inflation expectations. >> the sackler starting with more inflation and flatter yield curves. >> the fed's job is to keep a steady hand. >> everything is transitory along that timeframe. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: getting your trending week started. good morning. this is "bloomberg surveillance ," live on tv and radio. your equity market up 11 -- hero -- euro equity market up 11. looking down to d.c. it is all about the president's next move. tom: i agree but it is also the theme of getting into next year. i love the lineup of guests through brief us. just first rate. in moments, we will go in search of dow jones' 38,904.47.

we interpolated the extrapolate of the standard and poor's 500. jonathan: price target on the s&p 500 is 400 from morgan stanley. they are underweight united states, overweight the likes of europe and japan. tom: others go against that. there is a lot of divergence of opinion, including on the next fed chair. jonathan: not just the next fed chair but the next fed rate. morgan stanley says, q1 2023, inflation starts to moderate. lisa: fascinating call. i was struck by the idea that the federal reserve has the ability to push back against the political shift, trying to fight inflation. how do they do that and wait long enough to raise rates? how much does that depend on the morgan stanley call that we will see inflation pressures roll off? jonathan: we will find out who

runs the fed as well. here we are in the middle of november reading tea leaves. a wall street journal piece indicating that an interview went on longer than expected. that is basically all we have got -- reading the tea leaves and some reports about how some interviews went couple weeks ago. lisa: we do not even understand what the parameters want -- what does a biden administration want? a more dovish fed? or is it just about the employment market? we do not even know. jonathan: we have no idea. watch this space, hopefully some point later this week, we may find something else. equity futures advancing 0.2%. good morning to you all. we advance on the s&p 500. bond market yields, in just about one basis point. the main event u.s. retail sales on the data front. tom keene, euro-dollar 1.1449.

senator schumer over the weekend calling for an spr release once again. tom: i am going to stay away from the spr. there has been a lot of study on that, and i am not sure about that exit the it makes a media splash. what i really look at is retail sales i believe that is tomorrow. i do not think that is a small issue. jonathan: that is the point of the weekend. lisa: how much dynamism is there, especially as you see wages lagging behind some of the price increases we have seen. today, not a lot of economic data. the main point is 8:30 a.m., u.s. empire manufacturing, the first read on this month's manufacturing at its -- amidst some labor market shortages. that will be the focus. the expectation is that there will be an ongoing increase in manufacturing. still some momentum there. today on this show, we are lucky to have x new york fed president

bill dudley, joining us around 7:45. then former richmond president jeff lacker joining us. the focus very much on who will be the next fed chair p i want to bring you this quote from janet yellen on "face the nati on." she basically is reported to be supporting fed chair powell earlier this time around, when asked about it, she pushed back, saying she thinks jerome powell has done a good job of running the fed, what -- but what is important is that president biden chooses someone who is experienced and credible, and there are a range of candidate., and not only do we hear that president biden is excited to sign the bipartisan infrastructure bill, but president biden and president xi jinping of china are expected to have a virtual summit to talk about trade and climate. this is notable. they have met twice before on the phone, but this is evidently being heralded as something more. jonathan: i saw the same thing.

a range of candidates. the middle of november and we are talking candidates. tom: i know our team is forwarding the story as well. this is about politics or economics. i am sorry but it is always politics. jonathan: when there were some federal fed picks that came through, we had decent clarity on the process, then there was a change when gary cohn left. it was like the next administration -- the former admission took the process less seriously, started to come up with a serious candidate speed i am surprised the current administration and the previous administration have not addressed this with a little more urgency. this is a really important institution that you have the opportunity to do what you will, and i am surprised it gets overlooked. tom: you know the distance from the city over to the bank of

england -- i do not know that distance, but i know the distance from wall street and goldman sachs up to the jpmorgan museum and mansion on madison avenue and 34th. the answer is gary cohn knows why we have a fed and why it is important for the financial system. jonathan: it seems to be lost at the moment. and it is not just a criticism of what is happening here and now in washington. i saw it before in the previous administration as well. left open seats, tried to fill them with names that were never going to get those seats, just dragging their feet. for an institution that is really powerful, and you have the opportunity to do something significant with. lisa: and in a moment that is incredibly fragile when you have bifurcated potential outcomes with such an uncertain outlook. jonathan: joining us now, lori calvasina, head of u.s. equity strategy at rbc capital markets. at the close friday, year end,

2022, you are at 50-50. walk us through that past. lori: great to be with you guys as always. we wanted to refocus the conversation as opposed to just thinking about where we are going to trade over the next six weeks of the next 12 months. we went back to our models on basically all the economic fact test and models pointing us to about 161 or higher. i think what we are really seeing in the data are two things. one, even though economic growth is expected to cool off and we have some hurdles to get through, frankly, on supply chains and inflation, if we are right about where the economy will end up next year, about a 4% type number, we should be getting to somewhere around 5100 on the s&p. that would be fair value. all our evaluation work, stocks and bonds in particular, stocks are still the only game in town. i think that gets lost in this

equity market discussion. yes, we have suspended valuations, but stocks at the end of the day are an inflation hedge. when we evaluate stocks versus bonds, we still see the case for a percent type returns next year -- 8% type returns next year. tom: i noticed the string from general electric and j&j, and this morning the idea that the royal dutch shell will finally move from the netherlands to the united kingdom. these are corporations that will adapt, as you said, 7%, 8%, even 9% nominal gdp. forget the mathiness of it. how do you base your call? is it based simply on nominal gdp? lori: we look at nominal gdp, we look at real gdp, we look at stocks relative to bonds. we make an assessment about next year's earnings. and the earnings discussion is fascinating, because there was

so much angst on this last reporting season about whether or not companies would be able to manage through supply chain pressures, and there was a lot of complaining -- i am not saying it is unjustifiable. but if you look at the inflation discussion, it was pretty negative. we had a lot of companies talk about how their inflation alex had gone up, how they were caught offguard by the inflation they saw perk up. supply chain pressures have been real. they have been intense. at the same time, companies have demonstrated a remarkable ability to suck out costs from their system. they have been applauding their supply chain teams, logistics teams. they are meeting the demand they kampeter they are managing through it in a remarkable way. i am hard-pressed to understand why that will not continue on the strength we have already seen. lisa: how much is the question mark on the idea we will get a fiscal drag next year that could affect how much consumers are willing to absorb these costs? i am struck by the fact that two

under the three biggest companies reported substantially fatter profit margins this year than in 2019. lori: i think it is a question of consumers and corporate's. corporate's are passing along price increases. what we have not been negative feedback on underlying appetite or that have been issues with meeting demand technically here and there. underneath the surface, consumers still have the cash to go out and spend and still have the appetite to spend, even though, frankly, they have been feeling lousy the last couple of months. part of that is testament of the fact that we have this unbelievably strong labor market and we are seeing wage gain increases. at the end of the day, the appetite is still there. i look at forecasters calling for negative numbers or severe pullback and i simply do not see the case for a growth scare, a case for the idea will be -- we will be flirting with recession, which typically pushes us down

into negative territory. jonathan: good to see you. lori calvasina of rbc capital markets. speaking of robust growth, the outlook is one part of the story. for the economy, a 4.9% real gdp growth in 2022. pushing 5%. that is robust growth. tom: but you pointed out the key distinction. we have a gdp call very much like the time for sally -- tom forcelli gdp call, yet you get a different equity view. good studying over the weekend. [laughter] jonathan: lisa, almost a five handle on the outlook of gdp. impressive. lisa: it is. tom: no persecco.

jonathan: just straight vodka? [laughter] from a beautiful new york city, good morning. this is "bloomberg surveillance ." leigh-ann: with the first word news, i am leigh-ann gerrans. president biden and chinese president xi jinping have a lot to talk about. relations between the two countries are tense. there are dispute over taiwan, human rights, and the origin of the coronavirus. the european union has improved -- approved a new sanction powers related to belarus over the flow of migrants towards the polish border. president alexander lukashenko is using thousands of migrants and what the e.u. because i hybrid attack.

he has also threatened to block the flow of gas from russia to the e.u. senate majority leader president biden to tap the strategic petroleum reserve to help lower gasoline prices. schumer says consumers need immediate relief. the president has hinted he may take action on fuel cuts. polls indicate many americans blame the president for failing to contain inflation. and researchers found that pfizer biontech has the most robust immune response. global news 24 hours a day on air and on bloomberg quicktake. i am leigh-ann gerrans. this is bloomberg. ♪ ♪

>> all of these things go right

at lowering costs for american families. and this bill is fully paid for. it will not add to inflationary pressures. quite the option -- opposite because we will pay for everything in this bill by raising taxes on the highest income americans. jonathan: the administration out in force there. the director of the national economic council there on cnn. the year equity market positive. yields in a single basis point. your big it point of the week is u.s. retail sales. look out for crude, negative there 1.14%. majority leader senator schumer would like and as pr -- an spr release. but this pull from the washington post. a couple of things pop out -- 71% rate the economy negatively, including 38% who say it is in

poor condition get about half of americans overall and political independence blame biden for fast rising inflation. that is the blame game for the president. tom: there is a warehouse in bethesda that has "with inflation now" buttons. our bloomberg washington correspondent annmarie hordern. the sun is rising in washington. it was a sporting weekend. forget about the summit, forget about this. what does the president do to right the ship? annmarie: it was a sporting weekend. you can tell who they put on the sunday shows. janet yellen speaking to "face the nation." and economic advisor brian deese. they are clearly worried about inflation. today, the president will sign the infrastructure agreement in law. he wanted to make sure he had

the full show and dance with leaders on the right and left joining him on this signing. potentially when he does, this can be a way to build up those terrible poll numbers we saw over the weekend. tom: the vectors moving in the wrong direction pat will be compared to the former president, mr. trump, shortly. how does he turn that around, particularly by the symbolism of powell v. brainard? annmarie: one thing i will say was this poll was done after the bipartisan infrastructure agreement was voted on. the administration likely thought that would give them a boost. it has not yet. potentially today's assignment, potentially the president going to the road this week, going to agm plan and a number of other places to talk infrastructure that could help him. when it comes to powell versus governor bryan already -- powell versus government brainard, we do not know yet.

there was recent reporting which talked a little bit about the nuances of those meetings. they both had an hour with the president. looks like governor brainard went slightly over the allotted time. again, we heard from secretary yellen saying that she thought powell has done a good job over the pandemic, saying it was a hardship to steer, but she also noted there are a number of good candidates on the table. before thanksgiving, we are waiting on an answer. lisa: when it comes to inflation, what message is sticky from the democrats as to what it is ok? annmarie: they do not think it is ok. you heard from senator schumer telling the administration to tap spr because i need these gasoline prices to go softer around the country, especially in places like new york. i was in new york, and they are higher gasoline prices. these are things that bother the electorate. what democrats are starting to

realize, when you have senator schumer coming out and telling the white house publicly you need to do more, they are clearly realizing that their messaging over the past few weeks and about the sausage making in d.c., that is not want the electorate wants to hear. lisa: we heard three messages from three people -- janet yellen's and, once we get rid of covid, inflationary pressures will abate. president biden saying that there will be more support for supply chains. chuck schumer saying release more oil from the spr. these are all different messages and none of them are sticking. i am wondering how to dovetail the conversations to a fed, what the end nutrition would want -- would they want a more diverse or hawker's fed -- dovish or haw kish fed? annmarie: i do not know what the administration wants. we do not even know all the candidates they are interviewing for.

if they do not choose chair powell to remain, that is four spots. we know, off of our reporting over the weekend, that mary daly was potentially asked as a pick, from san francisco, and she said no on the governor spot. we do not know which direction they are going in. but the inflation picture right now -- goldman sachs says it is going to get worse over the winter before it abates. that potentially is going to put a little bit more pressure on them, leaning towards anyone who was little more hawkish on inflation. the problem is how do you know who is hawkish on inflation? powell and governor brainard has been in the spots when inflation has hovered around 1.2% to 1.5 percent. no policymaker right now has had to deal with this. it is very challenging. jonathan: thank you. i love that story about president daily of the san francisco fed.

do you know how much a fed president of san francisco might get? something north of $400,000. if you are asking someone to leave their position of the fed president of san francisco, you are asking them to take a significant take up your i think a lot of people forget that chair of the federal reserve gets around $200,000. you know what the president of the s&p gets? $800,000. granted, afterwards, you have to do some speeches to bring in real money. but a seat on the board of the governor to give up the president's seat, you will sacrifice cash. tom: i am going to get in trouble here. lisa: take another shot. tom: it is an absolute disgrace. they are slaves to the speaking racket. i've lived it. it's not good. it has gone back for decades and decades and decades. jonathan: are you suggesting

they should get paid more on the federal reserve and, perhaps, have more rules around what they should do afterwards? tom: no. they should not have rules afterwards, but they should be compensated so they can live like professional people. and i am sorry, it's chump change in washington, d.c. lisa: there is a revolving door debate, the idea that you can go to these positions and come out and make huge amount of money and that is why the government can afford to pay such low wages to the people who come into these key positions. i would argue that we have to have a reckoning of what we want from our public officials and being ok to pay them more if they want to restrict them in other ways. jonathan: i'm pleased you took a bite at that, tom. lisa: troublemaker. jonathan: early on a monday morning to let's talk about pay in washington. [laughter]

he's grumpy this morning. tom: who is the senior sibling here? jonathan: for our audience worldwide on radio and tv, this is "bloomberg surveillance." ♪

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jonathan: on tv and on radio, this is monday morning. advancing 28 points. studying to get a feel for the year ahead. the low end, morgan stanley at 4400. that is quite the divide. it is not actually not bad on the economy. looking close to 5%. they're looking for something closer to three. expect real yields to adjust. in the bond market right now, a

big mover last week. probably about half a basis point. no drama here. could you get some drama in the commodity market? i sound like one of those auctioneers. suggesting that he would like to see a release. it is on the table. we wait. the downside risk, making a move down in washington. tom: we will have to see how that unfolds. it is 2021. an economist showed up at morgan stanley and his name was stephen roach. he codified these morgan stanley

method. we argue about it out in public, and i am always respecting that morgan stanley takes a different tact. that is going on at morgan stanley. it is a cautious view. michael kushner joins us. he is going, tom, do not ask about the stock market. dovetail how your world folds into the stock market. >> we think of it from a top-down view. what is the fed going to do to respond? what is going on in the economy? as well as inflation and growth.

an unbelievable opposite move in real yield. they have ratcheted up over the course of the year. offsetting the impact on nominal yields. it is on and off for most of the year. a gridlock between the bulls and bears. tom: the nominal is the nominal yield full. they take away the inflation dynamic. which is the greater? quest we have had surprise

inflation all year long. every single quarter, it turns out higher than expected, quarter after quarter and month after month. it is substantially higher. it has been expected. higher inflation was expected. to see real yields seems out of line with the economic future. jonathan: it does not seem that the data is changing anyone's minds. they still think this would be temporary. we asked, what would tell you that you are wrong? he said, the turn of the year. i still do not hear them changing their mind.

reichel, what would make them change their mind? >> two ingredients. participation rate has not improved anywhere nearly as expected. wages are not rising rapidly. there is a lack of workers slowing down the supply side to recover. we see on the supply side that they had taking extra long to resolve. these things were supposed to ameliorate and get better and better. we are seeing normalization -- we should see trend improvement. at such a distorted level that

we may not be happy with where we are six months from now. lisa: what can we do to fight these inflationary pressures? >> not a whole lot. if it worries investors and participants about where the long-term growth is. you see long-term buying yields down. mortgage rates do not move. how do you get rates up to slow things down? do you really want to see demand fall when you are seeing a weaker supply-side, going forward? lisa: is it the same when it comes to bond purchases? what if they just ended them early next year, ahead of schedule?

>> hindsight is 2020. they could easily finish it right now. i even think that i would be behind the curve a little bit now. it will be a reasonably paste pace. -- paced pace. consumer confidence is at a low level. higher mortgage rates help that. it is very helpful right now. it is related to covid. the fed is in a tough spot. it will not help in the short term. it seems to be a no-brainer. jonathan: when you speak to

people, defined that it is pretty binary? there is disbelief that we start to move in one direction and that cycle is over. what do you make of that? >> it is all about the uncertainty in the world. some people have inflation as the underlying problem. covid has created supply chain issues that are not going away. the world will put us -- produce less goods than in the past. it is brought in line with production keep the lindy. inflation is going to be too high. it is a temporary phenomena. it will resolve itself. it is precipitous about making demands worse. tom: in our heads, are we

shifting down, given what they say? do we move along to get back to stability? >> i am an optimist that things will get better. i do think the supply side issues will likely work themselves out. these prices come about because we have had the perfect storm of multiple things happening simultaneously. no one would have predicted all these things happening at the same time. it just takes time. we need time to sort through changes. we know that the fed likes to move wide. do not move unless you think you

have to move. something like that. let's not move 50 basis points and realize that is a mistake. jonathan: that is deep, is it? i just sit here and think, how far is normal? lisa: a lot of people are wondering that. for some it is above 2%, maybe even 3%. other people say, we are going back to normal. tom: what are they doing in minneapolis? after j&j? these people are listening to michael and saying, where are we on the supply chain continuum? they will adapt and adjust. jonathan: demand gets lost in

the story at times. when you see the volume, it is really decent. we are very occupied. tom: the macro blast, yes. jonathan: morgan stanley is still looking at close to 5%. tom: anyone on wall street watching this says, you have a near 5% gdp and caution in equities. how unusual is that? jonathan: there will be other people in the market. tom: this is the greater public. inflation -- is it a worry? jonathan: i agree. tom and i went to breakfast. this man came by and said love the show.

tom: weaver at a restaurant two separate tables. jonathan: we get paid to come out and eat together. new york city this morning. good morning. tom: i had a double cheeseburger. ♪ leigh-ann: in china, the economy performed but are than expected in october. energy shortages eased. the jobless rate was study. a slump in property and rising coronavirus outbreak shows that recovery is not on solid ground just yet. the central bank should not overreact to inflation. it is likely to prove temporary. overreacting to a short time --

short-term increase could set them back in the long-term. british economists expect the bank of england to increase interest rates next month. that would make the u.k. the first major economy -- shortages of workers are getting worse and driving up wages. there is concern that it could spread inflation across the economy. this is bloomberg. -- global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> the pandemic has been calling the shots for the economy and

for inflation. if we want to get inflation down, continuing to make progress against the pandemic is the most important thing that we can do. jonathan: from new york with tom keene and lisa. we advance .25%. yields in, almost a basis point. inching lower. waiting to see what the next move is from the administration. let's talk about europe recently. the netherlands will return to partial restrictions. never quite light that term, lockdown. germany battling a fourth wave as well. tom: we have a number of themes

here. somebody stopped me and asked me why -- while i was not with jonathan ferro. let me go to europe. are you surprised at the challenges of germany, austria and switzerland? >> i am not that surprised. this virus is so transmissible. it is starting to be behind us. they go out and do more things, but if you are unvaccinated, it is dangerous. pretty much everyone unvaccinated -- that is what you are seeing. it is just not high enough. overwhelmingly, people getting very sick are those that are

unvaccinated. tom: we are 19 months on, depending -- from the vaccinated, it seems like the gap is getting wider and wider. ? i seeing a huge political divide. they are getting them for different reasons. still very concerned. the aaron rodgers fiasco indicates this, that some people have latched on to the idea. there is this undercurrent of resistance, an unknown, vague

authority, that really appeals to people. that can be hard to get out of. when people get sick, their whole families get sick. it will just be really important to understand the phenomenon and be more effective in combating it. lisa: you are saying that it setback the pandemic by getting this message out there, that there could be something that is harmful or nefarious. i do not know about him in particular, but it is combined with terrible news coverage that you can get on certain station about the vaccine,

misinformation that is being spread by people who should know better, as well as failures and social media. lisa: there is this fear that we could see european like cases going up in america. i am wondering how far away you think that we are. >> i do not completely understand the connection. if one of the factors is the supply chain and the fact that we need to move freely -- it is probably not just the u.s. control of the pandemic that is important. we are pretty far away in a lot of places, so it feels like we

are in that post-pandemic world. we will have to get the pandemic under control and a lot of places. jonathan: thank you, as always. lisa, we live in really strange times. the rate in america is at an all-time high. people have the confidence to quit their jobs. on friday, it was at a decade low. it is very difficult to get your hands on what is happening in the economy. lisa: it is a lot of upheaval. the vast majority of the population -- it is about average. for women and those who work low

or wage jobs. this is fascinating. there is a lot more dissatisfaction because they cannot get enough people to support them. they are busier than ever and they feel like they should be paid more. jonathan: they matter for consumer confidence. last week, they exclusively captured that story. tom: the chart of the week -- it is inflation adjusted wage growth. the fact is, inflation, seven months, it has crushed wage growth. jonathan: negative, bottom line. lisa: you are seeing consumer

confidence decline. what are people doing rather than past that they are buying and accepting these prices that companies are giving to them that go beyond? jonathan: that is exactly what the equity market has been doing. watch what they do, not what they say. ultimately, the story has held up. for corporations, the prophets are still decent. lisa: what is going to shake that? even though you are seeing -- even though you have the pessimism, people are still buying things. jonathan: america adapts.

edward jones will be joining us shortly. advancing .20 5% on the s&p 500. for our order -- per our audience worldwide, this is bloomberg -- for our audience worldwide, this is bloomberg. ♪

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♪ >> this is a new fed. it is a new reaction function. they are willing to let things run hot. >> the cycle is starting with more inflation and flutter yield curves. >> i think the fed's job is to keep the eye on the medium-term. >> everything is transitory on a long enough timeframe. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: getting you ready for 2022. from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance, " live on tv and radio. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. -- live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. the year-end outlooks poor in. tom: i have never seen it like this. the deep visions we see not only at versus other houses, but just the disparity of the call