the focus right now is this unfolding surprise which i don't think we have fully baked into numbers. >> we will have the healthier economy and an economy that is fiscally stimulated. >> we will transition very quickly. >> we've gotten price stability. we have gotten exactly what central banks wanted, slow and stable inflation expectations. >> double ultimately keep the fed on the sidelines. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: it is over. good morning morning, good morning, this is "bloomberg surveillance." alongside tom keene and lisa abramowicz, i am jonathan ferro. s&p 500 all-time highs in america.

not my words, the words that come out of the bank of america global fund manager survey that this crisis is over. that view is consensus. tom: we are seeing all sorts of research pieces this morning. 20.13, it is not that there is a bid right now with the dow and the nasdaq, there is no ask. they refused to go down. jonathan: yields are higher. the outlook for growth's getting better and better. now we have to talk about how well priced their story is. lisa: how much does that affect what is going on with equities. -- equities? we have shifted away from the recovery and now we are entering the second phase. what will that bring? at one point to higher yields because a further decline in equities? jonathan: that was a quote, it

is over. that is not my view. lisa: why do you think it is over? jonathan: the view of everyone else. tom: this is really important. we are at radio and tv. the bottom line is a micro babbling including retail sales is what will lead to that movement with better gdp. airline seats are countable and constructive. jonathan: united airlines a big-time. elsewhere in europe, still a struggle. 90 minutes away, we look like this in the bond market. 10 doing nothing. the fx market, 1.1946. muted price action this morning as we count down to a fed decision in news conference with chairman powell tomorrow. futures of about two points. not even 1/10 of 1%.

lisa: a lot of potential outcomes. the policy uncertainty is pretty stark. you were talking about retail sales, we will get that data out at 8:30 a.m. it won't necessarily show that pop in economic growth people are expecting. there is an expected decline in retail sales. the key question is going forward how much do you start to see some of the stimulus checks percolate and how much more firepower do people have? at 10:00, you will see the senate finance committee come out with a hearing on taxes and how it affects the supply chain. there will also be discussion about tax hikes across the board given the fact that the u.s. wants to spend so much money on infrastructure and other types of programs. today at 1:00 p.m. we have the 20 year bond sale at a time when we do have the expectation of rising yields. how much demand could there be?

hedge funds have the biggest month of treasury sales in january in a long time. that raises the question about who steps in at 1.6% 10 year yields? jonathan: there's the doom. tom: no one will show up. lisa: who's going to show up? tom: could i jump in with a research piece? [laughter] is she dumb what the gilt market? steve over at standard chargers -- charters not guilty. he says we are all off, it will be two points and we will adjust tomorrow to those. jonathan: this is the story. we will get the forecast and say better forecast, now show me the money. these have been a massive problem for a long time. tom: make them go away. jonathan: one of the issues in

the news conference tomorrow. tom: you all know what i do the fed show i am not a fan of dots. we will have a conversation with dick burner, they are way over guessing. jonathan: lisa always hits the nail on the head. retail sales at about -- that's her joins us right now, richard peart -- richard bernstein. let's start right here it starts like it is a consensus to say we will have a riproaring year ahead in the united states of america. how well priced is that view now? richard: it is partially priced in. thank you for having me on the show. the bigger stories here is the magnitude is probably going to be bigger than people expect. that always happens. when you see this type of acceleration in growth, you could look at the history of earnings surprises. we think there is plenty of room for those to continue to go

higher here. tom: this is after taking the required indoctrination course, it is about style investing. what does the style right now off of bernstein's style of classic investing? richard: style investing is all about investing on the profit cycle. even though there is a lot in the profit cycle, it still tells you that you want to own lower quality, riskier, and more cyclical investments. tom: you are saying the abandon tech call is wrong? richard: you make a great point. usually it is very cyclical. what we saw is tack was not cyclical. the issue with tech into their credit, they don't have any crisis from which to recover

because they did so well last year. they would normally benefit but we think you should move away from tack and own some of the more deep cyclical sectors that still cheat -- trade cheap at this point. lisa: how do you hedge in this environment? richard: it is getting harder and harder to hedge. pretty much everything is correlated today. there is still stuff you could own. it depends on what you are trying to hedge as well. if you're worried about inflation, you could own inflation cyclicals. we own a little bit of gold which provides you a little bit of the hedge. if you're worried about a big slowdown in growth, even with yields where they are you probably will get some hedging effects from long-term and things like that. it depends on what you are trying to hedge. lisa: that goes to the heart of the question. which is worse, inflation that

under should significantly or overshoot significantly? the idea that perhaps faster growth is likely and there is a more inflationary environment. richard: it is pretty clear that the inflationary environment is worse for people invested in the market. you have to think about all we really worried about this period where inflation will be riproaring but at the same time that will benefit a lot of these areas of the economy that are cyclical, that have room to grow and will benefit from that. i would rather keep that environment than an environment where you are talks about inflationary pressures despite the fact that growth is rolling over. jonathan: let's wrap things up by trying to keep you out of trouble. when you got the fund manager survey, what was the best way of processing this? it is what people say, not necessarily what they do. what they are saying is it is

the largest since march, 2018. the question we keep going back to, huge performance in those sectors. energies up by 40 percentage points this year so far. how well allocated is the story? just how well allocated are they to this massive move we have in the last four months? richard: i think you said it all right there. there has been little for me to add right there. that is the point we always make to investors. there is a big difference between what they say and what they do. you have to understand sort of the survey universe they look at tends to be much more global. if a smaller percentage of that survey universe, if you think about there is a lot of fast money investors in there. the bulk of investor assets,

they are really not in these areas. you see a big rotation over a couple of months into these areas of market. that is when they capture the survey, that change. if you look at a long-term picture of valuations, they will all tell you the same thing. people still don't want to own use sectors in a big way. tom: always good to see you. , dan suzuki there. is it actually well priced? tom: i strongly get your point. this is an authoritative survey. it is staggered out every 30 days, even every quarter. you see the shifts. i really agree the idea watch what they do, not what they say. jonathan: always important to get an idea of how the investment community will respond to a certain situation. that is why it is helpful to see

little things like see with the 10 year yield causes. people will get nervous at 2%, 2.5%. i do think that is somewhat useful. lisa: if you look at actual market action, the nasdaq has been tightly coordinated to 10 year treasury yields, even at 1.6%. you do wonder how that plays into the actual speed. jonathan: we have sought about vaccinations as well. some headlines crossing from dr. fauci. tom: dr. fauci talking up the safety and efficacy of the u.s. project. from johns hopkins university, his comments on astrazeneca. you must have been son -- stunned. he just flat out said germany, sweden, and the rest are wrong. jonathan: pushing back against

the concerns. good morning, alongside tom keene and lisa abramowicz, i'm jonathan ferro. retail sales, one hour and 18 minutes away. the fx market, the eurodollar firm at 1.1944. the equity market all-time highs of two points. this is bloomberg. ♪ ritika: with the first word news, i'm really cut -- ritika gupta. president biden trying to get republicans on board for a huge spending bill. they will have to decide whether to take part in several earmarks dedicated to spending projects. supporters say earmarks could be the key to dealmaking in congress. the government crackdown on the internet sector is just beginning. president xi warns beijing they

will go after companies that have market power. they have set their sides -- sites on tencent holdings. sweden has now joined a growing list of european countries that have stopped using astrazeneca's coronavirus vaccine. they say they are waiting for the outcome of the news being conducted on possible side effects. u.s. job listings using working from home as a selling point as they have more than doubled in the last year. they will keep using the benefit to woo employees. according to the job search site indeed almost 7% are using remote work as an option. powered by 2700 journalists and analysts in 120 countries, this is bloomberg. ♪

>> get our economy back on track by helping hundreds of thousands of small businesses open and

stay open. we could give people in this nation a fighting chance again. relief checks, lower childcare costs, lower health-care costs, so much more. that is our job. that is our responsibility. the process will be growing the economy as well. we will have to stay on top of every dollar spent through the american rescue plan. that is what we are going to do. jonathan: president biden on the fiscal effort in washington, d.c. alongside tom keene and lisa abramowicz, i'm jonathan ferro. going into that muted price action, what's call it 1.60 on tends. the euro slightly firmer here. the equity market, your s&p 500, futures of three, by about 1/10 of 1% after more all-time highs in yesterday's session. tom: the research notes, i think

we have done a good job of getting on top of. red and green on the screen, the vix, 20.04. let's ask the chief washington correspondent, kevin cirilli. you know the people bouncing around republican politics, bouncing around democratic politics. one of them is jean sperling, has been through different democratic administrations of different flavors. he is the keeper of the stimulus. what will jean sperling do for president biden? kevin: transparency to make sure there is no hijinks so to speak. secondly, he provides an opportunity and a link to the private sector as well as the government sector. ultimately that is why he was chosen for that post. tom: he will get on the phone and put out fires, give us an

example of a stimulus fire? kevin: in the previous administration, the first and second round in which both parties were heavily criticized for lacking communication strategy in order to connect not so much with larger businesses but with the smaller businesses. that is ultimately i think the biggest hurdle this administration faces. they already have the technological infrastructure set up on that front because of the previous rounds of stimulus. making sure this is doled out in an effective, transparent way is chief among his responsibilities. lisa: how much will they have to earmark in this new bill in order to get some sort of republican support? kevin: ultimately, that is where the conversation goes. it is not a mistake that the administration re-floated tax proposals yesterday and over the weekend based upon how they plan

to fund for infrastructure. a lot of the ways they want to pay for infrastructure our nonstarter's with republicans. particularly when you are talking about somehow trying to attract investment or even move investment from china to u.s. ally positions like japan for example or even europe to boost manufacturing jobs here in the united states. you want to raise the corporate tax rate. republicans i'm speaking with, it is a nonstarter for them. lisa: does this mean it will be a unilateral effort by democrats with potential tax provisions later this year? or does this mean we will get something that looks very different than what biden lays out. we will get a bipartisan effort. perhaps a couple of bridges to nowhere? kevin: i still think they have been quite cavalier in terms of the role of infrastructure plan. ultimately the situation and the crisis at the border has jumped

to the top of the list in terms of political priorities in the short term. jonathan: explain the crisis at the border right now. kevin: this is a heated political topic in u.s. domestic politics. when you have 3000 teenagers who will have to go to a convention center in dallas, who are traveling without any type of status, that is a significant, significant not just a political issue, a significant issue for the state of texas. immigration policy as a whole for the last decade has really stumped policymakers here in washington. you have governor abbott who has ascended to the top of republican politics, it is setting up to be a political showdown. jonathan: the number speak from themselves.

-- for themselves, what is the government defense? kevin: president biden campaign there would be a different tone and acceptance that he sought to draw contrast -- contrast from traditional conservative ideology. whether or not they are able to pass any type of significant immigration reforms remains to be seen. tom: thank you so much. our chief washington correspondent. research is extraordinary. lisa and jon, this is to your where -- wheelhouse. we know his early-morning note is absolutely a required lead -- read for weirdos like lisa abramowicz. pondering another reverse treats . significant tale versus 1:00 p.m., the 20 year bond is the

other bond that gives us pause. why is it the other bond? jonathan: it is the story of the last 12 months when i got reintroduced in the treasury market. a number of weeks ago we saw what most people consider a failed seven year option and they worry about a repeat. tom: the only thing i'm doing is a surveillance nap. what are you doing at 1:00 p.m.? lisa: look at the actual yielded where it goes. how it trades directly after. the 20 year bond, the reason this is interesting, there isn't as much liquidity around it. the question is how much are independent investors going to get in? you have seen of the past few auctions, pretty good direct participation. some hedge funds big institutional investors.

question is how to investors price out inflationary expectation where people are saying they expect treasuries up to 2% or 2.25%. jonathan: look at demand, how well the supply is taken down. at what price? tom: i will read every word of it tomorrow. jonathan: away from the technicalities around all of this, more information will be this end of the curve in the next few months. i will talk about it in the next five minutes, the real test for the fed, if they say we won't hike over the next several years , the response with yield higher in the coming months. tom: what is your number? we talked .1550. jonathan: if you start to see

five basis point moves on the back of data, the fed has a problem. good morning, futures up by five points on the s&p 500. tom: tens, 20's, 30's, cash butterfly, it is like link it is writing in greek. ♪

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♪ jonathan: from new york city for our audience worldwide, this is "bloomberg surveillance." 7:30 eastern. retail sales going into that -- the s&p at all-time highs. we had a little bit of weight to it. two's, tens, 30's in the bond market. this will be the story of the next several months. not necessarily this morning. this is what i will be looking for in the month ahead. higher inflation, the gross numbers. better retail sales as well. how does the curve respond? off the back of better data, great news. it will be at the front end of the curve. your two year yield, 15 basis

points. we talked about this briefly, it is worth repeating. this is where the credibility for the fed comes into play. this is where the real test of the ability will be for the reserve. they may tell you they won't hike for the next two or three years for the sake of argument. you start to get a move at the front end of the curve, yields pushing higher off the back and better data. even though the fed is trying to push them back down, that is where the credibility test will be. it will be at the front end of the curve. tom: i totally agree. the media is underplaying the near end of the curve. it is also real yield dynamics. i'm not sure they have time for the two year yield. jonathan: we could dive deeper into that in a moment. at 15 basis points, there has

been a credibility test over the fed. in this perspective but -- they have told you what they will do. they have sat on the front end. 10-15 basis points on a two-year. tom: george publishing moments ago for deutsche bank. he makes very clear this is the fed holding well in the -- into 2023. romain: a little bit of a sleepy day as people wait and see what happens on wednesday. some of the individual movers, a lot of this being coming off some analyst notes. the argument really being made, you talk about a company going forward that will only have single digit revenue growth. single digit sales growth. maybe double-digit total return growth.

there's a lot less volatility in the little bit more consistency here. as you start to talk about us coming out of this recovery and into a new phase of the market. a lot of folks are saying it may not be high growth stock but it certainly offers you some consistency and low volatility. citigroup kind of playing catch-up here. from 55, up to 80. they've been making a lot of the right moves, a lot of investments. i will put some pressure on the shares in the short term. tom: you nailed this. in the afternoon, the three of you are much more looking at sell side. is it catching up right now as you see economist readjusting? romain: they are catching up big time. what would be considered not necessarily traditional value but i guess more growth value type hiring. tom: we call that growthiness.

[laughter] romain: i don't know all of the terminology. this is one that has been in the sights of a lot of folks. they're talking about the reopening trade and going back and getting coffee. you talk about the smoothness, the more predictability of revenue growth and of course profitability. that is what they are pointing a lot of investors to. on friday we came in, most of the u.s. retailers in that apparel space actually reclaimed their highs from 2020. yesterday, we had nordstrom at a lot of those companies had to get back to their 2019 highs. you are seeing a lot of optimism on the space or the downside will be margins. that is what you are seeing designer brands down. cost sales growth down 20% in the recent quarter. spike the fact that they had

improved. tom: we will get to the closed this afternoon. i do want to point out the vix, 20.06. it has changed the market getting to the fed meeting. george is with us from wells fargo. he takes the income and all of the different mumbo-jumbo we talk about. he distills it in a usable analysis for people challenged to find yields. wells fargo asset management. where do i hide? where do i find yield right now? george: morning team, thanks for having me on the show. as you point out and as jonathan mentioned before, where you hide? were you look for yield? the bottom line is we are in a bear market for bonds right now. talking about it all morning. it is a trend that is likely to

continue throughout most of this year. tom: this is so, so important. strategists rationalize lower price higher yield. what does a yield investor do? do they only by two years? george: the yield investor states anchored at the front end of the curve. short duration bonds. go down as low in credit quality as you possibly can. you want to look at loans because they have a floating rate structure. they are geared to economic recovery. high yield is in a sector you and i have had conversations about in the past. cyclically is in the domestic and global economy. it has high enough phenomenal real yields to offset the rise in yields we are seeing in treasuries. the capital protection strategy works there. you could look outside the u.s.

non-dollar bonds are outperforming u.s. bonds pretty meaningfully. may not be immune from capital losses but you could certainly defuse the capital loss. in some instances at a hedge basis bring that money back in dollars could put you in a positive yield strategy. the central message is you have to cast your net as wide as possible. you have to focus and anchor your position in relatively short portions of the curve. jonathan mentioned the two-year. we would extend a little bit further out. we have to do that very carefully and make sure the companies and credits you are exposed to could offset that upward push in yield. we could find places to do that. it is a challenge. you have to look very carefully. jonathan: in equity than the

simple way of expressing this would be banks over tech. talk about the high yield investment grade, this was an equity conversation we would be saying it is those very consensus, we have already come so far. let's talk about this, why does this persist? george: the cycle is not over. you could make an argument that a lot of this is christ. we look across markets, there is a considerable amount of money harboring the front end of the curve. at some point it will make sense to extend your duration. to move out the curve. to basically say there is enough incremental yield to go from twos to five and fives to 10's. the capital appreciation you achieved just from rolldown is enough to offset that. lisa: i don't mean to interrupt but this is actually incredibly important.

basically you are saying at a certain point duration becomes your friend. i will point does this undermine the consensus call of going into emerging market and non-u.s. dollar? if all of a sudden you get an appeal to u.s. treasury at the longer end? what is that level where you switch gears and move away from that consensus call? george: i think you look simply at the spread differential, the yield differential between different points along the curve. you look at 10 year, there is a spread of about 80 basis points. that is a pretty steep level. once he gets down to 100 basis points or wider, you are being paid handsomely to take that additional duration in your portfolio. we are not quite there yet. you could see the same for twos

versus tens. that is pretty significant. it is about 150 basis points. when you close to 200 basis points, your breakeven looks very compelling. in just pure nominal yield terms , we think the fed is kind of thinking about this. the 10 year really needs to get up to about 2%. we think about what type of nominal and variable growth we are going to see this year with the gradual move in inflation, yields are still too low. the fed has some room to work. you mentioned it earlier, pace matters. if we go tomorrow, that is a big problem. we have seen a steady march of higher yields. the markets have been absorbing it. credit spreads are still at relatively tight levels.

companies are freely accessing the markets. the fed could look at this capital market and say we are doing a very good job, yields are still too low. jonathan mentioned a very important point. the fed's challenge is not just letting yields rise and letting the curve steepen. they need to toggle to allow yields to go up and kind of knowledge the front end. if they are going to normalize rates, that is a combination of shifting the curve up. we are not that point yet. we don't think the fed will suggest they are you raising rates anytime soon. it may suggest the shifting sentiment within the fed that there is some potential they might raise rates in 2023. we don't expect any type of definitive state. there is still room to go.

we want to harbor money and protect capital. we could buy relatively low quality debt that has cyclical exposure. they could save 4%-4.5 percent and still protect me against that moving forward. a cyclical sweet spot. ratings go up, that all works to your advantage. in the context of the economy that is improving in the fed that is trying to help us along. jonathan: always great to catch up. from new york city this morning, this is bloomberg. ritika: a bipartisan group of senators wants to rebuild law about tariffs with section 232

of the trade expansion act. those tariffs have been challenged by the u.s. in the wto. top officials are trying to rally asian officials around of common approach towards china. antony blinken and lloyd austin had a symbolic first trip. they accused beijing of using coercion and aggression in places including hong kong and taiwan. potential problems bloomberg has learned the company is looking at the flight deck window after finding out they modified the production process. global news 24 hours a day on air and on bloomberg quicktake powered by 2700 journalists and analysts in 120 countries. this is bloomberg.

>> the consumers at bank of america is 50 people spending $3

trillion and all these forms are spending more money than they did last year. that was before the pandemic. that bodes well. jonathan: the relief plan has been a big part of that. the bank of america chairman and ceo. good morning to you all, alongside tom and lisa abramowicz, i'm jonathan ferro. retail sales about 42 minutes away. the nasdaq up 6/10 of 1%. the s&p 500 of four. adding to the all-time high in yesterday's session. the bond market yields in about a basis point. your yield on the 10 year, 1.5969. tom: john hermon, he has stunning statements on the american economy about the 9% with the risk upwards to 10% year-over-year gdp. john hermon is really cute on this.

tom: quarter on quarter in the fourth quarter for gdp in america. the national economic council deputy director what is so important is the democrat politics of this nation and working with committees. we will go rice your work with senator warren years ago. the tax frenzy the media has right now in the reality of the committee process. how will the biden administration work with the committees in this modern politics? >> the president has made out a tax agenda during the campaign. it involved big corporations, tax changes that were going to drive more testament into the united states rather than abroad. higher taxes on extremely wealthy individuals.

we hope to work with congress to accomplish those goals. the tax plan is intended to make sure the middle class families are not any more than their fair share. the folks by a large have done well. to make sure they are paying a little bit more. tom: the social fabric is the single versus married split. will you play with the social construct of our tax system and particularly joint household and the single dynamics? >> i don't believe there's any plans for that. the tax code recognizes the different thresholds are warranted highlighting a single person or married. i don't think there's any plans to fundamentally change any of that. the key here is the president believes strongly that the biggest corporation and those

folks who have done extremely well should pay a bit more. to finance the support investments in the u.s. economy. jonathan: something important is happening down in washington. you just called anyone over 400 k extremely wealthy. if family earning under 150 thousand is deserving of a relief check as well. is there a message underlying these numbers? >> the president's view is a teacher and a nurse who collectively make $110,000 deserve relief. what we have seen in the data is they have suffered. one in seven american families reported going hungry during the pandemic. the fact that the unemployment

rate is elevated, there's evidence that folks have cut back on hours, had to take wage cuts in order to get through the pandemic. lisa: there is a difference between 150 thousand dollars and $20,000. there's a difference between $150,000 and no income. whether it is trying to stimulate economic growth versus plugging a gap and evening out the playing field, which is it? >> the american rescue plan targets money towards those middle income families. there is an expansion of the type -- child tax credit which will have the additional support. there is an additional unemployment that could target folks. what you have seen and the objective independent analysis have shown is the official approach will drive a tremendous

amount of sport with children. this plan will cut it in half. we think that is one of the main benefits of it. jonathan: do you think they will make the child tax credit permanent? >> we are not at that point yet. we want to make sure all of the relief actually ends up in the pockets of the american people. this weekend next week, the administration traveling the country, explaining to people how they get access to relief they are entitled zero. tom: day today, what do you observe the white house with how the president takes in the economic advice? what is the biden method of taking and your wisdom and for

that matter checkered -- secretary yellen's? >> this is a very data-driven, empirically based approach. in the arguments the president has been making over the past several months about the need to go big in response to this crisis, the point at the cost of doing too little is greater than the cost of doing too much. the president has said it is totally reasonable. in the long term, the cost of not providing this relief is also quite severe. jonathan: we appreciate your time, come back soon, won't you? the economic council secretary director. it is very difficult to do these kind of things and then unwind them further down the road. tom: there is a process.

it has been well covered on tv and radio. i go back years and years to the power of the committee. the tone i'm hearing is the committees have less of a voice then in yesteryear. jonathan: the issues many people have is we are making some important declarations down in washington with 150 thousand dollars for a family is not enough to get by on. i could tell you from personal experience we took in a fraction of that and there was food on the table. i think there are families across this country that need relief. the lines around the corner are very clear. once you start telling people you will get a check from the government if you have a check -- income of 150,000, it is inevitable we will have problems down the road. lisa: there's a difference of stemming the economic impact versus going forward.

jonathan: that i totally agree with. when did it become the idea that $150,000 was not enough. that is new. that is new under this government. from new york, this is bloomberg. ♪

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in just 10 minutes a day. no expensive machines, no expensive memberships. get off the floor with aerotrainer. go to aerotrainer.com to get yours now. ♪ >> the focus right now is this unfolding growth surprise, which i don't think we have fully the numbers. >> we will transition from fiscal support to fiscal drag quickly. >> the whole point is to get the economy growing faster. >> it will keep the fed on the sidelines. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone.