♪ >> certainly there is an argument to be made that we have gone up a little too far, too fast. >> the data is slowing. . momentum is ebbing. >> when you look at hiring, you see those permanent layoffs increasing. >> the important thing to keep in mind as we are starting a brand-new economic cycle right now. >> i think a lot of this band-aid stimulus has already been preston. >> the central bank -- been priced in. >> the central banks have locked themselves in at their effective lower bounds. >> when you get into 2021, some

may find it too difficult to keep going. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. good morning, everyone. an eventful day, to say the least, in the markets. a fed day as well, and not a routine december. there's not going to be secret santa in washington at the fed day. it is a meeting of value. what will you look for from chairman powell? jonathan: what everyone else is looking for, all centered around the asset purchase program. will get any forward guidance around it? well they establish the reaction function, so to speak? also, will they extend the average maturity of the asset purchase program? that is the question in the bond market, but elsewhere as well. tom: we have seen it with the ecb as well, where the theme of the last couple of weeks is 2021 becoming 2022, 2023. are we going to see those

numbers today and the press conference? jonathan: i think what made people -- what many people guidance,forward which is what the fed said last week. that is the story on forward guidance. the fact of the matter is they have all been clear. we want to keep financial conditions easy. not necessarily easier, but easy. they are all trying to establish and reinforce the commit and to do that. tom: the takeaway is without question, we don't want to set dates. we are going to be market we about it. michael mckee taking part in that press conference. we will have our fed coverage today. thrilled to have scott minerd among others with us. i look at the rest of the messaging from the market. got good pmi out of europe. what has credit done over the last number of days given the quiet in full faith and credit? lisa:lisa: it has been pretty

steady, actually. you have seen some money out of riskier debt just to pull some chips off the table at the end of the year, but the main story as the saying come of the people are plowing into riskier and riskier securities. how much is the fed willing to backstop this? will they actually raise some issues about how much asset prices are getting divorced from the fundamental economy, or is this the entire plan they will support, which is what the market expect for them? datawe will see the quickly here. a more a bully and data check earlier on. the vix really hasn't moved. i've got to go to the vix, 22 point 62. it really ought to be 21 or even 20. it is not. jonathan: i think the story this morning is in the fx market. you see one dollar 22 cents on euro-dollar a week after president lagarde said it is something we watch very carefully. they can watch it all they like. it is getting stronger and

stronger, and i think it has appreciated about 1% since that news conference. how much stronger does a get before you start hearing this in-kind news we heard repeatedly in september? i think we are already there. tom: jon's doordash shares have really worked out. jonathan: i wish. tom: sterling coming back nicely within the brexit battle. right now, to get the conversation started on radio, on television, to help you prepare for if you weren't in boutle,ty market, greg bnp paribas u.s. head of equity strategy. what does it say about developing confidence towards 2021? greg: i think it is an interesting story in the volatility market. we have seen the vix come down considerably, and 20 has been a bit of a low for the last six months. it is likely to go lower into the new year.

haven't seen the same type of returns to sort volatility strategy that we saw pre-covid. we think that could be a big story for q1 next year. jonathan: we get some notes whenever a guest comes on the program and kindly sends over their thoughts. i am looking at these notes right now. laughed at me last time i was on for my quote, more buyers than sellers. " i just thought the line was a bit trichet. are you excepting more inflows? greg: we think the pace of inflows will slow considerably now. we don't think we will see outflows from the u.s. equity markets, but we do think we have seen a huge amount of money being put to work. we have seen big inflows in the data for the future. we have seen multiyear highs in terms of the inflows into the etf universe, and importantly, some of the quantitative strategies we track have really re-levered.

so we think that is going to slow considerably, but we don't think we are going to move into an environment where we are seeing that outflows, so we think that could just be supportive of a slower pace of equity gains going forward. lisa: this is actually out of consensus a little bit in terms of people saying that the retail investor is now actually getting more confident to put cash into equities, and that you had not seen that full rotation until very recently. is that your sense as well, that other people kind of have too much faith in this cash coming off the sidelines? i put it" because i know that is a contentious phrase -- i put it in quotes because i know that is a contentious phrase. greg: i don't think it can continue the pace it has had over the last six weeks. a lot of these indicators are the highest we have seen over a multiyear period. as i mentioned, i don't think that means you necessarily see reversal, but it is just a much slower rate. the interesting thing, it is all

most every indicator we look at. crude positioning is extremely stretched. etf flows are extremely stretched. futures position is very stretched. so really, i think there's not as much a wall of money as maybe there was six weeks ago. jonathan: there's a really strange dynamic at the moment, whereby there's always something to worry about. about the moment, there is something to be hopeful about. and in the near term, there is something to worry about. walk me through how unusual that might be for you, and how the market is capturing that story. greg: i think s&p strategists often characterize it as climbing a wall of worry. when you can get past those events, that can drive a bullish catalyst forward. one of the things we are , it is probably

something of a consensus call now. i do think those drivers are very strong. there's the acceleration in the markets. the ambiguity of gamma, is it good for listeners or not? if we get acceleration of good news or continued acceleration, is that good? doesn't matter about gamma right now? greg: when we look at the options market, the thing we see is the vix is often used as a barometer of fear, and one of the things we haven't seen is a return to the pre-february, pre-march levels of volatility. we think we could see a new regime in q1 next year, whether 20, but ithrough does trade in the mid teens and high teens levels. that is when you could really see money start to put to work

again. it is generally a positive thing for risk assets. lisa: just to tie this all together, with consensus in terms of the positivity, but perhaps not with some of your colleagues who anticipate some pretty good gains next year. what are you looking for in terms of the potential returns on the s&p and where you expect the biggest gains? greg: we think there could be single digit gains on the s&p. we are going to see really strong earnings growth. then we can get mid to high single digit games from the gainsngle digit from the broader equity market. we let the value versus growth story, but we do think it is a consensus view. when we differentiate ourselves on that view, the value sectors that have led the resurgence in the last six weeks, energy and financials, we don't think these

will be the sectors that drive the resurgence next week. i think the banks in particular are at risk of being a value trap next year, given the environment we still find ourselves in. jonathan: greg, great final thought to leave us on. year.the rest of the the story of financials i think is absolutely clear. that is the tension at the moment. yes, we've had that catch-up moves, but if you expected to continue, where does the rate story factoring to that? the fed and the ecb are telling you what they are going to do with rates. maybes think the curve can steepen out and you can get some action further down the curve. but i think we'll find more about that from the fed this afternoon. tom: it is the wall of money out there. the trillions of dollars that has been invented over the past couple of years. where does it go short-term? how does it diffuse out of the system? challenge,ng to be a

2023 and 2024, for the central banks. lagarde alluded to that the other day. jonathan: is it the difference between a catch-up trade and something more durable, more sustainable? many different faces to cyclicality. everyone is in the same bucket. the bucket just says cyclicals on it, and through the next year or so, you start to get some dispersion. lisa: i am picturing literal buckets, and one of them says cyclical. jonathan: that's how it works, isn't it? lisa: i will say, i think it is interesting what the regulators are going to do with dividend payments and some of those types of regulations that were put on the banks in response to the pandemic. we got overnight the european regulators coming out and giving more specifics about reinstating some of these dividend payments. it wasn't as generous as people thought. this may be one of the biggest issues to determining how much

value there is next year. jonathan: a very timely conversation coming up on this program. we will catch up with jeremy ibc of aof c fascinating fx market. the euro just off the high. tom: you're a swissie pulls back as well. stronger euro, weaker swiss franc. jonathan: this is bloomberg. ♪ karina: with the first word news, i'm karina mitchell. republican leaders say there has been progress in talks with house speaker nancy pelosi on a stimulus package. kevin mccarthy said there is a possibility of getting it done. nowhere whether pelosi and senate democratic leader chuck schumer have agreed to set aside aid to state and local governments and liability shields for businesses. fed chair jay powell and his colleagues are considering whether to change their bond buying program to provide more

support for growth. fed policymakers wrap up their two day meeting today, likely to offer new forward guidance on bond buying is a virus outbreak spreads. and it was a pivotal moment on capitol hill. time, senate majority leader mitch mcconnell recognized joe biden as the winner of the presidential election. he is also discouraging republican senators from joining any move to reject the doctoral college next month, when the congress will officially count the votes. . angela merkel warned that germany faces a new peak of coronavirus infections next month. a lockdown forced non-essential stores to close, and parents were asked to keep children away from schools. a vanguard equity fund has made history. it is the first of its kind to equip $1 trillion of assets, a testament to the rise of index based investing over the past three decades. dashed vanguard

includes a mutual fund and an etf. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm karina mitchell. this is bloomberg. ♪ every year, we set out to do one thing: help the world believe in holiday magic. and this year was harder than ever. and yet, somehow, you all found a way to pull it off. it's not about the toys or the ornaments but about coming together. santa, santa, you're on mute! just wanted to say thanks. thanks for believing.

♪ jonathan: from new york and

london, i little bit of breaking news from politico. hill negotiators are on the brink of a $900 billion coronavirus rescue package that would include a new round of direct payments, but would leave out state and local laid and a liability shield. a deal could come as early as this morning. that is the latest reporting from politico. equity futures out to session highs on the s&p 500, and treasury yields climbing a little bit higher as well, as some confidence starts to build off the back of this reporting that potentially, we could have an agreement later this morning. tom: the path here is really important, going back to october, going from $2.1 trillion, president trump at $1.8 trillion, and then the shock the other day of $700 billion, and to me, the real reset other than getting the deal done is we are not at $700 billion. that is a big deal.

jonathan: the two important factors here, one is the size of the potential deal. two is the fact that we might have had an agreement on putting and astate and local aid liability shield, and that would be real progress because that is not tom thing we heard yesterday. i understand that kevin cirilli joins us now from washington, d.c. great to catch up with you. the latest reporting, your read on things and where they stand. kevin: first and foremost, this is the optimism we are seeing that senate majority leader mitch mcconnell said last night after the leadership reconvened in the 7:30 p.m. eastern hour, in which he said he was optimistic that they would be able to get to some type of an agreement sometime soon. at the second point, this is where the timing and the nuance of washington really matters, is that if they want to get to a deal, they have to do it by today. there really is no other option. proceduresok at the and the procedural hurdles in the senate, as well as in the house, with the clock ticking

down for friday with the guards to the omnibus bill, these are the final hours in order for them to do that. tom: who holds the power here? kevin: leader mcconnell. tom:? why does he hold the power -- tom: why does he hold the power? blinked with not speaker pelosi, and likewise with president trump. he knows that speaker pelosi recognizes that even if the democrats have a stronger position come the georgia runoffs, the republican party will be much less likely to want to negotiate with a democratic-controlled house and a democratic executive branch because the republicans are already going to be focusing on winning back the midterms, and you've got a cast of characters in the republican party in the senate laying the foundations for their presidential campaign. because of that, spending is not going to be en vogue for many republicans in the establishment

and the senate and the new congress. lisa: let's talk about some of the specifics. if politico is accurate, this bill is going to be $900 billion, including a round of direct payments to individuals that make under a certain amount. does this also include enhanced unemployment? can you give us a sense of how much there is for something that looks like this right now in the congress you are looking at? hard to talk about language and a bill i haven't seen yet, but i will tell you that in terms of the unemployment benefits come with a $300 weekly checks, the $600 check -- not weekly, the stimulus check, that the president and circuit hermitage and have been pushing for -- that was an ability for president trump to provide political cover for republicans concerned about spending so that they didn't have to be pushing for that with the republican party moving in the direction of their not winning to be spending.

the stimulus check is also an opportunity for cover for democrats and progressives who are arguing that they want additional aid for state and local government. reporting,ed upon my as is the notion for additional ,unds for vaccination rollout for there to be a fictive rollout of the vaccine. nuanced andibly politicized, and important to note that that is providing cover for various factions of both parties. jonathan: for our audience worldwide, a little bit of a bounce on the s&p 500 on the suggestion of a $900 billion rescue package that would include another round of payments, but leave out state and local aid and a liability shield. kevin, you did the right thing. it's not speculate that is in it -- speculate what is in a bill that no one has seen. reports suggest that liability

protection and state and local aid will not be in this. the good news is that those suffering in the labor market could be about to get what they need. the bad news is some of those states that are now shutting down cities again, thinking of california and the potential in new york. they won't get what they need. can you walk me through how that pressure builds? protectionsiability , what leader mcconnell entirely wanted, will not be in this proposal, but likely a watered will be included so that they can bring people back to work, keep people healthy and safe while complying to standards that i've had very mixed messages from all factions of government, in terms of various rules and regulations. withrms of where this goes

fiscal stimulus, this is without question -- [no audio] -- and senator dick durbin, i democrats from illinois. senator durbin, a member of democratic leadership in the senate, has now successfully been able to wrangle enough support away from the democratic-socialist rising tide of the populist movement on the left to say this is pragmatic, this is a real approach, and this is as good as it gets. in whatdifficult to do we all know, to use neutral words, has been an incredibly polarizing last six months in american politics. jonathan: kevin cirilli on the latest come our bloomberg chief washington correspondent. inching seemingly to a new deal. it is right to sit on the

politics of this moment. this is not with speaker pelosi -- this is not what picker pelosi -- this is not what speaker pelosi was pushing for. the yield comes up back towards the 1% level on the 10 year, but i do agree the politics of the moment is great. i just go back to the diminished expectations of the gridlock. down we go to $700 billion, and we save face by going back to $900 billion. jonathan: equities with a little pop, then we came back a bit. lisa, the more sustained durable move in the bond market. yields higher. lisa: this is consistent with the idea that direct payments to individuals has been considered more inflationary in the near term, in terms of the people most likely to spend the money actually getting it to put out into the economy. jonathan: speaking of spending the money, five minutes away

from retail sales in america. we will break down the numbers with michael mckee and took a little bit about the prospects d.c..deal down in good morning to you all. this is bloomberg. ♪ (announcer) do you want to reduce stress? shed pounds? do you want to flatten your stomach? do all that in just 10 minutes a day with aerotrainer, the total body fitness solution that uses its revolutionary ergonomic design to help you maintain comfortable, correct form. that means better results in less time. and there are over 20 exercises to choose from. get gym results at home. no expensive machines, no expensive memberships. go to aerotrainer.com to get yours now.

jonathan: this morning just got a lot busier. good morning to all. alongside tom keene and lisa abramowicz, i'm jonathan ferro. as we approach a stimulus deal in washington we need to look at economic data out of the united states. that dropping in just a moment. michael mckee standing by. michael: we are waiting for the retail sales advanced report. heavily revised. we are expecting a headline decline and that is what we get. down 1.1% in the headline for november, the forecast was for a .3% decline. we are also waiting for the revisions. that will be important in terms of try to figure out where spending is for the fourth quarter. and -- waiting9%

for the control group numbers to come out. the biggest issue for the numbers seems to be a decline in gasoline prices. we knew there was a weaker car sales number for the month. that is what we are waiting to find out, where the control group comes in. down .5%. that is not good news. the control group, you strip out andding materials, autos gasoline and you're left with what goes into gdp. a .5% decline is not good news. there were some people expecting a decline because they say we are seeing slower consumer spending. j.p. morgan chase, credit card spending down during the month. ,his is not a complete surprise even though the numbers are disappointing. we have revisions in october. retail sales up .3% in the

initial print, down .1% in the revision. the retail sales control group up .1%, now down .1%. all the numbers negative for october as well as november. the u.s. economy clearly slowing. jonathan: i mentioned things were getting busier, they just got even busier. here is the price action on the back downside surprise. equity futures lower, then stabilizing. yields which have been higher suggesting we are on the brink of a deal in washington, d.c. yields higher on the 10 year. then the next headline drops. we have been waiting for this one from the treasury. the united states designating vietnam and switzerland as currency manipulators. michael: this is an interesting report because for years the debate has been doing named china a currency manipulator.

the treasury department did a year ago, that in their last report took that designation off after the phase one trade deal. that was this year. now in switzerland and vietnam the u.s. has filed cases against vietnam for currency manipulation to try to affect the sales of certain export including tires. the swiss one is interesting. switzerland has been manipulating its currency. they would be the first to tell you that because there is so much demand for the haven currency that they have had to do that or the currency strengthens so incredibly much. there are three criteria the treasury department follows. one is a bilateral trade surplus. this year so far, switzerland is at $51 billion. --urrent account surplus foreign-exchange purchases up at least 2% of gdp and they are at 5%. they meet all of the criteria.

the only question is is it important the u.s. does a significant amount of trade with switzerland? they exported $65 billion worth of goods, last year it was only 36.5. a 78% increase, largely because of the pandemic. at this point there is not much the u.s. can do. it reminds me of the old monty noton bit that if you do stop i will insult you again. thatequirements of the law the treasury secretary has been in negotiations with the swiss. tom: do not move away. this is a historic moment for surveillance. this goes back to me and the guy that put me on the stool. jonathan: how did that go? tom: he had a british accent. this was the day the swiss had to react.

we have michael mckee with us. zurich withones of us, jonathan ferro. lisa abramowicz. michelle meyer. we look at three stories. jeremy stretch joining us on this historic moment. jeremy, there has always been a distinctive field of switzerland. there has always been a pressure on the nones of zurich and their nation they have to protect themselves from the wall of money coming in that would form outright deflation. statement offair manipulation to zurich and the people of switzerland? jeremy: this issue has been brewing for some time. the swiss are very mindful of that and have increased visibility vis-a-vis their intervention in order to try to placate the u.s. treasury. they were anticipating the risk

would, and you are correct to say the swiss are often recipients of a wall of money when there are periods of uncertainty. what they have been at tempe to achieve is to maintain currency -- attempting to achieve is to maintain currency and limit his inflationary tendencies. it is very much the case that the currency is a means are a mechanism to do that other than following some of the other benchmarks we have seen come asset purchases. other benchmarks we have seen, asset purchases. i'm not sure the treasury doctrine will change the dynamic for the s&p. report outesting the today whether they will be making their latest policy decision tomorrow.

one will expect them to argue the swiss franc is still highly valued. it is very much the case the two sides are highlighting the differential additions -- differential positions. jonathan: the s&p says it does not engage in currency manipulation. they also say they are willing to intervene more strongly in the fx market. these words are important. manipulation and intervention. i want to sit on that a moment. i was lucky enough to spend a lot of time in switzerland to visit the swiss national bank. i would talk to the president after the week -- after the meetings and he would often talk about intervening in the fx markets. manipulation is a different word. is that just a technicality? jeremy: i think it is important. manipulation applies malevolence, trying to gain an implicit advantage at the expense of your competitor.

that is always seen -- in the context of the snb and other parties aiming to try to maintain economic stability or maintain a degree of competitiveness vis-a-vis trading partners, there is a different interpretation. there is a material difference between intervention and manipulation and the question is whether the u.s. treasury should accept that differential when it comes to negotiations going forward. clearly the snb do meet the criteria laid out by the u.s. treasury in terms of being labeled manipulator. it is not benevolent process -- it is not a malevolent process the swiss are involved in. lisa: does this have any significance for actual trading action? jeremy: probably not. week often is one wait for and get excited of --

one we often wait for and get excited about and then we debate and move on to other issues. the context you have been discussing, i think there much bigger fish to fry in terms of discussions involving the stimulus and the u.s. and the broader dynamics in terms of the covid response mechanisms. i'm not sure this report adds too much to the narrative. the timing is interesting in view of the snb decision tomorrow, but it is one we will move on from relatively quickly. the u.s. treasury secretary is negotiating with counterparts. the treasury secretary change relatively quickly. and the nature of the new cycle will move on quickly. jonathan: the other issue is the swiss have not been that successful since early 2015, addressing the fx market. jeremy stretch. michael mckee, final word on

this one? michael: the treasury secretary is supposed to determine whether countries manipulate the rate of exchange for purposes of protecting effective balance adjustment or gaining unfair competitive advantage. on that basis you go back to what jeremy said about intervention versus manipulation. the swiss would say we are not manipulating the currency, we are just trying to hold our currency at a reasonable level so it does not affect our economy. i think jeremy is right. it will probably not mean anything. the law requires the treasury secretary to engage in negotiations with currency manipulator's. it does not mean a lot. let me point out one thing in the retail sales report. i know you want to get to michelle. down, but ations clothing sales down 6.8% in november and 3.4% in october. general merchandise and department stores down 7.7%.

the narrative we were buying is getting a little bit of an adjustment. we are not buying online. retailers, .2%. -- tom: mr. mckee, thank you so much. watching three stories. stimulus settlement in washington. much more on that. we are looking at a historic inent, currency manipulation vietnam and switzerland, and also currency manipulation among retail sales in america and what it signals. michelle meyer of bank of america, thank you so much for waiting for this moment. are we in recession? i look at the ezio screen michael mckee tells me to bring up. grim retail.

