accommodation. >> the interest rate environment is the most important economic backdrop over the course of the year. >> valuation is not particularly good in some segments of the market. >> a lot of money has gone out of some of the speculative parts of the market. >> this is a stock pickers market, but you have to do your homework. >> this is "bloomberg surveillance" with tom keene jonathan ferro, and lisa abramowicz. jonathan: good morning. this is bloomberg surveillance live on tv and radio alongside tom keene and lisa abramowicz. your stock market on the s&p down 52. on the nasdaq down almost 2%. tom: i will go right to the two year yield. we just broke out to a new high. but that in perspective. valentine's day pre-pandemic the two year yield was 1.43%.

imagine where we were a number of months ago and how rapidly we are getting near that level. jonathan: we are getting back quickly michael schumacher looking for 1.60 by year end. we have some goldman sachs earnings later this morning. tom: the goldman sachs earnings will be profound. keith horowitz was out with a note on jp morgan. the big shift was may be what we will hear with goldman sachs, which is full steam ahead on capital development, innovation, and simply spending money. horowitz brings the price target down on jp morgan, still up 11%. you wonder if we see the same thing from mr. solomon at goldman sachs, where he says we will spend money to stay out front. jonathan: that is goldman. a lot of people looking to get paid big time. lisa: that is where i wanted to go. i love you can read my mind at

the beginning of the week. why is this surge in fed expectation coming now? it was some of the commentaries from the ceos of big banks saying they are seeing wage inflation like they have not seen in decades and how much is that feeding into the zeitgeist? jonathan: they're hoping they have to do this once and not repeat next year and the year after that. lisa: perhaps, if you look at real wages, there is still a long way to catch up as oil prices climb and consumer prices are not showing signs of slowing materially. jonathan: a time to get through. futures down 53 on the s&p. on the nasdaq down 283. into the bond market, yields higher two or three basis points on 10. 1.81. on two, 31%. on germany, closer and closer to zero. $85 on wti and briefly we broke

through $88 on brent for the first time back to 2014. lisa: there is so much. it is also geopolitical concerns . 7:30 goldman sachs releases their earnings. a trading story. we heard about their oil unit and how much they earned. they have been behind other financials, and even as they outperform, they have not managed to deliver the same kind of return. how much are they going to say there lending unit is gaining traction at a time when yields are rising in the consumer is trying to borrow more? at 8:30 we are getting the interview with bill winters. the interesting thing about standard chartered is the vast majority of its business is in emerging markets, which is underperformed over the last year and people are wondering what is the outlook, especially with china, at the same time

they are cutting rates. it'll be interesting to see the opportunities that arise from that. eddie: 30 a.m. we get the empire manufacturing survey for january. the expectation is some insight on supply chain disruption. the feeling is we are starting to see the peak and perhaps things are starting to ease, but i hear that every other month. jonathan: and then crude kicks in in a big way. a ton of research. you want to start with mike wilson on morgan stanley? a new fed forecast brings forward our call for equity valuations and raises the risk. his price target 4400. tom: everybody will recalibrate. there is no question. i will do it in a moment where we recalculate the drawdown. the answer is maybe we are shifting to single digit analysis.

lori calvasina sees moderate gains, sheep models out up 6%. i think everybody is ready for the drama of up big, down bait. jonathan: the chief investment strategist at oppenheimer asset management joins us now. good to catch up. a lot of challenges to your year end call. why the optimism? john: the optimism because it is still early in the year. we are right about where we should be with all the nervousness around the variant, the nervousness about the supply chain, when will that be resolved, the nervousness around a shortage of labor. most of this is beginning to be responded in terms of the inflation worry. it is not only the accelerated pace of the tapering of the bond purchases.

beyond that the likelihood of raising the fed funds rate after march and looking at reducing that balance sheet, all of which we see positive. we like the pivot and we think where we are right now, early in the year we start calling to better things, ahead. tom: have we forgotten a drawdown, have we forgotten a correction, have we forgotten how to enjoy going down where john templeton says shares were on sale? john: amen. many people have. those of us who have been around a while, this will be my 39th year in the business. when we look at it, just recently if you look at the last fed fund hike cycle it was from december 2015 through december of 2018. during that period you had a fourth quarter drop of around

