morgan stanley's president retires as all banks suffer their worst months since december. -- the company's prices we're going to talk tech pipeline with allan patrick cross. nd trade talks constructive. steve mnuchin looks into trade talks. an agreement is not time dependent. welcome to "bloomberg daybreak" on this friday. david west on is off today. happy friday. happy end of the month. we made it. >> happy brexit. we're still going on with brexit in parliament. >> they're debating. they've been debating for the last few hours. the votes is going to come in three and a half hour's time. there's two things they're going to vote on is leave the e.u. it's super complicated and may not have any majority to get

their plan b through. >> if you take a look at the banksy instagram post, this is his first instagram post of the year, he also made a rendition of parliament a little bit different than what we're seeing. ut he said that bristol museum devolved parliament. so definitely showing the mood right now. lisa: this is the mood right now. there you go. alix: so in the markets, we made to it the end of the quarter and at least for the equity and commodity market, it's sort of buy the rally into the end of the quarter. bonds taking a bit of a pause here. yields back about three basis points. you're going to have some blistering but a touch of a risk odd. lisa: yeah. well, you have as more constructive zone in the trade talks and the idea that

officials coming out and saying we're not imminently in a recession. it's time for your morning brief. 8:30 a.m. eastern. we'll get u.s. economic data. personal income and personal spending. 10:00 a.m., we'll get new home ales status. 10:30, robert kaplan speaks in. at noon, we'll hear from randy control. and 10:30 eastern time, that vote on the brexit withdraw agreement is scheduled. now, let us go for bloomberg first take. we're joined by michael mckee. and rachel evans at bloomberg news. and the interest thing to me is we're getting a more constructive tone on train talks. steve mnuchin coming out posting on twitter that u.s. trade rep and i included constructive trade talks in beijing.

i look forward china to continue these important discussions in washington next week. mike, do you get a chance that this is culminating in something that actually will be a trade agreement that markets can sink their teeth into? >> yeah, i wouldn't look into instagram. isa: you never know. michael: they're looking both sides to see if they match up. the u.s. worried that chinese officials are translating the u.s. tex differently than they intended. so there's still work to be done but we don't know what's in it and how much progress it makes or a face saving compromise or whether there are deep structural reforms that the u.s. has demanded that they wait until next week. rachel: i think the question is going to be whether the trade is the thing that pushes people

back in the safety of the fixed income market into equity. we've been seeing a slight into afer assets. the people are really cautious. and it's going to be interesting to see whether trade is enough to convince people that everything is ok, going negative in europe. it's going to be interesting to see whether the trade this going to be what pushes people over the edge. lisa: when you have set officials saying guys, we don't see a cut. let's hold back a little bit. what did you talk to him about the yield curve and version and all of that? michael: she said the yield curve does send to send -- tend to send a message. she said the rate cuts is not in the cards because there's no recession out there and it would take a lot. the fed are prepared to do

either direction but they want to know how the economy is going. >> they want to give confidence to markets but they're also saying we don't want to take away confidence by saying giving overly bearish feelings right now. how do they tow this line? rachel: we spend years looking and ese signals and saying as soon as it happens, everybody backs away. so it will be interesting to see how that does that and we will see whether they have anything to say, particularly about the balance sheet. alix: another issue that's hanging out over market is wells fargo. m sloan, the 68-year-old c.e.o. said he was stepping down

yesterday. this comes after a really rocky tenure. he's been there six 2016 at the helm and since the end of 2016, wells fargo shares have lost more than 12% versus a broader index of banking stocks that has gained 1% in the period. mike do we have a sense of why now? what were the tipping point for him to step down? michael: maybe his relationship with congress and the fact that people have just been pushing, pushing, pushing for him to go as a symbol of the problems there. the fed was -- jay powell at his news conference was asked about it and he said we got appear asset cap in place and we're going to keep it in place because we are not satisfied with what this bank has accomplished. they have a lot more to go. that's a strong message saying when your regulators say you haven't done what you said you would do. lisa: what about the tweet? alix: about damn time.

other story has to do with pricing yesterday. the top end of its range about $72 a share. rachel, how important is this going to be in terms of today's trade or how it trades over a month? what are investors focused on? rachel: it's a accident to see -- design to see if trading goes well. but i think it's going to be interesting how it lasts over time. we have seen other start-ups come to market. i'm going to be interested to see how it goes from the indexing perspective because it's $2.4 billion of valuation coming to market. it's going to be eligible to move into something like the russell 2,000 when you look at the market perspective. i will be interested to see whether that sparks passive buying that could keep the price high. lisa: it's going to set a tone for the biggest year for i'mos on record. we've got interest, ubero, all

slated to come out at some point this year. how much is it saying with tone? michael: if it's a successful as it appears to be, it is setting up for a good year for other tech i.p.o.'s as they come out. does the economy continue to support that in terms of confidence of investors? you separate out sort of what people think these companies are going to do from the immediate profit taking of the people who have been involved in the short run. interesting aspect of this, i want to bring out here. i brought a chart along that shows san francisco home price have gone through the roof. the white line is the median u.s. home price, $251,000. $952,000 in san francisco. and people are saying if these tech i.p.o.'s continue to price like this, it's going to go over

$1 million fairly easily. that's the median home price. peel are not going to live in san francisco unless you've got these i'm sorry. -- i-s. that's -- i.p.o.'s, that's a problem. alix: also about how much to diversify where the tech hubs are especially. lisa: like austin. guys, thank you very much. stay with bloomberg for more on the i.p.o.'s. we're going to speak with logan green and john zimmer at 9:30 new york time. do not miss that. and a reminder. you can find all the charts we're going to use throughout the show. check it out. gtv go. and tim sloan steps down. we're going to talk to a analyst who predicted what happened this year. this is bloomberg. ♪ loomberg. ♪

