>> the fed is signaling that they don't like these entrenched inflation expectations. >> every component of the inflation metric is moving higher. >> that is when markets are really going to have a problem. >> the fed is worried about inflation, feeling like they might have lot control of it. >> i think they should go faster than what is priced into the market. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: 90 minutes away from economic data in america. good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market up two or three, not even 0.1%. a big get a drop in 90 minutes. tom: a "surveillance"

correction, it is retail friday, not retail thursday, as i mentioned in the last hour. this is not a normal cpi reading. everyone is going to be focused on the stunning 7% statistic. jonathan: i wonder what the read will be on retail sales later this week, given how many people backed away from engaging in this economy over the last month or so. tom: what i would note across all of december and the holidays, it was party gate here in america comfort team "surveillance," and not to interrupt the opening of the show, but i think it is partygate in london. jonathan: would you like to go live to parliament? is that what you're suggesting? british prime minister boris johnson facing questions. reporting suggest he has been graded a few minutes to speak. let's take a listen. pm johnson: we simply did not get right, and i must take

response ability. number 10 is a big department, with the garden as an extension of the office, which has been in constant use. when i went into that garden on the 20th of may, 2020, to thank groups of staff before going back into my office 25 minutes later to continue working, i believed implicitly that this was a work event. but mr. speaker, with hindsight, i should have sent everyone back inside. i should have found some other way to thank them. and i should have recognized that even if it could be said technically to fall within the guidance, there would be millions of people who simply would not see it that way. people who suffered terribly,

people who were forbidden from meeting loved ones at all, inside or outside, and for them into this house, i offer my heartfelt apologies, and all i ask is that -- be allowed to complete her inquiry into that day so that the full facts can be established, and i will of course come back to the house and make a statement. this morning i had meetings with colleagues. i shall have further such meetings later today. >> thank you, mr. speaker. my constituent carol ridgway has eight weeks of stress and worry as she waits for an appointment at a clinic. 85% of patients wait only two weeks -- jonathan: the prime minister will face a series of questions now in parliament, and this will get pretty heated over what

happened in spring of last year. for a lot of people reducing this as just a drink in the garden for colleagues, for a lot of people around that period who lost loved ones, could not attend funerals, could not meet the birth of their grandchildren , this will be a massive issue. tom: is there any american equivalent? i can't imagine president biden going through this exercise, but do you see an american equivalent? jonathan: not right now, no. the premised or is going to face some questions through the next 30 minutes or so, if in the -- and if there are any headlines, we will bring them to you. cpi in america, from the pandemic to the inflation we have seen, the estimate is 7%. lisa: how much is it going to be the 7% handle, the shock factor of seeing inflation at that have a rate versus the underlying components? how much do we need to see a transmission from the goods inflation to the services

inflation in order to give rise to the stickier feel that we keep hearing? jonathan: let's get to the s&p, up a little more than 0.1%. on the nasdaq 100, up 0.2%. yields on tens, 1.7428%. yields higher by almost a basis point. joining us now, sebastien page, cio and head of global multi-asset at t. rowe price. what are you looking for? sebastien: 7% looks reasonable. that is the consensus. when we discussed in our asset allocation committee where we expect cpi to print year-over-year at the end of this year, our base case is 3%, but we think risks are skewed the upside, and for that you really have to watch the supply chain factors. they are pretty confusing.

the baltic dry index is down 60% from its peak, the cost of shipping stuff, but then you have 100 ships in the ports of los angeles. you have omicron creating more and more issues. you mentioned people not showing up for work at the airport, 1/3 of the workforce for united. so the supply chain a puzzle. the new york fed has put out an index of supply chain pressures, and their narrative is that it is peaking, but when you look at the data, i don't see it. i have it on the bloomberg. it just keeps going up. so we think the risks are skewed to the upside, and position our portfolios to be short duration. tom: the heritage of t. rowe price is absolutely unique. you guys invented growth. you invented sector analysis on the buy side. t. rowe price right now on

american technology and american growth stocks, and i long? sebastien: at the moment, and our asset allocation portfolios, we have tilted towards value, and we like being long cyclicality because it is a relative valuation call. i've got to be really clear, we still believe in the role of technology. we are still diversified between growth and value. but as asset allocators, we think the cyclicality is so underpriced, all-time extremes in terms of relative valuations, it is already sort of playing out so far this year. you have rising rates, which is good for financials or analysts on the platform upgrading financials, so that is our position tactically. lisa: how much is that call hinged on the idea that the fed will not be forced to move too quickly, will not necessarily move to a restrictive monetary

policy, and that the data will cooperate and allow them to do so? sebastien: it is interesting because over the past few weeks, have we have priced in quite a few additional fed hawkish in us. now i see three and a half rate hikes for 2022. powell yesterday talked about balance sheet runoff in the markets reacted ok to that. so the question is not is the fed going to be hawkish or not. it is more can the fed still surprise on the hawkish side relative to what is priced in at the moment. our view is the direction of travel for rates is higher this year, and that is why we are short duration, but what we are really looking at right now are the long-term dots. they are at 2.5%. they have been at 2.5% since

2019. will the long-term dots change? that will be the kind of tail risk hawkish surprise. it is very hard to bring those up because we have piled on so much debt over time. we had 10 trillion treasuries outstanding. we have 30 trillion outstanding treasuries now. however we done that? by lowering rate such that debts serviced, if you plot it only seems hard, is almost a flat line, you get trapped every time you add that, and we have added a lot in terms of government debt. you handcuff yourself in terms of where the rates can end up, so that is where the surprises could come, but nonetheless, our positioning right now is towards longer rates -- higher rates. jonathan: sebastien page, really summarizing the debate right now in the markets and on the dot plot. what did bill dudley call it early this week, the long dot?

i think he called it fantasyland at the federal reserve. lisa: however, on the others, you have stephen major going back to that note this morning, where you talked about perhaps going along on the short end and seeing some value there, seeing a further selloff at the long end. that is a tactical trade. he still has the same view that we just heard from sebastien page, that long-term rates cannot go up that high simply because of the amount of debt and how difficult it is to get to that higher terminal rate on a long-term basis. jonathan: this is the self-limiting selloff that a lot of people have been discussing in the bond market for a while. tom: other things come in. the biggest problem here is the static analysis of many people that are in the game, but also the static analysis of the financial media. we at "surveillance" refused to do that. we have alisa levine coming up. these people think dynamically.

there's moving parts here that don't get you to the certitude of a given view. jonathan: alisa levine coming up a little later this morning. looking forward to that. looking forward to the economic data as well. 8:30 eastern time, cpi in america. your estimate has a 7% handle. we haven't seen a number like that for 40 years in the united states of america. with tom keene, lisa abramowicz, jonathan ferro, your market essentially unchanged on the s&p and the nasdaq 100. yields up a single basis point to 1.7464%. and there it is, that grind higher continues on crude. wti up 0.7% to $81 $.79. heard on radio, seen on tv, this is "bloomberg surveillance." ♪ leigh-ann:, i'm leigh-ann gerrans. the u.s. consumer price index is

expected to show inflation climbed to 7% in december. that would be the most since 1982. that will keep markets' att ention on a fed rate lift off. the cpi data is released at 8:30 year time -- 8:30 new york time. fed chair jerome powell is trying to convince investors that the fed can pull up a tricky task to bring down the highest inflation in four decades without damaging the u.s. economy. powell told a senate confirmation hearing the fed is on path to start raising interest rates and reducing its balance sheet. in the u.k., the rapid spread of the omicron variant lead to a spike in the number of people missing work last week. according to analysis for bloomberg news, employee absences rose 18% compared to the same period in 2021. it is estimated that 3.1 million brits were affected last week. now morgan stanley will raise annual bonuses for its best-performing staff by more than 20%.

according to reuters, bankers and the equity underwriting and m&a advisory business are expected to get the biggest raises. morgan stanley is not commenting. in australia, tennis tar novak djokovic has broken his silence. fitch mooted he attended a newspaper interview -- djokovic admitted he attended a newspaper interview when he knew he was infected. he is still waiting for the final decision about whether he will be allowed to stay in melbourne for the grand slam. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

