent, you are seeing a

negative share reaction which is what we have seen across the board in other companies that either beat or been in line. it has not been that big of a pop, even when they delivered. jen, treasuries. yields look like this on a two-year high via single basis point. ten-year up by two basis points. catching up over in hong kong. talking about the move in march, a move that is pushed back to that call. brian wieser also -- michael gapen also seeing a move in march. lisa: some people seem to deteriorate in on the front when it comes to economic data. it is now 40% chance of a march rate cut. that is down from 86% at the peak of all of these excited feelings towards rate cuts. a lot of people are eyeing june.

march is not consensus. jonathan: two basis points. ecb meeting in a couple of days time. the euro looks like this against the dollar. 108.63. the ecb is not a snooze. president lagarde, according to several reports criticized a staff union survey marking the halfway point of a rate year term. a slight majority of respondents assessor presidency as either poor or very poor. criticized for spending too much time on topics unrelated to monetary policy and going too frequently into the political domain. lisa: what is shocking is how much it diverged from her predecessors when there was more support. her comments on trump making people dislike her. are her political forays making people feel like she's not represent in the nuts and bolts of economic theory? i don't know the answer but the survey speaks for itself.

jonathan: there might be a pay dispute in the last couple of years that may be poisoned the water between the top of the ecb and the staff level. i will say this. my view is if you survey the governing council, the national central bank governors and the executive board of what they think of lagarde versus the previous governing council underneath draghi, i imagine there's more tension around draghi then there is around lagarde. i have seen a consensusbuilding at the governing council level that draghi never had. draghi wanted to get everyone and a corner and say this is what we are doing. p saw a lot of unhappy central bankers. i don't see the same thing under lagarde. the staff might be super unhappy, and we have been talking about her weighing in the politics when maybe she shouldn't, but if you polled the governing council they would have a different view on this. lisa: i wonder if there is a larger take. strong leadership styles.

is a great for people who might want to weigh in at the top that maybe it makes her a clear mandate in the middle ranks. i agree with you. people are able to have their opinions and voice dissent, which we have talked about. annmarie: it's less than 25% of individuals who work at the ecb who weighed in on this ball. i would like to see what 100%'s have to say. jonathan: i expect of that pushback for the ecb. the ecb said you can fill in the form twice, multiple responses. whatever. lisa: it speaks volumes. jonathan: under surveillance. authorities in china drawing up a rescue package for the stock market. pressure building to act with the shanghai index touching a five-year low this week.

almost $6 billion has been wiped out since the peak in 2021. the nasdaq golden dragon index down over 15% to start the year. the plunge protection team regrouping offshore. lisa: what's interesting is this is coming without necessarily a commensurate package of economic bolstering that a lot of people say are required in china. you are seeing shares down in china about 10% year-to-date even with the pop we saw overnight. a real question of what they are trying to accomplish and does it make china more investable for people who have abandoned it. jonathan: please intervene said yesterday. basically uninvestable. a matchup between donald trump, nikki haley. trump leading by double digits. haley -- the next major content is in her home state of south

carolina on ferry 24. -- february 24. well even get to february 2 any for? -- 24? lisa: if trump wins new hampshire it feels like trump is invincible. a lot of republicans wanted to wait with trump. they care about issues she tried to call gillette like fiscal policy and foreign policy. this is the place you can win. if she does not win here, it feels like it's over. jonathan: midair emergency earlier this month. according to bloomberg, scott kirby is appealing to u.s. transportation secretary pete buttigieg to act following frustrations with boeing management and their handling of the incident. united gaining the premarket after raising its guidance when they announced fourth-quarter results yesterday. united this morning is positive.

on the month, down about 9%-10%. lisa: there has not been real clarity on what they can bring -- when they can bring these jets online. it highlights how challenging it is for boeing. leak the idea that scott kirby is saying calling short for the management. what is going on, guys? we counted on you. we actually are one of the biggest buyers. you let us done and we cannot fly these. that has to be such a frustration and the reason why maybe we are seeing a more motley outlook going forward. jonathan: how many airline bosses have complete about this country? michael o'leary set with us and -- sat with us and complained about delays. lisa: michael o'leary has perhaps a more colorful personality when it comes to saying some things, the quiet parts out loud. scott kirby is more buttoned up. personality -- michael o'leary speaks his mind very freely, which is refreshing.

other people not as much. jonathan: netflix coming a little later. purporting after the closing bell today. analysts expecting the company to be its own forecast for subscriber growth. the streaming giant announcing its film chief is leaving in march. a lot of turmoil in this industry. brian wieser joins us now. what is netflix doing that seems to be crushing every body else? brian: they continue to invest in their business. you look at the industry going back to 2019, disney was talking about massive investments. i always thought the understood what profitability would look like, which is terrible. they clearly didn't. if they kept to that plan and everyone else kept to the plan they would have positioned themselves better. netflix would have been much weaker. instead, netflix is illumined really committed among the big public guys -- amazon's, apple is -- but among the traditional

media companies it is like they are giving up. lisa: what does it mean to invest in the business now? we were in the whole content is king cycle. it seems to have died with disney and the idea that people will strike and it's expensive and they don't to do that. is that what means to invest in business? is it cracking down on password sharing and how you expand and compete with your competitors? brian: content investment is king. that is the critical thing. the willingness to put money to work. increasingly a tolerance for lower profit margins. this is what i did not think about when i was an analyst. if you have a business that has a 20% margin business rather than 30%, it sounds bad, unless you were twice as big and offering globally and scaling your costs more broadly. that is how the mathworks. they have to keep investing. that is where netflix is really well-positioned.

lisa: before we dig into the nuts and bolts, do you ask by some to talk about artificial intelligence? chatgpt writing the scripts? they can probably really lower their costs. brian: i doubt it. i think ai will be a big issue this earnings season when it comes to meta, alphabet. it is driving so much growth. agencies. there will be investor days coming up this week. you will see a lot of ai talk in the ministry but not at netflix. annmarie: they were about to lose their head of film. this is an individual who brought martin scorsese to netflix, spike lee. how concerned should the company be and how to they go to attract new top talent? brian: no doubt losing someone like that is not good for them. they also have a very deep bench. unlike other studios they are willing to invest and keep coming back to the point. if you look at the enterprise value of warner, paramount, fox,

literally everyone but disney and comcast, they don't even add up to netflix. annmarie: i was looking at the data about when subscribers are like i have too many of the streaming platforms. everyone is averaged about 5%. netflix is at 2%. netflix is my base and potential add on something else? brian: that's the advantage of the really deep library. there is always something on. i can't even remember what i size today because i plowed through something. there is so much content. that's a good thing. as long as they can manage the economics and do it at a profit margin. investing towards scale is what matters most. jonathan: everyone has something to say about bob iger. what is the solution? brian: i have not heard one. they seem a bit adrift. if there was a lot of strategic clarity going in his first retirement they knew what they were doing, had a clear plan. now it is kind of all over the

place. he is floating ideas left, right, center. he has to reassemble his team of strategic advisory side of the company. that is going to take a bit of time. jonathan: we have asked about the future of espn for a decade. what is the future of espn? brian: i think it is fine for the near term. i worry about this with sports in general. one of the great appeals is everyone watches a little bit of sports. you have a large number of hard-core consumers who will pay a lot of money for it. the business model only works if you get everyone watching a little bit of it, too. advertising money goes in and it makes the economic works -- economics work because of the reach. the way to access content is nontraditional pay service. most people who don't want sports don't want to pay directly and will not have those services in a few years. they are not going to pay an a la carte $30 a month for streaming service either.

sports is in a really difficult place when you start to look out five years from now. lisa: that means cable companies are in a bad place when you look at that far. i'm wondering how far are we from the time when streaming takes over the sports channels, the sports teams, the sports viewing and is the death knell for cable. brian: cable is in a great place because they're basically a data business. internet service business. he primarily choose your cable library now because you want the high-speed data service. lisa: oh. brian: you pay up for that. we all do. jonathan: brian, good to see you. brian wieser. sportswriter got so extensive. we got to the point with a not really know what to do with them. you take a full game and you bury it on peacock and hope it sticks and hope people start signing up. the strategy around sports is not as obvious as it once was. i'm not sure the numbers, the profits, make as much sense as

they used to. lisa: that's why people say the new model looks like the old model. who is going to win from that? so many sports teams are just going direct. we went private capital and intellectual capital -- intellectual property. we are just going to get the profits directly and you can invest in us. jonathan: netflix results coming up this afternoon. let's look at other stories making headlines. >> goldman sachs chief economist weighing in on the fed's path and the state of the u.s. economy. >> the fed is on its way to achieving a soft landing. no guarantees but i like what i'm seeing. >> also sang golden maintains a base case for a march rate cut. noting it would be consistent with the trajectory of consumer prices alongside chair powell's comments that the central bank would like to cut before inflation returns to 2%.

citigroup says it is cutting bonuses in its investment banking business. the ban is chopping payouts by 15% to 20% this year. the reductions coming after citi posted an 11% decline in dealmaking fees for 22 any three. -- 2023. hijacker hacked -- the agency saying an unidentified person changed the password after gaining control of an employee's phone number. to cost of research in the price of the world's biggest cryptocurrency. the sec approved almost a dozen spot bitcoin etf's the following day. that is your bloomberg brief. jonathan: appreciate the update. up next, china hoping to spark an equity market bounce after a rough start to 2024. >> we pulled our clients out of china. we think it is not a place you

can put client capital. jonathan: you are watching bloomberg surveillance. good morning. ♪