>> deutsche bank's merger plans are reportedly facing mounting opposition. just two weeks ago, executives at the lender and crosstown rival commerce bank agreed to explore a deal but employees are against it. labor unions want to block it and some of deutsche's biggest shareholders are skeptical. bloomberg has learned the chances of a deal are dwindling as talks continue. morgan stanley president plans to depart at the end of june. he joined the company in 1989. two decades later, he helped guided through the financial crisis. he was once seen as a potential successor to c.e.o. james

foreman. an internal memo says he will continue as a senior advisor after his official retirement. lehman brothers lives on on stage, that is. a that the cal is running here in new york city until april 20. the lehman trilogy is built as a love story of the american dream. opening night at the park drew several lehman family defendants and executives. the production was already a smash hit at london's national theater. and that's your bloomberg business flash. alix: thank you, viviana. there's tension and drama in the lehman story but how do you make like all of that interesting? like mortgage-backed security and c.e.o.? high drama? lisa: you don't want to be high drama but i love the idea of a love story about the american dream. alix: i mean, there's no way. it's stage left, you're going to

talk about credit default steps and c.l.o. lisa: sounds good to me. alix: tim sloan stepping down as the bank's c.e.o., the fourth u.s. bank goo a hasty search for a successor. the focus on me has become a distraction that impacts our ability to be successfully move wells fargo forward and shares up 2%. joining us on the phone, charles peabody, a research partner. charles, you predicted this. it would happen this year. who was the trigger as you understand it? charles: both the political and headwinds were too strong for sloan to survive and the straw that broke the camel's back came this month when the regulators both the o.c.c. and the feds spoke out against the lack of progress. alix: so charles, what do you make of the successor c. allen parker, the general council of wells fargo. how good do you think he will be in that role and how long will

he be there as they try to search for somebody new? charles: the regulators and made it clear that wells is in the fix it stage. and if you recall correctly, when citigroup was struggling, they appointed a lawyer and when bank of america was struggling, they appointed a c.e.o. and brian was a lawyer as well. so i think given that they're still in the fix-it stage, it's an appropriate appointment. alix: so charles, david's not here for me to make fun of lawyers, a bummer. so tim sloan wasn't the guy at the helm when all this happened. what's the order of priority ere? charles? looks like it might have gotten disconnected here. lisa: there is also a question

of how much they need someone with vision right now. how much do they need somebody to direct the bank forward and say this is how we're going to resurrect our reputation versus just a fix-it person who can patch up the band-aids in a very competitive environment for u.s.a. alix: you need to clean your shop here to get to the point where you can actually grow. that's more of the point. lisa: indeed. we are going to be discussion this more and charles peabody, thank you. charles peabody, thank you so much. joining me now, joining us now is christian lawrence, senior market strategist. christian, one thing that people are looking at is some of the pain that we've seen in wells fargo. and saying this is the emblematic low yield market that we're in. how low can we go? christian: we are go -- we can

go lower. efore we saw the u-turn from powell, the 10 year keeps going lower to 225 but next year, we could be talking abigail doolittle 125. i really think the end of the cycle is nigh and rates will move lower. alix: if that happens, what happens to the rest of the market? what growth is that looking at? christian: i think it's a question of two things. one, we have late cycle behavior in the u.s. and it is external headwinds from europe, from trade wars. there's a whole manner of things that are slowing global growth. the reason that the fed is acting so aggressively is stopping a shallow recession into a deep recession. we could see a feedback loop between the market and the economy. alix: although the fed speak indicated they are not seeing a rate cut on the table the way the markets necessarily have and you have predicted a recession the u.s. i believe in the second

half of 2020 which gives us some time. until then what, do you think is the most prudent pass for the federal reserve giving this backdrop? christian: the shift that we've seen now around 2:5 rate cuts. but i think the markets have growth in terms of the timing. i don't think we'll see a rate cut this year and a whole rate cut is priced in. the fed needs to watch data. it needs to monitor very carefully but when it acts it needs to act aggressively. lisa: is it priced in when it comes to europe. so what would be the trigger for that to start being priced in? christian: in a way, you can argue japan indication of the orld market. the situation in the u.s. is different and there's a lot more

room to cut rates as well. although we've seen 225 basis points are tightening but it's more like 550 basis points. lisa: this morning, hsbc's stephen major who has gotten bond rates right has lowered the -- it to 2.1%. do you think that is reasonable? christian: yeah, we had 225 this year and 1.25 for next year am significant move across the curve. we see continued flattening. lisa: that is not necessarily music to the ears of all those banks that has been making some job cuts. alix: bond builders are super psyched. lisa: christian, you are sticking with us. ming up, let's debut after showing more shares than expected. what this means for other silicon valley dance, with allen

patrick cobb of gray cross. that's next. this is bloomberg. ♪ loomberg. ♪

alix: lyft filled more shares than expected after pricing at $72. what is this to say about other silicon valley looking to go public? no one better to talk to than alan patricof. alan, when lyfts starts trading, what is the number one investors need to start paying attention to in the next 24 hours? alan: boy, you're asking a tough question. this is almost a roulette wheel at this point. i mean, you've got enormous amount of excitement about the whole i.p.o. market which has led off a week or so by levi's. we've got oil consumer -- all consumer brands that are coming to the public which is always a source of getting people enthusiastic and lyft and uber

and the ones we've been talking about recently, they're coming up have got the attention because everybody knows their name. i mean, they're in every city virtually in the country. so, you know, i think it's anyone's guess as to where lyft is going to open. i guess i heard last night the opening prices or the price they're putting on the offering is at $70 or $72 a share? am i close? alix: yeah, a little higher. alan: there's probably an unfulfilled book which means it could pop on. on the other hand, we don't know what day traders are in there and what flirps are in. we could have this go to a premium and then people sell off and you see a decline. so i think it's hard to predict because the metrics are so unusual for a company going public at this stage. i mean, the kind of revenues versus the losses you've got.