20% based on expectations of higher inflation and a fed that one continue to raise. then the fed pivoted. when you look at the period from 2015 to 2018, the best performing sectors were information technology, utilities, financials, and consumer discretionary. value and growth with tech at the helm. we could see something similar. history may not repeat itself but it often rhymes. lisa: a lot of what you are saying seems to jibe with consensus. we got the bank of america fund manager survey and it looks like investors are the most overweight stocks versus bonds going back to 2011. they are overweight commodities, they are overweight bank stocks. does it concern you?

consensus is agreeing with what you think? john: it always worries me when consensus goes to my side, needless to say. what is comforting is interest rates are rising at a high percentage based on where they were just a few weeks ago. the reality is borrowing is still -- it is still a rough environment for people who rent -- to lend money in a better environment for issuers of debt. we think we are moving towards the next new normal. we think it is a positive move and we think stocks will reflect that. lisa: weight is the new normal not feasible in terms of how high rates can go and still continue this very nice environment for risk assets? john: i would say if we get to a level of around 3%, we see that stick. in 2018 we saw the 10 year

treasury, the first half of the year the peak was around 3.11. the second half of the year, it hit 3.25. people recalling and saying are we going to 4% on the 10 year, i said this is ridiculous, the yield is much too high based on the rate of inflation we have. we think the fed will manage as well. the most important thing you'll respond to the issues at hand and it certainly has begun to do that. jonathan: wonderful to catch up. john stoltzfus of oppenheimer. looking for 5330 on the s&p year end. the equity market facing some challenges at the moment, much more so on the nasdaq, down 1.83%. you mentioned the bank of america fund manager survey. that bank is overweight the highest since october 2017. the tech overweight is the lowest since december 2008. month after month that was the

most crowded trade on the street. that has corrected quickly over the last several months. lisa: this is a rate story. this seems to be the most leveraged sector to the idea of higher rates. at what point do people view this as bait in? at what point in the rate hike expectations go too far? we have four rate hikes priced in by the beginning of next year. at what point do people say that is enough? jonathan: we have more fuel on that going into the weekend. bill ackman was talking about may be a 50 basis point height in march. people are starting to think about it. it is no one one's base case at the moment. but deutsche bank and matt was eddie and peter hooper are two people we expect. "the fed may need to return to a more neutral policy stance sooner rather than later. events argue for return to a more preemptive approach to avoid the harder landing down the road caused by having to

deal with more persistent inflation problem." that is a conversation shift. never mind the 50 basis point stuff. the conversation is shifting quickly and just a month. tom: the conversation has shifted to earnings. i like that mike wilson says rates will become less of a determinants, and it is about the earnings. i think we have forgotten how to go down. s&p drawdown -4%, down -3%, nasdaq 100 -8%. these are nothing burger. lisa: i have to say, i love how you say bill ackman is calling for a .5% rate hike. jonathan: i do not have a call. i'm not giving my call. lisa: how could you? jonathan: you know what happens. someone said something. equity down 54 on the s&p, down

more than 1%. from new york city, this is bloomberg. laura: major u.s. airlines are worried of disruptions from wednesday's scheduled rollout of 5g wireless services. a trade organization urged government regulators to prevent 5g from being implemented within two miles of where aircraft fly. airlines are rate the new signals could interfere with aircraft instruments. a study from israel found the fourth dose of pfizer biontech vaccine was not enough to prevent infection by the omicron variant. researchers said that did raise levels -- in china, the housing slump keeps taking its toll on the economy. the property sector going in a faster pace in the final three months of the year. output in the real estate industry declined 2.9% in the fourth quarter. blackrock ceo larry fink is hitting back at critics to say

that considering environmental impact investing is clinically motivated. in his annual letter, he wrote we are capitalists and not environmentalists but he says companies will be left behind if they do not embrace sustainable business practices. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am laura wright. this is bloomberg. ♪