♪ pres. biden: i believe the threat to our democracy is so grave that we must find a way to

pass this voting is right asked these voting rights bills -- the past these voting rights bills. we have no option but to change the senate rules, including getting rid of the filibuster for this. jonathan: the president of the united states. from new york city, with john keane, lisa abramowicz, and jon ferro, tom keene, how many times have you been asked why we can't have pmq's in america? can you imagine if we had a little bit of this, with the president going to congress to face these questions? tom: the general when speaking in the house of commons, explain this sport here. was the risk of resignation to the prime minister? jonathan: right nil here is clearly waiting for the ash right now he is clearly waiting for a review of what happened in may of 2020. the investigation is being run by a civil servant, sue gray.

the prime minister keeps referring back to that, so for now i'm of the risk is low, but in the next couple of weeks, if it does not go away in the polls start to move against him in a more material way, the pressure is going to ramp up. tom: i thing we do better on capitol hill with that big gold thing they've got on the table. jonathan: why don't you ask a man who could maybe make this happen? tom: we are going to turn to politics now and the delicacies of this early 2022. french hill joins us, the republican from arkansas. he has been a wonderful support to this show in giving us perspective of arkansas and the republican party. congressman hill, always support reading the "arkansas times," and i think of their great editor max brantley, who has skewered you over the last couple of days. a gentlewoman from wyoming and her father looked pretty lonely out there. why couldn't a guy like you honor the police officers who

protect it you on january 6? rep. hill: great to be with you. let me start by saying that the very first resolution to honor the capitol police after january 6 was offered by ed perlmutter of colorado and myself to honor their bravery, and that is absolutely the fact that everyone, republican or democrat, honors the capitol police and their amazing work trying to protect us every day in the work you do for democracy. as it relates to last thursday, the anniversary of january 6, the house of are presented is was not in session. tom: oh, come on, french. we have been around this. we've been around the block. you could have gone on the gulf stream and showed up. it was that simple. rep. hill: we were doing district work. we were not notified that there was anything happening on generate six. our office was not notified on january 6. i was home with my constituents doing meetings. i did not even anticipate there

was an event in washington, d.c. that day. lisa: from the past to the present and the future, today the focus is very much the cpi report, the latest on inflation. the idea of 7% year-over-year inflation. what is your view on whether this is a negative or a positive and people see wage increases they haven't seen in decades? rep. hill: yes, we are seeing wage increases. i saw the report where it is 9.9 percent estimated year-over-year. that is a huge wage increase. that is also troubling, even though it is covering the inflation we have witnessed of 6.8% to 7% consumer inflation over the last year. that is a sign that maybe wage expectations are increasing. i looked at hr expectations for increases in salary. they are all 4% or greater, so i am afraid we get into this cycle where we increase our inflationary expectations, we see large wage increases, we have trouble getting people back to work.

wages are increasing and consumer prices are increasing. that is why i don't believe inflation is transitory. lisa: what do using will be the most effective way to bring it down without torpedoing the economy? rep. hill: it is a careful balance. the fed always has that concern in their dual mandate of stable pricing and maximum employment, and the fiscal situation. we have inflation in my view because we have too much fiscal stimulus over the past two years, chasing too few goods, and we have supply chain issues and the most accommodative monetary policy in decades, and we should have begun tapering sooner coming out of the pandemic. so i believe some action on all of those things is necessary to lower inflationary expectations. jay powell now has this responsibility as he gets confirmed by the senate for a second term. tom: is arkansas fully employed? rep. hill: here is my view of that.

the un-limit rate has dropped to a very low -- the un-limit rate has dropped to a very low level. we have recovered much of the job losses from the pandemic. but if you look on a national basis, there's still 3 million people out there, fewer working than working before the pandemic in february of 2020, and we have one and a half jobs open for every person who is unemployed, so i would argue we are not. we don't have job and capacity utilization as high as it could or should be, and i think people who look for a job are going to find an increasing wage environment and more opportunities if they search this year. jonathan: always good to get your contributions on this program. thank you, sir, from washington, d.c. the cpi report, 8:30 eastern time. the payrolls report behind us. that payrolls report surprised a lot of people with that 3% handle on unemployment. tom: it is a statistic that is fungible.

i will go to the economic policy institute with careful analysis why that is not a germane number. guess what? it is what it is. it is like dow 30,000, dow 10,000. it just means something to be under 4%. jonathan: i am with you on that point. on the dow stuff, i can't relate to that. there is a vision 12 months out. can you imagine a situation where inflation is trending lower and unemployment still has a 3% handle in a labor market this robust? that is a pretty good economy if we can get there, and that is the soft landing the federal reserve is trying very hard to engineer. that is threading the needle through the next 12 to 24 months. tom: but it is based on data dependency. i know nobody once to hear this. we all love to pontificate, but they are going to go step-by-step to the data, and that is why 8:30 on cpi wednesday is so important. jonathan: the issue people have is that we already have the

data. never mind about the data still to come. we had enough now. the fed hasn't done enough already. lisa: is this going to perhaps juice the inflation rate because of supply chain disruptions, or will it actually have a drag on them? the data has been unprecedented not only in the numbers that we have seen, but the lack of pretty debility given the backdrop. tom: it is brutal out there. i am in my own pmq's right now. check out this tweet. for a moment i thought maybe you wrote this under one of your ghost accounts that you've got. notice how they get you right out front. thank you so much. [laughter] i do not blame me for not knowing rafa. when rafa was born, i was already 60.

tom only members things that took place before 1960. i will never forget the red hair and the energy that mr. laver played with. jonathan: that last line hits close to home, doesn't it? just a little bit. [laughter]

♪ jonathan: 5100 on the s&p 500, the year-end call of julian emanuel, now at evercore. we will catch up with him in a few minutes. futures up 0.1% on the s&p. on the nasdaq, a little more than 0.1%. the estimate, 7% cpi in america, and number we have not seen in 40 years. the relationship between bonds and fixed income, the rates of the equity market, sounds a little like this over at jp morgan asset management with bob michele. bob michele says that strike on the fed put is not to percent lower on the s&p 500. he says it is something like 15% to 30% lower on the s&p is when he think the federal reserve would have to step back in.

he think we need to do some more work on the front end, so this is what it sounds like for bob michele at jp morgan. 90 basis points on the two-year right now. he thinks the front end of the yield curve starts to compete with what is happening at the long end. stay in cash, maybe get to the front end of the yield curve, and look what happens at the long end of the curve. the buyers come in. they have over the last week. the real test for him is to see how that develops over the next few months. you put that together, the front end competing with the backend, and that story for the fed put his way out there. tom: for those younger that do know who rough on a doll -- do know who rafa nadal is, what we get is excess off of that. that is how you wander out to the 20% or -30% handle is. jonathan: i know for a fact you know who rafa is. you knew that already. finish on this. if you on radio, you missed the smile. tk's, not mine.

tom: the annual smile. [laughter] jonathan: the prime minister in the u.k. facing some brutal questioning about his activities going back to may 2020. that drama continues. sterling basically unchanged at 1.36%. it's get you something will names and say good morning to romaine. romaine: a lot being made of the rebound we saw yesterday in tech shares. you have the nasdaq up about 1.5% here. despite some of the breadth that appears to be shown on the service level, when you dig down deeper, you have a lot of names that set out that rally, including netflix and tesla. microsoft was only up about 0.2% yesterday. it is up about 0.3% in the premarket, but rumor, it is flat to down now for the last eight or nine sessions. you are not seeing a huge bump up in some of those sessions. you did get a couple of sell side analysts today saying that when you look at the valuation,

it is more attractive than some of the other tech names out there. then you have paypal, which had a phenomenal day yesterday, was up 5%. today you had a couple analysts downgrade the stock, saying valuations may be too strong. those shares now down 2% in the premarket. i know you have been loading up a lot of those chinese tech stocks. they have been having a phenomenal day. they are up higher in the premarket. tom: you just had the close come up. you are getting to be like ferro and promoting your other properties? romaine: that is the only reason i am here, tom. we start at 2:00, go all the way to 5:00. you can stay up for that. here's what you missed yesterday , tom. biogen. this was big news after the market. a lot of controversy on that. the medicare department in the united states saying it is only going to cover the cost of this for a very limited amount of patients. some concern about the effectiveness of that drug. a lot of controversies here. we will see how that shakes out. tom: thank you so much.

it is the toughest job on wall street. if you can imagine walking into evercore isi, and you have to stand at the table with ed hyman , it is a little circular table, and he's got his research note, coveted on wall street for 40 years, and he says here, take the black sharpie marker and tell me what is important. newly anointed equity derivatives and quantitative strategist and user of the acclaimed black marker at evercore isi, julian emanuel joins us. what was it like, your first day with ed hyman? julian: you know, you try to play on the same baseball field as babe ruth, and learning from the best, you know i have been doing this for a while, but you keep learning in this business. if we have not realized that the last couple of years, i don't think we are ever going to learn it. tom: you take the granularity,

his optimism on the experiment, and folded into the spx above 5000 call. julian: the bottom line as we know we are going to have issues with the fed, whether they are going to do too much or too little. but the bottom line is ed hyman sees this economy growing 4.5% in 2022, and that for us translates into 11 present earnings growth on the s&p 500, and that is the recipe for higher stock prices. lisa: do you think stocks have fully priced in three to four rate hikes this year? julian: they have, and if you think about it this morning, we are all obsessing over this number that we are going to hear at 8:30, 7%, but the fact is we have been obsessing over it for a week. it is in the market. lisa: so what would it take to surprise the market? what would it take with

respect to a fed approach that you and so many other equity strategists out there see? julian: to be very clear, this rally this year is going to be unlike last year. it is going to be volatile. look at the first two days of this week, abject terror monday morning that no one was ever going to bid for a tech stock again, and the new market turns around. we are going to see that all year. if the fed tells us later this month that they are going to end qe in january and hints that you could get the start of a balance sheet roll off sooner rather than later, in march were certainly in the first half, those are the kinds of things that could get the market rethinking if the view is that the fed is going to be more aggressive than expected. jonathan: the team here at bloomberg wrote a wonderful profile piece on you with your new seat at evercore. one of the things they picked up on is one of the great calls you made over the last several years , which is retail participation. that has been a big factor in

some of the price action we have seen over the last couple of years. i wonder how you think that develops in 2022. julian: when you look at the long-term, whether it is a function of the baby boom generation, estimated to pass on in the neighborhood of $68 trillion to the generations below over the next decade plus, or you think about it in terms of the fact that spike the fact that real yields have climbed drastically over the last week and a half, we are still negative, the desire, the need, the viewpoint that if you are someone who's got a forty-year investing horizon should be overweight equities, that is what is going to carry us through. there's going to be times, because leverage is still very high in the system, where it won't feel that way, but the big picture is equity investing is a multiyear phenomenon, if not longer. jonathan: the caricature of the new retail investor is one with short dated call options. are you saying it is different? julian: i am saying it is

different. we have seen elevated call option volumes for a year-and-a-half now, but look at the flows into equities over the course of the last year and a half. those to us are sticky, and we think there's more to come. jonathan: earnings season kicking off on friday. what is the big call for you going into this year? julian: we think this is a different year because of the fact that the economy is going to grow as strongly as is. we like value. we think earnings are going to be much more of a stock specific type of event, but looking at the year as it unfolds, we like financials, we like industrials, and we like health care. jonathan: julian, congratulations. wonderful to see you, as always. julian emanuel of evercore isi is a 5100 price target on the s&p year end.

just going into earnings season, the banks kicking things off this friday. tom: i'm glad you mentioned it. this is a big deal. i have said this before. maybe i am wrong. maybe this is why we saw the media splash earlier this week. they are not going to be embarrassed by their profit, but the fact is, the belief is they are minting money given and within the national struggle. jonathan: the banks have been off to a flyer. lisa: a lot of this is because a possibly steeper rates, possibly a balance sheet rolloff that will allow longer and to rise, but also this belief that lending is picking up, that people are starting to borrow now as they run down their savings accounts. that is what i am most interested to hear. how much is the borrowing increasing on the consumer side and the corporate side since that was the story of last year? there's a lot of money, no one was borrowing it.

