>> we need to believe that we have a fed that is awake at the wheel. >> they are trying to reestablish their credibility as inflation fighters. >> the token withdrawal isn't going to be enough. >> i don't think the fed is trying to tighten financial conditions. >> this is bloomberg surveillance. >> from new york city and london, good morning. this is bloomberg surveillance. kailey leinz, gina martin adams and guy johnson in. he thought it was going to be a sleepy holiday week. joe manchin is now a no unbilled that better. the world economic forum now

being pushed out until the summer of next year. >> i'm not overly shocked about davos. i would be surprised to see the likes of jamie dimon. it's a double whammy for the markets. joe manson -- joe manchin accelerating not only here in the u.k., across europe and now in the united states. equity markets are off their lows which i think is interesting because we are seeing a more positive response to that mentor news. we have a bit in the bond market. euro-dollar actually catching a little bit of bid as well and s&p futures really mirroring

what we are seeing. >> equities are down a lot harder. in terms of what else is coming up we are going to get conference board leaving index. a lot of the data is going to come later this week when we get pcs and gdp. any economic indicator could in theory make a difference. we will be keeping an eye on the white house. what will they do about the threat of the omicron variant? dr. anthony fauci says he doesn't see the u.s. heading into any kind of lockdown scenario. he'll be interesting to see how the white house handles this. modernity showing a 37 fold

increase in protection against omicron. we are going to get some earnings on this holiday week. it will be interesting to hear what the outlook is like but also commentary around supply chain issues and the ability to actually get product in the hands of consumers. >> let's talk more about what's going on in the markets. michael, here we are. we have a problem with the president's build back better plan it looks like that has hit the buffers as a result of what joe manchin said over the weekend. we've got omicron absolutely raging. what do you do? should you be responding, if so what should you be doing? >> at the moment it looks like

a. to the week. the weeks are fairly long. i will take the pieces separately. senator manchin, the bill they're trying to pass as much more about politics than economics. it's about redistributing the income in the united states as opposed to straightforward stimulus to the economy. i don't think the equity market will have a significant problem with that bill staying in the democratic caucus for a few weeks. as far as omicron is concerned, the news is extremely fluid. we are clearly in a worse position than we were several weeks ago. there are reasons to hope. an awful lot of people look to be infected. the severity of this variant is

not going to put us back to where we were 18 months ago. >> what do you make of the market signals this morning with equities holding pretty well. the bond market not rallying to the extent you might expect considering the meltdown and growth assets. what does that mean for 2022? >> there aren't massive amounts of capital being redeployed. there has been some money going into bonds. yields are already so low compared to any kind of measure of inflation. it's hard to see them going much lower. i think most people would be happy to see this year and. i think most of the markets look like they are trying to keep their nerve heading into the

quiet period at the end of the year. >> let's talk more about the bond market. we are looking at a federal reserve that could hike three times next year. what is the disconnect between the markets and what the fed has indicated it's going to do? >> nobody really wants to cut their allegations. but that market has been weirdly static. it's a sort of made 22 risk. the long end of the curve does start to lose its nerve at some point. most people talk about the risk of a flat yield curve.

people simply don't want to earn that kind of asset. >> let's talk about the fundamental market backdrop. do you think 3% to 2% is the correct call? what is the correct price of the u.s. 10 year on a 2% u.s. economy versus a 3% u.s. economy? >> not a great believer in gdp as being anything useful. what you have is incredibly strong momentum in the demand for physical goods in the u.s. and to some extent globally. i see that persisting and really the driver of economic condition. gdp is a very strange mission. -- strange measure.

the federal reserve is simply not contemplating raising rates to the point that would interfere with that. >> one thing we have not talked about yet is currency. the euro being up versus the dollar is one of the other questionable signals we are getting. how is your currency outlook playing into your broader asset outlook and where do you see the dollar going? >> i think if you look at where the fed is relative to economic conditions, i would argue the fed is the loosest bank on the planet. global investors -- u.s.

equities in particular. i think for the u.s. dollar the risk is that if technology starts to underperform, that's some of the weakness we have seen in the last weeks or so and that intervenes with flows into the u.s. equity market. the dollar could easily lose the gains it has seen which could be a 5% decline. >> is there anywhere within growth equities you would feel comfortable keeping hold of into the new year? >> the strange thing about technology is that there is a portion of it. it's not the leadership. richardson a clear bear market that started nine months ago.

if you continue to have divergence, that's not a problem. if you see drawing lines between the blue-chip technology companies -- that i think you have a recipe for a recipe for much more difficult 2022. >> thank you so much to michael shaoul. downgrading their forecast for the first, second and third quarter of 2022 saying a failure to pass the back better has negative growth implications. what exactly was in this bill that was going to add to growth knowing some of these programs were much longer in duration. i wonder if it comes down to the child tax credit. >> you do see transfer payments

reflecting tremendous fiscal stimulus for the household specifically. i'm still skeptical that this is that meaningful. service ratios, overall debt to income ratios really low so it's hard for me to suggest that we're going to see 100 basis point deterioration as a result of this one simple thing. >> the omicron variant is spreading quite rapidly on both sides of the atlantic. we will talk this and more richard bernstein. session lows down 1%. >> i'm laura wright. chuck schumer says lawmakers will vote on president biden's

tax and spending legislation early next year and he warns that if republicans abuse the filibuster and try to prevent the the senate will consider changing. this comes after joe manchin declared he would not support the biden plan. please support is essentially fatal in a 50-50 senate where republicans uniformly oppose it. goldman sachs cut its forecast for ux -- u.s. economic growth. the world economic forum and davos switzerland has been -- in davos, switzerland has been postponed. organizers are planning to hold the event next summer. the u.k. is refusing to rule out tougher coronavirus restrictions by christmas. infections are running in the hundreds of thousands per day.

boris johnson's conservative party is pushing him to avoid tougher regulations. bank of montreal is expending billions to expand its presence in key growth markets. at will by bnp paribas bank of west unit -- bnp paribas plans to return some of the cash to shareholders through a. -- a buyback. global news 24 hours a day on air and on bloomberg quicktake powered by more than 2700 journalists and analysts in over 120 countries. i'm laura wright. this is bloomberg. ♪

>> one republican in the united states senate or the house gets prepared to stand up to the drug

companies or the insurance companies or the wealthy. i would hope we would have 50 democrats. but if that is the case, i hope that we will bring a strong bill to the floor of the senate as soon as we can and let mr. manchin explain to the people of west virginia why he doesn't have the guts to stand up to powerful interests. >> senator bernie sanders of vermont after joe manchin said he would be a no on the build back better agenda. if there's anything we know it's that equity markets don't really take well to uncertainty. we are down more than one percentage point when it comes to s&p 500 futures. you're seeing the haven show up more in the euro. of course it's not just the fiscal policy question the market has to take stock of this morning.

the other is the pandemic. we know davos has been pushed back to summer of 2022 thanks to the spread of omicron. current pandemic conditions make it extremely difficult to deliver a global in person meeting. traveling in general is getting a lot harder to do in europe on your side of the atlantic. guy: absolutely. i don't think as a ceo, a business leader, a thought leader, he would want to be seen at a large gathering at the moment. a lot of people have taken the pragmatic decision that this is not the way they want to go. as a result the world economic forum has had to bend to which way the wind is blowing on this. do you want to be a ceo showing up in switzerland, getting a positive test, going into

lockdown and not being able to run your business. i don't think anybody is surprised by this decision. kailey: it's already a difficult december on your side of the world. it's also a difficult december for joe biden as he is having a tough time of getting his economic agenda through joe manchin critical in the 50-50 split senate. let's bring in emily wilkins. manchin has consistently been the problem child here. it seemed like they were working it through. do you think this is a death knell or are we going to see this conversation rearing its head again? >> that's the big question out of d.c., if this is really the end for joe biden's policy.

chuck schumer says he's going to bring the bill to the senate floor in early 2022 and have lawmakers vote on it. that way if senator joe manchin wants to vote no, he's going to be on the record as voting no. there is also a lot of discussion on whether they could retool this package. instead of having a package that has childcare and health care and pays family leave and childcare provisions, could you just have a passage that focuses on only one or two of those things. manchin is on board with the tax credit. he wants it to last the full 10 years allowed under that reconciliation package.

the big question is what is the willpower. the fact of the matter is that the clock is ticking. it is very hard to get major legislation passed in an election year. kailey: the democrats aren't able to get this social spending through or not all of it, does that give the party know hope that they can retain control of congress? >> democrats will point to the fact that they did pass that infrastructure package. they can point to legislative victories. this is supposed to be a big piece of what they were supposed to deliver. they have been talking to -- about the provisions in the bill.

this will absolutely hurt democrats if they can't figure out a way to get something through. they will be seen as not being able to deliver an the 2022 midterms are already tough for democrats. midterms are already tough for the party that's currently in the white house. this is adding another layer of potential difficulty. guy: i was quite surprised at how ferocious the language from the white house was in response to the interview that joe manchin did on fox. how broken is the relationship now? the democrats are going to need joe manchin for other things. >> it was very clear from what you heard from white house press secretary jen psaki. to blow him up on a sunday with

only a few minutes letting the white house know what's coming, i think there's a lot of frustration and anger from the white house and within the democratic party. democrats are in disarray. not just the manchin and the white house. president biden promised us that if we got infrastructure through he would deliver on the social policy bill. at this point that has not happened. kailey: it seems that manchin's primary concern would suggest that perhaps there is still a chance come january, february, maybe later into 20 22 that we get a smaller sized bill. are you hearing any early whispers as to where this may land in terms of its ultimate size and scope? >> that's a really great question. one thing that is interesting

from what we heard this weekend is the white house statement that came out saying that manchin came last tuesday to the white house with a proposal that was within the current monetary range. it just had a couple key priorities left out. it seems like manchin might actually be comfortable with the current cost of the bill based on that statement. this bill was supposed to be much bigger. it was reduced due to demands from manchin. kailey: emily wilkins with the latest out of d.c., boris johnson will be holding a cabinet meeting at 2:00 p.m. to discuss covid. apparently there is no plan to close schools in january.

guy: we will see what happens. it depends on when the cabinet meeting is going to be. kailey: winnie caesar of credit suisse will be joining us. this is bloomberg. ♪

kailey: welcome to bloomberg surveillance. i would wish you all a happy monday, but it's not shaking out to be that much of a happy monday at least in terms of the equity market. joe manchin saying he is a no to biden's back better plan. your having to deal with the spread of the omicron variant in many parts of the world and that's leading to restrictions in some places on the others of the atlantic. a down day for equities. s&p 500 futures down one point 14%. small caps getting hit the hardest.

you aren't seeing moves you would expect in the bond market. we are down less than two basis points. that raises some questions about what the bond market is seeing that the federal reserve isn't. we are down about three basis points and 180 on the third year yield. when you take a look at what's moving underneath the surface we also have oil. occidental petroleum down 3% or more. a lot of questions being raised. what it means for our holiday travel plans when we think about the virus. big tech also getting hit relatively hard. it's not all bad news.

they are seeing some stocks including vaccine makers. novavax has been cleared for emergency youth -- emergency use authorization. you're getting a nice bid for those stay-at-home names. it's now down about .7%. guy: that ship sailed along time ago. i'm now concerned about being able to leave my house. it is almost look at her. -- it is almost obligatory. thank you very much indeed for taking the time.

we've got omicron tearing across the world. are either of these events game changers? >> good morning. i don't think they are necessarily game changers but they will desire patients from investors. we had not expected another round of fiscal stimulus to pass. the unfortunate reality is election season just begins sooner and sooner. on the omicron variant, clearly the public health side of things is quite worrisome. we are seeing this mismatch between fiscal stimulus and central-bank support winding down while public health restrictions are ramping back up again. you have the natural inclination

of people to stay home. so we are going to make a bumpy road in the near term. guy: we haven't had a proper credit cycle. because of the support both central banks and governments have provided. how different as a result will it be for the credit market and are we finally going to get a credit cycle kicking in? >> there's this allocation of capital into smaller cat private credit. some of them are middle-market lending names. we think all of the fiscal and monetary support really helped support some of those less liquid parts of the economy.

we think there's probably more headwinds there rather than in the large-cap investment-grade corporate credit names. all of those issuers are cashed up, tons of cash on the balance sheet. interest coverage metrics look really great. i think it's a mistake for investors to assume the next phase of the credit cycle is going to look like it did in march and april of 2020. >> oftentimes credit leads to equities. there signals you are seeing in sectors and industries in the credit market that we should be wary of? >> i think that is a great question. there almost back to where we were at the beginning of the year. the composition of that breakdown is very different.

we have the energy sector in terms of the commodity or covid linked sectors whereas technology is pretty significantly wider on the year. i think that rotation out of some of the things that performed during well during the lockdown stay-at-home and continuing to prefer to allocate capital into the reopening trade. it's going to little bit less comfortable for the next couple of months. kailey: i will take the role of adding some historical context. winnie and gina is to work together. you mentioned earlier that companies are really cashed up. i'm wondering if that means they are going to have to keep going and what your expectation is for

issuance. >> the amount of issuance we have seen for the past two years just record-breaking levels. we are going to see a 20-ish percent decline. we think we will see a decline in issuance by 10% or 15%. a lot of issues will prefer to rotate capital in the loan market given that we are expecting continued long demand for loans. lower issue with less of the decline in yields. kailey: is that lack of supply going to provide underlying support for the fed normalization or not?

>> we also are expecting a shift in demand for credit and we are now at the point where absolute low yields given the inflationary pressure is probably going to shift demand out of the market a little bit more. i think investors should definitely be paying attention to that signal. until we get long and yields moving higher again it's going to be much harder trade to expect retail demand for ig. fixed income yields are still very low. guy: it strikes me that the yield gap between the bottom and top of ig remains unbelievably

tight. does that continued and is there an advantage to being highly rated or are corporate treasurers going to go, it doesn't make much difference if i'm down at the bottom. i'm going to keep taking as much cash as i can. >> this is now the crux of the credit market. this means that we are going to continue to see ratings migrations. so management teams are actively kind of flexing their balance sheets so they can retain cash on the balance sheet. for most management companies the difference between a single a issuer and a triple be issuer

on the cost of capital basis is pretty marginal. >> what are your clients saying as far as the risks right now? when you're thinking about the relative value of a broader portfolio of assets, are we on the cost of moving into risky assets after 10 or so years of hiding in fixed income? >> my clients have generally been saying that they were hoping for some volatility. clearly we are at the end of the year, the markets a little bit thinner. people have had two years of really grueling new issuance. taking a pause is merited. the big risk that i hear is definitely for a policy error.

it will be very interesting to see how policy plays out over the next 12 months especially given the significant shift in the inflationary environment that caught a lot of people on the back foot. i think that in the credit markets we are starting to see that. hearing that we are moving out of the u.s. ig, all of those things are definitely trends that i'm hearing. >> we will be talking about yan coming up. stick with us. this is bloomberg.