>> the president will be talking about that is well. there investigating potential couching and the makes for good talking point. we have to remind ourselves the president does not control oil prices or frankly inflation as they continued to deferred the story to the fed. it will be interesting to see how he addresses these tomorrow and he is in front of the cameras. >> john matthew a bloomberg, thank you. looking forward to the radio show. lisa, one 800 opec will be the

number they have to dial. that is where the conversation is going. crude is up by more than 10% your today. brent this morning through ata briefly, 87 60. wti, 8527. >> the situation with russia and ukraine seems to be heating up. the joint response from the united states is unclear and all of the geopolitical concerns continuing to heat up. how do they address this? they want to do it if they want to bring down oil prices in time for the may term election. jon: tom keene, this is delicate. the goldman forecast, triple digit heat -- triple digit crude q3 this year. q4, we have conversation about midterm elections, haven't we? tom: oil is way hard to predict. everyone knows that including the best minds we talked to on this. i would suggest technically with this breakout at $80 brent crude, it is basically an extrapolated free pass up to $110 per barrel, rarely when i say that. but that is technically what the

chart says. jon: numbers we have not seen in seven to eight years in a commodity market. yields have not been here for a while either. 181 on tens. futures down on the s&p. from new york city, heard on radio and seen on tv, this is bloomberg surveillance. ♪

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jon: wall street getting back to work and getting back to work in equities lower. on 53 on the s&p and down a little more than 1% on the nasdaq 100, down about 285. this relationship between equities and bonds is where the debate is at. we have interesting levels now. look at this. year-over-year, what a move it has been. we were lower last year after peaking in q1 and into this year, i'm not your how many expected basis points move in a couple weeks. that is what we have had on twos and tens. this conversation in the fed has shifted quickly. middle of december we had the fed news conference. people thought it was dovish. they thought it was dovish based

on the price action. into this year, talking about a major pevey, the federal reserve needing to do more work. deutsche bank asking the question, bill ackman asking the question, tom keene asking the question, it may be for hikes this year. it's not enough. we have a hint from jamie diamond on friday too. tom: the paradigm will shift as this continues. could you imagine a 110? i don't know where those breakout points are but when i would counsel is this is not a normal tuesday of a four-day workweek. it is like land on the ground, let's go. jon: never mind the risk aversions on the screen this morning. we already had a big rotation. look at the survey from bank of america this morning. that overweight and the banks is the biggest since october 2017. the overweight in big tech was the most crowded trade month after month after month for years. now that overweight is the smallest we have seen all the way back to december 2008. you have an interesting political story as well. switch up the board and get to

crude. brent crude, 88 for the first time going back to 2014. back to 87 .59. wta -- 87 59. could now crude is backup. tom: i'm sorry, it is technically a vector up, up, up. i don't know where it goes but it is a very eloquent chart toward a higher price. jon: what can opec do about it? what does opec want to do or are they comfortable with where these prices are? tom: seems to be demand driven. if jay polonsky and the call on booming asia, a booming pacific rim, that tells me higher demand. jon: and potentially higher inflation, more consistent, the fed has to do more, then we are compromised at the valuation level for some of these stocks. tom: let's go to the stocks of the united states of america. we are thrilled to announce providence citizens group, within the old terminology of citizens bank, they have taken

on jmp securities, a fabulous, more technology and equity shop, in my transaction at the end of the year. devon ryan joins us, director of financial research. securities of citizens. devon, i want to get right to a, your discussion of goldman sachs in new initiatives. clearly we heard that from j.p. morgan. they will spend, spend, spend on new initiatives. what is the best use of money for banks looking for new initiatives? laura: well, tom -- devon: the key data point i'm looking at is the financial technology raised $130 billion of capital last year. if you think about that, banks are competing with these fin tech disruptors in the market right now. what you heard from j.p. morgan, as far as what we're seeing from goldman sachs, they are leaning

in on investment into their digital capabilities both internally around data and how they can use data smarter and helping optimize the customer outcome but also they are direct to consumer, whether it is mobile or using ai to help bring together all of the financial progress -- financial product. goldman, one of their progress right now, they are hitting their targets and they are also disrupting transaction banking which is cash management for corporations, and they are measuring that market and have done nice over the last couple years with the differentiated offer in relative to some of the other markets. tom: what is david solomon and for that matter james dimon or brian moynihan learned from the retail expansion of goldman sachs? what are the lessons learned

