>> i think it is important for investors to take pause. >> bonds are down but not out. >> there is a little bit of peloton and everyone, a little bit of netflix in everyone. >> we are starting to see some growth here is in the markets. >> this is bloomberg surveillance. tom: there is a little bit of peloton in me, and i mean a little. there are three of us, pick out the one that possibly would be

on a peloton. it is not me. the distraction of peloton moves us away from thursday. the inflation report is front and center. jonathan: 7.6 the high. we are having a conversation what would happen if he got big downside surprise on the market. recalibrating expectations for march and beyond. tom: the march 11 meeting, you wonder what we will see on thursday and the outcome, up, down, sideways. it is a vision of past march, the data dependency of the fed. jonathan: the basic facts should help out the federal reserve. to what degree, i don't know. up 60 basis points on 2s. a big move and it's happened quickly. tom: unlimited aaa gas, $3.44.

a gallon gas is front and center for too many. lisa: the basic facts that were supposed to wear are not wearing off as much. the pace of increase has declined in certain areas but supply chain disruptions persist, oil prices rise, and we just started to take off. tom: i have failed because one of the shifts in the zeitgeist overnight is the credit market. lisa: there is a tension because you are seeing extra spreads increasing as a sign of stress. people are looking at this as a possible canary in the call mind of a disruption that the fed will take a look at. but there is not real credit

distress. there are not company struggling to raise money. frankly, they have so much cash and a long runway before the debt matures. when this becomes a problem is a question for managers right now. tom: jonathan ferro was out in front, the italy dynamic in europe. give us an update. jonathan: seven days, up 55 basis points. the level may not concern you at 1.83 but the speed might. that has to be of some concern for the european central bank. they still may not hike interest rates until the back half of 2022. tom: how can italy have a one .83 and we have a 1.95? jonathan: different currency, different dynamics, different world. equities down. the nasdaq down 38.

yields higher by three basis points on a nominal 10-year yield. in the fx market, euro-dollar down a quarter of a percent. 89.60 wti. down 1.9%. tom: brian levitt joins us from invesco. you are looking at the late 1940's out to the great disinflation of the early 1950's. are you telling me we are living in post world war ii america? tom: it's an interesting analogy. a lot of pent-up demand unleashed on the economy when the soldiers returned but the factories were not able to meet that demand. what you ended up getting was a significant spike in inflation, only for that to come down in the following years. i'm not saying we are heading

toward a deflationary environment. what i'm suggesting is, as the american consumer starts to suggest they have had it with higher prices, as businesses rush to build inventory, could you see a more promising sign from the year from now, an economy that has managed well? jonathan: is that a soft landing? tom: if you start to see these inflationary pressures start to come down, allowing the federal reserve to back out of its tightening stance. already the markets are pricing in seven interest rate hikes. could you see the fed come in under that? that will be the challenge. we saw that in 2015. you had a slow down economy we accelerate. similar in 2018 into 2019. but it will be a challenge.

investors should expect volatility as we navigate toward that. jonathan: how do you position for a slower economy with higher interest rates? is that just being super defensive? brian: with real yields rising, hope moving beyond omicron, you could see an environment where the more value-oriented parts of the market do well here. my concern is the tightening of financial conditions. you were talking about it with the credit spreads. i view the tightening of financial conditions as the theme for this year. that is driving the slow debt in the economy, tends to be more higher-quality, lower volatility parts of the equity market. lisa: can we talk about the transmission mechanism of this? company that don't have maturities that are near-term, consumers are deal averaged, don't have a lot of debt on their books.