it's hard to put a number on it. it's hard to measure this in terms of normal values, valuations. lisa: alan, we're so happy that have you because of your ncredible history of a venture investor. apple, home depot. al. you've made a lot of good calls. here we have lyft kicking off a really active i.p.o. year with the uber and the pinterest and the big names that are coming to market. which of these invest -- would you be investors as an i.p.o. coming up? alan: no, i wouldn't be an investor but the public itself has an insatiable appetite to be in this. i think a lot of institutions almost can't afford to end the month without showing lyft on their year end statement and hat's coming up as you know in a minute.

they want to print that will show that they were there. so the demand is there. and the question is how serious people are as they make this long-term holdings. i think from my standpoint, i'm always looking at the first, second, third quarter after the offering and seeing how they meet the expectations that have been given during road shows and how the metrics are -- the metrics will be important going forward and then you're going to have the metrics of one versus the other. there's no question you're going to measure uber against lyft once the second one is out. alix: fair. the other i.p.o.s in the pipeline, pinterest, uber, etc. any of those float your boat? alan: i really haven't read the prospectuses fully of all of them. it seems to me that pinterest is demonstrating the kind of trends you like to see of reduced losses, continuing high growth rate and i don't know where

they're going to price it but if there's a reasonable valuation place on it, i would say pinterest is probably -- and this is an uninformed investor talking. i mean, it seems to me that has some built-in factors that would, you know, have more sustaining elements. one of the things i've noticed and someone can check this out. there has been an enormous push on stimulating the uber and lyft and car riders. alix: alan, thank you so much for joining us. alan patricof of greycroft going there. this is bloomberg. ♪

alix: this is "bloomberg daybreak," you made it to the end of the month. ninth equity rally, last day of first quarter. dow jones futures up.

s&p, closing out best quarter since 2009. what were you doing in 1998? the dax up. killer quarter. the best in three years. other asset classes, not surprisingly, a great quarter, best since 2010. curve flatter. cable rate, sterling best performer g10 currency this quarter. unbelievable, considering brexit drama. risk on feel, look at brent. best quarter since 2009. lots of decade superlatives. lisa: mind-boggling returns given bonds and stocks rallying together, flatter yield curve. go figure. alix: regional banks, one of the best performers. transports. no doubt. stellar rally for the s&p.

lisa: update on outside the business world. in the british parliament could further delay brexit. members of eu cannot see what is next. barley speaking exclusively with bloomberg. >> we still don't have a clue of how this is going to end. it depends on the proposal itself. if the government knows where it wants to go -- as soon as we know, we can adjust the delay. >> the reaction to the ongoing political saga, she said the rest of europe has a sentiment of astonishment. for $1buchar calling trillion in investment. she released a detailed federal

infrastructure plan. this includes a corporate tax hike and $650 billion in federal funding. she wants to revive the build america bond program. j.p. morgan chase, majority ownership of a joint venture, making it the first u.s. lender to receive such a nod from regulators. beijing lifted a 49% ownership cap last year. the banks by 2030, profit from chinese securities alone could reach $3.3 billion. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: opening up the economy. officials concluded a deal in beijing after working line by line. it could be put before the

presidents. twitter,uchin on calling trade talks productive. enda, what does line by line mean? sure it is about making there are no discrepancies in the text, the understanding of what they have agreed on. our colleagues have reported the u.s. side has been unsettled by pushback from the chinese side. language agreed to, lost in translation, sent back, crossed out. they are trying to get their ducks in a row to make sure everyone is on the same page in terms of what deal will be presented to the presidents. u.s. was in beijing for the appearance of equality, and vice versa. everyone is trying to keep

everything even. it is continuing to move forward. lisa: how much progress is it that we have a document to goal line by line through? for a long time there was nothing. we were talking hypothetical. isn't that alone, progress? enda: absolutely. relative basis, when you consider where we were at the end of last year, there were fears of a prolonged trade conflict. fears that the truce would not hold. it is holding. negotiations ongoing. tweet from steve mnuchin, saying things are constructive. all indications are, things remain on track. will they get far enough to the point where they can sign off on a deal they can hand off to president trump and president xi? by all accounts, talks are on

track. lisa: thank you for the update. trade talks resume next week in washington. the timeline could go on for weeks or months according to larry kudlow. not a time driven. this is a policy enforcement driven deal. things have to be done right. as the president has said, it has to be great. aaron, andng is now, still with us christian lawrence. aaron, policy is at the front and center, according to larry kudlow. what are the main sticking points? probably thek biggest issue between the sizes how they will enforce agreement. what happens to tariffs the u.s.

and china have on imports? last.ill continue to there are fundamental differences on both sides. we understand there has been recent progress made on digital issues, both related to cloud computing but also on data localization and cross-border data flows. that is essential for tech companies and modern companies that use cloud. headliner take on the about j.p. morgan. does that mean companies can go business as usual into certain sectors irrespective of the conversation? erin: the one note of caution is it is good they have gotten the license. we don't know how many others are in the line seeking majority stakes.

it doesn't mean we will see a flow of them. among structural issues, if we begin to see three or more and we know more about how many are waiting, that might be better indication of whether something has changed or if this is individual. lisa: people talk trade. they talk market response in stocks, that stocks could selltially, buy the rumor, the news. some sort of lift to optimism. what does it do to rates? if there is a deal, does that mean higher yields u.s.? partly a way of soothing markets, removing uncertainty. i think this goes deeper. this is a power struggle. we will be talking about this in 10 years. for rates short-term, it could

give a lift. it would be temporary. alix: what about europe? they will not have the same struggle on the ip basis. they could benefit from a broader deal. is that a game changer for risk appetite? christian: it would provide a boost. globally, we get a boost on the back. it would be more temporary. lisa: enforcement mechanisms. do you have a sense of rough parameters? erin: both sides have been clear. the trump administration feel strongly tariffs have to be a component. they feel that is what brought the chinese to the table and that is what will cause them to remain in compliance. from the chinese point of view, unilateral decision of whether

it is in compliance is unacceptable. they have domestic pressure to show they are holding their own against the u.s. there is a possible solution. both sides can find common ground. it will be difficult. in?: how does fx play dollar-yuan? now currency issues are part of an agreement in the broader agreement. currency, they have been intervening to maintain balance in currency against the dollar. that is not a major issue in the trading relationship. indication they are both comfortable with where they have gotten. lisa: larry kudlow saying it

could take months. how long is too long for markets? christian: markets outpatient. -- are patient. day to day, we have seen 50. itlong as progress is made, will be priced in worst case scenario. longer-term, what will happen with exchange-rate? i personally believe it cannot be kept stable. at some point china will have to let that go. 20% overvalued at this stage. lisa: that is big. christian: one of the things we will see is stability extended. at some point that currency will have to give. you cannot have debt build up without it breaking. alix: bumming me out. 10 year?