there? devin: i think the lessons are the next generation bank doesn't necessarily have to have a lot of branches. goldman sachs doesn't have branches and as a result, they have a low cost for overall infrastructure relative to the traditional banks needing people, branches, and other infrastructure. some of the cost savings can get reinvested back to the consumer to give them better pricing or a better experience. i think goldman is seeing true different -- terrific growth and not having this platform and legacy technology has been beneficial. i think you're seeing people like j.p. morgan, bank of america, citigroup invest in substantially technology initiatives to be competitive in this new world of what banking looks like. lisa: has goldman made enough progress with other initiatives to be considered more of a

lending bank at a time when yields are rising and that seems to be driving some of the optimism around the financials? devin: it's a great question. early days. it was a spin tech if you will to get to $1 billion of revenue. they are doing well relative to the industry. there are growing at a nice rate . -- they are growing in a nice rate. in the business, you think it is a small piece of overall business, 10%. over the long term, it becomes a very painful piece of business, could be 30% of overall revenues. right now, we don't think goldman is viewed as much of this ply on interest rates. it is a different story. that being said, we think there'll underlying growth is stronger than pre-much any other large financial institution now and that is because of these initiatives like what they're doing in transaction banking. lisa: do you think it has been

priced in? devin: we have had a great run. we were arguing $200 and now we are at a $400 ballpark. we have moved up dramatically. i think there's another leg here in the stock to continue to execute. this is all about, right now for financials and bank stocks, the economy, which is interest rates are going to be very much tied to what happens to the economy. i think if the economy continues to be strong, goldman sachs will do well. when the economy gets three to four rate hikes per year, that is going to be an issue for bank stocks. that is kind of one point in the other point is how they continue to invest in their business. we think they are doing quite well. we do see another leg up in the upper $400 range for goldman sachs, but it has been a nice performer as well. there has been a relatively high bar for goldman and other stocks

as well. jon: don't you get the feeling people like jamie dimon and j.p. morgan have journalists on screen sometimes, that we come away from the call friday and all the stories about the rate hikes jamie dimon is looking for. no one was talking about the earnings. they were talking about jamie dimon's call for rate hikes. let's get back to the compensation story. the ft wrote it up, an extra two point 5 billion earmarks of compensation and travel expenses. one of the numbers we are looking for today? the bonuses people might be getting over the next few days? lisa: two bloomberg reporters talked about the commodities trading sector and how top traders can make north of $30 million in terms of their bonus as a result of making more than $1 billion that unit. how much is that going to be a focus at a time when compensation really seemed to hang on j.p. morgan's earnings? jon: how big is the exodus of

this -- of these banks going to be in the coming months? they'll get paid and move around, it is musical chairs. i want to gauge what the next three years looks like. i'm convinced the c suite one to do this once, they do not want to do it again. are they going to have to repeat the act the next few years? devin: it's a great question. ultimately, we are coming off a year where trading revenues were records. in that type of backdrop, you see a lot of competition for talent and that is what is happening. there has been inflation across the board but no doubt compensation. i think as a result, there will be firms willing to pay up as well because often times you see these musical chair backdrops when the environment is so strong. the flipside is this, you can out have for interest rate hikes into an economy that may be cannot withstand that but at the same time excite capital markets

to remain a strong as it was in 2021. the flipside is the economy remains incredibly strong, which right now, it'll -- compensation is almost secondary. it is almost about their economy more than the backdrop of the capital markets. this is all correlated around capital rates. the fed is threading a needle around getting this right because we are in a tough spot after we have had a very significant move in the stocks that'll last you a couple months into this. jon: a massive move. fantastic to catch up. devon ryan of jmb securities. 15 minutes or so, goldman sachs earnings. a reporter wrote on twitter, for the first time in a long time, i don't know how long, more than a decade, we are talking about an asian, cost inflation, people getting hired and expenses going

