taylor: let's get a look at how equities performed on the the s&p 500 managed to climb at -- to close at record highs. russell 2000 also doing really well. up 9/10 of 1%. we go from an intraday to where we are long-term. commodities up 26% for the year. equities more than 15%. bonds did not have a good year. negative for 2021. that is the markets rep. what did you miss starts now.

caroline: we are focused on where taylor just left us. the markets not just from 2021 but the year ahead. the omicron variant spreading globally. the risks are clear. today we will dig into not only the danger spots but the areas of opportunity. where investors can find shelter from the ongoing uncertainty. let's get an outlook on 2022. sonali: across the asset classes, let's take a listen to what our guest had to say. >> maybe i'm in the festive spirit but i think we are going to be in a bit of a sweet spot. >> it might seem strange now just when inflation is really taking off as an investor that we decided to -- on that view

and move back to a more neutral view. >> no one understands what drives cpi. >> we are mindful of a fed policy mistake. it is a bigger risk than omicron. >> more of the coronavirus and the pandemic in these options is critical to probably not emphasized sufficiency -- is critical. probably not emphasized sufficiently. >> we have -- >> there is always uncertainty. >> i believe investors should look through the noise to identify where the long-term growth areas are. >> pretty favorable environment for staying overweight equities. taylor: we talk about inflation. we talk about a 10 year yield that cannot break above 150.

as you think about next year and the variant, which we have not mentioned through that yet, a lot to digest. let's bring in another 2022 outlook with the chief investment strategist with riverfront investment group. as you look to 2022, could we talk about the biggest risk you see on the horizon? >> i am happy to. thanks for having me and happy holidays. for me, the biggest risk seems to be interest rates moving higher faster than we forecast. the reason i say that is because if you look at valuations, i will use the u.s. as an example. if you look at valuations on the s&p 500, you look at it as an historic basis, they are very rich. if you factor in the interest rate regime so you compare earnings yield to 10 year treasury, stocks look reasonable. stocks are either cheap or

expensive depending on what happens to the interest rate. our best case has the 10 year not moving all that much and therefore we are generally constructive on stocks for 2022. going back to your question about risk, if that interest rate were to move more quickly and the magnitude of the change were higher than we expect, then the valuation drop you could get in equities might subsume or more than offset their earnings growth we expect to see. caroline: policy mistakes first and foremost. all about the ongoing omicron variant we see? google canceling in person attendance at the ces conference going ahead in person. how much could that be an economic dampener and an impact on risk tolerance? >> obviously the coronavirus is always going to be a wildcard. it is likely to be with our global society for some time. there is a lot we know.

there is a lot the medical community and society at large nose in terms of treating the virus we did not know couple years ago. the likelihood the u.s. economy has another. shut down like 2020, the likelihood is reasonably low. you heard leaders such as resident biden say much the same thing. what is going on with the u.k., is that going to have an impact on their economy, at almost assuredly will. it almost might change the calculus for the bank of england. there are starting to tighten monetary policy. they may have to do an about-face. i think you're still in this goldilocks time where if variants of covid start to restrict economic output, central banks will react and create more accommodation.

the market can see through the and move higher. sonali: i'm wondering your concerns about an inverted yield curve and what that signals about a recession. >> i'm glad you brought up the yield curve. i'm supposed to be on vacation right now but i'm such a market nerd. it is fun. i was just looking at the u.s. yield curve because we do think the yield curve does hold important clues for equity markets. what we see is a yield curve that is not in danger of inversion anytime soon. we also see a yield curve not so dramatically steep we are going to pull central bankers off the sideline and to ingressive tightening. i think we are in a decent spot as it relates to equity markets. while we are on the subject of rates, also looking at credit spreads which is another harbinger of equity risk. looking at credit spreads right now in the united states, we are

not seeing anything terribly concerning on that front. all of indicators are still green. taylor: is it because spreads have stayed so low because the fundamentals of the companies and economic growth is strong or there is a lot of formal because there is nowhere else you can get yield? >> i think it is a little bit of both. if you look at credit risk across u.s. corporate's, it is quite low for the reasons you just mentioned. over the last few years, companies have been able to refinance into less onerous levels of interest expense. they have continued to be able to do that. even if the economy were able to turn down, that is not our best case even if that were to happen, the likelihood you would have a massive credit event in the early stages of the downturn are pretty low because corporate's are in such good

shape. caroline: we want to thank you so much for giving up some of your holiday. we mainly want to thank your family as well for letting you step away and come and be on television. enjoy speaking with you. up next, we will focus on the global outlook for 2022. go global outside the u.s.. michael kelly is with us. this is bloomberg. ♪

taylor: we're focused on the market risks and opportunities in the your head. allies have been on omicron come

of the variant even central bank policy but there have been a few more risks under the radar. caroline: this is not the most uplifting part of the conversation but let's look at what those under the radar risks are. they are concerning. cyberattacks a key concern continuing to plague many an industry group. natural disasters is where we are going to have to focus our attention. civil unrest within -- also a deeper carbonization focus. geopolitical tensions is going to be an interesting one. russia where we look at the gas prices in europe. tie one away from china. -- taiwan moving away from china. want to be moving toward those conversations and the global nature of these risks. taylor: let's go global with michael kelly. on a global basis, what are the biggest risks for you? >> the risks are very real.

they were very unpredictable as you know -- they are very unpredictable as you know. i think your prior guest had it right. the biggest global risk market still is coming from the united states. it is not necessarily interest rates. we are used to the fed as your friend. in fragile environment, the central bank needed markets to do well to produce wealth effects, to produce consumption. now we are overheating and everything flips upside down when you are overheating especially when you cannot just wave your wand say transitory and we are right away. the policy mistake is not -- and sends markets down a little bit. that is the old world. the new world is they don't do

enough to tighten financial conditions. we don't just have supply shocks creating inflation. goods demand is way above 2019 because we have had too much fiscal stimulus. we have had too much monetary stimulus and they need financial conditions. they need to play grinch. that is the biggest risk of the new year. taylor: i'm curious about not just the u.s. but china in particular and what china means for the larger emerging market growth story that investors have been excited about and to next year. >> china has been the biggest wildcard i would say because they have had tremendous policy downward pressure on their own economy. and now they are putting stimulus back to neutralize much of this downward pressure.

china as a risk is beginning to abate somewhat. risk to their own growth, risk to emerging markets growth. coming out of the economic conference, they have answered some of those questions. they are going to try to make sure there is at least as much stimulus to stabilize the downward pressure. by doing that, that downward pressure was one of the only things keeping inflationary pressure in the world down to where alleviate in the growth pressures in many of the emerging markets, they are going to exacerbate the global inflation pressures. caroline: add to that, a zero tolerance china to the covid virus that could impact supply chains. >> in very likely will in our respect because omicron is ever well -- is everywhere.

getting relaxed about it is so contagious but not very lethal. you look at south africa data, the area where it came about, the number of fatalities barely budged. they had a surge of cases but fatalities barely budged. that is comforting to most countries but not to china. it could interfere with supply chains once again. inflation is going to be with us for a well. we're thinking of this like a relay race. as goods related bottlenecks begin to clear, service related pressures are going to come on. we are quickly coming into this wage price dynamic. we have created massive reserves the last decade. there was no bid for credit should those reserves did not turn into money supply growth and inflation. we come into this world and we are no longer so fragile.

private sector is ready to invest. they have to start moping out the excess faster than markets are prepared. getting the markets prepared is the risk. taylor: really appreciate your time and perspective. michael kelly. coming up, the merck covid pill. the treatment gets emergency use authorization in the u.s. we are going to discuss that clearance and what it means for the pandemic. the merck senior vice president of global medical affairs is next. this is bloomberg. taylor: -- this is bloomberg. ♪

>> the omicron variant, increasingly in the rearview mirror. >> much more transmissible. >> we don't see omicron as that big of an issue.

>> people cannot go to work if they have the virus. >> it has already been discounted into the market. >> i would be cautious. >> more red flags than most of my ex-boyfriend's. >> some of these vaccines are proving to be pretty good against this version. >> going to have an economic impact whether or not it is deadly. >> there is going to be a bit of a roller coaster ride. caroline: if you of our guests discussing the potential risks. the u.s. cleared merck's covid treatment pill. adding a second at home treatment option. to discuss this milestone is the man behind the drug. the merck senior vice president of global medical affairs. congratulations on the news. talk to us about how important you think this will be in the campaign to fight covid but also the new variant shared >> it is

very important because we need to have as many tools in our toolkit to fight the pandemic. it is a very resilient virus. this will be one of our tools. it is an easy to use tool because one can take it at home. one does not have to worry about any other medications one is taking. it is something that will be quite useful. it has shown in vitro to be effective against the omicron virus. another important way we may be able to stem the tide of this incredibly infectious very. sonali: i'm wondering about the challenge there will be for the u.s. in particular when it comes to distributing and prioritizing the treatments ahead given the u.s. has already ordered 10 million courses of pfizer and 3 million of merck >>. i think we need to hurry up and distribute. we are very lucky because we have several hundred thousand courses within days. about a million courses available the next few weeks in

the united states. it is going to be available soon to the right kind of patient. the focus should be on patients who are high risk for getting covid complications. that is what has been studied in the clinical trials. taylor: given your medical background, i'm curious how doctors would choose between the two. >> i think it is important to have multiple options. the key thing is we need to have medicines that will reduce the risk of hospitalization and death. a medicine that has been shown to reduce the incidence of death from covid by 90%. that is very valuable. kind of patients that are eligible include those that are -- that have risk for having a complication from covid-19 above the age of 60 and for whom there are not any other options available.

it is a very large population. there will be all kinds of circumstances around which doctors will choose. there are some things that will the a biased toward one drug or another. we have two medicines. those can be effective in the fight against covid-19. caroline: talk to us about the biases. it is interesting regulators seem to be saying -- seem to be signaling they prefer pfizer's pill. >> the fda did not say they preferred one or the other. we really are confident to be an important tool for patients in the fight against covid-19. it is a medicine that will be administered within five days of symptom onset. it can be taken at home. one does not have to worry about what other medications you're taking or if you have things like kidney disease, which is an issue common in people at risk for covid-19. i think it is important to have

these very tools. it is going to be very important. sonali: france for example had scrapped of their order for the antiviral pill and has been looking to pfizer. what kind of conversations are you having in terms of the availability in other countries and what patients would be most suited for this pill? >> in the united kingdom, there have been requests for more supply. we have had agreements with several countries in europe and around the world. we are really well ahead with the availability. these low income countries are facing a shortage of vaccines and the same title wave of omicron. we have had agreements with low-cost manufacturers to be able to have those drugs available throughout the developing world.

we are in good shape. we have the right supply. we have been ahead of the curve in terms of demand. we have a drug that can reduce mortality due to covid-19 by 90%. taylor: how are you thinking about pricing as well? >> i think the pricing is negotiated with each government. the good news is for the american consumer, it should be limited or no out-of-pocket given the governments are buying the drug. the key will be for patients to remember that if they have symptoms, to get tested and if they are tested to call their health care provider. vargas of which tablet is being used, we need to start the medicines within five days of symptom onset. caroline: you have stated the drug will be helpful against omicron. much of the wildcard has omicron been? how much have variant --

>> the pandemic has shown us covid-19 is a very resilient virus. the good news is this attacks a viral -- a very specific part of the viral lifestyle -- viral lifecycle. we will need to have these kinds of medicines available here now and in the future. we also have the ability to treat other viruses. perhaps the next pandemic virus because it is a medicine active against a range of viruses to we are going to have to keep an eye on this. we're going to have to develop new medicines and therapies to keep ahead of the curve. caroline: great to have some time with you. a busy man. merck senior vice president of global medical affairs. we have more medicine to be able to tackle these covid virus and

the variant. taylor: that sense that you have to get through the next few weeks. sonali: certainly get through it and in a positive way. caroline: happy holidays, all as we wayfair well. have a great evening. this is bloomberg. ♪

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>> from the heart of where innovation, money and power collide, in silicon valley and beyond, this is bloomberg technology with emily chang. taylor: this is a bloomberg technology. coming up in the next hour, the fda has cleared merck's covid pill for high-risk adults with no other treatment options.