jonathan: the supply scene issues have meant people can't build up inventories. they have had no need to go and borrow money from the bank. tom: we will see that in the data. i defer to lisa. i did some grocery shopping yesterday. that bill -- vey bily -- vet bill has come down with covid. i guess there's the story out there. jonathan: whole foods in manhattan. is that where you are? [laughter] gucci and then whole foods. tom: let me say this, at least up 15%, absolutely. we are making jokes about it. forget about it. there is some real serious agony out there about food and energy, and that is with brent crude, looking at the bloomberg terminal on cpi wednesday. brent crude, $83.88. that hurts. jonathan: this is the hope of the administration, that some of

these issues fade through the year, but the positive aspects of what we are seeing in the inflation number, a stronger labor market, that sticks. i think that hope is the hope that this federal reserve shares as well. that is the needle that chair powell is trying to thread right now. lisa: it is such a difficult meal to thread. energy prices are expected to go down as a component of cpi month over month, if you take a look based on the price at the pump. rents are climbing so quickly. jonathan: if wages are up, you are going to see more of that. equity futures up six on the s&p. we are up a little more than 0.1%. inflation is just around the corner. 50 minutes away, your estimate 7%. from new york city, for our audience worldwide, with lisa abramowicz and tom keene, i'm jonathan ferro. this is "bloomberg surveillance ." ♪ leigh-ann: with the first word news, i'm leigh-ann gerrans. let's start here in the u.k.,

where prime minister boris johnson has apologized for attending a downing street garden party during lockdown in may 2020. in parliament today, he insisted he thought it was a work event. pm johnson: with hindsight, i should have sent everyone back inside. i should have found some other way to thank them, and i should have recognized that even if it could be said technically to fall within the guidance, there would be millions of people who simply would not see it that way. leigh-ann: the leader of the opposition has called for johnson's resignation. billionaire bond fund manager jeffrey gundlach warns that recessionary pressure is building along with inflation. any webcast, he says the fed seems pre-far behind the curve when you consider wage growth. he also says the central bank may only be able to raise rates to 1.5% before it inflicts

economic pain. the latest u.s. inflation numbers are out at 8:30 a.m. new york time. and omicron outbreak in china, manufacturers and shippers are bracing for problems. two chinese cities are now in lockdown and more are facing disruption. policymakers will have to decide how much to increase restrictions. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪

>> the economy in march looks like it does today on the outlook is similar, and of

course there is uncertainty around that, but if it does, and the fed is moving back from some of the extort and area accommodation we needed earlier in the pandemic. jonathan: a chorus of fed officials looking at the economy. our thanks to loretta mester for joining us yesterday. alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market up 0.1% on the s&p. yields higher by all most a basis point to 1.7446%. inflation data it :00 eastern time -- 8:30 eastern time. the next few months of inflation data will be key to determining if the fed will need to proceed with a more rapid rise in policy rates. the speed, the pace dictated by the data. the data is in that hour justifies the start. that is the view from citi. tom: today's data point will be something, particularly if it comes in south.

right now on the inflation, kriti gupta. kriti: it is a new year, but the same issue. it is not just hitting retail. it is heading semiconductors, chipmakers as well. i decided to compare the two. essentially, the supply chain issues you are seeing. in the some good letter space relative to the supply chain issues you are seeing in the retail space really just measured by a similar ratio right here. what you really want to know for the radio audience is that chip acres have been beating retail, especially in the last month or so. a lot of that has to do with simply what the growth outlook is. chipmakers are dealing with building up that capacity. retailers dealing with labor issues more so than anything, and right now it is ending up to be that use case for chipmakers helping them outperform. tom: thanks so much. going to have to race here because of the inflation call coming up in about 35 minutes. it is a beautiful and frigid not full moon in new york city last night. i guess even colder into the weekend. all of that leading to the full moon of january 17.