up in a material way. we're not talking about cost cards or layoffs, there has been a massive change. tom: a massive change also, they're doing new projects. basically the banks are going to be the innovators and the ones that are not -- greg mopping did a nice piece on elon musk. different industry in different topic granted but i love the ideas of go big or go home. is that what we are hearing from these banks? go big or go home? i think it is dead on. jon: the link between the fed and compensation is not lost on you. [laughter] lisa: how much of this is dependent on the cycle and how much is the individual trader worth in terms of the dynamism of a specific bank? [laughter] jon: down 1.1 on the s&p. on the nasdaq down 1.75%. good morning to you all, this is bloomberg. ♪

>> with the first were news, i'm lower right. brent oil extended gains today to the highest level in more than seven years. a number of reasons are cited among them. geopolitical tensions in the middle east and the concerns of a pandemic impact. $87 above a barrel and went over $85 at one point. the british government reportedly may end monetary self-isolation for positive covid cases as early as march. and chlordane -- including the guardian newspapers, authorities on other restrictions including working guidance and covid passports. that is seen as a sign boorse johnson is prepared to let the u.k. live with the virus. north korea confirmed the latest in its big string of missile launches since 2019. kim jong-un said it tested two tactical guided missiles on monday. he is told ruling party

officials he is more interested in bolstering his arsenal, not returning to nuclear talks with the u.s.. car sales in europe plunged 22% last month. that caps the worst year for automakers on the continent since a trade association started tracking the market in the 1990's. the industry was hurt by a shortage of semiconductors expected to last or much of this year. donald trump is planning an extension of one of his biggest properties. trump national in miami. the president will apply to create 2300 hosts and retail space in the first base. he because it perhaps the most exciting development in the country. 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. ♪

>> it is an open question as to whether or not omicron is going to be the live virus vaccination

everyone is hoping or because you have such a great deal of variability with new variants emerging. jon: dr. fauci speaking with the world economic forum. from new york with tom keene and lisa brummel was, i am jonathan fara. features downhearted, awful lowest on the s&p. negative more than 1%. negative on the nasdaq 100. yields through 1%. yields higher by three basis points. accrued at 85.19. w ti brand, very briefly through 88, numbers we have not visited since 2014. comparing that dr. fauci quote to a line from the pfizer chief executive speaking to a french newspaper, we will soon be able to resume a normal life, we are well-positioned to get there in the spring thanks to our disposal and vaccines and the first treatments that can be taken at home. the hope of the pfizer ceo i

think is what a lot of people in these markets, economists on wall street are thinking about, maybe near term to start the year but as the year progresses, the outlook gets better. tom: i'm so glad you brought this out. to me it is massively confusing. i thing more than any other time , the agony of delta, the original months of early 2020, do you feel as confused as i feel? jon: i'm always confused about where we are the moment. i've also think we have reduced the debate in economics 21 inflation number and what can we do about it? there is more going on than that. tom: there is more going on and we will do more data checks. it's an eventful tuesday. amesh adalja with us right now, senior scholar at johns hopkins securities. i look at where we are in the confusion i see, is it coming up next weekend, the rams will play the buccaneers in tampa and something like 65,618 people will gather to see tom brady

throw the football around. how does a pro like you respond to that? if jon, i, and lisa are baffled on omicron, how do you respond to 65,000 people altogether? dr. adalja: you have to realize people have different risk tolerances and different values they will pursue. covid-19 is not going anywhere. it will be around for next year's nfl playoff as well. what we are trying to do is shift to the spectrum of illness to the mild side. with all of the tools we have and with vaccines, and what you will see as people get to their activities as they risk tolerance dictates. for some people, they may never enter a football stadium again. for other people, they are ready to do so. i think that is what you're going to happen with any and i make disease, people go different paths. tom: how does cdc in atlanta or the buffalo bills, how do they deal with this single new word, and i make? dr. adalja: what that means is