thanks so much. era tax laws. we look at wall street's dirty secrets helping etf's dodge taxes. unfortunately, it won't help you. this is bloomberg. ♪

>> this is "bloomberg daybreak," and coming up, robert shiller, professor of economics at yale. ♪ the bloomberg business flash.

the biggest deal in a decade. the u.k. drugmaker will pay $7 billion to buy into a promising japanese cancer treatment. half that amount will be funded through a share sale. this is part of a push to become a global oncology powerhouse. surge last year despite global scrutiny. the chairman expects double-digit to continue. he defended the cybersecurity track record. the u.s. and u.k. governments are the most vocal critics. 1 >> there is not a single backdoor installed in any of our products. the cybersecurity situation has not worsened. besti has the cybersecurity record over the past 30 years, including recent years, when there were malicious cyberattacks, none of which had to do with huawei.

>> the company will continue to invest in improvements. h&m reporting first quarter profits beating expectations. the retailer has been cutting back on clearance sales, introducing new products at lower prices, avoiding massive discounts later on. sales growth up 7% at start of second quarter. the unsold inventory levels are on the rise. that is your bloomberg business flash. alix: all thanks to nixon era tax laws, etf investors are dodging taxes. that is featured in bloomberg businessweek. we take a look. these trades have spiked recently. peace nowhors of the -- piece now. what is the heartbeat trade? >> this is when a bank or market

maker puts a huge amount of money, sometimes billions, into an etf for 24 or 48 hours and takes it out. lie? -- why would they do that? it washes the taxes away. >> what does that mean? >> etf creates and redeems shares, how investors move in and out. they can do that with cash, sell shares in the market or give out cash to investors or they can give out short. etf's have a middleman. you have brokers that deliver shares or take shares out. as part of that, when they take them out, they do not have to pay taxes on that. they can get rid of the tax so investors don't have to pay it. lisa: here's my question. this is legal. a loophole. >> we don't really know.

the irs has never said either way. the funds, the banks have legal opinions from law firms, saying they believe it complies with the tax code. lisa: who gets the benefit? >> the savings from not paying taxes, at a time when u.s. equities are rallying the most since 2003, 2009 rather -- you have to wonder, who is getting the profit? comes to the tax maneuver, ultimately it is a deferral. you pay your tax when you sell shares in the etf, when you leave the fund for good. you areof the process, necessarily paying gains yearly basis. your minimizing your tax today. you will have to pay in the future. there are ways in which you may avoid them for good. fund, a mutual

fund, a brokerage account, and etf all held the same stock portfolio for one year, there is a good chance all three of those other funds would have to pay a tax at the end of the year, but the etf would not. lisa: is this why they have a tax advantage over other funds? structure, they take in and give out securities. what we are talking about with heartbeat are, it is a special situation. index rebalancing, a ton of stocks to get rid of, may be incurring capital gains, they can do that in a tax efficient kind of way. how legitimate is it to create a transaction to make something efficient rather than using the ebb and flow of assets coming in and out? alix: imagine a broker and a guy walk into a bar.

walk us through what happens. up, thatrst big spike is an outsider, a large investment bank probably, putting more than $3 billion of stocks into the etf, making it bigger 14%. two days later, probably that same investor takes all that money back out. the magic is the stuff they put in, was regular shares. the stuff they took out was stocks the etf needed to sell. instead of selling, withdrawing investor, no taxes due. that was facebook with high appreciation, essentially they were able to sell without paying taxes. lisa: magic. alix: no joke. lisa: thank you. story, latest issue of bloomberg businessweek. sunday onrday and

bloomberg television and radio. coming up, tim sloan, out. this is bloomberg. ♪

lisa: tim sloan gave into critics and step down -- stepped down. he has faced calls for his ouster from critics including senator elizabeth warren. >> those people should not be left in charge of this business. exactly whatoted was wrong with this bank over and over, you went to the stock market and bragged about it. you made money personally off it. when you are asked about it, you did not tell the truth and you tried to cover it up. wells fargo is not going to

change with you in charge. lisa: the facial expression was gold. she tweeted yesterday. "about time." phone, as ag on the shareholder of wells fargo, does the dismissal, the departure, make you more inclined to add to your holdings? tony: great discussion. he may have been the guy that fell on his sword to clear the decks. whatever the case, they needed to clear the decks. guy that was the helping uncover the situation. you don't turn a supertanker on a dime. it has taken too long. for the board to recognize, we

want to get back to growth, we have to get past the imposed fed cap that causes us to not grow, the final settlement with the doj, get back to growth. that is what they were tired of needing to get back to, rightly so. it makes sense. we are happy. not because tim sloan wasn't a good manager -- we disagree with elizabeth warren -- truth of the matter, no one was going to give up on this. it became way too focused on tim sloan, not the overall bank. lisa: let's talk who is in charge. parker. the temporary appointment. who do you want to see as the next ceo? tony: the board is in charge. elizabeth duke. they will look for outside. fresh eyes.

they said they will look for somebody that will bring shareholder value. that is the way they are oriented. that is what we like to see. they will take time. find the right person. great organization, deserving of to get the leader ship back to growth, back to the number one mortgage lender they are. alix: overall, a bad month for bank stocks. what are you buying? tony: we own the banks in outsized ways already. we are happy to have that positioning. if they got much cheaper, we would want to add to them. the next 10 years, 12 years of time, the thing missing on banks is lending. velocity of monday -- there is none. no appetite for risk.

thanks have more capital on balance sheet then they have historically had. they are in a great position. incredibly cheap. lisa: we appreciate you. trade aboutill 10:45 a.m. eastern time on the nasdaq. stay tuned. coming up, robert shiller joining us. his thought on banks, the yield curve in the valuation of unicorn companies going public. this is bloomberg. ♪

>> america is now the hottest

economy anywhere on the planet earth. alix: president trump singing of praise of the u.s. economy. members talk down a recession possibility. fargo's ceo quits the bank , morgan stanley's president retires. , will its listing be snap or alibaba ipo? we will talk valuation's with robert shiller. welcome to "bloomberg daybreak." we made it to the end of the quarter and the month. >> the question is have we made any progress on her said. we have a live discussions in .arliament

today is another crucial vote before they have to decide on another crucial vote. down, now at cable, back up. sterling is the best performing currency for the quarter in the space. take that. , the trade is by stocks. s&p futures are up, the best quarter since 2009. euro-dollar higher. take a look at that. bonds selling on the margin had a huge rally. yields up 2%. crude one of the beneficiaries of a risk on move. the best quarter since 2009. lisa: it is amazing considering people are saying it was

a boring quarter. 10:00 a.m., new home sales data for february and consumer sentiment data. , robertme fed speak kaplan speaks in new york at noon. also, 10: 30 a.m. eastern, 2:30 p.m. in the u.k., a vote on the brexit withdrawal agreement. alix: futures advancing, treasuries declining. >> what a quarter. it was a global bond market that had a big rally, that index up 6%, the best high-yield quarter since 2012. that led to it emerging-market debt getting a boost. it is called the most crowded trades. equity markets rebound.

the production cuts are pushing crude up 30%. this is your classic portfolio theory lesson. 8% is the best quarterly performance for the best 60/40 portfolio going back to 2009. one of the best-performing sectors has been tech. after an 18% drop in december, you are now up 26% relative to the s&p 500, which is up 20%. global tech and high-yield bonds are the traits. alix: let's get to the technicals. joining us now is our guest. the best quarter since 2009 for the s&p. what do you do on monday? >> we need to look beyond the s&p 500.

the russell 2000 index is a small cap benchmark, it has pulled back and exhibited week momentum. with that we have seen contraction that i view as constructive. these positive divergence is in the russell 2000 suggesting momentum can improve their. if momentum is improving among that is good for the s&p 500. it has broken out above the 200 day moving average and some important resistance between 2800 and 2815. lisa: heading into the second quarter, the s&p is in a tenuous position. can you explain why that is important and what that means? >> the percentage of the stocks in the s&p 500 above the 50 day

moving averages have fallen from 92% to 65%. that can be viewed to ways. it is contraction, but it could be constructive. we have had a pullback where participation has not been there this month. we have been able to relieve some of the conditions with the rotational pullback in the underlying securities. the february cell signals in the countertrend at thisrs worked off stage, so we want to look for momentum to improve and be acting on breakouts as they unfold. alix: walk us through wells fargo getting a boost yesterday on tim sloan leaving and the bank having a bad four weeks. what do you do? most banksrgo and are in down trends, but with the short-termhe

reversal condition has become widespread in that space. that is happening at a higher level, including wells fargo, then the december lows. we will see a slowdown within the framework of the down trend, and if it can lift banks above 200 day moving averages, that could be the early part of a long-term turnaround for them. alix: thank you so much. joining us now onset is robert shiller. global investments. thank you for joining us. i don't think i have seen you in person before. to kick it off on the banks, to make about banks as the yield curve continues to flatten? what do you do with them? curve isverted yield overrated as a indicator.

it's a success in predicting has diminished somewhat. banks quite at bit. the inverted yield curve is to some extent a product of what we call data mining. we only have so many recessions. they say it work since 1957 predicting recessions. how many have we had? you will find an indicator that does really well to predict them , but it won't as well in the future. lisa: correlation is not causation. let me come in here. we are talking about wells fargo. i know you don't own the bank, but does the changeover with tim sloan retiring, does that give

you more confidence they can chart a path going for that is more constructive? >> it does. you have to look at the near-term and longer-term. in the near term, the shares should react positively. your move what they might call the elizabeth warren overhang. she has been hammering the bank and him to resign. there has been talk they might keep restrictions on wells fargo with as long as he is here. with temps loaned leaving, she was going to continue to hammer aggressively. that now removes that overhang. in the longer term, you really look out for a new ceo to come in who is probably prepared to deal with a recession if we have one, someone with could experience in consumer and commercial banking, and someone with good relationships with warren buffett, the regulators, and politicians. lisa: robert shiller making a saying the yield

curve does not necessarily have the predictive power it once had. do you agree? if we have low rates but solid growth, is it better for banks that people are counting on right now? >> i largely agree. it perhaps has a track record as the best redactor, but it is one. most of the other signals we look at still are not flashing red yet. lebron james is the best player in the nba. he can't win on his own. none of the other indicators are flashing red yet. that is something to consider. looking at the financials is something that the banks have been hammered. probably would not be aggressively jumping in right now, but does signal may be look for some financials that are sensitive or rate firms that have a more company

specific story now. side, it wasother written that the more people who curve,read the yield stocks could fall and volatility could rise and pockets of liquidity become the self-fulfilling prophecy, what do you think? --self-fulfilling for policy prophecy was quoted by a sociologist. the whole great depression was a self fulfilling prophecy. the news media played it up. they talked about suicides. alix: it is our fault. lisa: i know. much is amazing how publicity this inverted yield curve is getting. people think it is an oracle. suddenly amped up when it became inverted. it was one basis point short,

not much talk, so that is overreaction to when indicator. lisa: we are over sensationalizing it. >> i did not mean it like that. lisa: it is totally fine. both of you are sticking with us. we will look at the prospects of ending the trade war between the u.s. and china. that is next. this is bloomberg. ♪

alix: trade talks were constructive according to secretary mnuchin. president trump sounds really positive. years, welast two have embarked on an unprecedented economic revival.