what will be the tightening as yields arise to levels we saw before the pandemic? brian: this is not about a high-yield bond market forecasting a recession. high-yield started this recent move up at incredibly tight spreads. investors have to ask themselves where are we in the cycles? cycles and with a lot of excess, and the consumer is in good shape, businesses are in good shape, banking is in good shape. the challenge we have is elevated inflation and a federal reserve at to tighten policy significantly. the high-yield bond market is not are casting a recession. companies are in good shape. the challenge in all of this, does the federal reserve feel the need to tighten conditions so significantly to the point that the economy cannot stand it any longer? i don't see the rationale behind that. but if inflation expectations get away from us, they will have

to move tighter than what is currently forecasted in the market. lisa: a lot of central bankers saying they are data dependent. some come out and people say not a big deal. others, the job the part was not supposed to be important, and it of being important. thursday, what will be the bigger market impact, if it beats or misses the expectation? brian: i think if it misses. if you under shoot, you could start to see a little bit of a leave in the market that you are finally starting to see inflation rollover. we have already priced in an awful lot of tightening. it wasn't long ago that the two year yield was around 0.1%. i think now it is 1.3. the market has already priced in a lot of the tightening. if you see inflationary pressures start to come down -- which they should by the way. you talk about the base effects, the consumer saying it is not a

great time to buy things. maybe you are seeing some improvement in the supply chain. look at steel and fertilizer prices. still high but coming down. good news is the breakevens in the bond market are still downward sloping, not forecasting persistent inflation. we are dealing with unique challenges in a pandemic cycle. the market would breathe a sigh of relief from some signs of hope. tom: brian levitt, thank you. if i told her 18 months out, you'll be happy to be have inflation at a six handle or five. lisa: the idea that we could see such incredible inflation, but it is the pace and direction, as brian was saying. it will be interesting to see how much recalibration of the market makes if there is a miss. jonathan: the estimate is 7.3, the median.

something we will average seven through q1, and then into the unknown. jonathan: everyone has an opinion. rosenberg used to do this at merrill lynch. i will say even 20 or 30 lines of things moving around in price. it is a lot more complex than just trotting out one number, 7.3%. part of this is the overlay of better news on the pandemic. we have heard that from a number of guests. jonathan: moving away from the mask mandate in some states, australia opening up for tourism. china and hong kong doing something else. tom: it has a residence with our following. it's important that you disinfect. this is our medical tip of the day.

jonathan: kathy jones says, to be clear, i know how to drive. my dad owned a garage growing up. that was from the previous conversation. ed ludlow on the west coast, he is driving into the office in san francisco. his driver listens to us every morning, so we have to give him a shout out. tom: we are up to 40 listeners. that is great. jonathan: good morning. from new york city, tom keene, lisa abramowicz, jonathan ferro. this is bloomberg. ♪ ritika: with the first word news, i am really good group to. prime minister trudeau is

blasting the freedom convoy. drivers say they will not stop until all covid restrictions are lifted. trudeau says they are hobbling the economy and trying to undermine democracy. there has been a flurry of diplomacy prior to the resumption of those nuclear talks in vienna. the deal would likely allow iran to resume exporting oil in exchange for limits on its new your program. in the u.k., consumers held back on spending last month. card purchases raised 7.4% compared with the same month in 2020, the smallest increase in years. some are worried about rising inflation on their finances. big changes on the way at peloton. the co-founder john foley is stepping down as ceo, will become executive chair.

he will be replaced by barry mccarthy. that moves are seen as a victory by investors. they also said about 2800 jobs will be cut. president biden and the company ceo will make the announcement today. the plant will be located east of nashville. it will make as many as 30,000 electric chargers a year. 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. ♪

>> i am frankly deeply skeptical that the russians are truly going to pull the trigger on an invasion. part of the reason for that is, frankly, what we have seen in the last few weeks has been the strongest display of u.s.-led multilateral coordination that the world has seen to after 9/11. jonathan: ian bremmer of the eurasia group on the prospect of an invasion into ukraine, and invasion the russians continue to deny. futures unchanged on the s&p. on the nasdaq, down about 20. yields are higher in the bond market. 1.9396. not just the u.s., in italy, we

are up for a seventh straight session. yields higher on the italian 10 year. euro-dollar just a little bit lower. just about holding onto 1.14. tom: $91 for brent. we speak often with french hill, representative from arkansas. we note he is the most popular congressmen in america on valentine's day, because he is the congressman of romance, arkansas. have you ever delivered an envelope to romance, arkansas with valentines greetings? rep. hill: you will want to know that all of my wedding invitations were mailed from romance, arkansas. it is an economic magnet for

lovers all over the nation. tom: in the new york times months ago, a wonderful piece on the cauldron of gop politics in arkansas. it is arguably the litmus test of the future of the public and party. what has changed in the gop debate in your district, state in the last six weeks? rep. hill: we are talking about redistricting. i lose part of polasky county, which is metro little rock, i pick up an additional rural county, which is next to two big counties i already have in the region. i would say the party has become more conservative as we see democratic qourum courts switching to the republican party, a major trend. lisa: i'm wondering for valentine's day, given the fact that prices are going up, aside

from that particular holiday, how do you address the fact that it seems persistent? how do you address the fact that the president is leaning on the federal reserve but there is a legislative aspect to this? rep. hill: as i have said for many appearances on this program and others, we need to not be spending so much borrowed money in a continued pandemic manner. we need to go back to pre-pandemic spending priorities on the fiscal side, while the treasury withdraws its accommodation on the balance sheet in terms of the treasury securities it is buying and then slowly those interest rates. those are key points to lauren inflation expectations. lisa: in fairness, we are cutting spending. you are seeing the fiscal drag that everyone is talking about. there is the feeling that if the government invests in things like renewable energy and certain programs, we could avoid some of the shots we are currently seeing with oil.

what is your view on that? rep. hill: you look at the energy information agency's predictions for needed fossil fuel production, electricity increases between now and 2050. you will not produce that with renewables alone. we need to replace our reserves and increase our supply in fossil fuels. i believe sincerely that we should continue to invest in cheaper, more effective nuclear power, in this country and around the world, to fuel the energy demands that we are predicted to need over the next 30 years. tom: the linkage on a constructive child support with a lot of amendments, wages up, the inflation report coming out on thursday. tell me about near fully employed arkansas. what is the wage store you are hearing from businesses in arkansas right now? rep. hill: first, we are about

9000 jobs below february 2020, before the pandemic, in terms of employed arkansans. i am seeing wage pressure increase at the low end and the high-end, particularly in health care. in your previous discussions, you talked about a low and working salaries going up, but we are seeing that in the professional ranks, particularly in health care. these wage increases we saw during the pandemic to get people to stay on the job, they are being embedded into the system. we are seeing increases in the 4%, 5% range in even higher, and that is reflected in the index that we saw at the end of the year. jonathan: there is a massive game today. should i watch? what game is this? this is basketball? rep. hill: this is auburn, a

team in the south. we are playing basketball. this is what you need to watch. tom: you have no idea of the morass of southern basketball. paul sweeney is expert on this. the razorbacks will take it in a surprise. jonathan: i will check it out. lisa: i am just struggling. curling renditions. jonathan: i don't want to let this slide. do you notice how tom always benchmarks valentine's day? the two-year valentine's day 2020. tom: i think we ought to remote from romance, arkansas. jonathan: are you going to bring misses k with you?

we assumed after all of that. yields up three basis points. the fiscal conversation, it sounds like it is dead. tom: who knows. i just know the election is upon us. we are in february. jonathan: we have a long way to go. if they have anything going for them on the inflation conversation, it is the calendar. the hope is that the inflation story fades. whether the sentiments in the polls can turn around before the midterms come i'm not sure. tom: there are like five flavors of republicans in arkansas right now. old-line republicans, maybe french hill is in that group. tom cotton and others. it is really complex. lisa: i was just struck by what

spending is good at appropriate right now and what is not, and a time of inflation. jonathan: futures down 0.1 almost. this is bloomberg. ♪

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jonathan: let's talk about this bond market. this is bloomberg surveillance. yields are higher on 10s, 1.9468. it has been a while, july 2019, the last time we were up here. yields done by .2% on the nasdaq. tom: let's look at the trade balance. i have not looked at the number yet. a better number. we had a negative survey number. coming in a little bit lighter. i will call that supportive. 1.95 on the 10 year shocking, you are right.