they have to match it with another word, sustainable. what public health measures they have in place cannot be from a pep -- from a perpetual state of emergency. they have to recognize covid-19 as part of a constellation, respiratory viruses, including influenza, that will plague us for the existence of our species. what you focuses -- focus on is trying to prevent cases that will inevitably occur from turning severe by making sure you have tests like monoclonal antibody's, vaccines, antivirals, and help hospitals when they are in a tough spot. many hospitals are in tough spots because of omicron but after the omicron surge ends, and it looks like it is peaking in parts of the country, we will be in a different place. i think at that time, with an -- with enough of the monoclonal antibodies, we should handle this much like other respiratory viruses. lisa: this concern is even if people get natural immunity by

getting omicron, it will not protect them from additional variance and may not protect them from getting the same variant down the line. what is the latest on the protective quality of getting sick, of having the boosters and everything like that going forward? dr. adalja: if you get omicron, you are probably unlikely to get omicron for at least several months after that. if you do get it, it may be mild. we know there are other coronaviruses, four, that cost 25% of the common cold and they reinfected 12. this is probably -- reinfected at will. this is probably going to become the fifth seasonal coronavirus. if those infections are not sending people to the hospital, that is a win. because this virus is not going anywhere. we will inevitably get covid many times over our lives and that is just a biological fact based on what coronaviruses do. if those are mild and are not able to crush hospitals, i think we are in the place we want to be with this virus.

it will be new variants and covid will not be a zero but we will be in a better position where we can handle this much like other respiratory viruses. that has always been the goal, not eradication or elimination. i think we still are on track to have that happen. i think we have to stop worrying about mild cases because if the mild cases do not translate into hospitalization, we have a win. lisa: when you talk about mild cases, it would be great to put perspective on this. if covid is going to become the new flu and we will just get seasons like this, is it going to be considered more deadly than the flu after all of these remedies and vaccines are factored in? dr. adalja: for the first couple years, i expect it will have a higher death toll than the average flu season but we are getting drugs, monoclonal antibody's, a better vaccine. a lot of tools we don't have fleur influenza exist. i think you will see the fatality drop to seasonal view

after i think about two years. in terms are getting the tools out there and immunity, but we will see this in addition to flu. it will be a base number of hospitalizations and deaths. that is not something we can avoid but i think it will get down to what the other coronaviruses do. with the tools and immunity and people getting infected. jon: as always, dr. amesh adalja there. how may times have we mentioned that, the endgame? once again we are talking about the endgame. over the weekend, a story in the guardian, a senior sorcerer on the government, the u.k. government looking and atone -- ending mandatory self isolation for positive covid-19 cases and placing it with guidance. the government is likely to lift the requirement for travelers taking the test. all of this could end by march. that is the government in the u.k. right now preparing for the endgame. tom: my head is spinning over this. i honestly do not know which way

to turn, particularly as we come on a martin luther king day and everybody starts looking at february and march vacations and such. i have no idea where we are going in terms of testing. jon: we are looking to the u.k.. the problem the u.k. has is is this being shaped by the polls or by the science? we hope it is the latter and not the former. the government has a bit of a credibility problem at the moment. tom: this is a good time not to talk about the talks. but does the prime minister make it to next weekend. jon: the prime minister has done question will things over the last couple years and it has not shown up in the polls. this time it has shown up in the balls. that is the difference this time around. jon: what is the difference between him and theresa may? tom: i think america ends know the difference between boris johnson and theresa may. why don't they play the music? [laughter] futures up 52.

dow futures up on the s&p. down by 1.1% on the nasdaq 100. we are done by 1.8%. it is my first day back and i'm trying to stay at a trouble. tom: sterling is sterling. [laughter] jon: from new york, this is bloomberg. ♪

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♪ >> there's going to be a push pull between fear of the fed and the fed moving off of accommodation. >> as valuations support, it is not particularly good in some segments of the market. >> a lot of frost, a lot of -- a lot of froth, a lot of money has gone out of the more speculative parts of the market. >> this is a stock pickers market, but you have to do your homework. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: what a move in this bond market. from new york city, for our audience worldwide, good morning. this is "bloomberg surveillance, live on" this is "bloomberg surveillance -- this is "bloomberg surveillance," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro.