really struggling to get out of the environment. it just increases the appetite for u.s. assets. [bell ringing] they really like to be bearish on the dollar. a lot of people want to be bearish on stocks and they have been losers. there has been so much confusion. s&p 500, record highs. you are seeing it on the nasdaq composite as well. the dow jones industrial average up. we had seen some decent small caps outperformance over the past few weeks. there's still some people parsing what this means for the smaller domestic stocks. witha weird board there the dow and s&p moving, pretty solid day for the nasdaq. there you go. romaine: let's dive deeper into the action with our markets

reporters. abigail, get us started, please. abigail: that divergence you were talking about, the major average slightly higher on the day, that stands out. we have a different situation with different indexes on the week. the s&p 500 up for a third week in a row. the nasdaq outperforming this week, but one piece of underperformance is the faang complex. 0.25% on index down the week. down for the second week in a row. index stuckhas this in its own way. here's a longer-term weekly chart of the faang index. we see these beautiful gains until the end of 2018 when the volatility started. the 40 week moving average in yellow, that is the equivalent of the 200 day moving average. it is hard to see the markets

overall climbing too much higher, though that has been happening. it will be interesting to watch how this plays out. right now, the faang stuck in this range, taylor. taylor: you are stealing my faang, so i'm going to steal your sauce. this has been outperforming that s&p 500 for most of the week. the last two days, outperforming by almost 2%. today, there seems to be some skepticism. broadcom is weighing down on the stocks index. phasecould be included in two. a little bit skeptical here, taking a little bit of breathing room. they are underperforming today by about 0.6%. mike? mike: one thing that it outperforming today is investment grade bonds. that is the big ishares

investment grade, up today, which is not too surprising. high setting a new record today and it is extending its total return for 2019 to almost 17%. that means it is poised for its best total return since this etf was created in 2002. also a good sign that we will see investment grade spreads close tighter today. the u.s. corporate aggregate index fell below 100 basis points spread for the first time in 21 months. likely that we will see those ig spreads close even further below. romaine: thanks to taylor, mike, abigail. still with us on the desk right ,ow, bloomberg news reporter

katie gry felt, and joining us now, david balin. david, i want to start with you. it has been an eventful weekend month. a lot of encouraging signs about the economy, the state of trade. how bullish and how confident are you that we can build on the gains in 2019? >> pretty confident. this week was a big deal for markets. we got rid of two major uncertainties. one was brexit, and secondly we see the potential end to the first part of the china situation. year,e look to next there's a lot to be positive about. the most important thing is the fact that manufacturing can rebound in europe and across the world. manufacturers have been under producing for about six months. for could be significant earnings next year. joe: i want to challenge you on

something you just said. you say, we got rid of these two sources of anxiety or overhangs. 26.4% for the up year. find thed for me to evidence of overhang or stress. how much were they actually hurting the stock market in the first place? anotheruld have been up 5% or 6%. we have to look back more than one year. remember where we started 2019. if you look back over two years, you might have an average of about -- these are not bad gains, by the way. they are above average. but we have to look at earnings going forward. imagine earnings are plus 7% this year. imagine if it is not just cyclical, but some of the more value oriented stocks or

dividend oriented stocks perform well. there's a move available to investors if they consider adding dividend stocks. that is underrepresented in client portfolios right now. that is where we are focusing our attention in 2020. romaine: does that mean cyclical stocks? joe: they are going to do well, but they pretty much had their run. romaine: where do you stand in the debate over value versus growth? >> right now, right in the middle of it. growth has been on hold. there are areas of the market, whether it is fintech, cybersecurity, health tech, that we think have pretty much long trajectories of growth with high degrees of certainty. we seek companies that are not only cash positive, but generating earnings. is athe 10 year yield 1.8156. it is not even back to where it

was in july. there was obviously still incredible demand for these safe haven assets, even with some of the bounce over the last few months. what are people saying about their desired he to keep bonds on the portfolio? katherine: so far i'm still hearing a lot of demand. that is mostly a function, or at least partly a function of the fact that durations have done so well this year already. i do still hear a lot of demand and bullishness for treasuries. 2019, butgoing to be people are still stressing, not just u.s. treasuries, but sovereign debt as a blanket. >> the u.s. is going to stay in demand. the differential is huge. if got about $13.5 trillion worth of debt with negative yields. what we rise, which is expect will happen in the first ,uarter due to this recovery

that is going to make the dollar strong for the remainder of 2020. romaine: we all remember the yield curve. is that still a thing? >> my father knows about what an inverted yield curve is as well. because he's reading the internet. romaine: a lot of people learned about that back in august or whatever it was. we are still a far cry from where we were to begin 2018. we are at something like 20 today. do you think we are going to see that steepening into 2020 given where we expect central banks to be this year? >> a little bit of steepening. the long rates can go up a little bit. the fed is going to keep the short end down. that is going to be good for financials. but i do think we are going to see that slope stay there. it seems to us the fed made the

right moves in stopping, allowing the markets to understand there is support for the economy. we are not seeing other interventions which will allow this to play out in a reasonable way. joe: what about politics? we are facing down the barrel of an election year. we don't know who the democratic nominee is. we don't know who is going to win. how much of that -- that is going to be like half of what we talk about next year. katherine: that is the sense i get. joe: it is going to be like 4/5. katherine: that is going to be the story in markets. i heard a lot of angst over the fact that phase two negotiations aren't going to wait until after the election. they are going to start immediately. we are going to have volatility while we are trying to parse through those politics. who knows what it will look like? romaine: if you stay with sort

of a vanilla type strategy, something similar to that, can you still expect the sort of profits you did in 2019? >> in 2019, our average portfolio was up about 15%. there is no way we are going to see a repeat of that. we could see 7% returns. people have to get used to the fact that in a 1.8% 10 year market, 7% is really good. lots of clients decided not to stay invested. they got out of the market. value timing is eroding of a lot of portfolios. romaine: triple leverage. joe: thank you very much to bloomberg news katherine gry cio and city private bank david balin. that does it for the closing bell. up next, we will be taking a closer look at the u.s. and china trade agreement, with a

fellow at the peterson institute. this is bloomberg. ♪

romaine: live from bloomberg's world headquarters in new york, i'm romaine bostick. joe: and i'm joe weisenthal. romaine: here's how stocks closed today. the dow, s&p, and nasdaq all moving higher. the u.s. and china say they agree to the details of a phase i trade agreement. and a tory victory. u.k. prime minister boris johnson returns to power with a landslide majority win.

and, impeachment advancement. the house judiciary committee votes to impeach donald trump in a historic partyline vote. but first, that trade deal. the u.s. and china have taken a step toward defusing the trade war that has kept investors and economists on edge for almost two years. >> phenomenal deal. the tariffs will largely remain. 25% on $250 billion. we will use them for future negotiations on the phase two deal. romaine: joining us now from washington is mary lovely, a senior fellow at the peterson institute. mary, we heard the president there. one thing we heard was that the tariffs are still going to be there. we are just not going to get those december 15 tariffs and some existing tariffs will be scaled back slightly. but there's still this overhang that the u.s. and china have a

lot to work out. how concerned are you about this next phase of the trade war? mary: clearly the tariffs could go back up. phase two contains the hard stuff. but i don't want to leave the impression that the rollbacks weren't important. they were important. to sevenack from 15% point 5% happened on consumer goods. that is good for households, especially lower income households. and then the tariffs were postponed on the next round which was supposed to take effect on sunday. those were mainly u.s. tech goods. those would have been very destructive in terms of consumer confidence, producer confidence. i for one, very happy that the rollback happened. joe: one of the key things we've heard from the white house, enforcement mechanisms.

these don't mean anything unless there is some way to enforce them. what could that look like? what would you expect the shape of that to take? mary: we don't know the details yet, but it appears that it would be a process whereby complaints could be made, even anonymously, and they would be sent up the food chain. if they couldn't be settled locally, they would be moved up through some chain of command. ambassador lighthizer today said they could land on his desk and gave the impression that they could lead to the re-imposition of tariffs. that is a new procedure we hadn't seen before, but we have to see what is in the final document. romaine: a lot of people look at this through different lenses. a lot of folks that i talked to look at it more from the perspective of having u.s. market access to the chinese

consumers effectively. are we going to see a little more of that? idea thatunt on this the chinese market is going to be a little more open than it has been over the last year and a half or so? mary: i think you put your finger on something that is important to american businesses, which wasn't covered by the 301 report or the negotiations. we do know we are having some market access through state promised purchases. but that is not what american businesses are seeking. they are seeking a level playing field where they can compete. i don't think we saw much of that today. i doubt if we will see much in the final agreement. i would have to score that as a disappointment. joe: some of the issues we know are going to be left for further down the road, cybersecurity, things like that. do you expect meaningful

progress on those things in 2020? ask on those. items has been very vague. we don't know specifically what they are looking for. industrial subsidies are at the top of the list for phase two. those issues have stymied negotiators for decades. i think it is hard to be super optimistic about this. if we are asking for some cutback in subsidies, we've that in the some of current wto. we may get some more. not only the united states, but other countries are concerned about export financing from the chinese government, which gives chinese exporters a leg up in other markets. makes it harder for our exporters to compete with them. maybe we can get somewhere on that. what are we asking for, and are

we asking for something in the realm of something that can be done? subsidies.so has most countries consider this to be their sovereign domestic territory. it is going to be very difficult to get big changes in china's development plans, which are to pump a lot of money into what we might think of as emerging technology sectors. romaine: vesely we are taking a long-term view as to how this relationship is going to work out. in the interim, could we expect any meaningful contribution to gdp growth here in the u.s. from the resolution or at least the current resolution of this deal? mary: ambassador lighthizer talked about $200 billion worth of new exports. that is important. we don't want to minimize that.

but given the size of the u.s. economy, we are not going to see a huge boost to gdp. what i do think we could see is an improvement in business confidence. we know that right now, what is weighing on gdp growth is business investment. consumers have been bullish. business investment has slowed. if we can get a little more business confidence, a little more positive, i think we could have an impact. romaine: mary lovely of the peterson institute, thank you very much for sharing your perspective. coming up, impeachment heading to a floor vote in the house next week. we will head to capitol hill next to discuss. this is bloomberg. ♪

joe: the house judiciary committee today sending articles to impeach president trump to the chamber floor for a vote next week. trump repeated criticism of the democrats. >> i think it is a horrible thing to be using the tool of impeachment, which is supposed to be used in an emergency -- it is a scam. it is something that shouldn't be allowed. it is a very bad thing for our country. you are trivializing impeachment. watson, congressional reporter for bloomberg news, joins us from capitol hill. just in terms of process, is there any sort of debate when it gets to the full house, or do they just take a vote? >> there will be a debate.

the rules committee will take it up. we are looking at a full house floor vote on wednesday. we will hear both sides yet again. going to be a long debate in the rules committee. there will be that. it will be sent over to the senate where we are expecting a trial in january. there is a big divide over whether it should be a long or short trial, but looks like the short trial idea is gaining steam. there is a story on the terminal today about how that is gaining momentum. trump today talked about how he could go either long or short. until now, they have talked about a long trial to bring in joe biden, hunter biden, the whistleblower. a lot of the moderates in the senate are sort of against that idea. they want to see this taken care of. romaine: the main narrative has been that democrats were pretty

united with regards to moving forward with these articles of impeachment and trial in the senate. is that still the case? >> a story is coming out tomorrow about how moderates are weighing this as a very tough vote for those swing districts. we are seeing some of them come out. max rose of staten island came out in favor of impeachment. there are about 31 vulnerable house democrats. most of them are still weighing this very tough vote which could cost them their political careers. joe: when the trial goes to the senate, is there going to be anything new that could potentially come out of that, or basically all the facts and everything came out already? >> we haven't seen trump's substantive defense, really, at all. the white house counsel will be leading a robust defense on the senate floor. there could be others who are deposed, whether it is rick

secretary,energy secretary pompeo, so they have the option, and may well provide more details or substantive defense of the president. of course there are those on the more right-wing part of the republican party who want to see this process used to dig into joe biden, to establish that he did something corrupt, and there will be political gains to that as well. romaine: thanks for taking time for us. eric watson, congressional reporter. let's get a quick check of the latest headlines. a monday deadline to appeal that decision denying it a license in london. the regular leader said the company -- the regulator said the company failed. that signals that uber might

take a different approach in its appeal. at&t has switched on 5g service in 10 u.s. markets. among them, los angeles and san francisco. millions of customers will have access to the next generation network, but if you want to take advantage of it, you have to upgrade. and microsoft showing off its new game console. is goinghe xbox, which to go on sale in the 2020 holiday period. sonysets of a clash with and its playstation 5. microsoft says its new console is going to be for times more powerful than the current generation xbox. that is your business flash update. conservativee u.k. party scoring a big election day win. what can we expect from boris johnson's party going forward? we are going to talk about that next. this is bloomberg.

♪ [ electrical buzzing ]

[ dramatic music ] ahhhh! -ahhhh! elliott. you came back!

>> i am mark crumpton with bloomberg's first word news. the white house has started to map out its plan for defending president trump in an impeachment trial. bloomberg has learned that differences between the president and senate majority leader mitch mcconnell over the proceedings have so far cut the strategy short. one key decision has been made. the top white house lawyer will represent the president in the senate trial. the house is expected to vote on articles of impeachment next week and the senate plans to kick off a trial in january. the head of the european commission says the one-year timeframe for striking a

post-brexit trade deal with britain is challenging, but once the relationship to be as close as possible. she spoke to reporters in brussels. she also congratulated british prime minister boris johnson for his party's victory in yesterday's election. johnson campaigned on a promise to get brexit done. >> we expect the ratification of the withdrawal agreement by january. we are ready to move to the next phase in our relationship. we want our future relationship to be as close as possible in full respect of our principles. romaine: in comments today outside number 10 downing street, prime minister johnson pledged to heal britain's divisions over brexit. china and the united states have agreed on the text of a phase one trade deal. it will lead to the removal of tariffs on chinese goods in stages. in return, china will increase

imports from the u.s. in beijing, chinese officials said the benefits of the deal will be felt around the world. >> given the downward pressure on the world economy, the agreement will also help to markets, stabilize expectations, and create an environment for normal investment activities. >> on twitter, president trump called the agreement an amazing deal for all. flu season is here. health officials say it is hitting children the hardest. the centers for disease control and prevention says flulike symptoms lead to higher than normal doctors visits in the u.s. in november. officials say the severity of this year's flu has been comparatively low. two years ago the flu killed more than 60,000 americans. dayal news 24 hours a

powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. romaine: we just want to bring you some breaking news involving the tax return saga with regards to u.s. president donald trump. congress and the new york attorneys have been seeking to see trump's tax returns. the supreme court has decided to review and appeal by president trump to block congress and the new york grand jury from seeing those tax returns and other financial records. this would effectively move this to a decision by the supreme court, much bigger than just tax returns. this is about immunity from investigation. what is going to on in the u.k. british prime minister boris johnson scored the biggest when for the conservative party in

more than 30 years. that gives johnson the mandate he needs to pull the u.k. out of the european union in less than two months. >> your hand may have quivered over the ballot paper before you put your cross in the conservative box, and you may intend to return to labour, and if that is the case, i am humbled that you would put your trust in me and that you would put your trust in us. romaine: joining us now is stacy goddard, professor of political science at wellesley college, and the faculty director for the madeline albright institute for global affairs. you just heard boris johnson there. was this really about the voters saying, we trust in boris johnson, or was this about voters saying, we don't like jeremy corbyn? >> really good question. in part, there is some

expression of trust in boris johnson. at the very least, enough is enough, we are done with the uncertainty, and it is time to get brexit done. on the other hand, a lot of this is viewed as a referendum not on brexit, but on jeremy corbyn and labour itself. throughout the campaign, there were signs that jeremy corbyn was not going to paul traditional labour policies. didn'tin areas of london trust that he would fulfill their interest. there were charges of anti-semitism during the campaign. meant that jeremy corbyn's labour was ineffective as an opposition candidate. joe: there's a massive conservative majority now. they will have five years. it is not going anywhere for a long time. outside of brexit, what other major priorities do you think

this conservative government is going to have in terms of reshaping britain? campaignedis johnson , because he had to speak to jeremy corbyn's labour, he did so on a transformative platform. his promise to the country has been, now that brexit can be conservatives are going to reunite the country. what we are likely to see is a lot of work around the national health service. there is a lot of uncertainty about what conservatives are going to do there. there's discussions about britain and universal human rights. this is all going to be a challenge for the conservatives. they are pledging to have a big tent party, but the reality is that they are now incorporating a lot of different issues, particularly issues that are central to brexit, and that

includes disputes over free-trade. whether or not britain is going to be a protectionist country that adopts policies that protect these labour converts, or whether it is going to embrace free-trade and deregulation throughout britain. romaine: if johnson is going to unite the country, we have to point out that when you look at the vote totals, particularly in scotland and northern ireland, there's a possibility that we could see at least those two areas push for their own independence away from the u.k. do you think that is a possibility, and how much is that going to hinder boris johnson's strategy? might be one of the big unintended consequences. the northern ireland and scottish case are separate. in terms of scotland, the scottish nationalist party managed to capture a large number of contested seats.

and already, the head, nicola sturgeon, has said scotland will have another referendum on its independence. they had a referendum in 2014 and it failed. sturgeon is arguing what happened suggests that scotland wants to be in the e.u. even if this means leaving the u.k. the irish side is a little different. nationalists did manage to get more seats, but it is unclear what that is going to do to the status quo. romaine: it is dangerous to draw analogies between the u.s. and the u.k., but i'm curious about one thing. in the u.s., there are certain parts of the country that used to be democratic strongholds, but they support republicans and they've never gone back. last night, we saw conservatives make huge gains in some of these working-class labour strongholds. seats that conservatives haven't

held for decades. are these seats now conservative seats for good, or does labour have a reasonable shot of winning them back? depends on two things. they called this the fall of the red wall. this had been really traditional labour territory that moved over to the conservative party. the conservative party a party that what adopt protectionist policies that they believe is going to allow them to bring back industries and rebuild this industrial heartland. this basically raises the question of whether or not the conservative party intends to do that. the conservative party also has this very large faction that is anti-rebuilding the social welfare state. if these people in the industrial areas of britain see that conservatives have

abandoned them, they might go back to trying to find another option. romaine: really appreciate your insight. wellesley college's stacy goddard. coming up, we hear from gregory milano. this is bloomberg. ♪

romaine: time for a look at what stories are trending. terminal users are reading about new york governor andrew cuomo, who may be spending the new year explaining how he was caught offguard by a hole in his state budget caused by rising medicaid costs. trendsent spending

continue, the state would face in 2023.illion deficit bloomberg.com has a story on the retail apocalypse which could be paying off for one group. while the group of chief executives at the biggest u.s. company as a whole gets more , women have made gains in the retail space. because of the retail gettingw woes, some are the opportunity to run things a lot sooner. and quick take by bloomberg is reporting that pepsi is rolling out a new way to get caffeine. pepsi cafe has nearly double the dose of caffeine of irregular pepsi. the flavor is a combination of coffee and cola. coca-cola already has a version on the market outside of the u.s. storiesfollow all the

on your bloomberg terminal or on bloomberg.com. corporate leaders spend a lot of time managing short-term results. doing so can come at the expense of long-term interest. gregory milano wrote a book on this so-called short-term is him growth versus current earnings. on what with scarlet fu has changed about corporate behavior since the 90's. >> companies just simply invest less. they are more focused on trying to maximize margins and returns. those measures tend to look worse when you are investing in the future and look better when you are milking old assets. our research shows they are investing less in aggregate than they used to. >> has it gotten worse? >> yes. if you look at the 90's versus the 2000, it is getting worse. investment of net income into

the business is going down. kind ofroblem is it is embedded and entrenched in the calendar. everything has aligned to boost the share price. when you stray from that, people say you are not honoring your fiduciary duty. >> what maximizes your share price next week or next month is different from the next two or three years. shareholders as a group are better off when you think longer term. i often ask people, would you be willing to do something that might be misinterpreted by investors and drag your share price down now, but if you are right, will pay off over the next two or three years. they are almost afraid to do it. >> and they might attract activist investors who will demand even more changes for the short term. >> although one of the endorsers of my new book is an activist investor. note that went to

are not trying to tell people not to maximize profits. we are just saying, be willing to invest those properties back into the business. >> one of the most common ways to maximize profits and not reinvesting the business is through share buybacks. do share buybacks ever work? >> there are times when a stock price dips and a company can take out a large number of doing for a time by buybacks and that benefits the remaining shareholders. when the share price bounces back, it tends to go higher. unfortunately most companies buyback when the price is high. and the compensation structure means that their tonings are often tied shares. does compensation need to be changed, the way that we pay executives, for the

short-termism to fade? >> there are two principles we think need to be changed. first is the measures. many of the measures react negatively. the use of those measures, especially in short-term plans, discourages investment. we need to get people away from measuring negotiated budgeted targets of performance. when we do that, we are telling them to stand back their targets. in my experience, when people plan low, they deliver low. we have to separate the way people are played -- paid from the way they plan and budget. >> does anyone do this correctly, address this in a way that would benefit long-term results and benefit the company in the long term? >> we have some clients that do, but what i like to refer to more

is companies that are founder led. companies that are founder led our relentless in pursuit of profit and cash flow, but they would never cut investment in the future. they would never cut r&d or marketing. they are much more focused on maintaining their investment. that is the model. in the book i talk about creating ownership culture. ownership culture is where people are driving performance, but willing to make investments in the future. >> so these founders are better at avoiding the short-term thinking than professional managers, who are supposed to be able to make long-term objective decisions. >> some of it is just their makeup. some of it is also the fact that there long-term wealth is so inextricably tied to the success of the organization over the long term. how they get there in the short-term doesn't matter as much. are nottion plans

to howas much linkage the company cares over the longer term. romaine: that was gregory milano, author of curing corporate short-termism. that is set for release next month. coming up on the chopping block, deutsche bank considers deep cuts to bonuses for this year. can the ceo deliver on his radical restructuring plan? this is bloomberg.

consideringe bank deep cuts to bonuses for the year. bloomberg has learned that bonuses could be cut by as much as 20% as the ceo tries to eliminate billions of dollars of cost. furthermore, let's bring in sri, who covers banking and

financials for bloomberg news. put the bonus cuts that we expect into context with the long term plan to restructure deutsche bank. >> we are just a few months removed from a dramatic restructuring. coming into the end of the year, you sort of expected a cut to deutsche bank's bonus pool. setting aside deutsche bank, there are always some games played with this. this is not the final number for the year. they go back and forth with the managers and then they arrive with a final figure. it helps orient your thinking going into the end of the year if you are planning a flashy purchase. romaine: anytime you see these cuts, you have to wonder what this does to morale and recruiting. are we seeing other similar cuts, or is deutsche bank -- >> deutsche bank definitely does stand out on its own, especially

because of what has gone through. you have a stock trading much lower than it was a few years ago. favor, the stock has stabilized. the latest numbers have come out. but you have to remember also that the decision will be unevenly distributed. over the summer, they must have done something, must have given some visibility to their top talent. stockou mentioned the stabilized, but it is at a low level. we've seen other financials bounce. basically no bounds at all yet for deutsche bank. what is it that people still need to see here? >> it is still early innings. you talked about a dramatic restructuring. we were thinking they would go back to lending out to companies, but then you look at the long-term outlook.

maybe you will have to find other pockets of strength. they have said, we are more confident in our investment banking, which is not something you expected out of them in june or july. it is still early in the process and they have a long way to go. romaine: they've done deeper cuts before. i don't know if you said that already. >> i'm not sure about that, but 20%, we don't know if that will be the final number. don't miss this. next week, new york fed president john williams and boston fed president eric rosengren. romaine: and don't miss this. the boe and boj announcing their weight decisions on thursday. and a reminder, subscribe to our weekly podcast on itunes. you are going to find all the best content each friday to enjoy over the weekend.

from new york, this is bloomberg. ♪

♪ >> i am taylor riggs in for emily chang. this is "bloomberg technology." tech stocks on the move. china and the u.s. agreed to phase one of a trade deal. that includes intellectual property. plus, tensions. the strength continues to flare between alphabet employees and management. we will hem