let's move on to economics. laura raymer joins us, chief u.s. economist at fs investments. i love your language, you are braced for the inflation report. what are you braced for? lara: we're all thinking it will be creeping higher. everyone keeps talking about inflation receding in 2022 but it will definitely keep going up in the first quarter. that is something we all need to be ready for. it is coming from everywhere. it started as a transitory supply chain. it is now corrupting from everywhere and that is what concerns me. tom: your forte is the overlay of foreign-exchange dynamics into broad economics. i'm talking to you about good inflation. what do you see in trade, foreign-exchange dynamics, that gives you any inkling about what

goods and inflation will do? lara: when we look at the global -- and you were discussing it -- you need a global reopening, and that continues to be a hindrance when you look at china and frankly a lot of the rest of asia. good price inflation continues. that is part of the reason why the dollar will be strong on a relative basis, even though you have a lot of concerns about the u.s. equity market underperformance at the moment. lisa: why do you think long-term rates will remain below 2% as we get closer to that benchmark? lara: i knew you would mention that flag i planted at 2% when we are right there. [laughter] at the end of the day, the u.s. 10 year for a long time is not truly reflected in fundamentals. it reflects global risk

appetite, that the fed is doing a massive amount of bond buying. for me, the move will happen in the beginning of the year, when we start to re-normalize the balance sheet. when we look at the 10 year and the very low policy rates around the world, what we see are flat yield curves, and the u.s. 10 year almost tends to reflect global expectations, not just u.s. for that reason you have the u.s. flywheel kicking up, we are staying healthy, but uncertainty about how that ricochets in china, u.k. data this morning. that is where you get stuck in the mud when it comes to global growth. the u.s. 10 year, harder to increase that a lot of people think, but we are really watching really yields move significantly. lisa: just to build on this, we

are reaching this to percent threshold faster than you expected. does that mean the end rate is expect it to be higher are lower in the long run as people hike in rate hikes in the u.s. and europe? lara: this is a dynamic we saw last year and i'm glad you touched on this. we had a 10 year rise early in the year and that it retreated. that is i think but we will get, a more choppy outlook going forward. we have already seen rates volatility just to ricochet through fx, commodities, equities primarily. that is the dynamic that really makes 2022 a year where you cannot rely on the rising tide of the big indices. you need to be more active. just because we are popping up now doesn't mean that we could not get data later, growth data out of the rest of the world that makes us go lower again. tom: what do you see for

consumption? we are talking about these distractions, 70%, 60% of the economy. what is your derivative on the consumer? lara: we have already seen it in the equity calls. the high consumer will do great, no doubt about it. when you dig down into the bottom half of the income spectrum, you are seeing household spending being crowded out by higher gas in food prices. we are all used to volatility at the pump we are seeing food prices creep up all over. that is why i'm almost more focused on the michigan numbers coming out on friday. tom: give us a primer on that, why does michigan matter so much? lara: when we look at consumer

confidence, we all know that is the canary in the coal mine. we don't get strong growth without a healthy consumer. if we think about how inflation could impact consumption -- let's face it, the u.s. consumer powered by stimulus has been the hero of this economy over the last year and a half. inflation has the real threat to slowly take the wind out of that sail. the university of michigan numbers in particular have a higher sensitivity,geared more toward inflation. we see those numbers now closer to the lows, even that during the lockdown. i'm interested to see if those numbers reflect high inflation expectations or a lot of concern about how inflation will be managed in households. lisa: as we see the consumer

being hit by higher prices, how does this feedthrough to the labor picture, especially given the survey that showed an incredible amount of pessimism around not being able to hire enough people? will this bring more people into the workforce or is there another reason for this friction that is persistent? lara: i think you nailed it. when i say inflation is coming from everywhere, not just from consumer prices but from the wage side as well. this is an apartment that makes it tough for small businesses. you see it with hiring, inventory. follow these things are much harder for smaller businesses to manage than they are for medium or large businesses. this is when inflation gets entrenched, and the fed is trying to get ahead of it, but they are behind a ball right now. lisa: can we tie all of this

together and understand where we are in this economic cycle? what you are portraying is an economic slowdown as a result of this inflation, however, we are coming off an incredibly fast pace of growth. is this a robust economy where inflation will eventually be a good, or a bad thing eventually leading to another recession? lara: we need to see inflation peak and turned the corner. as far as economy goes, deflation slows everything down, inflation speeds up. i think it will cause companies to spend on capex. some say that we are in the middle of a rebuilding. it gives us growth that enables businesses to really continue to harness the power to hire, continue to spend. the real issue to me is whether or not we can get the demand to stay strong despite the fact

that the fed will be pulling rates higher to address some of this inflation. jonathan: larry rain from -- lar a rhame from fs investments. peloton holding a conference call right now with john foley, but now former ceo, if challenging that he made some "missteps." tom: making room for the new guy to come in and make some tough decisions. i have a wide knowledge of failed investments. that happens. i guess they are clearing the market, as we heard from simeon. jonathan: the new guy being barry mccarthy. losses now just 1.3%, not on those comments, but we were lower.

what does this mean for the prospects of a takeover if we are having this managements which now, cleaning this up to make a sale or to make a bigger effort going forward? lisa: as we heard earlier, it will be a hard sell for certain companies. the perception is that did not go as well as expected. there is also a broader takeaway, that 20% cut in workers. how often will we see streamlining as a result of the higher costs? especially if you are an unprofitable tech business with a load of cash, what happens when cash is turned off? jonathan: lisa is right to raise the question. tom: a big difference between the small and large caps. harley davidson is out today with a cost-cutting program. they are down the road on it, are doing better, showing better

numbers. all of that is about this productivity overlay. i will go back to what david stubbs said last year. he said technology reigns supreme. jonathan: he will be happy that you gave him a name check. tom: it is a big deal. technology is front and center. jonathan: some comments from emmanuel macron. putin said that he would not be the origin of escalation. russia repeatedly denying any plans to invade ukraine. from new york city, with tom keene, lisa jonathan ferro. we are down a third of a percent on the s&p. this is bloomberg. ♪ ritika: french president emmanuel macron says vladimir

putin told him that russia would not escalate around ukraine but he did not offer any specific details. today, macron is in kiev to speak to the ukrainian president volodymyr zelensky. the u.s. is losing patience with china regarding trade agreements made during the trump administration. china pledged to buy an extra $200 billion in u.s. agriculture and energy products through the end of 2021. billy near peter thiel is leaving the board of meta to pursue donald trump's agenda, backing senate candidates who back the former president's policies. a divided u.s. supreme court has dealt a blow to minority voting rights. it is reinstating an alabama congressional map that creates only one district likely to elect a black representative.

a lower court said federal law required a second one. the ruling ensures alabama voters will use the original republican drawn map in the elections. the state is 27% black. pfizer forecast sales that fell short of wall street estimates. fourth quarter profit was expected to be better. 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 ritika gupta. this is bloomberg. ♪

>> if inflation does continue to build, and wages respond to it,

the question will be due central banks play catch-up? are they willing to accept a much sharper downturn in growth, possibly even something worse than a slowdown in growth? we know a lot of tightening cycles typically and in some type of contraction. do they sit back and take it too gradually? tom: the hsbc global chief economist. wonderful conversation. really valuable to talk to her about the hsbc view. maybe not in too large of a panic over rising yields. the vix, 22.98. lisa and i are watching the 10-year yield. with barry ritholtz, a columnist for bloomberg opinion. there can be an eclectic view of finance, investment, etc., but there is also a darkside that you don't know. he thinks part about the

american society and the fabric of our unique capitalism. barry ritholtz has been thinking about this with some important fed data. one of my favorite books, london school of economics, "marxist revenge." is mar getting revengex -- marx getting revenge on american capitalism that promotes disparity? >> one way to look at this is the wealth accumulation side, and the flipside of that is the tax structure that was set up in order to run the country, society. what we have been finding is that some of this is intentional. you look at the reagan tax cuts. very much wanted to unleash the entrepreneurial spirit by

creating the incentives. some of these are just unintended consequences. look at the bill clinton rules to limit executive compensation by forcing them to take stock compensation instead of cash. we know how that worked out. lisa: that is exempt beware i wanted to go. it brings into focus the central bank, the low rate policies that some say have fueled the gains on stocks. i know that is highly controversial. i know a lot of these companies did very well. however, can you dovetail the fed's role in this, about whether they are exacerbating the wealth inequality, or solving it, by allowing employment to be more inclusive and broader based? barry:

a broader framework for thinking about this. historically we have had monetary and fiscal policy working together. anytime we have moved away from that, we have tended to exasperate the wealth inequality. post financial crisis -- anytime the u.s. equity markets are down 57%, i am a buyer with both hands, other than the first drop of post-2009. that is a fantastic opportunity. we have this false myth that somehow we have democratized trading because it is free, democratized investing. the reports show that the vast majority of equities are held by the top one and 10%. it is a little bit less disproportionate for real estate, somewhere in between for privately owned businesses. when we think about wealth, stocks, bonds, real estate,

businesses, it's not a surprise that fed policy has helped those assets. at the same time, what we saw with the cares act in 2020, toy 21, fiscal help tends to help the bottom part of the wealth pool. while there wealth has not gone up dramatically, we have seen a catch-up in wages, and you can think the fiscal stimulus for that, not monetary stimulus. lisa: the reason why this is an important conversation, it has a huge implication on society and also the trajectory for the fed which has a broader mandate now. they want to decrease this gap, as many want to see, between the rich and the poor. is this something they are factoring into keep policy easier for employment, or to tighten up? right now, they are benefiting mostly wealthier individuals who have equity in the market. barry: again, it is complicated.

the fed is trying to benefit the entire economy, financial system. in a winner take all society, who stands to benefit the most? it is the wealthiest. i want to separate the wealth accumulation gap from the income and opportunity gap. one of the most important things we can talk about is economic mobility and the opportunity for talented, hard-working, skillful people to go out and raise their standard of living, increase their station in life. what we have seen it is economic mobility in the u.s. has fallen in the past few decades. that is the underlying root of the problem. we will never make the world equal, make sure that everyone has the same amount of money. but at the very least, we should make sure that everyone who wants to go to a decent school, get an education, get a career,

have a profession, that those opportunities exist. we have seen that flip in the u.s. since the 1980's. tom: thank you, barry. really thoughtful about what we are hearing on the distribution of the income and balance sheet for all of america. red and green on the screen. the vix is more constructive, but the whole thing has a feel of waiting for thursday. lisa: waiting to see what that inflation read will be, how that influences the moves by the fed, ecb that have already been priced in. it is such a picture. tom: how many textbooks do i have at home on this stuff, and is any of this right now in those textbooks? maybe it is in the behavioral

conman. in the messiness of economics, this is all original. lisa: how much of this is a pleading consequence of the biggest health crisis since the spanish flu? how much is this a structural shift that was accelerated? tom: didn't have time to talk about the reality of the gains that we have seen off the back of the pandemic. we need to prepare you for thursday. there is some economic data, but really all looking toward thursday. lara rhame said that she is looking at friday and the behavioral statistics, inflation data from the university of michigan. 10-year yield, 1.95%. that probably bears close

scrutiny. always interesting from maryland. van hollen of maryland and the 12 noon hour. this is bloomberg. ♪

jonathan: yields higher inequity softer. good morning. your price action sifting up as follow. negative one on the s&p.

the countdown to the open starts now. announcer: everything you need to get set for the start of u.s. trading. this is "bloomberg's the open" with jonathan ferro. jonathan: live from new york we begin with the big issue, a synchronized global market selloff. >> if it was just the bond market, we are adjusting higher in yield. >> the benefit. >> the new regime underway. >> the environment is one of tightening policy. >> as a relates to the bond market. >> when you see these types of moves. >> the fed is going to overdo it. >> there are limitations as to how high these yields can go. >> is the fed and global bank pulling back? >> it will cause challenges.