>> the u.s. senate will vote despite joe manchin's rejection of the nearly $2 trillion package. chuck schumer it clear that he will force manchin to go on record with an objection. losing his support is fatal in the senate were republicans uniformly posted. moderna said the vaccine boosted antibody levels. a growing body of evidence that three shots will be needed to neutralize omicron. interrogate the lira fell to another record low after president erdogan pledged to continue cutting interest rates.

elon musk says he will pay more than $11 billion in taxes this year. that could be a record payment to the u.s. internal revenue service. he has been selling millions of shares to cover taxes related to his exercise. the new spider-man movie set up and in my area record. -- set a new pandemic era record. sony produced the movie in conjunction with disney's marble division -- marvel division. global news 24 hours a day on air and on bloomberg quicktake powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> in the near term we like the u.s. because we have more

clarity. will be very important is how nations are in their cycle. as we see different timing on when people are hiking that's going to also have a big impact. kailey: that's true for risk assets across the board. right now we are off session those when it comes to futures. there are starting to see a little bit more movement in the bond market. oil taking it on the chin. nearly 5% on wti. we are down about 20% from the high we saw in october. euro-dollar stronger by about

.3%. very interesting behavior in the currency market. i know you are taking a hard look at fx as well. >> i brought to my favorite risk gauge indicator. why do i choose these particular currencies, kind of more risk on currency that you see in addition to being one of the most traded currencies not to mention also major haven currency. when the line goes down it is risk off and line has been going down since those omicron variant

headlines came back. we have seen high-yield spreads come back a little. the aussie dollar versus the japanese yen continues to drop in this morning it is still under pressure. he did not see it in the fx market. i have seen become this risk gauge for the macro world so that's going to be something to watch as we go into how the markets are really pricing in whether this omicron variant can actually be something the market sees through or whether it is going to be a longer-term problem. kailey: our radio audience can check out that chart on twitter. we have to highlight the chilean peso weaker against the dollar.

actually hit a record low after the leftist candidate won. it's not just in fx readthrough. what is the real impact going to be? >> this is the worst impact markets could have predicted. effectively you are going to see more radical movements. expect more social services, expect more taxes, they are going to tax the wealthy that much more. i think the stock market is down . we are seeing this across the whole of latin america.

we have two major elections coming through in latin america. columbia and brazil. >> latin america in general has been a big stage -- stain on the emerging equity markets. we have seen brazil, mexico. what is it going to take to create a bottom in these economies are in the risk tolerance at least for this region? >> it's going to be stabilization of the dollar. i think 50% of the factor attribution in terms of an equity return converted back into dollars is going to be that equity impact. rest assured we expect yields to go up.

i think it is going to be very difficult for chile to avoid a recession. >> we've been talking about turkey for a very long time. i remember talking to president erdogan years ago and he was saying similar things. we are now starting to see his turbulence in the equity market. if we start saying the currency volatility bleeding into other asset classes. >> you are focusing on the equity market. the focus needs to be on the u.s. dollar credit market. kailey: it looks like we are having connection trouble with damien. can you hear us?

he can't hear us. i think it's a really interesting question. we have been talking about this in turkey for quite some time. president erdogan doesn't feel any pressure to change his course. >> absolutely not. he's been talking about this unorthodox approach for quite some time. those kind of protections that are available, if they stop working than the endgame of this goes towards president erdogan. if people in the street start to feel there's nothing in it for them, then the game changes. kailey: on going to make a hard pivot and talk about movies. $253 million debut that smashes

the pandemic record. saturday was the busiest day globally since christmas 2019. >> i have seen it. my kids loved it. i found it quite relaxing. it kept the kids happy for a while so that makes me happy. >> i haven't been in the movie theater since 2019. i think it's fascinating that saturday was such a big boom of the day considering the acceleration in the omicron infection rate. what's it going to take to see that slowdown is a big question. guy: i was surprised at how busy it was. they had fully cranked up the ventilation. kailey: a lot of people

calculating that spider-man may be worth the risk. we're going to talk to richard bernstein at rb advisors. his thoughts on the wing prospects of fiscal stimulus and what we should be thinking about the omicron variant. this is bloomberg. ♪

♪ >> what the remain balanced across -- we want to remain balanced across sectors. >> the fed wanted to raise rates slowly. it is long-term ok for risk assets. >> we will get the potential for a serious rate shock, which will i think be in the short term quite damaging. >> it is not so safe to move around the cabin. >> we don't think it is time to give up on equities as a whole. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. >> good morning. this is "bloomberg surveilla