>> there's going to be surprises on the way that will largely not be pleasant. >> we could see the first quarter get back into negative territory. >> i'm expecting it to mulcher was year. >> the first part of the year will be very tough but i think you are looking at a better second half. >> you could have an economic recovery and not necessarily a stock market recovery. >> what we focus on what happens during 2020, we will all be amazed at the reputedly of the response. this is "bloomberg surveillance." lisa: from new york city and berlin for our audience worldwide, very good morning everyone. this is "bloomberg surveillance ." alongside mattr miller. jonathan ferro and lisa abramowicz are returning in the

new year. what are you focusing on? maybe perhaps exit finally done? brexit finally done? matt: i'm putting that way in my rearview muir. mirror.iew parliament passed it less than 24 hours ago before the deadline. who would've expected anything other than that? today --focus for me it has been on bitcoin. we crossed another big round number, 20 $9,000 for bitcoin. what does this mean? i was looking at a fed chart and i'm curious how much money the fed has added to its own balance sheet. boosted by 75% in 2020. the fed is not alone. central banks around the world have been adding liquidity. that is one of the reasons you

see this incredible rise in bitcoin. we saw it again in 2020. so much money pumped into the system because we needed it to be that way. many differento investors to seek out deals. it has been going into all different kinds of assets like bitcoin. it is up something like 50% in december. moves like that. at the same time, some people like in bitcoin to the new gold. track for a banner year. had a few busy ipo year. kind of interesting to see some of the difference. should we look at the market? matt: an entirely different magnitude. i bought my first bitcoin for $600. had i been a smarter person i

would be sitting on a caribbean beach somewhere sipping a cocktail. i would've kept buying them when they went down to $235. i instead continued to work here. in any case the big focus has been the virus and the vaccine. u.s., it has the really hit markets to some extent. the ftse down 1%. one of the few indexes open for trade here in europe. to hearot helped continued bad news. with england being broadened and tightened. forget we still get some economic news today. it has been such a key metric for all of us.

also more timely information when it comes to the labor market. it is the canary in the coal mine for her. indicator, those lockdowns have increased in the united states and around the world. to ouret's go over edward hammond standing by in london. one of the big concerns has been the vaccine isn't going to make things better right away. the u.k. was one of the first countries to really rollout the vaccine. heis johnson last night said is going to tighten and broaden the lockdown. you could see a resurgence in the coronavirus threatening to overwhelm the national health service.

an extremely difficult few months ahead. the problem is they are trying to rollout the vaccine but not at the rate the virus is spreading in the u.k. right now. some waysonder in with the u.k. parliament getting through in time before the end of 2020 getting that deal through and getting that macro issue off of the shoulders of boris johnson. does it then allow him to focus on covid-19 right now and focus on what his economy needs right now? beend: he certainly has focused on covid. i suggest caution and brexit is part of the issue. the deal of the breakup with the block, it has been hanging over businesses.

of this relationship is unresolved. they will have to figure out how the new rules will -- services were left out of the agreement. financial services still waiting to see what kind of access they will have two the eu. we are still waiting to see what the eu will do about data transfer. obviously the eu takes a very strong line on data protection and ensuring data is protected. ine broadly and politically the future relationship has not been set in stone. if the u.k. wants to diverge, it could. at the cost of imposing tariffs from the other side. that means the political debate will go on. this could be reviewed and terminated at a later date. the question will be what the relationship with britain's nearest commercial partner will

be. carol: the story that keeps giving. matt: it will be interesting to see tonight what happens in tomorrow what happens. how many trucks are lined up. france fired a warning shot with goods trade before this deal is wrapped up. for me, the most fascinating thing will be to see how the city develops this year. on the newmy friends york stock exchange hate to hear me say it, london is the global capital of finance. what you expect for the city? therd: a key thing here is city has the automatic passport to offer its services from london across the eu. to do that you have to rely on getting equivalents from the european commission. that is something they could grant entirely unilaterally.

that was not part of the trade deal. we are still waiting to hear whether the eu will do that equivalents. that is the big thing. not been waiting for that decision. they transferred people and assets. in practice, we have to see what kind of effect it has. carol: that will certainly continue into the new year. edward evans joining us with the latest on brexit. that is one of the big macro issues we had to deal with. resolution of to the other issues weighing on investors. happy new year, nice to have you here.

a happy new year? will we have to be patient before it is kind of a happy new year? aeve: i think we've gotten pretty good fourth quarter. i think the celebration has started early. i think you will have a little bit of a sloppier first half of the year as we adjust some record gains here in november and december. the u.s. is having its best quarter ever, up over 31%. we pulled forward a lot of good news. we will see how things unfold in the first half of the year. matt: where do you see valuations really stretched? apple is only 40, which feels pretty conservative. amazon is only 96.

there are places, tessler is over 1000. wert -- tesla is over 1000. where do you see it is most stretched? growth, it isap trading closer to 40 times earnings. over 40%.growth is up driven a lot by technology, health care. it could bring you down to what is the market. everybody wants to jump on these high cell growth companies. trading close to 10 times sales. the rest of the universe trading close to three times. it has gotten wider and wider. i'm more optimistic that gap is going to narrow. we will start to see typical start to do a lot better versus the central growth story. in terms of some of the it, names that have led

stocks continue to trade higher. do you dare step away significantly from some of the faang names? we have seen them start to come down in our data whether it is long only folks, hedge funds. a little bit of money coming out of those things will really help broaden the market. there was notis an alternative. the sweet sixteen stocks have been growing their revenue double digits. now as we move into 2021 there will be an alternative. whether that is going to be the industrials, whether that is going to be materials. if you start to see rates to cup .nd 8 -- pick up a little bit coming out of those

names with the u.s. equity market. carol: we shall see if we see that broadening out. steve, have a great new year. analysts equity stabbe joining us now. is a lot of questions. i just think until we get more clarity on earnings and economic growth that will really determine the trajectory. it has to. y fomo butte to saf that seems to be determining trading. this year, everybody since the dot-com bubble, all of my high school friends started texting me questions about how do i get syndicate? how could i buy shares? how could i get in on this ipl? i haven't had that much main street interest in my job really since the year 2000. a little depressing i've been in the business that long.

i think that says something about where we are and where evaluations are sitting. thel: coming up later in hour, the head of global commodities at derivatives research. she has interesting thoughts on bitcoin, gold, and also oil. carol massar and matt miller, this is "bloomberg surveillance ." madea: mitch mcconnell has it clear the direct payments in the stimulus package will not be increased to $2000. the senate majority been -- leader says the house bill that would do that has no realistic path to quick passage. the larger payments are backed by democrats and president trump. mcconnell says the house legislation fall short of what the president wants. u.s. health officials admit the coronavirus immunization program is off to a slow start. that is the all in bet on vaccines that hobbled other

measures to contain the pandemic. about 2.7 million americans have been vaccinated. of the 20 million the government had hoped. global news 24 hours a day ♪ you can go your own way it's time you make the rules. so join the 2 million people who have switched to xfinity mobile. you can choose from the latest phones or bring your own device and choose the amount of data that's right for you to save even more. and you'll get nationwide 5g at no extra cost. all on the most reliable network. so choose a data option that's right for you. get nationwide 5g included and save up to $300 a year on the network rated #1 in customer satisfaction. it's your wireless. your rules. only with xfinity mobile.

sen. mcconnell: the senate will not split apart the issues

president trump put together because democrats are afraid to address it. the senate will not be bullied into rushing this out. carol: nice to know there is some consistency, that is the division we continue to see in congress. that is the senate majority leader. i think that is one thing that unfortunately continues to evade washington. there still is that divide. i don't think that is going away anytime soon. that is one of the most depressing things about 2021. the end of this year does not mean the end of the completely polar political situation not just in the united states of america but around the world. it is most pronounced in the u.s. let's get over to chief washington correspondent kevin cirilli. we heard mitch mcconnell saying

he will definitely tie these $2000 checks, the likelihood of to allegedontestable protection is and -- protections being stripped away from big social media companies. you think we will see any of that? >> there's no chance a piece of would get to move through and passed the senate with those three items attached to it. leader mcconnell knows this. this is precisely the strategic reef or lack of a better word that leader mcconnell is a master of. president trump tweeted out he wanted this issue explored. he did so at a time when the negotiations were finalized. leader mcconnell presented to the president and upper chamber a piece of legislation precisely

how the current occupants of the white house asked for it. goingesult of that, it is nowhere. across the ideological spectrum there is a poison pill for republicans and democrats. political crusade is another person's poison pill. no chance of getting through with a bill with all three of those items. carol: joe biden is somebody who will maybe be an equal adversary. perhaps a friend when it comes to mitch mcconnell. what about their past relationship will help them in this future relationship? it will be different because it is the president at the head of the senate. my dad always taught me to remain optimistic and focus on the future and what lies ahead. senate majority leader mitch mcconnell childhood, in which he

overcame polio, he was treated at the same hospital where former president franklin delano roosevelt also received treatment for his polio as well. becausethat up president-elect joe biden in the closing weeks of his political campaign campaigned in georgia and gave a speech rather in his campaign in this particular town. as a result of that, many people interpreted that as the source autobiographical elements to the decades long political-personal relationship. understanding why leader mcconnell overcame it at a young age. president-elect biden has been incredibly open about his own journey. ande are two individuals

american politicians who have crafted a personal relationship the predates many of freshman and junior level relationships that currently occupy the culture in the halls of congress. carol: it harkens back to tip o'neil reaching across the aisle, edward kennedy reaching across the aisle. there were bipartisan relationships in washington. having said that. i have had tons of conversations with individuals who said i will not get anything out of this second round of pandemic really. what is the likelihood something else comes down from the biden administration and a new congress in terms of more relief for those who have been impacted by the virus? kevin: there has been a lot of comparisons to the post 2008 crash versus what we are seeing right now in terms of the recovery. the biggest difference in terms of the political landscape is

that unlike post-2008 with the freedom caucus in the tea party really ascended into power there wasn't a counter political caucus with clout. the time there is bipartisan problem solvers caucus. that really served as the foundation for the current stimulus we are seeing now. rural,y, in terms of more conservative types of politicians representing agricultural districts, they have financial services incentives to work and represent urban communities in the cities. that unites them from a business perspective. frankly, the government we have all alluded to, that dividing government typically will source people to get to some type of consensus in a way that could play out for the

united states to develop a nonpartisan agenda in which certain items will be american principal and not a political piñata. whether you think it was good or not, one of the most exciting moments of the 2016 election cycle was when wikileaks started dumping loads of emails. president trump praised wikileaks. extraditednge may be to the u.s. very soon. will the president, before or after he leaves office pardon julian assange? reporting,d upon my there are sources in the republican party who came out incredibly strong against that. there are other people in the party who would welcome that. it would no doubt be an

incredibly controversial pick if that were to happen. we will be reporting on it every which way. carol: senator josh hawley saying yesterday he will object during the electoral college. does this have any staying power? is this significant? kevin: it is significant of the lens of 2024. senator holly making the foundation of the start of his 2024 pitch to republican voters. what happens on january 6 poses no real risk for being overturned. fors incredibly impactful the dynamics at the starting line of the 2024 cycle. i still want to be a campaign trail reporter. there is something wrong with me. carol: you are the best.

you are rocksolid. kevin: thank you. carol: kevin cirilli is amazing in washington. he will check in and talk to us about his economic outlook. when he sees coming in

carol: it is bloomberg surveillance, carol massar along with matt miller on new year's eve, getting ready to wrap up 2020. having said that, let's take a quick check on the market. global market industries -- indices covering the records for the year. s&p 500 futures, no surprise, there are a few of us working but it is pretty mellow. 37.23. euro at a buck 22. 29,000 dollars earlier, you can see bitcoin pulling back -- 29,000 dollars earlier come you can see bitcoin pulling back. some of the rest of the trade this morning, you can see over in europe again, quiet trade, a little bit lower.

ftse rallied, after earlier this week down. the cac 40 also a little bit lower, but we can anticipate it will be kind of a mellow day as we wrap up a volatile year. matt: it has been a volatile year. that is probably not going to stop. i want to go right now to talk more about what to expect with the cofounder of the economic cycle research institute, probably the most respected private institution that tracks business cycles in the world. first of all, happy new year. great to see you. you have really a unique position to tell us what to expect in terms of the economy next year. at the beginning of this year, nobel laureate economists forecasting a cascade of bankruptcies. we did not see that happen. are we going to see it in the beginning of 2021? >> i think the short answer is no.

and a lot of people get tripped up by the cycle, the cycle is superpowerful underneath all of these huge, stressful headlines that we are digesting every day. so nine months ago, you know, 2021 is really getting set up by 2020. i want to do a quick thing on 2020. nine months back in the depths of the craziness, we were able to make a call that the recession would be really short because in part it was so extreme and the way it kicked off. building on that view, another thing happened. we had an upturn in global industrial growth. we don't really think about it, but we are connected to this huge global industrial cycle. that started in may of 2020, and then in the summer, there was an inflation cycle upturn that started from really low levels because recessions kill inflation. so it started from really low levels, but the cycle changed

direction. that happened this summer. so that has played out really well, and the markets have adjusted. boy, oh boy, right? they are completely on board for this so-called inflation trade, and they are banking on a continuing straight through 2021, and right there is the foreshadowing we have got to be careful. we all knew winter was coming, but you have got all the bears and hibernation right now. it is really exciting to see. matt: what does that mean? your indicators showed that we were going to see a pickup in business activity and inflation at the end of this year. we have seen that trade. look at the index, you were right. but what about 2021? what is your data showing you? isthere is nothing that going to stop happening as the year started. this cycle is still completely

to the upside. you could look at very short living indicators like our industrial price index. last week, this is a composite of sensitive industrial material prices. last week, it hit over the 10 year high. and when you look inside of it to see what is animal spirits and what is real, you can look at the nonexchange traded components of sensitive industrial materials prices, and they have hit an all-time record high in their growth rates. so the bottom line is that the glitz sector in particular of our economy, the u.s., and partly around the world, is on fire. it is red-hot. and that is great, and it is going to continue. we can still make hay on that. but we also know -- i think we all should know that trees don't grow to the sky. so the question in 2021 is, when is it going to turn around?

and there are some storm clouds on the horizon. carol: there is a great story by our economics team that is on the bloomberg terminal, and it talks about the changes in the world economy are only just beginning. and it is things like locks of -- lots of easy money floating around. k shipped recovery. shapeoes that mean -- dk to recovery. what does that mean? we have seen technology take off , and what can that do, replacing workers once again. this idea more embracing of climate change and technologies and companies that play in those areas. those can have a lasting impact. what of those? this is the story, everyone -- go to bloomberg.com for more -- but what are those trends that will impact the economic cycle that we will see not only next year but also for years to come? lakshman: i think those are some longer-term issues beyond 2021,

and what will really be telling -- and we don't know the answer to this yet -- is what happens as we start to reengage. carol: do you think everybody comes rushing back? seriously. lakshman: we all are going to try. i think we want to. matt: i'm ready. lakshman: some of us are more reclusive, but generally we are going to want to be engaged. there will come a time when you are done working on the old car and setting up the things at home. right now everybody is doing everything at home, do it yourself. that is why the good stuff is on fire. it is part of the reason. you spoke to the k shaped recovery. if you are working in people facing lower paying jobs, you are in dire straits. that is where things like the stimulus come into play. for others who can weather that

for a year or that, work from home, cobble something together, the stimulus is a little less important. that is about half of consumers who do the bulk of spending, and right now they are spending it all on goods and houses and stuff. and that is not over. as unfair as it sounds, it is still happening. ifol: matt, i am thinking your mom was here, this is an issue she would want to push. even though you say that the half that has not been touched by the pandemic, where do we get more concerned about the half that has been really hurt? i have had conversation over conversation with individuals who say we are at wits end, that with unemployment benefits we are not getting anything anymore and we are having a tough time. when do we start to be concerned about that in terms of our society and our economy even if there is a small part of our

economy, that is still important. lakshman: i can tell you this, that earned income, not a stimulus, earned income began recovering back in april and may. it continues to recover. stimulus is a big firehose. some of it goes where it is not needed and some of it goes where it is needed. again, if we get another stimulus, the same kind of lack of precision all -- precision will probably happen, but you still want to do it because people are in dire straits in certain circumstances. i don't think that is going to ultimately change. the cycle is not going to change. what can happen is that pain can reseed as the cycle continues to improve. cede as the cycle continues to improve. inflation is in an upturn. doesn't matter who you are, the prices are going up.

that means treasury yields are going up. and when treasury yields go up -- matt: exactly where i wanted to go. lakshman: when treasury yields rise, there are unintended consequences. matt: yesterday, carol and i were talking and a lot of our guests agreed that 10 years 2.00 by year or end, it did not see them -- it did not seem that controversial. lakshman: that is in the cards with the inflation upturn, which is not over. breakevens took a break, right? the forward-looking kind of inflation expectations, they went flat. but the future inflation gauge, league-leading indicator that we produce for the inflation cycle indicator that we produce for the inflation cycle has gone up. that might not sound like a big

deal. we are coming off of really low readings on inflation. but it is if you are on a tight budget for the k shaped economy conversation, and when you look at equity valuations, a lot of those current valuations to some degree are predicated on sub 1% interest rates, and so when interest rates rise even a quarter of a point, that is a big deal for valuations. so that can weigh on equity valuations, that part of the market back and forth in 2021, and separately, remember we said trees do not grow to the sky. if we believe the cycle starts to turn down, not a recession, just the slowdown, you have a 1-2 punch now if higher yields weighing on prices, some slowing and growth weighing on earnings growth. that is a tougher combination.

it is very different in 2021 at some point than what we saw in 2020. that is where the bears might wake up a little bit. carol co. you might have a repricing there. -- carol: you might have a repricing there. thehman achuthan over at economic cycle research institute in new york joining us there. course, the founder of that institute. a k shaped recovery -- i have talked about it. peter atwater at william and mary who first coined it, it describes so much of what is going on and we will continue to see that play out in 2020 one. i think it is something that policymakers have to address in terms of the recovery and how we can do better. matt: absolutely. jerome powell is on board. you have janet coming into the fed and she will no doubt be on word with that. maybe joe biden and kamala harris will be focused on it as well.

the question is how much you can do in a socially distanced economy when there are not those people to people service jobs available. carol: coming up, we will talk with francis: lunch -- with francis: blanche. that is coming up on surveillance. this is bloomberg. ritika: senate majority leader mitch mcconnell has ruled out passing the house bill that would give most americans to thousand dollar payments. mcconnell says the measure has path tostic pass -- quick passage. instead the senate will work on -- the senate is closing in on a vote to override president trump's veto of the $740 defense bill.

it may not end into the final hours before a new congress begins on sunday. the house has already voted to override the veto, and senators are expected to follow suit. the u.k. is optimistic about getting a trade deal done with the u.s. under the biden administration. we spoke with the british ambassador to the u.s. >> we believe this deal can be done. it can be done in 2021. another vehicle to do the deal would infect the covid recovery. we want to send an early signal in 2021 of our confidence in economic recovery across the globe, particularly in the u.k. and the u.s. saida: the ambassador digital commerce would be a big part of the trade deal with the u.s. has not saidea whether kim jong-un would return after his death she issued a report instead. they have typically used the

first day of the year to announce plan. -- two announced plans. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more i am ritikantries, gupta. this is bloomberg. ♪

>> regulation is a big risk for bitcoin. i think with zero interest rates and high valuations in other

asset classes, you can see why there is an an attraction bitcoin, but it could be a house of cards. we have been talking a lot all this week about bitcoin as it continues to take out one level after another, just yesterday's00 in trade. having said that, bitcoin and little bit lower, down about a half a percent in today's trade. let's take a quick trade on the markets. -- a quick check on the markets. we have seen a quiet trade certainly in the european markets. futures, call them flat, 1.22 on the euro. as for the 10-year, we have backed off some of the levels we have seen. 14%,in just down about coming in at 28,000, just about 28,800 there. storywhat a fascinating it has been. everyone knows by now, but this ago ins created 10 years

2009, so 10 years and change. when i covered it in 2012, and was a thousand. two was the reason we did a week report on it. it then dropped off. the run-up has been insane. has been, isbates it a currency or a commodity? we have a commodity specialist here to talk about that. --coin isn't the only francisco blanche, head of global commodities and derivatives research joins us. what is your take on this? you have been writing about bitcoin here and there for years now, francisco. has it been accepted, widely accepted in the institutional

investment community? look, i think iyptocurrencies in general, think they are clearly tokens. i would not necessarily" them as currencies. -- any cryptocurrency can be issued by almost anyone, right, it is a bit ofe an unusual set up. i think it is more of a currency, aat i crypto token. i think thising, particular contract that bitcoin is, 90% plus of the coin held by less than 1% of the account holders, so there is a

very high concentration of the early adapters that have not again, if yound think about supply and demand, it is maybe one of the things that there has been a flurry of demand, and frankly not very much supply because the -- first of all, the supply is capped longer-term. and that has been the issue. so it is extremely volatile. compare it to any other commodity, the volatility of cryptocurrencies is way higher. to ask you, what do you make of the year where you have bitcoin up more than 300% in 2020 and you've got gold on track to have the biggest annual advance in a decade? how do you juxtapose that, or make sense of that? to be --

francisco: to me it is quite straightforward. naturally when you get so much money -- remember, we were talking about currencies before, right? -- in the create world largest economy, when they inject so much money into the system, all assets tend to benefit from that. that is what we have seen. now, when you think about stocks or you think about other assets that have been severely impacted , they have not gone back to previous records. but all the asset classes that were in some way constrained, of course, that is included commodities like gold or silver, and it is also, like i said

before, think about electric vehicle stocks. those have also taken off in a huge way. so i think liquidity has been driving this enormous divergence in asset values that we have seen because central banks with the fed at the helm were trying to support the economy, particularly financial markets. then, tot happened, oil. we were looking at $60 at the beginning of the year. it dropped to -40 come and that point 89.ding at 47 i can take the negative dropped possibly, a giant orchestrated fat finger, but nonetheless, a commodity priced in dollars that has dropped 20% in value. why? oil story comehe as i mentioned earlier, is to a kind ofe idea

recession. normally recessions are cyclical . we tend to see some kind of financial event driving them. covid-19ime around, shot the global economy down in a meaningful way, and mobility collapsed. i am at homey rather than being in the studio with you guys as i would normally do on a regular day. and i haven't been on a plane now i guess for the longest until in my life, nine, 10 months without hopping on a plane. so, you know, that mobility is what has taken down the demand for oil by as much as 30% in the month of april. and when demand fell by 30%, which also probably gdp also fell by that number, oil prices collapsed, and then to your point, it was a bit of a fat finger, but also at some point

opec started to cap back production. we reopen the global economy and it started to be may and june and things picked up. but now in the last couple of days we got nervous again because of this new virus strain going on in the u.k. or 20 just got about 15 seconds. what is your projection. if a secret price target for oil in 2021? toncisco: we see oil getting $60 a barrel by the second quarter. we are constructive. we think the economy comes back. we have to control the u.k. strain, so he could be patchy in january. but once we get to june we will be in much better shape. vaccines will help things get moving. carol: thank you so much. have a great and safe new year. francisco blanch joining us here. matt, this is really important.

we know supplies in the oil market have been pretty fast. we will have to see if demand ultimately picks up. matt: i've been driving as much as possible, i have to say. carol: that doesn't surprise me. matt: maybe it will pick up from my side. coming up, state street global macro strategist, joins us. this is bloomberg. ♪

♪ >> there is going to be surprises on the way that will largely not be present. >> we could see the first quarter back into negative territory. >> i'm expecting a tumultuous year. >> i think we are looking at a much better second half. an economic have recovery and not necessarily a stock market recovery. >> when we look back a decade for now and focus on what happened during 2020, we will all be amazed at the rapidity of the response.