recession?l michelle: certainly not. we are seeing a payback after exceptionally strong growth in retail and good spending the last several months. november seasonal factors tend to be very large. when you're looking at month over month changes for retail sales, you have to account for the fact you typically have large seasonal adjustments as a result of the holiday season. this is not a normal environment. the way people are spending, the timing of the spent has shifted and is probably making these month over month comparisons that much more difficult. that much more difficult meaning it paints a worse picture than is actually the case? michelle: potentially. if you look at more high-frequency data, what you

see is typically black friday, cyber monday, there is a bait increase in spending. thanksgiving and black friday with doorbuster sales. people go to stores and they buy. that did not happen this year as a result of covid so you do not have the in person threat around the does go to three day period. certainly you looking for that type of increase, particular things like clothing and department stores. i think it is right there was a weakening this month relative to what you typically see in the holiday season. part of that reflects seasonal adjustments and part of the fact reflects there was so much momentum into this period the softening is not that surprising. toathan: are you ready pencil in a negative print for payrolls for december? michelle: i do not think the data is pointing to that yet.

the claim status looks weaker. noise, butgain the there has to be some concerning signs for a claim. some of the other high-frequency data points we monitored, survey data, we monitored data for our businesses, there is some softening but not a collapse. relativey likely that payments in november weakening for jobs. we see further softening in december, but it is not obvious yet it will be a negative print. jonathan: let's think about lessons learned over the last couple of months and try to apply them to q1 and q2. the tailwind is obvious. the vaccinations have started. the headwinds are obvious. new york in lockdown within weeks. seeing the same thing in california and elsewhere. how does the economies respond going into lockdown and back out? how do you apply that into next year? michelle: it is not -- we should

not overlook the near term challenges for the economy the data is showing. a lot of it does reflect the fact the rise in covid cases is significant and the responses for government have been significant in terms of restrictions. different than in the spring. in the spring we had lockdowns, it was an extreme collapse of economic activity. this time around there is a greater ability to navigate these restrictions. people can move back to a more virtual workforce. economy,a more dynamic which is helping to buffer -- there is still a softening and we are only looking for 1% gdp growth in q1. we are forecasting this moderation in growth. it is very different in terms of restrictions that was in the spring given how the economy has been able to navigate it. us, if you're just joining

michelle meyer of bank of america securities. she will continue with us. we are following four stories. let me get to the quick one. bitcoin over $20,000. extraordinary. it has been a moonshot. we will have more on that through the day. stimulus in washington, we will have that on any moment. we are looking at retail sales with michelle meyer's, and currency elation by vietnam -- currency manipulation by vietnam and switzerland. futures up six, dow futures up a fractional 14. ofhelle meyer, the oddity the huge swings in march, the huge recovery balance. some of the vectors are uncertain. how do stimulus affect your world? how do stimulus affect retail sales? michelle: it has a direct link through the consumer.

when you think about the ability and the willingness of the consumer to spend, the extent they are getting more money in stimulus gives a greater ability to spend. with restrictions that limit how much they can engage in the spendy, how much they can , they cannot go to restaurants as much, they can spend online. if stimulus is coming in, the purchasing power of the consumer , that was extremely clear in the middle of april when stimulus funds first started to be distributed, even with the economy still largely in lockdown we saw consumer spending turnaround as people went out and started to spend the stimulus funds. once the economy reopened it unleashed a lot of spending .ure much more extreme in the spring from an economy shut down to one that was brought back very abruptly because of the stimulus and the reopening. the turnaround will be much more

modest. the restrictions put in place as a result of the covid rise, the economy has been able to work around that in a way much different than the spring. there is this question, especially if the $900 billion plan goes through that would include direct payments to individuals, that is considered by some to be more inflationary. how much would that increase your inflation expectations next year should it be passed as we seem to be seeing the parameters ? michelle: if you think about looking at cash on hand or in ,anks or money supply measures there is a lot of cash out there already. with the stimulus likely to be enacted, potentially with direct payment to consumers, that will add to the cash pile.

over time, it creates a healthy response to the real economy. that builds on itself and gains more momentum. it is inflationary, but it enforces the real economy has to pick up. people have to use the money and put in at the economy. in terms of the inflation dynamics, we see switzerland battling deflation. it goes to the disinflation worry and the heritage of the united kingdom real wage declines seen across much of the 20th century. inflation wind and united kingdom based on what michelle meyer said about inflation in the u.s.? michelle: a lot of what we -- jonathan: a lot of what we have seen is been currency driven. right now we're time to figure

out what is going on in the labor market. spending and the forces of gravity largely because what is going on on the fiscal it is difficult to get a read on what is going on in the labor markets because they've been so well supported by fiscal policy. michelle: the labor market has not received the same degree of support as the consumer. what you think about the stimulus and the u.s., much more around direct payments so consumers have money to spend and help lubricate the economy. in terms of the labor market, there were extreme losses. over 20 million people lost their jobs. half a million people back in terms of recovery. a lot of sectors are fully recovered, but there is a lot that are not. workers employed player to covid are still out of work -- prior to covid -- they're still a lot of healing that has to be done in the labor market and the

stimulus creates a bit of a gap between -- and job creation, which is due at levels that are pretty low. the stimulus bridging that gap and hoping it can help generate enough time for the labor market to heal itself, and then you get income creation naturally in the labor market. that has not happened yet. jonathan: always fantastic to catch up with you. what a morning for it. michelle meyer, bank of america security head. the fed story for later. the news flow in the last 30 minutes, phenomenal. tom: to be honest, we are looking at the tots in liverpool rather than the fed. the news flow is phenomenal, but you know what this speaks to, we can blather all day about the report. things get soft. with all of the gloom and all of the abramowitzian worry that is out there, things get solved.

a pragmatic approach. jonathan: i think the world of science has proven that again and again through 2020 and i hope they continue to prove the skeptics wrong through 2021. speaking of the news flow in the last one hour, i think for this market, the dominant story has to be the news out of capitol hill, reporting not just from politico but the team at bloomberg, that top congressional leaders are close to agreement on a relief package worth a little less than $900 billion which they hope to attached a crucial government spending legislation and passed by the end of the week according to a person familiar with the discussion. henrietta treyz is with us. fantastic to catch up with you. let's start on your reaction to the reporting, which i am sure you have read. henrietta: good morning. thank you. i am very excited to see there has been a breakthrough. i think we are on track to get

this voted on in the house thursday, in the senate on friday. very positive news on direct payments to individuals. that is obviously a huge boost to retail. we saw that in the spring with the original $1200 checks when out. there'll be an agreement on how much aid to provide to children as well as adults. that is going to be an upside surprise for the markets. how does the president-elect respond to the stimulus? is it a one-off or does he say we will put it in and follow-up with more later. what is it? henrietta: absolutely follow-up with more action later. the bided administration will be another round of investment in the economy, whether that is the bridge, and other stimulus kind of component with ui or state and local aid, or if it is a rebuilt moment. that is the way it has been put

to me by biden campaign counsel. there is a bridge concept, and then a rebuilt concept which goes towards getting the unemployment rate down, specifically the permanently unemployed. democrats have long felt the 1.6 joint dollars in deficit increases authorized by the 2016 tax bill are something they can deploy and they want to focus on infrastructure due to the multiplier effect of job creation, and that will be the single most realistic probability for legislative action under a joe biden administration and the first early second quarter of next year. jonathan: thanks for jumping on the phone. henrietta treyz. veda partners director of economic policy. we advance .2%. retail sales justifying the need for a fiscal package. it has been the data in the last three weeks and the direction of travel with restrictions we are seeing across america.

tom: we have to say that those looking for slowdowns, some of the tough conversations we have had. i am sorry. that is real data. it gets you way under any acceptable gdp. is about the here and now. that hard data has not been going in the right direction over the right direction over last several weeks. lisa: what is so interesting is policy yet again is trumping the actual economic reality, or the hope for policy. we can see bonds are responding to the news of the 900 billion dollars stimulus plan in washington, d.c. they are not responding to very disappointing retail sales. tom: can i spin forward to the fed meeting? -- i think powell chairman powell would start garrett bell this afternoon. you notice you leave

michael mckee until the end because he asks the tough question. maybe that will be the tough quote -- maybe that will be the question he has to use. will chairman powell start garrett bell? that has to be the number one question across wall street. [laughter] up next on bloomberg tv, bob michele. ♪

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from new york and london for our audience worldwide, good morning, good morning. "the countdown to the open" starts right now with equity futures up .2%. counting down to the fed decision. >> this will be an important meeting an important announcement. >> labor will expand their qe program. >> we are in a pause mode waiting for the fed. >> so little the fed can do. >> a lot of folks are hanging their hat and hoping for clarity. >> whether or not they are extending duration and asset purchases. >> accepting this week may be too soon. fedour best bet is the extend out some of the forward guidance. >> this is more about aligning the language with where markets are already priced. >> make