america is now the hottest economy anywhere on the planet earth. there is nobody close. robert shiller still laughing at that. do you agree? >> looking at 26 countries, the united states is the highest come of the most expensive stock market in the world. they say it is not even close. japan and switzerland are close. it's not like nobody is even close. come on in here. benefitll there be any if there is a trade agreement in the next few weeks? at it in termsk of what it means for the economy and investors. valuations does not necessarily it is the hottest economy, just

the most overvalued and richest. be a lot ofhat may good news is largely priced in. even if we do get good news, it might not be enough room to run. lisa: robert, will there be a material the client and violations and growth if there is a more protectionist stance taken and less trade in general with china? protectionist rhetoric matters. there is a long-standing theory that the great depression was caused by the tariffs in 1930. i think that is overstated. it was a factor, but that was a part of the story. i don't since this will cause any mammoth changes.

we will come to some kind of agreement. is it buy the rumor, sell the news? if you want to play defense, what do you do? think if investors are worried about the flattening or , first ofield curve all, equities are still attractively valued. is stillpremium positive and higher than historical averages. you look for places that exhibit earnings stability. you would think health care would, in fact. they have had issues in health care with more regulatory scrutiny coming on. you look for companies with undered balance sheets.

you look for companies that have more company specific stories that aren't quite so leverage to the macro economy. lisa: it sounds like you are pretty constructive on u.s. equities. you thinkwonder if there is an incoherence between people's positive feelings towards equities and the yields we are seeing on developed market government bonds with with u.s. treasury yields at some of the lowest rate since late 2017? >> lower rates suggest higher stock prices. , compare think long-term yields to stock prices. it is not a strong correlation. we have to view these as separate markets, and it is sensible to diversify a cross them. i said it was the most expensive market in the world.

alix: what do you make of europe then when you have the curve trading in negative territory. you can send see yields lower in japan than the interest rate from the central bank. what do you make of that? the inverted yield curve works best for the u.s. as a predictor. i am bullish on europe. i know it is taking a while. it iss why diversification that matters.

to lowthink yields are tol in the u.s.? >> i can't say they are too low, ,ut relative to the economy they probably are a little bit lower than where they should be. when i talk about the case for usa kitties, it isn't that we necessarily expect positive returns going forward, but your getting try to the best we can do right now. you're getting weaker yields in the fixed income markets. that is probably the best case for equities. go?e else are you going to up, thames loan steps down. the street views it in today's bottom line.

this is bloomberg. ♪

alix: time now to look at three companies worth watching. first, how about a killer , a 25% jumphuawei in full year earnings. r&d has the best cybersecurity record over the past 30 years, including when there were malicious cyberattacks, none of which had anything to do with huawei. alix: take that, u.s. how theill indicates economy is undergoing a transformation, but not badly as some had expected. alix: they are crushing the smart phone market. lisa: i want to look at deutsche bank. deutsche bank and commerzbank

have been talked about, the forced marriage at gunpoint with both banks not loving the idea. there is growing opposition to this marriage. the biggest investor in deutsche bank coming out against it. you have other investors, people within the banks and we don't like this. you have deutsche bank saying to commerzbank that we don't like your loan book and you have taken risks we don't want to assume. telling commerzbank deutsche bank to check out their investment bank and let's not have this conversation. a lot of questions whether this will go through. alix: also negative deposit rates in europe. lisa: there is that. the third company we are watching is wells fargo. for more we bring in the senior research analyst on the phone. he has an outperform rating and a $59 price target. thank you for being with us. how much does tim sloan's

departure benefit this company going forward and how soon could we see the benefits? >> good morning. in terms of him sloan's iparture, the fundamentals, don't know it has a big difference or impact in the near to intermediate term. to the extent they bring in someone new, they will be things they need to evaluate with respect to the company in the middle of a large cost reduction program to the tune of $4 billion, are they going to stick with that? are there any major strategic issues? his departure will open the doors to a lifting of the asset cap imposed by the federal reserve. i think mr. sloan's departure could have been a condition to get the cap lifted. alix: do think it will be lifted when they announced the new ceo,

a lawyer in charge in the meantime, will be enough to get that lifted? sequence ofbably a steps that wells fargo needs to accomplish to get it lifted. 2019, we think we should see that asset cap lifted. we think the departure is probably part of the process as well. david, really interesting implication that that was the catalyst behind tim sloan's departure. lisa: why now with he come out and say it is better for us just to have me leave? distraction. you are suggesting regulators forced to this in one factor in lifting this cap? >> to an extent. we are not trying to engage in speculation to that extent. we do not know what the fed has

told wells fargo's management team, but we think this will help the relationship with the regulators. i think the drumbeat, and we are big fans of tim sloan, but the trump be politically has become ,o loud, and additionally regulators would not surprise us again that this may have been sequence of events that wells fargo needs to accomplish to get this asset cap lifted over time. alix: good stuff. david george, thank you. coming up, the latest read on the u.s. economy. personal consumption on deck, and spending. this is bloomberg. ♪ you.

all of you. how you live, what you love. that's what inspired us to create america's most advanced internet. internet that puts you in charge. that protects what's important. it handles everything, and reaches everywhere.

this is beyond wifi, this is xfi. simple. easy. awesome. alix: this is "bloomberg daybreak." i am alix steel. happy easter d of the first quarter of 2019. we are waiting for the ego -- happy end of the first quarter of 2019.

as you have a rally toward the end of the quarter, that is encapsulating what we are seeing. the cable rate of .4%. as a result we see bonds weaker. eco data -- that dropping. personal spending communion .1%. personal income .2%. spending for january just .1%. february .2%. pce,u take a look at core kind of what we saw yesterday with the gdp coming in at 1.8%. lisa: personal spending being revised downward for the prior month. we are seeing two-year yields fall on this and it does confirm some of the bearishness we have been seeing on the u.s. economy and raises more questions about inflation and about the health of the consumer, which has driven the recovery.

alix: we had a shutdown at that point, so i wonder how noisy the data will wind up being. still with us as robert miller of yale university. what is your take on the consumer? are we in the danger zone or is this a short-term blip? it is a psychological phenomenon that is hard to predict. it has been strong. it has something to do with our politics. donald j. trump models conspicuous consumption and wrote books saying you have to show off. that was his advice to everyone. alix: isn't that the american way? dream comesamerican and goes. it is like any person. there are moments when you are feeling confident and moments when you are not.

trump has brought back a big feeling of american confidence and for now is holding. news it has mueller gotten stronger. lisa: spending is one thing in has to do with confidence. personal income is not something that is sentiment driven in the same way. that came in lighter than expected. i find that interesting because it goes to the question of when we would see wages increase meaningfully to give the extra boost to the u.s. economy. theme, this is an old this goes back to fdr. he wanted to see wages pushed up because he thinks that will be .he source of expenditure now we are coming to the point of setting a record expansion for the overall economy. numbers will show we're

the largest expansion ever and still part -- if we are still growing by june of this year. there are a lot of people feeling precarious. we had a long stock market bull market and now we have a long extension. a lot of people are thinking this affects people's decisions, whether to invest in a new house or renovation or things like that. so this idea people are getting pessimistic i virtue of how long this has gone on. the question is, we are not getting inflation. this is underpinning the fed's dovish tilt recently. my question is if we do not get inflation does that make this cycle that much more precarious? i am talking about inflation and wages. not higher gas prices. if we do not get that, does that create a limit for how far this could go given how much credit has been created?

robert: if the wage numbers show weakness, that would holster the view that we are late, that we are overdue for a recession. i could see a scenario where recession are stronger. it would not be as surprised if we had a recession before 2020. that would matter a lot for some people, including the presidential election. it could definitely happen. it is hard to forecast these things because it is forecasting people's feelings about the future. alix: on the flipside, going into of an election, it would be hard for me to see president trump letting the economy getting into a recession ahead of the election. in the expansion go on for longer than anybody thinks? robert: i don't know what you mean. what can trump due to boost confidence? anx: the can talk about

infrastructure bill, he can talk about stimulus, more tax cuts. could that prolong the confidence? robert: fiesta get cooperation from congress or the fed. it has gotten to be such a fractious atmosphere that it is hard to predict right now. i see this is one of the times for forecasting because it involves a change in our national makeup. a new emotion is playing strongly, the emotion of anger that effects consumption decision an investment decisions. lisa: you started talking earlier about how this fear of a downturn has driven sentiment in investing decisions. is there any area where it has not? weather has been exuberance you think could lead to -- where there has been exuberance that you think could lead to problems

down the road? robert: it is not like the year 2000. that is when i wrote my book. it is not like 2007. the talk is more political and less economic now. areoes look like markets fragile in late stage exuberance. in the stock market and the housing market. -- last year we had two drops in january and the drop on christmas eve, if you remember that. there is a sense of fragility. the housingth market, which is starting to slow down. everyone is trying to judge what other people's confidence is. turnaround,be a there could be some new story that is not panned to this and

then people think this is the turning point. alix: let's get a housing. we saw the average 30 year mortgage rate now at 4%. what are you thinking about in terms of affordability and is that the threshold to help the housing market, prolong it, spur demand? robert: i think the housing to him -- the housing market could continue to rise for years. bitoes remind me a little of 2005-2006. we started to see slowdown in the housing market for a couple of years before the real falls began. the housing market is different from the stock market. it is more -- we are starting to see weakness develop. it could be a temporary thing. it could come back up. before we areo go setting a record in terms of real home prices in the u.s.. lisa: you said there might be exuberance in equities.

i am wondering what you see as a potential catalyst to cause some sort of material downturn in equity? robert: the problem with answering that question is that we do not see what the catalyst was even afterwards. my scenario for a downturn, a major bear market, would be we see some event, a one-day event that gets people talking. they repeat and then people start extrapolating. the willingness to do that depends on the narrative. i'm writing a book called narrative economics, the narratives change through time. ga narrativeagile ma

, that even if you don't like trump you might still follow along with the narrative, which seems to be that the economy is strong. it seems a little fragile at this point. i think it is impossible for anyone to predict accurately how the psychology will respond to some random event that triggers talk about a direction in the market. alix: just talking specifically, going back to housing, you were saying you think there are signs in 2005-2006. what would happen to set this up to be more fragile scenario for housing prices and get to those record highs? robert: one thing i do not see now compared to 2005, when the housing market turned the last time, is a lot of talk about speculative excess. if you do a search on google trends, which allows you to search other people searches,

you will see that in 2005 there was a huge burst of searches for housing bubbles. we do not have the word housing bubble until around 2005. hardly anyone use that term. suddenly there was a fear, supported by news media reports -- ewsline alix: it is back to us again. robert: it is not just the news media. the news media as a source of communication. they also communicate well by word-of-mouth. i can see a scenario where home prices would come down. i do not see anything as sharp -- the financial crisis of 10 years was a record setter and we do not expect things like that to repeat. alix: wrapping things up here, tell us about this annuity fund you've helped barclays and cibc

and how you change it and moving toward that. robert: we've been working with people for financial products that are value-oriented based on the cape index, the adjusted price-earnings ratio. is aatest index diversified index. it could be the only index you buy because it is well diversified. it also has a value tilt. now promoting this new global cape index. it has usa, japan, and europe. it is globalized across equity markets. one of the major equity markets of the world. it also has commodities and fixed income. it is very oriented and

attentive to momentum. it is a sensibly diversified portfolio. alix: it is good to get that perspective. robert shiller of yale university will be sticking with us. lisa: breaking news. brexit hardliner says he will back theresa may's deal. debates are ongoing in parliament. lawmakers said the moat on -- deal inote on may's less than two hours. how big of a deal is this? francine: this is a big deal. this is the arch brexiteer, the person that used to be a brexit sarah -- a brexit secretary that resigned. is still unclear whether theresa may will be able to get this through. yesterday we thought that dominic raab would vote against

the deal. that meant there would be people that would follow him making it impossible for her to get it through. dominic raab wants to be the next prime minister. theresa may offering to step down of the deal got through. he is positioning himself and saying, just like boris johnson, who says he backs the deal, the next prime minister of the u.k., the next conservative leader of the u.k., who would become prime has said it is only through the deal they can become that. they should start voting in a couple of hours. we are closer to actually getting a majority for this deal . it is still unclear. it is interesting we did see pound movement. she has aders think better chance of getting it through than she did 24 hours ago. lisa: francine lacqua, thank you

so much as always. alix: robert shiller is still with us. i cannot help but ask you about brexit and investor psychology. the cape ratio for the u.k. is much lower. a little over half than the u.s.. the u.k. has a brilliant history. this parliament, they can get fractious lately, but on the other side, if you watch they have been argumentative style -- they have an argumentative style. alix: so that is a yes? lisa: robert shiller like the style of parliamentary debate. lyft public debut. the company gears up for its first day of trading. what this means for other

silicon valley companies lining up to go public next in today's follow the lead. this is bloomberg. ♪

viviana: this is bloomberg daybreak. coming up later on bloomberg markets, an exclusive interview with lyft's chief policy officer. lisa: it is time for follow the lead. a deep dive into stories making headlines and moving markets with the insight from industry veterans and insiders. today, tech ipo. we go to taylor riggs. taylor: we are looking at $72 a , giving lyft evaluation of

up to $25 billion. and is on par with netflix above peers like spotify and grubhub. take a look at lyft by the numbers. analysts think the market share could equal uber by 2021. a growth rate will rise 30% on an annual basis. lyft is passed the $1 million mark. none of this matters if you can't monetize it. take a look at revenue per ryder -- revenue turned positive for the fourth quarter and revenue growth per ryder. they are a long way from profitability. the good news is topline revenue growth is strong but the negative cash flow may weigh on the valuation today. alix: thanks to bloomberg's taylor riggs. joining us is dan morgan from atlanta.

he invests in technology. robert shiller is still with us. are you buying the ipo today? dan: we are in the process of going through the information. we were late on facebook. we let facebook hit the ticker. we waited in the we started buying the share. we will wait for them to go public today. we will try to figure out if we can get a path to profitability. lisa: how much are you watching the lyft trade today and how much -- and how well it is received to indicate how well the other ipos lined up will do? dan: it is huge. we have all these companies that will be going public in the next six months. none of them are profitable. it is reminiscent of what we saw in the late 1990's when we had companies going public that were not making money. it will be interesting to see how the acceptance of lyft and

uber and the other ones you mentioned and tried to compare and contrast these in terms of will is be a repeat of what we saw in 2000, where we had tech companies going public that were not profitable or is this just something that will work through and these models will work out. lisa: robert shiller of your university, come in. dan is saying this could be another.com bubble. robert: it does remind me of that. on the other hand, i can talk like a traditional economist, too. it is a good sign they would be doing an ipo when earnings are negative because lyft and uber are doing cutting-edge changes in technology. the fact that the earnings are negative is not proof of anything. on the other hand, looking at lyft, it is one of the most visible companies in the

country. uber.e all used lyft or it has an idea behind it that has the potential to make it overpriced in an ipo. does it give you pause these companies are losing money after being private for so long? they've been in existence and sustain themselves on private capital. does that give you pause? dan: they are obviously looking at the climate of the market. you have an inversion of the yield curve, you have things that could be construed as negative about the market. i think they are racing to get out there. you talk a lot about this on your show. you look at the valuation of lyft and uber. they will be 10 to 11 time sales. snap came out a couple years. alibaba and twitter were 13

times sales. they're trying to seize the moment in regard to getting the ipos in the market with fear of they waited another year, the climate may be different. you andbbert, last to relatively quickly. what kind of company would do the best,? robert: that is a difficult question. there are certain people who are studying these things. i'm not studying them closely. some sense of the ultimate scope of the market and the ultimate composition. this reconfirms my sense that people who are diligent and smart, the combination will make money. it is not an easy thing to value these companies. alix: that is why we have you. lisa: if they are good and they are smart they will do it. alix: dan morgan and robert schiller, it has been a

pleasure. stay tuned for bloomberg with the interview with lyft co-founder and ceo. it is a week of turmoil for turkish assets. we discussed the latest on the lira and a local election this sunday. more on what i'm watching next. this is bloomberg. ♪

alix: here is what i am watching. turkey and a week of turmoil in the markets. a reporter joins us. walk us through the market action and what we can expect in the next 48 hours. >> obviously the turkish government and officials had prevented foreign investors from shortselling the lira. that helped stabilize the lira somewhat. it has been depreciating against dollar for the past three days. some traders say that is due to turks dumping the turkish lira and buying dollars instead and

there is uncertainty before the election. also turkey is dealing with runaway inflation. foreign investors are dumping other turkish assets again. some turkey's 10 year bonds are more than 270 basis points this week. elections, it will be a test of the president's popularity. alix: thank you very much. the elections on sunday. what happens monday when the markets reopened? lisa: apparently president erdogan thinks he is a friend of market. alix: coming up on the open, julian emanuel l joins jonathan ferro. this is bloomberg. ♪

jonathan: from new york city for our viewers worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. ♪

jonathan: coming up, global markets closing out q1 with massive gains in the face of escalating growth fears. trade talks wrapping up in china with secretary mnuchin and trade representative robert lighthizer in beijing. and ringing in the new year for the unicorns with lyft ipo pricing in the top of an elevated range. your is your friday price action. futures positive .5%. in the fx market, the euro touch stronger. treasury yields off the lows for 2019 and up three basis points on the session to 2.42% on the u.s. tenure. we begin with our top story. wrapping up a massive quarter. >> massive rally. >> huge rally off the lows. >> bond rally near 50% equity rally. >> the big dovish tilt by central banks has