that brings up the new moon in china, which is the chinese new year, and our retail analysts know the euros a tiger is important. what do you have? reporter: we are talking about inflation here, and the biggest constraint we have its transportation costs, wages, as well as production, and that means factories in china are going to operate at lower capacity as people take vacations, and also you have omicron to do with, which means people are getting sick and people are calling out, and china's zero covid policy is not helping here. tom: are we willing to pay the new prices for retail? what is the research on how the public responds at the grocery store, on amazon, or on any other platform? reporter: on the discretionary side and even on the food side, people are paying. we saw it over the holidays when discounts were at the lowest i

have seen in a long time, and consumers were out shopping, whether it be online or in stores. so consumers are healthy and they are really to pay the higher prices for now. i think as we start to see sentiment fall a little more, if it does in the coming year, we think that could change, but in order for prices to go down, retailers need more supply. we don't see the supply situation changing anytime soon, at least not before the end of 2q. lisa: how much are some of these retailers trying to diversify away from having supply chain focused in china due to all of the disruptions that have been ongoing for several years now? julian: they have been diversifying -- reporter: they have been diversifying from china for many years now, but china will still count for a bulk of their production because that is where the labor and the factories are. you cannot just pick up the factories in six months or a year and moved in somewhere else. and they are moving up to -- moving them to bangladesh, to

vietnam, to other parts of asia, we are still dependent on asian production to get our goods. we don't produce much of what we consume here, at least on the apparel side. more than 90% of what we consume is manufactured out of the country. lisa: in about 40 minutes we will be talking about the cpi print. we will be talking about what is healthy inflation and what is not, and how wages dovetail into this. we are probably going to hear from the administration that this is a good type of cycle. we are seeing wages increase. there is an issue about the labor market share. what are you seeing from retailers in terms of how much they are able and willing to pass along the cost of higher labor to the end prices, creating something of that spiral people are worried about? reporter: higher wages are great for the consumer, and that probably goes to why they are willing to spend more today. but on the retail front, it is a big headwind. retailers so far have not been seen to take up their ticket prices. rather, they have been curbing

their promotions to drive the margins higher. that said, it is not going away. because retail margins at the apparel side are in the mid to high single digits and on the grocery side in the low single-digit level, it is going to be very hard for them to improve their profits is out taking prices up, if inflation continues at the mid to high's and go dig it pace we have seen for the last two months. tom:tom: now the fun part of "bloomberg surveillance," where we front run the intelligence. the core theme here, is there gross urgent ice value? how good is amazon look to get to $2 trillion, $3 trillion, $18 trillion of value? reporter: we see it getting to $1 trillion for sure. i think the next leg of $2 trillion will depend on how well they scale. the next leg will really depend on how well they do in india and

europe. jonathan: we've got to leave it there. thank you. if i told you the equity market would be up 27% over a year, would you guess that amazon would be up only 2%, 2.38% last year? tom: it is a big laggard, and the zeitgeist is interesting. mr. bezos going out the door. you really wonder how that folds into it. and also, we talk about wage spiral, there are reports of a real discussion about compensation across all of their different deciles of implement categories. jonathan: this is what people have been talking about. not every tech company is the same. they face that labor market issue in a big way. lisa: they also gained 76% the year before, so some of it was brought forward as a result of the pandemic. [laughter] jonathan: certainly not suggesting amazon has underperformed over a series of years. lisa: but it is telling, because

how much is this people just already having brought forward evaluations, and how much is this a change landscape for retailers, not the tech giants? amazon increasingly is a retailer, even though it derives a lot of its revenues from the cloud business. jonathan: we get earnings from amazon this friday. big banks kicking things off with j.p. morgan. you have been out front on this this week. it is not about cpi, it is about those earnings. tom: to me it is about the earnings. at amazon right now, $24.99, this is perfect for you, a wordle flex fit baseball cap. jonathan: what does it look like? what color is it. tom: black with a little bit of wordle. i thing this really could go. jonathan: it just says #wordle on a cap? lisa: are you making this up? is it real? tom: you want to know what is real, the letter f is in the

correct position. surveillance wordle. jonathan: do i have to come in tomorrow? futures up 0.1%. cpi 35 minutes away. this is bloomberg. ♪

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>> it is important that the fed has pivoted and changed direction and the market is handling that quite well. >> this repricing still has a lot of room to go. >> we do think omicron is going to impact earnings. >> i think the market has legs to go higher. >> it is a rapidly aging cycle. we will see if it ages well or it ages poorly. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. a 40 year high for inflation. will it be 7% or higher? it is the item of the