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jonathan: live from new york city, good morning. here's the price action on the s&p 500. three gains of gains on the s&p, the longest winning streak of the year so far. another record close yesterday. this morning totally unchanged. under surveillance this morning, china hoping to spark an equity market bounce. >> the sentiment is so bad that i would have to expect there's an opportunity somewhere. we think it is not a place you as a fiduciary can put client capital. jonathan: you think it is on

investable -- uninvestable? >> essentially. jonathan: china drawing up a $278 billion rescue package to backstop the country's stock market. lisa: people are wondering what they are trying to achieve. is it a temporary boost to evaluations or longer-term? the head of asia-pacific extra pan speaking on bloomberg. when you look at this package or any other set of actions, how does it address it? how does it change sentiment? does it give people reasons to believe in the future of the economy and the positive way. part of the challenge is works met with action. we look at the different measures, the piecemeal measures the chinese authorities have come up with. it does not seem like they are convicted to do something that is holistic and give people comfort. jonathan: they have been doing this for the better part of 10 years now. just two weeks at the end. 2015, 2016.

big funds could not sell. could not sell stocks. that is how long we have been doing this. lisa: other measures were announced that were not so wholesale banning activity. do you see a real commitment to bringing back foreign direct investment by the chinese authorities? we saw the biggest coalition of chinese authorities in davos since 2017 trying to talk with people, but there was resignation that things are not going to change material. the u.s.-chinese relationship is fracturing. how do people get that confidence that they can get their money out if they put it in? jonathan: what is the strategy here from chinese authorities? andy: kid speaks to a sense of urgency among the authorities. you have the premiere making the point they had to respond with forceful measures. the concerns of where the stock

market has gone is at the top of government. we are only three weeks away from the chinese new year. you consider the retail investor component of the stock market, they don't want another dampener on consumer sentiment ahead of the holiday season. will this mechanism work? lisa was talking about 2015. that has some impacts over the summer months. then went back into selloff mode. people question whether this rescue effort would be nothing more than a sugar hit. it will not change the fundamentals. the market is in a slump. foreign investment is in a slump. consumer sentiment is not great. the piecemeal approach is not turn things around. the question is if it will be enough to that. lisa: if this -- is this directed afford investors or drumming up domestic sentiment at a time when people have been spending -- not borrowing, not deploying the cash they been hoarding? enda: definitely a little bit of both.

no doubt they don't want the stock market in a heap just before the all important chinese new year holidays. they are given the retail investor component. there's a sense of overall gloom on the chinese economy. equally, there's a signal to the world with the premier li chang. you saw him making this point that china is open for business, come invest with us, come to business. when have the stock market cratering the way it is it just as to the sense of gloom on china. uninvestable as your previous guest said. it's another effort to try to turn around the perception. that is not going to fix the real estate story. not going to turnaround the foreign investment story. not going to turnaround the consumer sentiment story. the stock market is only small part of the economy. it is only one piece in a jigsaw here. annmarie: there was an interview with our colleagues in hong

kong. he talked about chinese authorities are not willing to use a bazooka when it comes to stimulus to shore up the problem. what would a bazooka look like? enda: this has been one of the big frustrations for the rest of the world looking at the china story. china was a big disappointment last year. the post-covid arrow didn't rebound. the authorities very disciplined, very restrained when it comes to the support they're putting into the economy. they are spending on infrastructure and borrowing and putting in some sport. this comes from previous turns in china when we saw massive full-scale borrowing and spending by the government trying to reinflate things. in some parts it's wasteful projects. that's been a legacy of debt china has been nursing since the global financial crisis. they going back again with this

all out fiscal approach. one would think the pressure is building on the authorities to do something more meaningful if they do want to turn the narrative around. jonathan: it feels desperate to see reports that they are willing to go after the prophets, the money offshore from state owned enterprises and then recycle that back into the equity market. you mentioned the physical space. how much space to they have if they want to do something more? enda: not a lot at the local government level. the central government has room to borrow and spend if they wanted to. they are being pretty disciplined and what they want to do. they have sometimes made reference mistakes by the west, particularly q. week. -- qe. they don't to go down that path. we are in the second or third year of this downturn in china. authorities cannot let it go on too long. you just look at the great strategic rival of the u.s. weather stock market is hitting records in the economy holding

up well. there is pressure on authorities to do more. jonathan: this of course is a package they are considering according to people familiar with the matter off the back of our reporting. your best guess is the package go through? enda: they have done it in the past and i don't see why they wouldn't do it again. the question remains if it's enough to turn things around. jonathan: enda curran down in washington, thank you and the latest. a $278 billion trial balloon. lisa: equities are down 7% to 10% year-to-date. this is not yet january over. there was a time they were going at 6% a percent per year -- tate percent a year -- to 8%. i don't understand with the goal is. is it to get foreign direct investment in? do they want international companies competing in a real way?

do they just want to even things out so they don't grow as slowly as some people are projecting? jonathan: somewhat say it's a consequence of poor policy. if you're trying to buy equities using state enterprise profits and recycling that into stocks you are dealing with the symptoms another cause. but because is not just the economy, which has slumped and struggled coming at a covid. is the governance issues that lisa levine talked about. deal with the causes if you want to see an equity market the same place where we have things in america right now. lisa: it's using offshore money to support the equity market and that might have the exact opposite. it's the exact opposite effect. why would any company have confidence that their money is protected if it's just reclaimed for government purposes? jonathan: u.s. equities at all-time highs. china struggling to stimulate demand in their domestic equity market. coming up in the next hour, brilliant lineup. thomas michaud of kbw, henrietta treyz and meghan robson of bnp paribas.

good morning to all of you. you are watching "bloomberg surveillance." ♪ ♪ (captivating music) ♪ (♪♪) the first law of thermodynamics states that energy cannot be created or destroyed. (♪♪) but it can be passed on to the next generation.

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>> inflation is coming down. the economy is slowing but not falling off a cliff. >> they could be sticking is inflation that makes the fed's -- >> if the fed was trying to be aggressive in rate cuts they run the risk of the economy accelerating a bit, therefore inflation accelerating a bit. >> the fact the fed is considering rate cuts does introduce a new tail risk, the re-acceleration risk. >> we are chugging along but

probably closer to the recession. announcer: this is "bloomberg surveillance" with jonathan ferro, le lisa abramowicz at annmarie hordern. jonathan: good morning our audience worldwide, this is "bloomberg surveillance." your equity market on the s&p positive by not a 10th of 1%. three days of gains on the s&p 500, the longest winning streak of 2024 so far. over the last two days is been all-time high after all-time high. lisa: initially it was just big tech and that was driving it. it was a rally and everyone else was living in it. yesterday we saw small caps pick up. regional banks started to pick up, interesting in light of bob diamond's comments yesterday. jonathan: we will talk about financials in a moment with kbw. we are looking over to new hampshire. annmarie: make or break moment for nikki haley. she has spent so much time in

new hampshire. if she has a chance, she has to win new hampshire. the polls are showing it will be the former president. basically everyone is just girding for a long general election between trump and biden. everyone is trying to understand what will matter when they have to pay attention. there will be a lot of noise and there will be a real question about how different the two candidates will be given the policies have not been all that different, at least in trade and international relations. jonathan: this republican primary might be over in 24 hours if you get a similar win for the former president like we saw we could go. annmarie: is basically an incumbent running in a primary race. how do you beat an incumbent in your own party to take over the gavel to be the leader? it's pretty impossible. lisa: it will be fun. we are all looking forward to it. annmarie: i am. lisa: at a certain point how do we gain this out in terms of

potential surprises? libby cantrell, i left for comment. "jamie dimon will not be president. no, oprah winfrey will not be president." really? did you put in is a joke? she said the client are saying to her, isn't really going to be jamie dimon? jonathan: she said talking to clients about the political election this year was like staring at the sun. that is what it felt like for both clients and strategist alike. lisa: we have a lot of staring into the sun. jonathan: for the next 11 months. annmarie: sounds dangerous. jonathan: s&p 500 totally unchanged. bond market yields look like this on the ten-year. higher bite two or three basis points. lisa: walking back rate cuts, hopes and dreams as a look at better than inspected data. one after the other expected than the other. curious to see pce, personal spending and income. could that change the dial or

are people they simply -- basically leaning into june's rate cut? jonathan: the data has been good. maybe a march rate cut. we heard from bank of america may be of march rate cut. it has to turn at some point. lisa: here's the frustration people have. better than inspected data with ongoing disinflation. when we see inflation respond to the fact we are seeing better-than-expected economic activity or are we still living in the post-pandemic reassessment of prices? jonathan: stocks just about unchanged on the s&p 500. talking about all-time highs in the u.s. china just a massive struggle considering the rescue package to try to stimulate demand, not in the economy but for chinese stocks. later on we are talking united airlines. the stock flying high on better than affected earnings and pushback against boeing. we will wrap things up with the conversation about nikki haley and donald trump clashing in new hampshire. we begin with the top story,

stocks at record highs. kbw announcing its top picks for 2024. "we like goldman, morgan stanley. is becoming more favorable for capital markets due to declining pressures on interest rates, a prolonged period with recession leveling investment banking activity, and potential for the battle 3m game to be water down." the kbw ceo is with us for the next 60 minutes were so. let's get into earnings. he talked about the industry, the economy and going forward from here for the stocks as well. walk us through the three. tom: the industry is like what's happening across corporate america, all centered around covid and covid policy and the policies to defeat covid. the hangover was we had a five and a quarter percent interest rate move in 16 months, the most and 40 years. -- in 40 years.

deposits typically grow 5% per year. they grew 30% in the early days of covid. the industry is dealing with the unwinding of all of this. that means the industry has had negative operating leverage since its balance sheets been resetting. there's been no revenue growth in the banking industry. that will change we believe in june. we believe we will finally reset the balance sheets and moving forward if the fed does in fact cut rates. we have two cuts in the model for the second half of the year. that will be the first thing. we just had earnings reports out. the stocks rallied 35% from the end of october into the end of the year. the reason for that was it took the worst case off the table. a lot of investors still felt like the worst case scenario was possible. there were lots of questions i was getting from clients about is this the global financial crisis again. i think we demonstrated it is not that. the industry has survived.

it's about to reengage and start to grow again, which we think will start in june. the other thing is you talked about the stocks. a lot of talk about how stocks are in the high teens p/e ratio in our extensive. not banks, not a lot of small cap banks for sure. they typically trade around nine times earnings. some had very big dividend yields that they will increase. most companies will be buying back stock by the end of the year. if you were to summarize what we are talking to clients about, 2024 exit velocity. that is the theme talked about a lot which will have an industry that is growing revenues again slowly. we will have banks raising dividends. we will have buybacks coming. if we get a soft landing, that is the goldilocks scenario. then we can talk about credit quality. lisa: it shows how low the bar is when is not a financial crisis. you are talking about potential to restart and there is not a

crisis anymore. during march people were talking about the fact that the fdic was not ensuring beyond a certain level at the small banks. that became a huge liability. why wouldn't and a sign any distress whatsoever every investor pool their money as quickly as possible even faster next time around to get ahead of any issue? thomas: that's a great question and a great set up. i testified in front of congress last may on that topic. i agree. you don't want america to pick their bank based on its size. to guarantee put into big banks is extraordinary. in a span last march silicon valley bank failed and the of the ic said the depositors don't get their money back on friday. they did not change their mind until sunday. when credit suisse got in trouble, a global -- the central bank organized a merger with

their 100 your competitor across the street and no depositor was at risk. if you want to see the difference in the implicit guarantee, look at those eight days and how the two different banks were treated. the fact of the matter is, small business in america will be very unhappy the fbi see and congress -- fdic congress have not created a modernization of the fdic insurance fund were small businesses feel comfortable leaving deposits in banks. meanwhile, the proposals we have seen are all about capital at all about issues that had nothing to do with the three bank failures. we are not addressing the key issue, which is deposit insurance modernization. jonathan: let's talk about the consequences. we are focusing on the wrong thing. what are the consequences if we go forward with this? tom: they will be another crisis. one of the things i wish i did not have to do was reading about bank failures in the u.s. and the creation of the fdic. listen to fdr's speech encourage

passage of the ftse on their website. -- fdic website. every 15 years america has a banking crisis. that is the role banks take. you need to deposit insurance fund to make it orderly. what we learned in the recent crisis is money was faster than ever before. if you read the testimony of greg becker in front of the senate, you will see essentially 85% of his deposits fled in 48 hours. this probably no bank in the world that can survive that without some essential liquidity. this is what the fdic was built for. they should modernize the insurance fund so businesses can leave the money in the small banks. if a small business puts their money in one of these big banks, the deposit goes to the big bank and gets went somewhere else. you leave money in a regional bank, it probably gets went into

the neighborhood and the region. annmarie: the policy response to not much for the failure in your opinion? tom: what i hear is there are an equal number of republicans and democrats i don't favor it. they believe it will create a moral hazard for the banks and it will be a license to go create another chaotic moment. three banks failed spectacularly last year because they did not get it right. 4700 didn't. most of the initially got it right and there are some common themes to the three that failed. realistically the industry can handle it if you supervise it right. if it is done right i think the economy will need it. if what happens is these midsize banks believe they need to be part of a bigger bank to offset the implicit guarantee -- this happens over a long period of time -- she will lose small business lenders and you will have a bigger credit crunch possibly in the united states when times get tough. lisa: putting regulation aside,

i'm looking at the idea we will see profit growth in june. we will see a blotting about -- bottoming out and people will start earning. from where? we saw autoliv in fall of a cliff. we saw mortgages having a real tough time. we have seen that market basically die. we have the issue of all these private capital providers that are coming into your space. how much can you really see growth? tom: you just listed the agenda of a typical bank board meeting. those are all the things when i go to a bank board that we talk about. have you seen our board books? that was pretty good. yes, yes, and yes. we are doing something we have never done which is unwinding massive support post-pandemic. it has messed with everything. nothing is happening like it normally does. the industry essentially ran out of deposits, because of all this covid money and the deposit had been shrinking. loan to deposits is the key ratio in the industry.

if the banks don't have liquid assets -- they are competing with treasuries. i heard bill gross's interview today. take a 5% t-bill. that's a pretty good return rather than putting it in a bank. that is not giving the banks the fuel to make loans. that will correct itself and we think it will by the end of the year. also as the economy starts to look better banks will get more eager about lending. it's all about our reset moment. we think it happens very slowly. like you said earlier, all we need is non-chaos for the stocks to go up. there has been so much bad news. jonathan: my favorite stat of yours. a bank in 2008 the top 10 mortgage originators and on the number is three. is that amazing? tom: we are talking about -- don't think for a second the rules and have major implications. here's the real problem. the regulators -- the regulatory

proposals are to de-risk the banking system. the business is still going to get done, just in an unregulated place which i cannot believe we are better off with. we have a lot of talk about about what we don't want. we don't have a lot about what we do want. we have the greatest financial system in the world. why are we playing -- changing it so much without an endgame policy? to get your point, in 2008, eight of the top 10 banks -- top 10 mortgage originators in america were banks. today does three. banks only make 25% of the mortgages in america today. that is happening because of regulation. i will even throw in never curveball -- another curveball. for all of us who read about the global financial crisis, in one night all the biggest investment banks became banks. now we are going to get a capital charge on investment banking activity. they will try to push investment banking activity out of banks

after they were all required to become banks. it will do the full circle. by the way, investment banking will still get done in the united states. it just won't be in a regulated entity like a bank. jonathan: you need to address the senator from massachusetts directly. enda curran --tom michaud will stick with us from kbw. let's catch up with the bloomberg brief. >> new hampshire heads to the polls. donald trump and nikki haley vying for the gop nomination. the first batch of results coming from the small town of dixville notch, with all six votes going to haley. israel says 24 soldiers were killed on monday after at an attack on a tank and explosions at nearby buildings. this is the worst single day death toll since its war against hamas began in october. israeli forces are advancing deeper into the southern and central parts of gaza while

facing mounting pressures to wind down the fighting. eurozone credit demand is bottoming out according to the ecb's latest bank any survey. demand has been falling for a year on the back of rising interest rates and a struggling economy. the survey shows the drop in appetites for business and consumer loans was smaller in the fourth quarter than in previous three months of last year. that is your bloomberg brief. jonathan: thank you. up next, a pivotal day in the republican presidential race. >> republicans have lost the last seven out of eight popular votes for president. that is nothing to be proud of. we should want to win the a geordie of americans. the only way we will do that is if we elect a new generational conservative leader. jonathan: that is next on the program. this is "bloomberg surveillance ." ♪

jonathan: three days of gains on the s&p 500, the longest winning streak of the year so far. the year is young. the three-day winning streak is here at the moment. yields are higher by two basis points. 412.82 on the ten-year. a pivotal day in the republican

presidential race. >> we should want to when the majority of americans. but the only way we will do that is if we elect a new generational conservative leader. i voted for donald trump twice. i was proud to serve america and his administration. -- in his administration. but rightly are wrongly, chaos follows him. you know i'm right. chaos follows him. jonathan: chaos follows him. nikki haley making her final pitch to voters ahead of today's enhancer primary. the republican field down to just two candidates and the former president holding a clear lead over the last remaining challenger. it is down to two. annmarie: that is what we're hearing. the theme in recent days has been who has the better or worse cognitive skills. that's a losing issue for both candidates. a better economy with data supporting the improvement is a big deal. this looks like a goldilocks economy. if americans begin to believe

that, joe biden has a decent chance of winning reelection. it is that the topic we keep talking about. is the timeline on his side? jonathan: we saw consumer confidence pick up. jobless claims just south of 200k. you wonder if it ever will. joining us now is henrietta treyz. even if nikki haley wins new hampshire we see no path to her becoming the nominee. why is that? henrietta: we are basically looking ahead. nevada, south carolina. the former governor's home state. they are going so hard for trump that she does not have a path forward beyond this. but republican voters are telling pollsters is that they want trump. the way i put it, nobody wants diet coke. they want the real thing. they can have the real thing of they just pull the lever for him. that is what i expect they will do in your hamster he's polling

by 20 points. looking forward to nevada and south carolina and then on to super tuesday. there is no inroad for another candidate. i believe the voters when they said they want donald trump. that is what republicans are telling them and that is how they voted in iowa. that is what i suspect is the path going forward. annmarie: we have a rematch of biden and trump. where does it leave independent voters and many went for biden last round? do they still go for him this round? henrietta: that is the key question in the ballgame. 56% went for biden in 2020. the fight should be for exactly those folks. 28% of the population spread nationwide. it only matters in a handful of states. we will be watching this carefully. the sa you would ask -- the same as you would expect. this year there is less likelihood that democrats win georgia. stacey abrams had an incredible

turn up in the senate race. i encourage folks to watch jim clyburn who's getting more aggressive. he is integral to vice president biden becoming the presidential nominee and for, the harris to become the vp. those are the important people to watch as they headed to south and north carolina and georgia in the general election cycle. lisa: you mentioned biden. can we talk about him being missing on the new hampshire primary ballot? is this going to be an embarrassment for him? henrietta: i don't think so. no disrespect to the people of new hampshire but they are not indicative of the state of national politics the way they used to be. just as dismissive as i am about a potential haley coming in five or 10 points shy, i feel the same way about biden. i don't think this confusion about the state. p1 by eight points in 2020 -- he

won by eight points in 2020. this is the first year where they are doing that so they are some anomalies but is not a warning for things to come. lisa: you get the people saying what of the possibilities of any was coming into the race? the only way either biden or trump is not the nominee is if some sort of black swan event occurs before the convention and party leadership decides it is time are necessary to go another direction. given the fact it's probably most likely almost certainly a trump-biden matchup, from a policy perspective what are you focused most on from the candidates and from the voters with respect to understanding what a postelection peirod look -- period looks like? henrietta: we have a $2.7 trillion tax bill that has to be written in 2025. the potential for my new ship on the corporate tax side, those

are the bread-and-butter of what i love to do. i cannot wait to get into that conversation. the most striking part investors are focused on is the potential for a universal baseline tariff. for those who remember the 2016 efforts from paul ryan to impose a border adjustment tax, it is time to dust off those old books. universal baseline tariff is what investors get most keyed into. they do not take trump lightly when he says he would impose a 10% tariff on all imports. it is the primary revenue raiser in his tax plan. as i mentioned at the outset, you must have a tax bill in 2025. all individual tax rates expire. both biden and trump would extend them. it's a matter of scale and scope and duration and the offset. how do you want to pay for that? d1 one universal baseline tariff to pay for it? if so.

take that incredibly seriously versus the last time around when they assumed the tariffs were something he talked about but never intended on doing. mexico, the eu, japan, china. there no difference or between allies and foes in these tariffs being proposed by the trump campaign. i think a lot of folks as we key in the policy as opposed to just vibes will start to think about tax and trade in the selection. jonathan: well said. henrietta treyz there. policy, not vibes. lisa: it is still a vibe based in what we are talking about. jonathan: united shares rising following better than estimated earnings. that conversation is up next. ♪ legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989!

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jonathan: three days of gains on the s&p 500. equities look like this. struggling to make it day 4. mastech positive by .07%. the longest daily winning streak of the year so far. two consecutive all-time highs on the s&p 500. the bond yields shaping up like as follows. pushback after pushback from fed officials against the idea we get an early cut. yet goldman are talking of potential for one and bank of america, too. lisa: you are seeing repricing

in fed funds futures. a 40% chance priced in of a march rate cut. doesn't matter if it's march or june? if it is march or may or june? i have been reading all these notes. it doesn't ultimately matter if they start cutting rates and doing so at a time of this otherwise strong growth. that's the bigger question right now. jonathan: tom nodding along. tom: direction is the key in its unanimous everyone believes the next move by the fed is a cut, which means people concert planning for that. the relentless increases was disorderly. now we get something that is more orderly. businesses can plan for that. jonathan: and the cuts are good for the banks now? tom: they are. it will decrease competition in an inverted yield curve. jonathan: isn't that a change in what we used to talk about? tom: yes. banks are asset sensitive. they do better when rates rise. banks don't do well and things are disorderly.

five and a quarter point in 16 months, i would define that is disorderly. jonathan: things were disorderly at times last year. yields up by two basis points. we want to finish up foreign-exchange. the euro against the dollar. negative by 20%. 108.64. voters heading to the polls in new hampshire facing a choice between nikki haley and donald trump, the remaining gop candidates intensifying their attacks on each other in the lead up to the first primary. haley seeing the u.s. cannot survive another four years of trump while the former president already looking ahead to a november matchup with joe biden. it's amazing how the primary has started and ultimately my finish in the next 24 hours. annmarie: it will potentially finish shortly. i, start to tell much money was spent in new hampshire alone. more than $75 million. that's a ton of money and a tiny state. nikki haley has spent a lot of

money and time there and it looks like the former president will win it. lisa: i wish you could go to the small states and just mail a check. when that be more effective than trying to advertise in all these ways with 70 people? -- so many people? jonathan: that would make it easier. annmarie: you want to make it more transparent. lisa: it's basically becoming clear that we know what the outcome will be. when do we move on to policy? jonathan: right now. it's about policy and not vibes. henrietta treyz five or 10 mins ago. how do you think about the prospect of a be having a completely different regulatory backed up with a trump presidency in 12 months time? tom: it's very important. the president gets the bill that his team who executes from the executive office. you have seen a lot of approaches and i will speak to the -- the basil three endgame rules. it's an effort of global regulators to have globally

systemic banks have a common type set of rules. united states just elected to gold plate there is income in according to jp morgan and others 30% higher than the rest of the world. that was a very aggressive step. i would argue that it is not as much about de-risking the banks as it is trying to really transform what the entry looks like. that's a pretty assertive step to take. that is the debate that's going on. those types of decisions get made by the president's team. jonathan: i want to turn to the u.s. and u.k. launching more attacks on yemen's houthi rebels to stop targeting ships in the red sea. eighth round of allied attack since january 12. it's causing a spike in shipping costs. china to europe rates are up almost 400% over the past three months. annmarie: you will see ships continue to avoid the red sea and the gulf of aden until his have this -- until they have

this under control. the administration was to degrade the houthi capabilities but make sure there's no civilian casualties. will it stop the houthis? no, but give them potentially less ammunition. jonathan: let's talk about the economic fallout. how close are we to seeing goods inflation start to pick up again? lisa: i have gotten so much pushback. people saying you are basically overplaying this. it will not cause massive inflation. they will only be a european problem which is why the u.s. is not necessarily going to come out with more protracted efforts to stop this. i don't know. i'm curious. i keep pushing back and saying it could be an issue. annmarie: an analyst said to me it's affecting someone's bottom line at this exact moment. maybe it's not as big as when all the ports have those huge pileups but at this point it's hitting somebody's bottom line.

the amount of money and fuel it takes to go around africa is a big deal. jonathan: not just the suez canal but panama as well. tom: macro risks are high. you can add this to another reason i think it leads to a little bit of caution amongst the business community in investors. jonathan: citi cutting its bonuses by as much as 20% according to a report by financial news. the latest news and a major organizational overhaul of the bank with 20,000 jobs set to be eliminated over the medium-term. bonus season on wall street. how good or bad is it? tom: typically wall street is a pay-for-performance business. investment banking -- i know no one is crying for investment bankers -- but they've been in recession for the last year. compensation typically follows revenue. on a percentage change basis should not be surprising. one thing i read in one of the stories is that i heard a lot of

the producers will get paid more than management. i would applaud them for that. that is a good step if that is happening. lisa: i wonder who the performers are. are they in the tech wing or on the trading floor or banking floor. where is the outperformance going to come from as we see banks shifting their models in a significant way? tom: there is tremendous pent-up demand for investment banking services. all the time to has been no ipo's in mergers and there's a lot of pent-up demand. five or six years ago we started the boom of private equity. there is a terminus number of companies and private equity portfolios that are seasoning the need to be dealt with. i have been on wall street for 38 years. my experience is when it turns it is not just a little bit. it usually turns a lot. once the markets open you will start to see a lot more activity. citi is like other firms which is that you have to think what we are seeing out the new

normal? i personally don't believe so. i think we will see -- when we get stability and orderliness like we talked about there's a lot of business to be done. a lot of price levels will have reset which will allow things like mergers and ipos to happen. jonathan: you are constructive about the end of the year. getting paid in citi stock has been like getting a bonus cut every year for a long time. that has not been a good thing. lisa: except for right after 2008. in 2009, it was a good thing briefly for a hot second. how do you even the playing field to attract talent another way? tom: we talked about how big -- it seems to be a safer place to put your money. it has not necessarily been the best investment or not the highest performing companies. there are great small banks and are banks that are really big that have challenges. size is not a determinant of success.

it might be a determinant of depositor confidence but not success. jonathan: let's turn to earnings from united airlines. shares flying high in the premarket after the company reported better than estimated results. the company posting a strong profit outlook for the year despite uncertainty remaining over the status of its boeing max 9s jets. brooke sutherland joins us for more. . how are they getting this done with 70 flights on the ground? brooke: the forecast for the first quarter is not great. that is a seasonally weak period for airlines and difficult for them to navigate in the post-pandemic period we don't have the business traveler coming back in the way they have historically. they are looking for a sharp turnaround in the second part of the year. a lot of that is international travel and continued trend of travel is gravitating towards more premium options. the legacy carriers have really benefited in this market whereas the low-cost carriers have

struggled. lisa: if they cannot get the max9 jets online and not remedy the issues they have complained about, does that materially affect their outlook? does that hit their stock yet again given they have had such uncertainty baked into the forecast? brooke: i think you will see higher maintenance extensive -- expenses. delta was talking about 350 million dollars of extra maintenance expenses this year relative to last year, which was by no means cheap as far as aircraft maintenance. it is not just the max9. rtx is doing a very costly recall of its gtf jet engine that powers the airbus a320 jets. you are talking about significant chunks of the aviation fleet potentially being grounded over the course of 2024. what that means is they have to keep flying older planes for longer or they have to use bigger airplanes for markets that don't necessarily need that many seats. that has a cost to it.

lisa: ge came out and disappointed ahead of their big break off. shares tank. what's going on in the industrial complex in the u.s. or is that too broad of a question? is this a bowing problem over a ge problem? is there something hampering these companies that they cannot get it done? brooke: ge stock is taken off like a rocket ship. people are excited about the possibility of having a simplified ge at long last. this is a company that has a tendency to be conservative with its guidance. we need a little bit more details but i don't know if that's necessarily a macro impact. you did have 3m calling for flat 2% organic growth. that is not heroic. that is not something that is going to get investors excited coming off of a 2023 that was very weak for short cycle industrial companies like 3m. the companies that have a quicker turnaround time. they have been struggling with this inventory de-talking.

peace --de-stocking. you are seeing orders start to slow. we have not seen the boom to the bottom line for any of these phenomenons we keep talking about. it is just not necessarily showing up in a major way just yet and bottom lines. analysts are optimistic that could happen in the second half of 2024 but we will see if we end up getting that. jonathan: i want to finish will be started on boeing and united. how do you expect this to and for the people you speak to? what's the base case right now? brooke: you have to look at management and wonder how much longer you can keep the current management in place given the series of crises they have dealt with, big and small. from the grounding of the max to to them having quality control issues before this latest one involving the door plugs. there was improperly drilled fastener holes in and quickly

installed rear fittings on the max. you have to wonder if it is time for a deeper rooted cultural change. ge is a company that is really gone top to bottom and reworking the way that business is run. you need a similar change in falling and that might have to come from somebody with more outside perspective. jonathan: brooke sutherland of bloomberg opinion. the second time this come up with brooke. lisa: you cannot avoid right now. is series of things. in 2019 there was an issue and i was one hit after another. they have to examine these plugs in different models and the fact that we saw a burning plane flying over miami. this is not helping. this is not what you want to see. jonathan: perception, not reality, that the ragged three data is a soft touch on a company like boeing because it's a national champion. lisa: there's the issue of who are they getting to inspect some of these and what kind of

turnover are they seeing post-pandemic. we hear this again and again. staffing issues that have become really problematic and created some liabilities. at what point for that really shake out and normalize fisa -- normalize. jonathan: let's get an update from bloomberg brief. yahaira: beijing is considering a stock rescue package to stabilize its slumping markets. bloomberg learning authorities are seeking to mobilize about 278 billion dollars from offshore accounts of chinese state-owned enterprises. that will be used by shares onshore through the hong kong exchange link. the plan has been met with skepticism with investors expecting any stock rebound to proof leading without a fundamental fix. netflix has bought the exclusive rights to the world wrestling entertainment show raw. this is streaming giant's first

big move into live events. raw will air on netflix beginning in january of 2025. harvard university is picking up his legal team for two probes brought by the health education and the workforce committee according to people familiar with the matter. the investigations focus on anti-semitism on campus and harvard's handling of plagiarism allegations against former president claudine gay. jonathan: up next on the program the credit market gets the boost. >> these are things that would not have been able to issue last spring. you would not have been able to sell the paper even if you tried. now they're issuing with little concession. jonathan: that is next. "bloomberg surveillance "bloomberg surveillance you are watching -- you are watching "bloomberg surveillance." ♪ chances of a plane crash -- 1 in 11 million. you're not gonna finish those salted nuts, right? never waking up from anesthesia -- 1 in 185,000.

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jonathan: stocks on the s&p 500 totally unchanged after closing yesterday at another all-time high under surveillance this morning, a strong start to the year for the credit market. >> we have had a tremendous few weeks in investment-grade credit. i think to speak to the amount of sentiment has shifted in the last 12 months, you think about the regional banks and the issuance they have done in the last week, these are banks that would not have been able to issue last spring. you would not have been able to sell the paper if you tried. now they're issuing with little concession and multiple times oversubscribed on the books. it's been really large sentiment shift and i don't expect that to change anytime soon. jonathan: what i start to the year for credit. lisa: i can hear the pylon from every corner of wall street. the fastest pace of issuance in decades. the fires as well. andrew sheets over at morgan

stanley writing, "we don't see credit as sensitive to whether the fed is easing in march or june. if the longer-term path is clear. overall balance sheet health looks solid with plenty of dispersion." is there anything that can crack that solid nest -- solidness if the fed is not cut as much as expected? jonathan: let's ask meghan robson over at bnp paribas. what a start to the year. can we start with the supplied? meghan: incredible demand for issuance we have seen. hi great issuance one of the top levels we have seen on record. it's amazing to cig spreads tighten as we have seen all that issuance. we think some of it is corporates pulling corporate issuance from later this year to now given the strong demand. in the case of financials we have seen regionals take

advantage of the environment, diversifying away from their deposit base and locking in some long-term funding. jonathan: are they pulling forward this year's supply or catching up with last year? meghan: if you look at long-term debt growth for investment grade, it's very muted. we are at 1% growth. this is not a huge boost in issuance overall in terms of the long-term trend. there are some issuers that are catching up but there is also high great issuers we have talked to that cop to planning issuing in the third or fourth quarter. investors are thinking this could be the last time they have opportunity to lock in yields in investments at these levels. that is why we have seen so many deals oversubscribed. lisa: some overly skeptical people could say if they're issuing over something this favorable, that means yields could rise or spreads could rise. nobody is calling for that, serving out the investment side. can you bridge that gap?

meghan: we are pricing in this environment which should benefit the refinancing risk. but the open question which is still very debatable is if the lower quality issuers are going to be able to refinance later this year. we have seen a lot of high great issuance, higher quality issuance. for triple c's you have 25, 30 issuers. for them three financial penalty is 300 to 500 basis points. that's a major risk for the credit market. lisa: we have tom michaud nodding vigorously. what can go wrong? everyone sees this sweet spot credit. tom: the consensus is pretty strong and you have a lot of believers in the soft landing. the risks we identify is around credit quality. we are forecasting a 25%

increase in credit because for the banking industry for this year. that is still below what is normal. you could argue that banks are still over earning on credit. when credit costs go up it should not be a surprise. it has surprised us for how long it has been so low. when we do channel checks, look at the recent quarter earnings, nonperformance or up a little bit but they are one offs. credit quality is still excellent in the banking industry. there is nothing on the horizon that is making us nervous about it. you have some big issues. commercial real estate is a big issue. we think it is primarily specific to the big cities in the big properties. we also believe nonbanks have at least half that exposure. it is not all banks that have that exposure. jonathan: would you agree with that? meghan: we were surprised in the financials earnings to see how positive the credit picture was for financials. cre increased a bit. very muted. cre remains in overhang but slow

moving train. the positive credit reporting on financials was definitely supportive and has helped demand for many of these deals. tom: from a bigger picture is it just means the worst case scenario is further off the table. it makes people feel more comfortable that we are in a more orderly typical market. we are seeing no directional changes that said some of those risks everybody was worried about last year are happening. we are getting further from that rather than closer. lisa: if people said rates would be at this level and a lot of high-yield companies that borrowed at 0% would come and have to survive, people would have said this would be armageddon. you have incredible mass default. does it surprise you we are here and people are talking about this sanguine environment where every thing will be fine and people are going to be able to survive these levels? meghan: it's very surprising to us and has been. the liquidity backdrop has been very supportive.

that is one factor. look at the data. it continues to surprise to the upside. consumer intimate -- sentiment and retail sales last week. if we see earnings growth and be more challenged the here, that could really bring the wrist back into the discussion. tom: i think the forward market will favor companies with earnings. he sought in the stock market and you will see it in the credit market. that would be my perspective and our perspective. as we get orderly those companies that might have that trouble you were alluding to, if we get an m&a market, they will sell before they have to re-fi their debt. when there is a crisis you cannot do that. if you get stability, they will take actions to correct before they have to go to market with a tough deal. jonathan: favorite trade for 2024? meghan: we like decompression

over outperformance of investment-grade over high-yield. top conviction there. jonathan: meghan robson constructive on credit. amazing how things of into start 2024. lisa: at a time and rates have not gone down that much and they could stay here for quite a while. if the economy does well, people are happy. it is funny. it tells you where as we have been. as long as they have earnings. the fact we have companies that have no earnings that borrowed for as long as they did tells you something. tom: i'm glad we are positive on the investment banking stocks. jonathan: you are super constructive looking for that reacceleration year-end with the one thing that can disrupt it is credit issues. tom: we were talking about it. things like commercial real estate and consumer credit. 3.7% unemployment rate is probably better than what we would have expected. we are seeing stress starting to come into the consumer. the companies that are major

consumer lenders talk about it as we are getting -- we are normalizing. there is not a sense we are breaking out to another level. that is something to watch. jonathan: i love this. great to see you. how long have we been talking about cre, commercial real estate? just waiting for that to work for the economy. lisa: it's been three years. pandemic, lockdown come armageddon. -- lockdown, armageddon. there was the survival of office space and i have every set. in certain pockets it is still distressed but people think maybe it is priced in. jonathan: if you missed coverage from davos, constructive. hopeful. annmarie: she was optimistic. jonathan: a couple of days in new york city and it is armageddon. we will head to new hampshire from the -- for the latest. priya mr. and michael gaben.

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>> the markets are well ahead of themselves in terms of rate cuts. >> the fed is saying they will cut and not hike.

>> i do not see a huge gap between the market and what the >> fed ultimately wants to do. >>they will be taking a read on the macro outlook to figure out where to cut rates. >> every now and then things get ahead of themselves. and to us this is one of these times. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning for our audience worldwide. this is "bloomberg surveillance." your equity market on the s&p about positive after three day -- three days of gains, the longest daily winning streak of 2024. record high after record high. financials in the rearview mirror. we will be talking about tech later on. lisa: netflix is a first one kicking off things. we will be hearing from tesla and intel. how high is the bar?

we were hearing yesterday it is not that high. but we have seen disappointments and they have been punished. at what point do we get a blowback back to a soft landing versus the opposite which seems to be a pileup. jonathan: the u.s. wins. let us focus on tech numbers. europe is where they are not. china is struggling. the difference between the united states and china, i think we sit on that for a little bit longer. the u.s. at all-time highs and china trying to stimulate demand in its equity market. that is night and day in global equities. lisa: two points. this is a china specific question and how much the u.s. and chinese markets have diverged. given what we have seen. and then you can ask the question about how much the u.s. is more broadly. we have seen this with europe and other countries. the u.s. has continued to shine and has with the big tech names. jonathan: the market is good but

the politics are messy. we can talk about new hampshire. it is nikki haley versus donald trump. we are told by many people already in the last one he four hours, this race could be over by tomorrow morning. annmarie: it does feel like a make or break moment from nikki haley. we saw trump sweep through iowa and there is potential for nikki haley to breakthrough in new hampshire. it is a place where she spent a ton of time. the problem is that the polls show that the former president is winning. what is her path like after that? lisa: a lot of the ports and analytics -- of the reports and analytics have moved beyond nikki haley and a lot of people are saying when will she drop out and not what is the path to be her candidate. when do people move about the policies and the potential for some sort of blanket 10% tariff, which donald trump has talked about. do we start talking about that? when do we start talking about what the u.s. looks like whoever

could win this race? jonathan: i think right now. the problem i have and i am worried that others share is that we have a foreign policy vacuum. united states and the u.k. struggling to restore order in the red sea. do you know what the perception of america is is that there could be weakness and it could be replaced by strength. just how vulnerable are things on the international scene at the moment? annmarie: it says a lot that you say the u.s. and the united kingdom in the red sea striking back against the houthis. no other countries are joining them pushing back and what they are doing to global trade in the red sea. lisa: blackrock put out a note saying that things have changed in the geopolitical front and when they look at it it has gotten more front and center than in the past exactly to this point. these uncertainties could flareup in ways that people have underpriced and blackrock css ads feeding into an inflationary impulse. jonathan: in his research "we

believe the disinflation process is likely to slow or stall in the first pack of dust first part of 2024 in part because of shipping disruptions and upside risk for energy prices." lisa: it makes sense, if you think about it logically. if you have to go all the way around south africa and have the same voyage isn't that problematic? jonathan: let us get you up to speed on the price action. equities are positive on the s&p 500. yields about two basis points. on the 10 year, or .12 62. lisa: we have not seen any fallout in the stock market. i have to say even though it has been better than expected it has not spoken to this region inflationary vibe because you see inflation expectations coming down. at a certain point highly higher yields will be a problem. jonathan: markets at the all-time high as tech earnings begin.

looking ahead to results and placing their bets on rate cuts. katie writing this, fixed income optimism is fading and yields crept back up recently. the general view is that inflation could be stickier than hoped and it would take more time to get to rate cuts. she joins us now for more. let us talk about the spread and welcome to the program. the difference burst -- between the perceived view and what the market is price for. how do you expect that to reconcile? katy: if you look at what happened it was a massive, massive reduction in yields. i think people were ready to throw in the towel. it is time for cuts, let's move on. we have seen that people capitulate a little bit and say it is actually not that easy to get inflation down that quickly. it will take more time. that does not mean that we are not in the right path. it means that disinflation hope is not really going to happen in a month.

it will take three, six, or a few months for them to capitulate before the fed capitulates and says it is time to make cuts. that is how i see it. lisa: why is not -- why is long the new short? katy: because we finally saw a pipit in the fixed income market after nine quarters. we were looking for the rate and for the end of the rate hiking cycle. and when you think about it, they still look good and have positive carry. what we are trying to find now from a technical perspective is a steepener, or what is the shape of the yield curve. it does not mean that bonds do not look somewhat attractive. lisa: when you say bonds is there a tenor that makes sense, especially with a two-year option at 160 $2 billion of treasury options this week alone? katy: short-term fixed income is

a really nice return. and then when you look across the yield curve a little more reticence about long-term bonds because we do not know yet how things will play out. i know that credit could be an issue and we could see a resurgence any -- in inflation. my view is to be cautionary when you have a very small puree me on -- premium for long duration bonds. so long the short end and short the long end. jonathan: when we pick up on inflation re-accelerating, jp morgan says "we believe the disinflation process is expected to stall just a slow and stalled due to the impact of shipping and supply chain disruptions and upside risk for energy prices. share that concern? katy: i do. if you look at the signals in the commodity markets we have been walking -- watching for an uptick. you have seen that this month. it is just showing us that there

are still some large risks that could easily cause some vulnerabilities in those sectors, which might lead to potential pass-through effects as a company. it is going to take time to get inflation down to what we are used to if we continue to have issues. jonathan: can you build on that. how much time would it take for those pressures to show up. the next few weeks or months? where on the calendar would you expect the next -- that tension of the next few months going forward. katy: commodities action moves quickly. if you look what happened during the ukraine crisis, commodities move first. if we actually have problems we will see it in the short rather than the long run. that will be the catalyst to a longer-term move that could inflect -- affect inflation. lisa: last year you had the most conviction to short bonds which

was counterintuitive and for the bulk of the year did well. what is your highest conviction into 2024 that feels convictionless rather than the soft landing. katy: the biggest trade that surprised us is the divergence between u.s. and china, and even japan. the best trade has been the yen. -- long japanese equities and short the rent -- short the yen. that has been an interesting differentiator. jonathan: we appreciate the update. thank you for being with us. you expected it just -- to show up in energy markets. mh in the 70's even with what we have been a talking about. it is october. annmarie: unbelievable that we are waking up to another night of airstrikes in the red sea and energy prices are down. lisa: how much of this is u.s.

policy, we are pumping at the same time and we wonder where the margin comes from should there be a material disruption. this is a slow grind, not a massive disruption. libyan oil came back online. jonathan: let us get you an update on stories elsewhere. here's the bloomberg brief. yahaira: aberdeen is preparing to cut hundreds of jobs according to sky news. the format reportedly announced layoffs at a trading update. abrdn declined to comment. the investor has already slashed employee benefits as part of a cost-cutting plan. bitcoin has fallen over 20% since its intraday peak january 11, when the first spot etf debuted. the largest digital assets spiked above 49,000 and is now hovering below 39,000. a net one point $2 billion

slowed into nine funds during the first six days of the launch. liverpool fc is set to be in talks with very media groups about a behind-the-scenes documentary. bloomberg learning that the current manager is supportive of the project after turning down interest from amazon's all or nothing serious. liverpool was part of a 2012 documentary "being liverpool." jonathan: thank you. who is doing this right now? lisa: this is the playbook, turn your sports team into a drama series or something like that. jonathan: tennis did this, football has been doing it for years. who isn't doing it? lisa: horseracing. not as much as those. maybe aquatic ballet. lisa: i would watch that. jonathan: i think a lot of

people avoid. this has been the playbook. lisa: you get the money from that and you drum up support and it does not matter if you win or if you create the emotional dramas and then if you win it is more personal. his is the new playbook outside of the contract that is dependent on advertising revenues? jonathan: michael is keen to see that liverpool documentary. up next haley's last if -- ditch effort to take down cut donald trump. >> there is bigger buzz around his vice presidential pick whether -- other than nikki beating him in new hampshire. ♪

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jonathan: one hour and 15 minutes away from the opening bell. just about unchanged, the s&p 500. 0.1%. the yield bleeding a little bit higher. 4.2 162. haley's last ditch effort to take down trump. >> what have we been saying for the past six months, head-to-head polling that shows donald trump potentially beating joe biden in many of the swing

states. that has been a psychological factor that has been truly underreported and now there is a feeling of inevitability. you have seen the republican party coalesce around donald trump and possibly bigger buzz around who could be his vice presidential pick rather than can nikki haley beat him in new hampshire. jonathan: donald trump a nikki haley squaring off, a make or break moment for the former u.s. ambassador. governor ron desantis' endorsement increases the that trump wins and becomes a virtual lock to become the gop nominee. it could be over by tomorrow morning. annmarie: terry haynes talking about governor desantis, where do is voters go. the key is how much haley gets of the 50% ghost and -- ghost christie slashed a hand -- desantis new hampshire vote. our instinct is to fall short of

it making trump a clear favorite and putting haley's campaign on life support. if the turnout is 3000. 3000 or above haley could surprise. it is not over just yet, but let us see the turnout. jonathan: let us get up -- catch up with kailey leinz. can nikki haley get it done? kailey: it has been described as an uphill climb. this will be very hard for her to pull off. this is going to be primarily about turnout. the secretary of state joined bloomberg yesterday predicting more than 320,000 voters could turn out to vote in the republican primary. americans for prosperity, the super pac supporting haley has said closer to 340,000, but it has to be a real turnout and show of independent and undeclared voters that could break for haley that could help

her cross the finish line. polls suggest this will be incredibly difficult to pull off. suffolk university and boston globe have a traffic pole. they show trump at 60%, 22 points ahead of haley. that is the widest spread we have seen. typically new hampshire is able to deliver upsets. you see candidates upsetting gaining in the polls leading up to the boat and that is not his -- and that is not what is happening for nikki haley. annmarie: can we talk about the name not on the ballot. president biden is not on the democratic ballot caught up with representative phillips who says if he does not get a very large showing, people write in his name that he is perceived as weak, what did you take away from that interview? kailey: it was interesting to hear from congressman phillips who is competing for the democratic nomination and has been campaigning in new hampshire while president biden is not because president biden

has with the dnc decided that south carolina should be the first primary because of its more diverse base of voters. that is why there is a write-in campaign that they can directly support through different surrogates like annie kuster. it is a question of what kind of number that biden can put up considering incumbent presidents in new hampshire has secured 80% plus of the vote and that is the marker that dean first -- forest stood for. he said that biden should put 80% plus. if he does not that is a question if -- of is he had -- if he is a week candidate. he shared that it is a -- he is a weak and unelectable candidate. dean phillips told us that he thinks we will all be surprised by his showing in new hampshire today. he is saying could maybe get above 20%. annmarie: he has up against 20 names.

back to the republicans in iowa, in 30 minutes we knew he had won. how quickly or we can is seen new hampshire votes materialize? kailey: the polls will be closed by 8:00 p.m. and there is talk of an 801 call because major networks called iowa 30 minutes after the caucuses began. they had not finished at that point. it is really going to come down to how close the race is. the issue in iowa is that trump was leading by such an overwhelming meaning margin that it was clear that nikki haley, or ron desantis or vivek ramaswamy had been able to catch them. if it is a tighter race and suggested that it might be more difficult to call it so early. annmarie: let us talk about the weather. everyone was talking about the weather in iowa. i am looking at the weather in new hampshire, a high of 38 and a low 28.

it seems fine for new hampshire. will that determine turnout? are you expecting a bigger turnout than iowa? kailey: it feels like the bahamas after iowa. this is more than 45 degrees warmer than iowa. the weather could play a big factor in driving people out which might contribute to the high numbers we are seeing from the likes of the secretary of state, north of 300,000. turnout is driven by enthusiasm. that is another thing that we have to consider looking between the polls between nikki haley and trump. trump voters are more enthusiastic about his candidacy. they are far more likely to say their vote is for him that against haley. with nikki haley, a lot of voters are voting against trump and not for her. that could be a real factor, does the base of trump feel more impelled to go out and go to the polls and vote versus those who might not be as excited to cast

a vote for nikki haley. that said, you can say that trump is leading by such an overwhelming margin that some individuals will think that he can take it so my vote will not matter as much. it is the enthusiasm factor in addition to the weather that we have to consider. jonathan: looking forward to the coverage later on. kailey leinz in new hampshire. tune into bloomberg tonight at 8:00 p.m. eastern time, complete coverage of the new hampshire cover -- primary. that enthusiasm gap is massive between the former president and nikki haley. annmarie: it is impossible to run a primary with somebody who feels like it incumbent at the same time governor desantis said i was picking up steam and then you could not get through. the oxygen and media given the fact that everything was pointed towards trump and his legal troubles. and he made his legal troubles and election campaign issue. lisa: he ignites emotion each is why he haley's path would be to

ignite the opposite. but the alternative to love, so people feel -- that people feel towards donald trump. the question is is a referendum on him. a lot of people say you are seeing the coalescing of the republican party. i feel like people have moved on and it has gotten this inevitability about it. jonathan: do you know what is amazing, if nikki haley began the candidate, the win that we would see, it would be absolutely humongous, and that tells you how deeply unpopular the current sitting president actually is. nobody wants this outcome, and i say that you sleep. it speaks for itself. annmarie: this shows that americans do not want a rematch but that is what they will get. when next few months will be all about what does the trump campaign lawyer like in swing state votes versus what is biden doing? you will see a lot of visits to

wisconsin and michigan. those are where elections are won and lost. lisa: what does it say that a candidate that would be so easy to win on the national stage looks so impossible to win on the primary stage? that tells you a lot about the polarization we have seen. annmarie: it is why america chooses candidates this way. why was $75 million spent in new hampshire where there are 830,000 rides absurd for -- registered versus -- votes for the first caucus start in iowa? lisa: i should move to new hampshire. it is good skiing. and you can vote in primaries. jonathan: we will continue the coverage tonight with the team. lisa: wearing my balaclava. jonathan: and hit the slopes afterwards. coming up michael gave in of bank of america looking at critical data and a federal

reserve meeting around the corner. for that, b. michael gapen things that you see a rate cut as soon as march and a soft landing. equity futures on the s&p 500 deposited by 0.1% and yields are higher by two basis points. 4.1262. michael gapen has company. we have more of the same, march cuts. lisa: soft landing. else you get, ice cream? jonathan: rainbows, unicorns, and ice cream. soft landings and all-time highs in the equity market. coverage up next. ♪

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jonathan: stocks on the s&p 500 positive by zero point 1%. about an hour from now we are positive by point 3%. the russell bouncing back by .03%. it is about big tech a little bit later. lisa: netflix kicking off the earnings at 4:00 p.m. eastern and then tesla and intel. and then we get the big behemoths. and then the question is how low or high as the bar at a time when this has been the driving force behind the rally. jonathan: it is my favorite time of year we get the tech earnings and federal reserve decision. lisa: is that sarcasm?

jonathan: that is serious. i told the bankers and tableaux this. i wish they would deliver the earnings after the bell. or before the bell. you never get to read them and you have a bunch of earnings calls and than the market opens up. in the afternoon, after the close, tech comes out and you can read the earnings and listen. lisa: that is hugely instructive. the reason that the u.s. has diverged is because of the big tech names and they are the ones that are leading. the key question is if are you going to see broadening out. we are also getting 5% of the s&p. we have a bunch of the industrials. around the margins the next two weeks could be massive. jonathan: looking for that improvement a breadth in the equity market with broader anticipation. we are going to the bond market and joined by a gentleman who is looking at a rate cut in march. a two year at the moment around

4.3997. around two basis points on the 10 year. to finish up foreign-exchange, i'm trying to remind myself of this, there is an ecb meeting. we are negative by 0.1%. this is coming around quickly. lisa: we had it last week. jonathan: twice. lisa: they will not say anything. what will they say that will move markets given the fact that people are expecting them to cut rate in the summer, which is what she said last week. jonathan: news conference round three, far more interesting. how many journalists will ask about politics of the united states and whether it is appropriate to weigh in on u.s. politics and her response to the reports around the dissatisfaction of the staff inside the european central bank. there is a lot to discuss this thursday. lisa: i cannot imagine that she will back away completely but she has weighed in on the

politics. that she doubled down, justify or explain why that folds into monetary policy. annmarie: and she has weighed in with france 20 fireside chats at davos, large panels where she said that europe needs to go on the attack. at some point a journalist needs to act is inappropriate. when you say chair powell answering a question about emmanuel macron or olaf scholz? jonathan: or back home with donald trump, just avoid it like the plague -- like the plague. lisa: that is the last question. jonathan: united airlines reporting better-than-expected earnings but expects to lose money as a result of the boeing 737 max 9 grounding. scott kirby venting his frustrations over boeing management and its handling. even taking the issue to pete buttigieg.

where is pete buttigieg on the story? annmarie: he is saying that they have conveyed to boeing how they feel and they want to make sure that they are getting answers. the fact that they are airing frustrations to the white house, what is the white house supposed to do? they are monitoring it. this is not the decision for the west wing. the faa -- the faa needs to go through the process. lisa: i was scared of flying as a kid and then i flew a lot and it did not matter because it would be safe. it is disconcerting to see burning planes and have this a concern, even if it is not justified. flying is still very safe, get it. but, there is this why do we have to worry about this too. jonathan: stories will spook you. tk talked about the turbulence and he said that a woman was stuck to the ceiling. not lying but flying back from zurich and i am standing up and we had a little bit of tournament and i look at the ceiling. and i move back to my seat.

let us turn to this story. new hampshire voters casting their ballots in the gop primary. anti-trump republicans looking to rally behind haley in the last chance to avoid a trump-biden rematch. haley will look to her home state if she can pull off an upset. it is unthinkable that we are talking about this ending before she gets to her home state. annmarie: she is trying to bring out the independents who do not want a rematch of trump versus biden. what haley says constantly is look at how i poll versus the former president. i am leaving him 17 to 20%. at the same time it looks like the republicans will go with the incumbent. lisa: which we are excited about. you said you are excited about this campaign will have to give us some of your excitement because a lot of us are frustrated about the divergence between what people want and what they are getting and it seems like nothing they do.

jonathan: politics worldwide. i want to get to this from goldman, we are speaking to bloomberg weighing in on the fed. >> the fed is on its way to achieving the soft landing. obviously no guarantees. i like what i am seeing. jonathan: sticking with his base case for a martial rate cut. they still resilient labor markets, consumer prices and comments about cutting before inflation returns. here is another man who says that you might get a march rate cut. "look for a reversal of september -- december strength in january. consumer strength might be healthy but it is not surging or slumping. and we do not think that the report says much about the fed's ability to cut rates in march as we expect." good morning. march rate cuts even with that

data last week. michael: we think that was influenced by the seasonals. pulling forward of consumer spending and -- in october and november and the difficulty adjusting. we think it is more noise than signal. lisa: what else is telling you that given that the other economic data has come in that are than expected? michael: we can point to seasonals being about 2.2 percentage points more favorable in december -- this december than last december. it should wipe out any underlying signal. behind that it is what gets them to the inflation data. even if the activity side of the economy is doing well, it is really the deceleration of inflation and the fact that we are six or seven months with annualized course piece -- core pca. so as we run into the march meeting we get gradually more confident. lisa: a march rate cut or do we lean into or you do not lean into the idea of six rate cuts,

you see four. michael: early but gradual. lisa: how do they communicate what the goal is? what the terminal rate is? we heard bill gross say that they are basically pinpointing this and throwing a dart at the wall because they do not have a sense of what the neutral rate is. so how do you get a handle on what they are looking for and signaling? michael: you never truly know where the neutral rate is and that should not stop you from making decisions that are the right policy decisions. what they will communicate is that we are on track for achieving 2% and to avoid policy from getting too tight, we will file from this position down. we are not using in response to a recession. we are normalizing the policy stance and preserving policy rate tightness and guiding inflation lower. it is tricky, but i think they can do it. annmarie: bob diamond yesterday said that the bar is much higher.

do you agree with that? michael: meaning that the closer you get to where you think neutral is, you should be more conservative? that is right. i think you heard that through those comments that we should go gradual. it will allow us to be methodical and evaluate things. this is not recession cut early, fast, and d. it is move gradually and methodically and you will have to find your way. jonathan: if you go in march, would you expect for them to take it up next week? michael: they will move to a balanced language. it will remove the upside bias and talk about future adjustments to the policy rate. it will be more two sided. that is about all they can do because they see effectively three more inflation reports. they see the one for this week, be wary and then cpi and ppi into the march meetings. there is a lot of data that can still move. jonathan: the macro agrees with

you that this is the direction of travel. you heard something from goldman sachs. it just looks at the tension emerging at the red sea and the process that we get a pickup and re-acceleration of goods and nation again, what would you say to that? michael: possible. when we look at the data about where the u.s. gets trade flows and goods and imports from, not a lot goes through the red sea. we think that type of impact could be minimal. lisa: i have read report after a report of a reacceleration and housing markets and a whole host of business as in response to the expected rate cuts coming this year. are we not talking anymore about the fact that the market has priced in the rate cuts for the fed so we have already done it? michael: the fed will be validating, some of what markets are pricing in. yes, there is a risk that they have shifted early in this direction and later in the year the easing of financial

conditions will cause things to be more robust than they want. on that we are comfortable with saying the inflation data tells them they should be using and we think that happens in march. and risks are balanced around that. annmarie: on a scale -- lisa: on a scale of 1% to 100% what is your positivity of a rate cut. michael: 66.5%. lisa: how much of that increase? michael: over the past few months it has been the same. the big change was over the summer because we had a mild recession camp. at the scenario. jonathan: how weak is the labor market. he said around the table and we look at claims, 187 which is remarkable, i have lost count of the amount of dust months we stay below 4% we have people saying that there is weakness

emerging. you see the same thing? michael: you can point about the narrowness of employment gains. it is still coming from the catch-up sectors, the high touch and face-to-face. so i think the numbers are private payrolls averaging 134,000 per month over the last six months, 127 of that comes from these two sectors. so employment growth in the rest of the private sector is basically flat. the risk if it the catch-up effect fades were quickly than we think does private employment slow down to zero and do we get the recession risk? or has the fed shifted its tune early enough that the rest of the economy get supported in the second half of the year gains employment? jonathan: is that what is driving the decision for the march cut or the disinflationary trends, are they sufficient? michael: sufficient but some softness will help their case to go in march.

jonathan: good to see you and great to have you back. michael gapen on the march rate cut and a soft landing. lisa: 65.5% chance and then 88%. jo 65 is not right up there. lisa: it raises the question what could go wrong and i am very curious about that. i will focus on the 35% chance intensely. jonathan: let us get you an update on stories elsewhere. here is the brew burghley. -- the bloomberg brief. yahaira: shares of de falling -- ge falling after the first outlook fell short of expectations. it is in the process of separating the aerospace and energy businesses into standalone entities by early april. after splitting off its health care operations in 2022. johnson & johnson posted fourth-quarter results that beat estimates thanks to a rally in medical device sales and pharma

revenue. it is narrowing its focus on high-margin ventures ahead of unexpected drop off in sales for popular drug stellara. cheaper alternatives are expected to hit the market early next year. tko group appoints dwayne johnson to its board of directors effective today. the owner of wwe says that it has also entered into a services and merchandising agreement with johnson that provides for his promotional and licensing services. shares of tko group are soaring on the back of the news that netflix bought rights to which show raw. that is your bloomberg brief. jonathan: up next, while the fed begin to signal cuts? >> i would stop quantitative tightening. i think that is just not a correct philosophy and policy at this point of time. jonathan: that is next.

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jonathan: live from new york city, equities positive by 0.2%. the opening bell is around the corner off by two basis points. for to -- 4.1205. under surveillance all eyes on fed cuts. >> i would stop quantitative tightening. i think that is not a correct philosophy and policy at this point in time to continue to not tightened quantitatively. they should leave the reserve balance around $7 trillion and just see what happens going forward. jonathan: bill gross weighing

in. the former pimco chief weighing in on what the federal reserve will do. p seconding the motion,riya, saying that "we think the fed will taper qt. the fed is trying to finesse the lowest level of reserve to present a situation similar to the repo strike in 2019." lisa: i am curious. the conversation has been dominated with when they will cut rates. a big amount of dissent whether it matters. deutsche bank writing in response to some of the rally that we have seen in applico these -- and equities "the chink in the armor is rate expectations. futures are now pricing and with a 42% chance of a fed rate cut by march which is a big ship that shift by 2023." does it matter if the direction is known? you get different answers. jonathan: i will not answer that.

does it matter? >> i do not think so. if you are trading the contracts it does matter. if you are trading the two year or equities of any asset class what matters is the end point. how much are they cutting and what are the reason? are they trying to normalize or ease policy. i would argue that the market is pricing in rate cuts. whether they start in march, may, or june if they will cut the point for -- 3.25, they could actually cut lower. the longer term rate is closer to 2.5. 2.5 to 3.5%. that is still normalizing. it means volumes have some room to decline. if the economy is cutting fast and below that 2.5 level when you have to be really nervous. lisa: we will get into what can trigger that. the reason why march matters is the political backdrop and they

say there is no way the fed will want to be aggressively cutting ahead of the election. it will be tricky. so why not frontload it and get ahead of it. do you buy that? priya: the fed has enough things to focus on. it is difficult. they are going to get dragged into the political debate. but i will argue that they have a friend with a framework in a dual mandate and inflation is going to allow them to cut. averages are running 2%. so what we are hearing is what we can start. they can be slow. the earlier they start and that is a big? -- a big question mark. governor warner brought up provisions. for bond geeks, we look at revisions because the market always reacts to the initial number. if the inflation picture is weak, than the inflation backdrop is allowing the fed to

cut. i think whatever happens with politics, at least start the normalizing. although i'm sure they will be dragged in. lisa: is that a hope or a conviction? jonathan: which one is it, what you hope that they will do or should do? priya: we have to think about what they will do and they are trying hard to keep the soft landing going. inflation has allowed them -- i feel like a soft landing is rare. i think the fed has looked at the path and said inflation and let us start cutting rates and let's taper qt, that is interesting. they are trying to allow the soft landing to last. whether they can do it and whether there is anything that affects a recession i think that is just a call. jonathan: we caught up, sorry for the long-duration exposure around 380. we are about 412. you think we would look for for

20, is that right? priya: what is eight basis points or law -- among friends. i would argue that we are in a 3.75 to 4.25 range. i think adding some duration, particularly we have added to risk. and with the inflation backdrop and saying we can start to normalize, correlations between duration and risk asset will come back. we have not had that for a long time and that allows us to have some duration in case the economy worsens that the duration hedge will come back. and we talk about fundamentals. what has changed for me is that we look at technicals. look at all of the investment rates apply coming to the market. i think investors have been structurally underweight fixed income. as they are coming back, that $6 trillion comes into bond funds

which means 4.21 is not a bad level. but start adding to duration. anyone -- anything above 4%. lisa: are you talking about duration or going into high-yield bonds. priya: we are in a soft landing and the data look strong. the economy is normalizing so even high-yield, investing in high quality is attractive. secured credit and investing rate credit. you have to do a lot of credit work because there will be zombie companies. it is hard. make sure you do not own that or try. spreads look attractive. lisa: when was the last time you were this bullish? priya: bullish risk assets? it has been a wild. because the fed was raising significantly, supply-side gained back faster. and i think the fed took the opportunity faster than i thought. in september they were talking about higher for longer and i

did not think they were cutting rates until the end of 2024. i guess i am more bullish than for a long long time or since real rates went into positive territory. jonathan: something you said, when a -- we are in a soft landing right now. the right now piece of it. i remember when you were talking about hard landing. do you mean right now do you mean a moment but at the end of the year we are looking at something else? priya: there is a chance. it is not 5% of the market, they are pricing in a low chance. 35%, 45% chance of hard landing is there, because when you look at the details of the data it is not all of that. you look at the narrowness of the labor market or the fact that there are pockets of weakness elsewhere. there is a chance that things slow down or the fed does not act fast enough or they continue qt long enough and there is the chance of something going long.

we have to be position for that. jonathan: it sounds like you believe in a window of constructive risk. i want to know what it looks like when the window starts to close. what are you looking out for? priya: i would be looking at every revision and economic data. beyond economic data is real rates. if the 10 year real rates get back to 2% or higher, that is restrictive. we talk about financial conditions all the time, they are restrictive. that window closes if they stay restrictive become more restrictive. that will depend on data and what the fed does and that is when i get nervous that they did not cut rates fast enough and that restrictiveness will show up. we had the locket effects in the legs are longer. we had a lock-in effect starting to go away and you have to start paying those rates. jonathan: lisa can enjoy another

2% mortgage over the next 25 years. reminding us about it. are you happy that priya put a number on things. lisa: it is hilarious because we now have consensus jp morgan and consensus. 35 percent chance that things go bad and 65% rainbows and unicorns. and more bullish on risk. that is interesting to me. jonathan: we did not get to politics. no, for a good reason. new hampshire in the primaries, that is want to watch. the team will guide you through that at 8:00 p.m. eastern time. tomorrow, an absolutely stacked program on "bloomberg surveillance." we will catch up with former house speaker kevin mccarthy, kathy jones from charles schwab and citi's andrew hallman horse. 34 minutes ago and equity futures just positive. good morning.

this was bloomberg surveillance. ♪ ♪ ♪

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from new york city i mns kenny and for jonathan farrow. s&p markets are in the green, 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 farrow. manus: