>> we are all subject to the data. >> it is hard to seek pressures easing off completely. >> i don't think we will see inflation fitting back into this 2% box anytime soon. this is bloomberg surveillance. jonathan: live from new york city, for our audience world wide, good morning, this is bloomberg surveillance. tk his back tomorrow and equities are slightly positive. the last couple of days has been

china with the protests and if they are going to back away from covid zero. it seems there will be a vaccine drive in the world's largest economy lisa:. lisa:why don't they accelerate the covid programs because it's a significant part of the population. they are willing to do that but there cracking down harshly on these protests. jonathan: it's been like this the last couple of years. let's talk about the data out of europe, soft cpi out of spain. maybe some good news for the europeans this morning. lisa: it's fuel and energy cost because they didn't go up as much as people expected but we see some sort of input from the fact that it's been a warmer than expected winter. when does that make them vulnerable if other inputs are

not slowing? jonathan: we caught up with the cleveland fed yesterday. they say the cost of stopping to early is too high. how much is that weigh them down into december? lisa: bill dudley will join us later in the show. how much are they concerned about the fact that if they let inflation get away from them, they end up with a situation where they have to clamp down harder and will not get to a 3% level. why not let it flow to 3.5 or 4% and they say they cannot do because that's their mandate. we want to know about china next year and bank of america has a crystal ball apparently. they say 4000 on the s&p 500 at the end of this year and next year 2300 and that's in line

with what we're hearing. lisa: there is consensus we will bump along to the same place. you will see a lot of the friction. the crystal ball is interesting at a moment where there are so many variables. that pushes back against the fed because the fed says you can come out with all your prognostications but they say they will still go with what they think. jonathan: they say we will not get rate cuts. no real drama on the indexes. a rally in sympathy. lisa: maybe symphony. jonathan: the 10 year is 364 and the fx market, euro-dollar is slightly positive. lisa: you talked earlier about

the inflation information out of europe. we had softer than expected inflation in spain and we look at the different regions and we get an edm on germany and we expect to tick down a touch. that's the average of analysts surveyed. how much will be comforting before you get a different message from an ecb that has the same fear the fed does which is letting inflation get away without clamping down harshly? we will get a host of housing data out of the uas including the case schiller index for september but how much do we see that acceleration of the decline in home prices? this is a leading indicator and takes out some of the confidence of consumers and their buying power especially for pete -- for people who are middle income. at 11:00 a.m., there will be a news conference with the

secretary of state and nato. they will talk about crane but expect china to be front and center. jonathan: does housing data it need to be rebranded? lisa: you don't like saying the long name? jonathan: no. lisa: what would you like to call it? jonathan: we will solve this later. how much feedback did you get about the shoe debate yesterday? lisa: i got a little but did you get any? jonathan: most of my friends are on board. lisa: you are threading the needle because you were saying you as an individual should respect what other people do but you as a host should not impose your view aggressively. jonathan: correct.

you didn't miss anything from this debate yesterday. it to year versus the 10 year, how much signal can you take away from the yield curve right now? >> it's a significant amount of signal in the yield curve and it's a reliable indicator. the number you referenced is similar to what's called the term premium which is the difference between the future short-term interest rates in the long-term rate. there is typically a term premium in a long-term interest rate meaning investors says it wants additional yields were stepping out on the yield curve. for a long time now, the last six years, investors haven't demanded much in terms of a term premium. think about it this way, we know that lots of shelves were cleaned out during the pandemic

with supply chain problems and stuff missing. there is still stuff missing from the shelves because a lot of bonds were taken off the shelves and the fed is only putting a few back at a time. there is a bit of a distortion in that sense but markets clearly are deciding there are elevated risks toward recession next year. lisa: many people are going it's a longer duration because they see the proposition of growth over the longer-term coming down dramatically. we talk with brian weinstein of morgan stanley yesterday and he said he could see a 3.75% inflation rate. do these potential outcomes seem probable to you? >> it's possible. a lot of investors are talking about the fact that there are reasonable alternatives.

now that yields are up, there are alternatives. the boomers are aging and 1957 is the biggest birth year of the century. think of the bloomberg mentality , they probably thought they would never see interest income as part of their future earnings story but now they do. they will keep pushing back on these higher yields when they happen because they will say thank goodness, now i can rely perhaps on interest and they never saw the reasons why investors want fixed income so they could push into yields. there will be non-economic reasons in the sense but it's economic if you are a retired individual for wanting to explore fixed income. there are reasonable alternatives and yields look good relative to the long-term

average. it's also a hedge against future recession risks. lisa: what's your highest conviction move ahead of next year given that people are already rewriting the 2020 three outlook? >> the biggest conviction one should have entering next year and it isn't easy is to expected interest rate volatility will plunge next year relative to 2022. the forecast missed on the fed funds rate and it's highly likely to be smaller next year than it was this year. they expected the fed funds rate to engineer 1% and now it's ending near 15% -- near 5%. what are the chances of having a 4% spread next year -- drop next year? it probably wouldn't go that far because the fed, fiscal policy

and financial conditions will be enough to cause meaningful disinflation and therefore lower interest rate volatility will and if it lots of assets like mortgage backed securities and ultimately credit and equities. the real volatility might be in spreads in the bond market, not in interest rates. jonathan: do you have a number for us on the world cup? >> i'm a baseball players are you are asking the wrong person. jonathan: i should ask tom keene. >> let's go with the united states. jonathan: thank you. lisa: you did something today and i wanted to do it every day. you put out a morning note on twitter and you put the top stories. then you put up the stuff you

actually care about. jonathan: i'm still going to talk about market stuff. it seems i get paid to talk about sports stuff as well. lisa: in four years time in the u.s., i will guess that more people will have cogent responses to you with respect to football games. jonathan: this is why i'm polish on team usa and i want them to do really well because what's good for them is good or the sport. -- i am bullish on team usa. i think it could be fantastic for the sport in four years time when the world cup is hosted in north america. lisa: it's gaining traction because parents don't want their

kids playing traditional football. jonathan: it's like tony pushing bonds on retirees. lisa: you took that a step too far but you cannot undermine baseball. jonathan: i blame tony's generation. ups is coming up in the next hour, live from new york, this is blue word. lisa: keeping you up-to-date with news from around the world. federal reserve policymakers are stressing that more interest rate hikes are on the way to curb inflation. the new york fed president told reporters he sees rates heading somewhat higher than he had or cast a few months ago. st. louis fed president says markets or underpricing the chance of higher rates. china plans to increase covid

vaccinations among senior citizens. it's a step that health experts regard is crucial to reopen an economy stuck in zero covid restrictions. beijing stopped short of announcing mandates on inoculation rates and this comes after a weekend of protests. british prime minister rishi sunak says that you u.k. cannot rely on what he says simplistic cold war rhetoric against china. in his first major foreign policy speech, he said it would be naive to think that trade would lead to social and political reform and he said china cannot be ignored especially on issues such as global economic stability or climate change. you will have to wait a little longer for that new iphone. covid lockdowns and worker protests at foxconn have delivery times for the i 14 pro models as long as 37 days.

apple is expected to face a shortfall of 6 million units this year. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> error message to peaceful protesters around the world is the same and consistent, it should be allowed, they should have the right to assemble and peaceful protest and the law did taste that they take issue and we are watching this closely. we continue to stand up and support the right of peaceful protest. jonathan: that's the white house national security spokesperson responding to the events in china over the weekend. futures are just about positive on the s&p 500 and chairman powell will speak tomorrow.

yields come in of couple of basis points. this is live -- this is from the president of the united states as you might guess, i'm pleased to announce a tentative agreement that has been -- been reached between the railroad -- railway companies in the railroad workers. that was september 15. the 12 unions failed to sign up to that tentative agreement. we've got a problem. lisa: how does this president deal with it because he is the president of the unions. he comes out and is asking congress for help to force some sort of deal here because some of the unions won't sign on to this. how does he message this in a way where he sounds prounion even though he is going above them?

jonathan: amh, welcome back, what has happened here and why has this broken down? anne-marie: for the labor unions, it comes down to paid time off. this medical leave is more important than raised wages. that's why you see one of the biggest labor unions were the biggest one voted this down and that's when tensions started to rise and it looked like they couldn't get this agreement. they have until december 9 to negotiate this but that's around the corner and the white house doesn't think that's happening and they are calling on congress because they are the ones who could step into to avoid a strike step what the president was trying to say yesterday is let me be clear, a real shutdown would devastate our economy. at the same time, he said i am one of the most prounion presidents in modern times yet

he's concerned at the havoc this would wreak throughout the u.s. economy especially going into the holiday season. lisa: what's going on behind the scenes and was -- and why was this not signed on to buy all the unions? there are some unions that would like to see this agreement ratified. anne-marie: there are some unions that signed off on it but you have to get all 13 and that's where the issue came down . not all of them got all the votes needed from every single member who is voting on this. you have the top leaders negotiating at a table and i met some of them in the rose garden and talking to them and they were working around the clock. members need to vote for this. they see this as a moment in time where they can use this leverage now and there are supply chain issues and were going at the christmas and

there's a president who says he supports labor so they feel at this moment they can probably extract those demands and that will be medical paid time off. lisa: the supply chain disruptions are the broader backdrop and the president wants to see those disruptions ameliorated. we are seeing that with rails and in china. how is the u.s. dovetailing their message with the communist party in terms of wanting to end covid zero while encouraging companies in the u.s. to diversify so there supply chains are away from that alliance. anne-marie: admiral kirby -- spokesperson kirby said they are watching thesethere are a numbes happening. the fact that they are watching these protests in china carefully or closely and they don't see an impact on supply

chains but as you said, behind the scenes were out front, the u.s. and the money they put into the united states in terms of semiconductors and rallying behind the business community to divest away from china, to make sure there are other supply chain routes because that's what the pandemic exposed, this reliance on china and similarly in europe its reliance on russian gas and oil. they say the west is too reliant on these country so it's an interesting moment in china but the u.s. has not come out and said something direct or emphatic. they don't see a hit jonathan: how did this play out at the g20? anne-marie: a lot of what the g20 cares about is making sure they are shoring up these allies

and they can have stronger supply chain outlets and you see some companies moving what potentially would have been a factory in china to a factory in india and the united states wants to make sure they are there is a partner for these developing countries to be another lifeline instead of going through china whether that's debt sustainability and working that out or it comes to supply chain access. jonathan: clearly there's a bit of change in the labor market. we were talking about the amount of leverage that employees had over the last 18 months. they are speaking about getting back to the office for 80% of the time and what we may sacrifice will work in terms of

our collective success. does that resonate anymore with people in the tech space? lisa: is it getting through ours saying come back to work four days a week. you could talk about hr speak -- jonathan: it's like drink the kool-aid. do you find that anymore in silicon valley? lisa: we see a complete culture shift because been a harsh reality after adding a ton of staff in putting ping-pong tables in and booze at 4 p.m. i think it's a well taken point but the bigger picture is we

need you back in the office is what wall street is saying. jonathan: they fired 20% of the workforce. lisa: and then they will hold to their touchy feeley kind of message. jonathan: they say culture is so important with family and then you get laid off. give me a break. lisa: will this be a big culture shift, but it is a pivot point to come back to the office. jonathan: it's job insecurity. lisa: but they can't say that. come back to the office were we fire you? jonathan: futures are slightly positive. from new york, this is bloomberg. ♪

to finally lose 80 pounds and keep it off with golo is amazing. i've been maintaining. the weight is gone and it's never coming back. with golo, i've not only kept off the weight but i'm happier, i'm healthier, and i have a new lease on life. golo is the only thing that will let you lose weight and keep it off. who loses 138 pounds in nine months? i did! golo's a lifestyle change and you make the change and it stays off. - [announcer] imagine having fuller, thicker, more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color

and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music)

jonathan: three hours away from the opening bell and equities are slightly positive this morning. the biggest one-day laws on the s&p 500 yesterday. treasuries yesterday, -81 basis

points at the lows. you have to go back to the 1980's to see the curve that inverts it. yields are down by another to basis points. there is a beat in the bond market with a downside surprise in spain and likely to see the same thing from germany 19 minutes from now. the euro dollar is $1.03. lisa: interesting to see how the dollar has been the weakest player overnight and over the past couple of weeks. there was one outlook that said the early stages of the world cup reminds us that football is a funny old game but he didn't try to predict what would happen step it was a range of outcomes and how much we would see that as we look at different kinds of

scenarios whether it's china were energy or what will happen in terms of supply chain disruptions. jonathan: how do you read that quickly? lisa: i was looking at the 5% yield scenario and the 10 year yield could go to 5%. what's interesting is his thinking process. he isn't necessarily saying this is what i think will happen but he is looking at the potential scenarios. jonathan: you joked about me talking about what i want to talk about. steve is the same way. lisa: every note i've gotten his analogies to the world cup.

jonathan: the games start again at 2 p.m. are you going to watch that? lisa: i am. jonathan: you doing it just to make me happy. lisa: that's ok. jonathan: joanne feeney joins us now. let's start with the tech names because they been hammered. when do you think about picking up the pieces here? >> good morning, clearly, the higher interest rates have reduced valuations. there is fear of recession with earnings numbers coming down. you look at it relative to not just history but what they have in front of them and some of the tech copies are better positioned with better, deeper moats and more secular growth.

we like the tech names because the internet will stop growing. these companies are well-positioned and have gotten cheaper. there is substantial growth ahead and as interest rate increases start to peter out, not necessarily reverse, the headwinds that have caused evaluations to come down will evaporate. if you are a long-term investor, i think you will be pretty happy after a few years. lisa: is it a monolith or is it company by company? >> definitely company by company.

i think it's a lot deeper. the net work affects are stronger because of the need for more data or analytics. lisa: overnight, we've been focused on what's going on in china and we've been trying to play out with that means. how much does is bleed out into structural changes? as an investor, do you care or is it a short-term blip and you assume the geopolitical headwinds will resolve themselves? >> you have to care. clearly, the risks have gone up with the supply chain rooted in china and we can see apple

making changes. other companies are doing the same. you seen the valuations come down because of the high risk to supply chain and china poses a broad risk because so much of the world economy takes place in part there. that's why people are so focused on what's happening with the zero covid policy and the protests and what -- and when this might ease up. keeping an eye on china and the fed helps investors accept the risk and make sure they are diverse. if you are retired, there are ways to avoid the risk. jonathan: we've had a year of massive rate hikes and a year where banks have not performed in line with that.

what is the thesis around the banks and what's the argument by the banks going into a potential recession? >> the banks clearly are benefiting from the higher rates. on the other hand, their capital markets business and other places where they get fees, that part of the business is suffering. that's why we see these valuations come in. as long as interest rates remain elevated for a while, banks will enjoy higher net income and that will feed down to the bottom line. the valuation reduction only comes from the capital markets side step going into a recession potentially, there is the chance that loan volume comes down but investors are forward-looking. it doesn't look like will be particularly deep.

it looks like we are at the worst moment where it recession is the highest. you look beyond the recession and banks become a good place to be jonathan: such a crazy moment in this market. we are both discounting a recession and recovery to that recession in markets but we have not had the recession yet. it's kind of bizarre. lisa: that's why people say don't get ahead of your skis. do we understand what to begin being concerned about? the range of outcomes, how do you account for abilities and scenarios that seem to offer opposite results? jonathan: bank of america wrote this -- the is hoping for a fed pivot but it shouldn't.

can you speak to that from bank of america? >> our view is that the fed will have to raise rates a couple of times more. look for 5% tops and then they will hold there for a while because it will take a long time for the rate increases to feedthrough and reduce inflation pressures. chances are economic activity slows down. recessions are always temporary so you have to be in it for the longer term. the bond market is not particularly cheap but there are many stocks that have become cheap. this is an opportunity to get some stocks into the portfolio.

lisa: a lot of people pushed against what you are saying. we are not seeing zero rates anymore and not seeing re-money and were seeing qt that will potentially accelerate. can we look -- can we rely on past history and five years is a good investment if we are in a new regime change? >> that's a good point. we caution people not to use history as too much of a guide because the situations quite different. one of the biggest problems in the u.s. he connie is a labor shortage whether that's because of lower birth rates or lack of immigration, it creates a volatile environment but if you look at what drives economic growth and a companies ability to generate earnings, those growth engines besides labor shortage is still in place.

when you look at the input to growth, whether it's computing, robotics, health care, all of those things are still progressing in the u.s. economy. even though we are in a tough spot on the monetary side with interest rates, the underlying fundamentals of the u.s. economy are pretty strong. that's what gives this confidence that a five-year investment plan is a good target to think of as you plan your portfolio and your ultimate retirement plan. jonathan: wonderful to hear from you. looking ahead to next year and looking at the bloomberg terminal which gives you an estimate for growth in various countries and i picked out america for next year. in this survey, 0.4% is the forecast for gdp next year. that's all. lisa: will it even be that?

many people are wondering. and it's global. jonathan: david rosenberg will be on growth a little bit later. that's coming up at 7:30 a.m. eastern time, live from new york, this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world -- president biden and house speaker nancy pelosi are moving forward to prevent a strike that would shut down the nation's freight railroads. the house is preparing to take up legislation to impose a labor settlement despite the objections of some unions. a real strike could hurt the economy by crippling supply chains. opec and its allies are expected to consider deeper output cuts when they meet this weekend.

saudi arabia surprise traders when they announced a 2 million aral a-day cut back last month but prices have faltered since then as demand weakens. european union talks on a price gap on russian oil exports remain stuck. a cap as low as $62 per barrel has been discussed. poland and baltic states say the price is too high but shipping nations like greece and cyprus want it higher. the price cap is designed to keep russian oil flowing while limiting rob -- moscow's revenues. mike pence is calling on donald trump apologize for having dinner with a white nationalist. he said the former president profoundly poor judgment. he dined at his mar-a-lago resort with a white supremacist. elon musk is publicly attacking apple in a battle that pits the owner of twitter against one of their top advertisers. elon musk says apple has cut its advertising and he threatened to

block them from his app store. no comment yet from apple. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ ♪ we all have a purpose in life - a “why.” maybe it's perfecting that special place that you want to keep in the family or passing down the family business

or giving back to the places that inspire you. no matter your purpose, at pnc private bank, we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why?

>> it's possible zero covid ends early and it would be a game changer but it's just as possible to clamp down comes and uncertainty stays and it causes more economic slowdown out there. jonathan: great to catch up with brian weinstein there. equity futures are just about positive. equities are pushing higher and bond yields are lower by a couple of basis points.

we've had the regional rate down so far with downside surprise after surprise. just about hanging onto the 70's on wti crude. what did china announced today day? are we using the markets to imply something was announced? lisa: they indicated they were willing to increase some of the motivation to get the vaccine and that seems to have generated some encouragement and perhaps we are not seeing as many protests because that was cracked down on. jonathan: what has been announced in china overnight? >> we talked about this, they said we are going to boost the vaccination rates especially among the elderly across china. they said they will target nursing homes and they will use

big data to get to those people who have not been vaccinated or are short on boosters. the coverage over the age of 80 is not where it should be. it's about 70% coverage so that was the big announcement. what they did not say were specific measures like enforce mandates or other approaches to get people to go out there and get the vaccine.there are fears of side effects and some call it a rational and they said there is no need to get vaccinated because there was no, -- there is no covid in the country at that situation has changed. they need to get the vaccination rate where it needs to be in there starting on the first steps to prepare the country to reopen the economy and link it up with the rest of the world. lisa: is this preparation for an

earlier exit to covid zero than was previously signaled? >> it's a fair question but we don't know for sure. they came out with a 20 point plan a few months ago and are crawling along to ease up restrictions where they can. they have to somehow pull out of its covid zero approach. china is at risk of a serious public health disaster that continues to be a major constraint. there is a lot they need to do to offset disaster so most

people are saying this could be the beginning of the end but it's probably going to be pretty complicated from here. lisa: we think about the protests overnight. it doesn't seem to be the motivation of the communist party but we are looking at companies like volkswagen moving some of their factories were taking them off-line in china because of some of the supply chain kinks. they are pushing european allies to take a harder stance on china >> multinational corporate sentiment toward china is very rocky right now. they continually come out and criticize the covid zero policy. it's unusual to hear these

comments from the european chambers. supply chains are being disrupted with apple and there has been some dislocation out of the supply chain. when you consider the optics toward china and consider the downward pressure on the economy, of course manufacturers don't want to lose the foreign investments. that has to be a factor in the chinese thinking. jonathan: the human rights case in china is very powerful. how could they respond to a company like apple relocating its production base? do you see that kind of nationalism underpinning these decisions? >> in the past, there has been nationalism as far as chain stores or product from other countries whether it was because something was deemed offensive

to the chinese people or one reason or another, there have been instances where trade has been weaponized by china. you rule out that if a company wants to pull out of china on a broad scale, there would be retribution but some of these large multinationals complain about covid zero but on the other hand, they say where else do you go to offer the scale that china offers? there aren't many countries around the world that offer that right now. it isn't just covid, it's the real estate slump that's affecting the overall economy. jonathan: well said, appreciate that. it's not just a covid zero story. this has dragged a dam in china. lisa: how much has to do with is that people don't have the

income? this comes with the tightening. this was an nation trying to remove some of the liquidity that built up and generated the growth that drove the world economy. they've been moving away from that a little bit with the slowdown we so recently. this is a country at a massive inflection point and how do they navigate out of covid zero and keep companies there? jonathan: growth in china at eight last year and this year holding onto 3.3%. lisa: can it get back this year? a lot of different outlooks has been china will be the bright spot next year because it has to get better than this year. how can it do that if it's a difficult road? keeping companies will be tough. jonathan: our survey is 4.9%. there is a massive asterisk next

to that number. it depends what happens with covid zero. lisa: do you think people are honest in their assessment of what will happen next year? let's preserve face and a nation that will penalize us? jonathan: i've heard that from a million people for the last 10 years. lisa: that we never see the actual figures. will that change because this administration is putting out real figures? maybe, i don't know. there has to be an asterisk throughout step jonathan: coming up in the next hour, build dudley, the former new york fed president. from new york, this is bloomberg. ♪

as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts. saving you up to 60% a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities. when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets. before golo,

i was barely eating but the weight wasn't going anywhere. the secret to losing weight and keeping it off is managing insulin and glucose. golo takes a systematic approach to eating that focuses on optimizing insulin levels. we tackle the cause of weight gain, not just the symptom. when you have good metabolic health, weight loss is easy. i always thought it would be so difficult to lose weight, but with golo, it wasn't. the weight just fell off. i have people come up to me all the time and ask me, "does it really work?" and all i have to say is, "here i am. it works." my advice for everyone is to go with golo. it will release your fat and it will release you.

>> the yield curve, the labor market and risk assets are saying different things at the moment. >> inflation is what the fed will focus on. >> it's hard to see inflation pressures easing off completely. >> i nothing we will see inflation neatly fitting into a 2% box anytime soon. >> this is bloomberg surveillance. jonathan: a lot of world cup

talk coming up. lisa: really? jonathan: that's how we start the show now. live from new york this morning, good morning, this is bloomberg surveillance and equity futures are up about one third of 1% step it's marginal off the news from china. did we get a big announcement from the chinese authorities overnight? lisa: it's a nod to the biggest question people have which is how you prepare your population for the end of covid zero? this is the first steps and what it means in terms of expediting covid zero but we have no idea. jonathan: the implications are huge and we cannot look at the outlook for 2023 without the outlook on the fed and china. lisa: does anything the fed officials say matter?

we heard hawkish talk over the past 24 hours and they all say the same thing which is we might slow the pace but we will still go to a higher terminal rate and keep it there for the duration of next year. we are still seeing rate cuts priced into this market because the market is looking past with the fed is looking at. jonathan: deutsche bank had an interesting note. can you blame higher rates? he said equities are where they were 175 basis points in rates in the s&p 500 has been it recent levels four times over the next few months while rates have been notably higher each time with the yield of 175 basis points from the first time suggesting it is not high rates that drove the equity selloff. what you make of that?

lisa: there is an argument but it is not the rate picture, it's the growth picture and until it affects have companies operate, it's not going to have a material effect on stock valuations. i don't buy it. you have to think about the relative valuation proposition. people are suddenly saying there are relative alternatives. jonathan: as if we didn't know based on your pause. lisa: you said you'll tell us what you think off air but you usually tell us on air. i think there is a point being made which is we have not seen the effective rates of what people thought previously.

lisa: i think people are listening. jonathan: futures are positive one third of 1%. equities are up by a third of 1%. look out for german cpi in about 57 minutes with the downside surprise out of spain. soft inflation in germany relative to the previous month. lisa: i'm looking at a 10 year german yield that is sharply lower. this speaks to the downside surprise we may be expecting in less than an hour's time and we get the german inflation read for the month of november. how much does it matter how much it comes off of its due to energy? i'm curious to hear the analysis of the other drivers like employment and other consumer goods, wheat and other areas

that might be more telling in terms of protracted inflation. housing data comes out at 9:00 a.m. jonathan: we need to rebrand this. lisa: the case schiller 20 home index for the month of september, how much does it roll over? the 20 city data set will come in. can we see a real rolling over of house values or is this just a softening of the pace of how quick they are going up? we are looking for a disinflationary feel potentially. at 11:30 a.m., it will be an interesting news conference from nato as they talk about ukraine and ongoing support also china with pushback from the u.s. and saying we have to have a cohesive energy strategy when it comes to dealing with china. jonathan: joining us now is evan

brown. always fantastic to keep -- to catch up with you. you think investors will be surprised by how resilient the u.s. economy continues to be perhaps deep into next year. can you walk us through how long we might be surprised? >> we are in an environment we still have a lot of excess savings on the household balance sheets in aggregate. we know the excess savings are dwindling somewhat. the biggest spenders in the economy or the high earners and you have a tight labor market for lower earners plus, a big declining gasoline prices which will be a big support for the u.s. consumer. you gotta social security adjustment plus a cost-of-living adjustment that will effectively

boost incomes in the states have a lot of excess savings themselves and there is direct support for consumers coming through their. we are talking about a reasonably healthy economy despite the rate hikes. jonathan: can you be as constructive on earnings? >> as inflation comes down, that will weigh on earnings but a lot of that, even if you haven't seen analyst expectations come down as much, everyone is talking about recession and everyone is talking about earnings coming down. the surprise is that they hang in there. we are not talking about a boom but we are talking about them just hanging in. that's probably enough at this point. lisa: do you think we could see the outcome flipped him what people are expecting which is a

good first half and a lousy second half? >> i think the tightness of the labor market can continue and that will keep the fed on edge. there is narrative now that the fed will do another 50 basis point hike or 25 and more or less be done. if the labor market stays tight, there is a bias that the fed has to do a few more 25 basis point hikes. can we get to 5.5-six percent rate? i think we can and ultimately that could be the thing that makes the economy cracked down the road but it's too early to trade on that now. lisa: what is that mean in terms of the bond trade given that so many people hid in the long end? could it be fine for now we can see that work for another couple of months but if we go to a 5-6% benchmark fed funds rate, all of a sudden that gets blown up.

>> i think that's right. i think a lot of the bond rally is a result of people short covering, everyone has been short bonds for a long time and i think a lot of it is the round-trip we have seen from the u.k. transitioning to fiscal stimulus to fiscal austerity. that's putting downward pressure locally on yields but all of that has played out and we get to the point where growth is ok and inflation is sticky in the fed might be doing more than people expect and you have the bank of japan. at some point next year, they will be adjusting and even if that is known, that's the last anchor there is on bond yields. it's almost psychological. that will inject some term premium in bond markets perhaps leading to a renewed sell off.

jonathan: where does that leave the dollar trades? you mentioned the u.k. we've had a turnaround in euro-dollar. are you saying dollar strength can kick back in? >> yeah, i think it will but not to the same extent we have seen the bulk of this year. we all know europe is about to be in recession. they will bounce back and you are seeing the confidence, the consumer confidence in business confidence stabilize. you should get a little bit of bounce from here. the chinese path is bumpy with zero covid but the destination is to reopen which they have to innards to make sure the economy doesn't completely fall apart. the government has to tax

revenues to pursue their policies on prosperity and redistribution. the current situation is unsustainable in china. it's not just a u.s. driven economic story. jonathan: team usa against iran, what's the score? >> the u.s. will win 2-1,. jonathan: ubs likes to play ball. lisa: they are playing a different ball. what's your prediction? jonathan: i hope team usa does it. lisa: but what about the score? jonathan: i'll go with 2-1. lisa: i go with 3-1.

do you want to make a wager on it? jonathan: does the money go to charity? i don't like to campbell. i did horses -- i don't like to gamble. lisa: do you watch formula one? jonathan: i like to watch horses but i don't like to bet on them. bill dudley will join us in about 30 minutes time, live from new york, this is bloomberg. lisa: federal reserve policymakers are stressing more interest rate hikes are on the way to curb inflation. the new york fed president told reporters he sees rates headed somewhat higher than was forecast a few months ago. james bullard says markets or underpricing the chance of higher rates. china plans to increase covid

vaccinations among its senior citizens. it's a step that health experts regard as crucial to reopen an economy stuck in harsh covid zero restrictions. beijing stopped short of announcing mandates that helped raise an auction -- immaculate asian rates in other countries after a weekend of protest. hsbc has agreed to sell its canadian unit to royal bank of canada. the price is $10 billion in cash. the deal will allow rbc to expand its roster as clients and bulk up its retail presence on the west coast. this represents a rare domestic acquisition for one of canada's big banks. in new york, the transportation authority may have to raise fares. that's according to the state comptroller and the agency's current financial plans are insufficient to close long-term budget gaps. weekly ridership is at 60% of

pre-pandemic levels and they face a 500 million dollar deficit in 2025 step global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

we all have a purpose in life - a “why.” no matter your purpose, at pnc private bank we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why?

>> this is a critical time for our security and we are sending an important message. nato is here, nato is vigilant and nato is ready to defend every inch of allied territory. jonathan: the nato secretary-general and we are live from new york, futures are up just about positive. a downside surprise on spanish cpi and euro-dollar is the euro

showing a little bit of strength. what are we expecting at 11:30 a.m. lisa: that's the news conference with nato but i'm curious how they talk about ukraine and talking about china. jonathan: let's get you team coverage. let's go down to washington, d.c. what are you expecting from the nato secretary-general later? maria: i already had a preview because i was at a panel in which he assisted and spoke and there were two things he repeated, one, nato is the biggest military alliance and perhaps that a message not only to russia but to china and he appealed to allies for a full, comprehensive package of

assistance for ukraine. it's not just money and weapons but winter equipment. this country is under a lot of pressure in what caught my eye's we should learn the lessons from russia and perhaps apply them to other autocracies. lisa: this is an issue especially to hear volkswagen link back and closing down some of their factories in russia, saying it's because of supply chain constraints. is this a good excuse for certain industrial companies from the west to withdraw from russia? is that what we are seeing? maria: on the flipside come as was the german chancellor right now in germany, there is a

rethinking about what was their foreign policy for decades and that's that the mortgage trade affects the relationships you have and that will improve relations with russia. they did a lot of trade with russia and got burned and now you have a war. with respect to germany, there are tensions as to how to treat the chinese but in europe, you have to decouple and not be as dependent like the situation we are in now. high energy costs and still dependent on russian supplies. inflation is still a problem. lisa: how united is the west when it comes to moving away from china or russia?

anne-marie: maria speaks to the tengion you see, on the one hand, you see companies wanting to diverge and divest away from china and you see that with apple moving some stuff to india with the u.s. trying to drum up support. at the same time, you have the chancellor of germany going over to beijing recently to make sure economic ties were solid and he was trying to influence they german companies and emmanuel macron went to china. they are dealing with the economies that they are dealt with as maria said and this is what chancellor merkel had for years, the germans rely on china when it comes to their economy the same way they relied on cheap russian gas when it comes to manufacturing. is this something that will take years to unwind?

it will not be like switching off a light switch. jonathan: how do you think this will play out with emmanuel macron and joe biden? anne-marie: what will be on the agenda is what emmanuel macron called the u.s. inflation reduction act and climate subsidies they are giving to u.s. companies stopped he said these are unfriendly practices and he said they are calling this protectionism and it's something the europeans behind the scenes want to work out. it's also to show a little bit of a fractured environment in europe. germans say we need to communicate with the biden administration and we should not start and inflation trade war so they are more welcoming on what the u.s. is doing to reduce inflation which is different from how france is taking it. this will be the main topic as emmanuel macron visits washington this week. jonathan: who goes further,

germany or spain in the world cup? anne-marie: i'm ready for america. lisa: you set her up. maria: i'm rooting for america as well. the fact that that is even a question, i need a moment, let's go to commercial. jonathan: we will find out. that's the difference between spain and washington, d.c. right now. lisa: she would have a field day on that podcast where you can curse. jonathan: that would be my first guest. lisa: i actually watched spain versus germany. jonathan: they play really nice football. lisa: she's right and they are

good. there are others that are very good as well. jonathan: i'm pleased you watch it and look at the shape of spain. they always have someone on either side of the wings on the sidelines and that's the way barcelona plays futbol. they are always there in position. lisa: it's a fast passing game and i like that and the idea of one team moving as one even though jonathan: some people find it boring. lisa: it's like chess. jonathan: maria likes it as well. lisa: you would this you are just setting her up. jonathan: i thought she would be more diplomatic about it. lisa: you thought she would be less diplomatic about it. . jonathan: david rosenberg is coming up next. did i say thanks to anne-marie

and maria? lisa: we should say it again. jonathan: to the both of you, thank you, s&p 500 futures are slightly up. lisa: just follow her on twitter. jonathan: she is unhappy after those comments, equities are slightly up and yields are slightly down. lisa: she was really angry. she said go to break, i don't care. jonathan: she's not the only one. that's why tom is still off. from new york, this is bloomberg. ♪

jonathan: live from new york, trying to bounce on the s&p 500 by .3%. trying to bounce back on the biggest one-day loss on the s&p. nasdaq 100 up .5%. in the bond market, deeply inverted yield curve. two-year versus the 10 year, -80

basis points. 4.4340 on a two-year. more curve inversion for you. a bit brought in europe. firmer bond markets in germany. italy off the back of downside surprises, inflation in spain. we had the regional breakdown in germany on cpi earlier this morning indicating you could get in easing in inflation in europe. your tenure comes down 10 basis points in germany, down 15 in europe. -- italy. lisa: how much does it have to do with energy prices and people can shrug this off? jonathan: don't know. the ecb is in a tough spot. the ecb convenes on december 15. inflation is elevated in europe. a lot of that is the energy story. not the same as the united states. the ecb is hiking into a

downturn and is set to do it in a couple weeks time. maybe the debate goes from 75 toward 50. still, double-digit cpi. lisa: how much confidence can people give to the disinflationary kind of force? how much confidence can people give to what we heard overnight in china in terms of emphasizing vaccinations, particularly for older residents of china. this has been driving massive moves in certain chinese adrs, including by you and alibaba. those shares flying, up 5.5% for alibaba. baidu up 6.5%. i am looking at for ari, one of the main stories of the day. those shares down point 5% after the resignation of the team principal, who has been there for a long time. a leader. jonathan: very on to one team.

fantastic car, superfast, terrible strategy. they should have dominated the first half of the season. you saw so many polls that didn't converted into wins. i am hoping for ari will turn it around -- for ari - ferrarri will turn it around. i hope we get more turnaround into national football. lisa: you are trolling me on air. jonathan: i am happy we are getting buy-in in america to fall in. that is been a huge change the last few wealth spent -- 12 months. i believe vegas is coming. miami, vegas. lisa: it is a easier crossover because of nascar. jonathan: help people from converting back to formative one. lisa: it is equal opportunity, especially after sports. just trying to make you happy

everyday. let's move on. jonathan: [laughter] are you done? you've only got 60 seconds of me to talk. lisa: carry on. you want to go, go. jonathan: a week ago, -- of the philadelphia fed referred to inflation and said it could go up like a rocket and down like a fervor. we've got a conversation coming up with a man who disagrees with that. jason rosenberg joins us, fantastic to catch up with you. that is where we should begin. this idea you can go up quickly, inflation can be stickier on the way down. you push back against that, and why? >> i push back on it because i heard the same things when i was at mother merrill back in the summer of 2008 when we had the chinese commodity super cycle and global decoupling. inflation at that point was pressing against 6% because oil was running up to $445 per

barrel. we went from 6% inflation and the next year, the summer of 2009, down to -2% year-over-year. it was not because of services. service sector inflation is always sticky. service sector pricing never deflates. that is what people tend to focus on. that is what the fed is focused on, which dominates the cpi. 40% of the cpi are goods. the stuff you can see, touch and feel. they start to see the signs in the commodity markets. starting to create stronger deflationary forces. anyone hawkish on inflation looks at the rental side and everybody knows there is lags involved in terms of how that is constructing the cpi. in real time, we are going to be seeing significant deflation. 40% of the cpi called to materials. when it talks about inflation

cannot come crashing down, there are already measures in real that are crashing down. oil is down 35% from the peak. copper down 25%. most shipping rate measures are down roughly 60%. those were not the factors that precipitated that rocketing up of inflation, it came out of the commodity markets, the supply -- that had a big impact on transportation costs. they are not calling like a feather. they are falling like a stone. that is going to show up in a forceful cpi data between now and 12 months from now. lisa: falling on a stone to what? what level do you see it remaining sticky? david: overall inflation? i do not think it is going to be altogether that sticky. i think we have already peaked. when you take a look at leading indicators like the pipeline measures, core intermediate ppi, they are actually not just decelerating, they are

deflating. that is going to create downward pressures on the good side of the cpi over the course of the next year. i think we will be either at or below 3% on headline cpi year-over-year by this time next year. lisa: people pushback -- a lot of fed officials, particulate with respect to the labor market. it continues to be tight, continuing to see wages increase significantly. how do you view that and pair that with this disinflationary view you hold? david: what i find interesting about the fed is their prevalent focus on lagging indicators. you mentioned wages. you know labor costs, they are in the conference board index lagging of economic indicators. wedges -- wages like this cycle. inflation wages this cycle. the labor market is tight, but is starting to loosen up. the labor market is always tight. you always have either a three

or four handle on the unappointed rate at the peak of the economic expansion. my stance is, the fed has already told us there forecast for next year is for the unemployment rate to go to four point -- 4%. i think we will head up towards 6%. this is a situation where your substance drives their forecast. i think we will get much higher unemployment rate with a lag that is going to create more external downward pressure on wages. it is starting to show up. when you look at some measures of compensation, yes, they are running hot. they are starting to peek out and started to roll over at the margin. i think that is going to be a big theme. i do not think the labor market today is going to be the labor market next year anymore than you could tell me at the peak of the 2007 economic expansion, or the peak of the 2000 economic expansion, what the unemployment rate was above where it is today, to superimpose that on the next 12 months in the

context of recession staring us in the face. i think these wage trends are going to be rolling over significant. jonathan: what you think you market consequences will be from this? david: i think particularly in the stock market, look. i am waiting to shed my bearish for and turn bullish. in all see her in this -- seriousness, the -- of 2017 heading into a recession, you have endless earnings estimates. which have started to come down in drifts and drafts. you have never had a recession where earnings were positive and the consensus, the values, the print is, the forward premise or forward stock earnings estimates have not been cut much yet. for people buying a stock market in the 17 multiple on recession earnings are buying the market in over 20 multiple. that is too rich for me. i still am cautious, if not

bearish, on the stock market. i think the bond market is behaving well. i think the bond market is giving you a view the fed is over tightened. my sense is that i would, my strongest ambition call is the long bond the next 12 months. i think you will get returns there will not get in other asset classes. bearish on treasuries. in a recession, as this becomes more widely accepted and inflation comes down, i think treasury yields off the curve are the place to be. jonathan: what do you think the character of the recession will be? the consensus you hear a lot, short, shallow. do you pushback against that, as well? david: [laughter] the thing is, the same people that were saying we were going to have the roaring 1920's and there was a recession on the horizon are saying, do not worry, it is going to be a short and shallow recession. i'm not sure about short and shallow, but i do not care.

you could have forecasted a short and shallow recession in 2001 and he would have been right. gdp rarely contracted. you had overinflated asset values and still ended up with a almost three year bear market in stocks, even with a mild recession. one recession is not a get out of jail free card for long and risk asset managers. we do not know the extent to which it is going to be mild or not mild. here is the problem with the mild recession was serio -- dinero. you do not get v-shaped recoveries. in a sharp, downward move in gdp and the stimulus inevitably from the fed, you get the v-shaped recovery. i would ask those people thinking about equities and long-duration asset, unless we get a mild recession, what is the recovery going to look like? you have the fed telling us not only are they talking about the funds rate being higher, the terminal rate being higher than they talked about in september,

we are north of 5%. the fed is telling you no matter what -- rumor, their forecast now is 4.4 percent on the unemployment rate. that would be in this cycle what have risen almost a full percentage point, which has never happened in the context of a recession. they are telling you, we are so retentive on the inflation side that we are going to leave rates higher for longer. even when it comes time for the fed to cut rates like in the past in the face of economic strains, this fed is not going to do it. let's talk about short and shallow recession. what sort of recovery are we going to see? it seems to me with a short and shallow recession and a fed not stimulate and policy, we are going to be bouncing along the bottom on the economy for an elongated period of time. you are paying for growth as an equity investor. run with that view, short and shallow recession, with no recovery because we are going to

have a still tight fed well into next or, if not beyond. that means the longer-term outlook for nasdaq's for long-duration assets are going to be challenged. jonathan: and you will be in treasuries. this was wonderful. we could keep this going, but we cannot because we got to get to a commercial break. thank you, absolutely fantastic. a lot to think about there. a reason this guy wants to hang at a 10 year, that v-shaped recovery. if you get short and shallow, ain't coming. lisa: what if it is long and shallow? what if it is not steep, but is sustained for a longer period of time. jonathan: tiffany wall co. pushed back on that. if you believe this federal reserve is not going to be gutting any time soon and you believe in what they are telling us, they are going to keep rates elevated for a longer period of time, that should raise questions on the longer duration of the downturn. lisa: what is more negative for

risk assets, short and shallow, short and steep, or long and shallow? jonathan: bill dudley is going to be with us in a moment. looking forward to his thoughts. life from new york, this is bloomberg. ♪ ♪♪ energy demands are rising. and the effects are being felt everywhere. that's why at chevron, we're increasing production in the permian basin by 15%. and we're projected to reach 1 million barrels of oil per day by 2025. all while staying on track to reduce our carbon emissions intensity in the area. because it's only human to tackle the challenges of today to help ensure a brighter tomorrow.

we all have a purpose in life - a “why.” maybe it's perfecting that special place that you want to keep in the family or passing down the family business or giving back to the places that inspire you. no matter your purpose, at pnc private bank, we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why?

>> they are counting the first 250 basis points as if that was a tightening of monetary policy. that is just getting up to the long run neutral level of policy rate. we have only recently moved into restrictive territory and are going to have to move farther to keep inflation under control. jonathan: jim bullard, the st. louis fed president. equity futures positive, up .2% on the s&p and nasdaq. yields lower by a basis point or so. 3.66 on the u.s. 10 year yield.

12 minutes, you get inflation data out of germany. joining us now is bill dudley, the former new york fed president and currently bloomberg opinion columnist, and so much more. want to reflect on something we heard five minutes go from david rosenberg, pushing back against this idea inflation will be stickier on the way down. i know you listened to that conversation, what you make of it? william: i agree with david, inflation is going to take a longer time to corral. people are focusing so much more on the improvement in goods and inflation. that was well inspected as the economy opened up. food prices are weaker, services inflation is high. the labor market is still tight. we are having job gains well above what is consistent with a glistening labor market. the fed has a lot of work to do. the big thing about what the next year is going to look like, it is in the fed's control. the fed is going to keep policy tighten up for long enough to

get inflation back down. the stronger we get for the economy, that depends on how much we hurt economic growth. i think we will have a recession. i think it will last a while. it is not going to be a dangerous recession, the fed can relent at any time and and that recession, which is unusual in past cycles. this is not a cycle driven by financial instability, not a recession driven by household and corporate balance sheet's being overextended. it is induced by a tight monetary policy regime. the fed can end it when the time is right. lisa: continuing the strength the uc in the economy and -- was talking about -- you think the fed could go higher than you previously thought in terms of a benchmark rate? william: i am thinking the peak is in the 5% to 5.5% range. the news will probably stronger for longer, it will make it hard

for the fed to stop if we are still at a unemployment rate below 4% and underlying inflation running for percent or higher. i think people will get a series of smaller rate hikes that will push above 5%. clearly, the fed's strategy is stressing the longer rather than the ever higher. i think once we get to 5.5%, they will relent. they will sit there and wait for that restrictive monetary policy to slow the economy down, generate more slack in the labor market and that will gradually push wage inflation and service price inflation down. lisa: this is what fed officials have been saying, this is what is in line with what they are saying. the market is still pricing in rate cuts by the end of next year. what is the fed half see to start becoming less restrictive? i do not mean that with respect to keeping rates, lowering them in a significant way. william: they have to be

confident to achieve their 2% inflation objective. that doesn't mean inflation has to be 2%, but they have to be confident. they have to see significant slack developing in a labor market that brings down wage inflation to the 3% to 4% range, and they need to see inflation pressures much less persistent and brought as they are today. they need to see inflation in the 3% range and down. once they have accomplished both of those things, maybe they can start to relent. i think it is going to take time. if the economy has forward momentum, it is going to be sustained by the past inflation we are seeing. some securities are concerned a 8% increase in their check come january, they are going to spend a bunch of that money and that is going to keep the economy moving along. that is going to make it hard for the fed to restrain things. jonathan: you wrote yesterday

the fed shouldn't raise its inflation target. you said changing the objection -- objective now would be bad. i did wonder when that got published, are you worried they might actually go through with that next year? william: i am asked about it all the time. i thought i should write down -- the argument for raising the inflation target, you cannot hit 2%, so let's make the objective easier. the other argument is better, we have a higher inflation target then the peak and short-term interest rates and the cycle will be higher. when a recession hits, there will be less risk of being -- for lower interest rates. i think that risk has diminished, the peak in interest rates this cycle will be 5%. the fed has plenty of ammunition to cut rates in an environment where the inflation target is

still 2%. this idea the zero boundaries could be the huge risk and a big constraint on monetary policy, i think that is overstated at this point. lisa: how concerned are you the fed will not have the same resolve in the middle of next year to keep rates where they are, if we see the unemployment rate going up and we see the u.s. entering a recession? william: i think the committee will be interesting to see, whether it is united 12 months from now as it is today. i think chair powell means what he says, he wants to behave in a way that is not like paul volcker. whether he can keep the rest of the committee along with him as the on employment rate goes up and the trade-offs between the two objectives of the fed, price stability and matching stable employment, become more in conflict with one another. i think we all know the answer. i am hopeful powell will carry it. jonathan: i remain -- i remember when inflation was some 2%.

they should raise it to three, people would believe they are committed to getting inflation higher. then, they may hit 2%. lisa: do you remember when they were talking about free money and modern auditory theory? jonathan: appreciate it, always thought-provoking. the idea you say, i am going to go 3%. isn't it harder to hit 3% now because you started to believe from a inflation perspective, if i do not have confidence in a central banks commitment to a target of 2% and i am in the market, i do not get a question to whether they are committed to 3%? lisa: that is bill's point, this will and flout -- allow inflation expectations to become, there is a pinch -- benchmark for people to have reliable pricing strategies and be able to chart out some sort of policy going forward. he is saying 3%, studies show it

is harder for businesses to do that. there is academic research behind what price stability means for a major economy. jonathan: i didn't think it would show up and you mitch. lisa: [laughter] they would respond immediately. jonathan: my expectations are 100 basis points higher than they were the month before. lisa: it has been remarkably accurate in reflecting. if the university of michigan, if you call john, he will be more positive on this particular -- he will stop. jonathan: what inflation will be in five years. lisa: it has been consistent in tracking market sentiment. jonathan: alicia from bny mellon next. this is bloomberg.

>> the market justifies what the fed is doing. the cpi is the objective.

>> the wage numbers may become more important than cpi. >> the yield curve is telling you a recession is not here yet, but the check is in the mail. >> it is difficult for the fed to land the plane successfully. >> we are entering 2023, there are so many unanswerable questions. >> this is "bloomberg surveillance." jonathan: live from new york city, this is "bloomberg surveillance" on bloomberg tv and radio. equity futures positive by .3% on the s&p 500. a few events today. jobs data, jobs on friday, chair powell tomorrow. lisa: what you think is the most important? jonathan: i think this market is trading on the data and not the fed speak. we have seen that from cpi, ppi,

the recent data and the recent fed speak has pushed back about what we have seen in the markets. have markets listened, not so much. lisa: fed officials come out and keep trying to -- this market lower. we are not going to cut rates. market says, we are going to price that in so we do not buy it. i think the jolts data may be the most important data point of the week. if it comes in hotter than expected and more job openings then expect it, how much does that go for what the fed is going to say, but is not commuting to the market? jonathan: what is more in portland -- important, the fed speak or the data? >> the labor data. the fed has explicitly targeted the labor market as inflation remains higher and stickier and not transitory. they have been talking about the labor market trying to get rid of job openings. the beverage curve, which is the jolts data and the wage data.

i think if you do not see softness in either of those two reads, it is going to be difficult for the market. jonathan: are you saying good news is bad news for marbury at -- labor market data? alicia: we are back to the world where a softer, real economy will the more pleasing for the fed and means whatever their target is five, to five-and-a-half is still the right target. the issue is, if you get no softness in the labor market, and we have not seen any softness in the labor market in the aggregate data, we are going to have to go higher. in the end, every that hiking cycle ends when the fed fund rate is above cpi. we are not there yet. jonathan: what are you thinking the fed funds is going? we get some projections in the next fed meeting. the last fed meeting, where we had a sep in september, they pushed the dashed of to 4.5.

alicia: there is some scope for it to be higher than that, just because the surfaces inflation is not rolling over. the sticky services inflation is not rolling over. while headline is the goods inflation has peaked and is coming down hard, services has not. that is 60% of cpi. i think there is room to go higher. as you get higher on fed funds, you're going to see a wider aspersion and some conversation in the fomc of where we go from here. the easy part of the hiking cycle is the easy part is after the december meeting. after that, you get descendants. lisa: what do you think is going to be the bigger surprise for jobs markets? alicia: i think the biggest surprise would be if we got hotter. we have been really -- have had

a high number of announcements of layoffs. yet, it is not showing up in the aggregate data. those thursday morning new claims data are barely moving off of the lows. it is not hitting the data yet. i think if the numbers were hotter, it would be a surprise. lisa: people are talking about short and shallow. what is the consequence of this type of recession? we were speaking with bill dudley, who agrees with the idea of a longer and shallow type of recession. is that an ok scenario for risk assets? alicia: great question, that goes back to the difference between the real economy and risk assets. even in a shallow session, you can have s&p earnings declines of 20%. 2001 is a great example of that, risk assets did not do well, even with a short and shallow recession.

there is still risk here. this year was about rates and will compression and the correlation between the bonds and equity market, the worst being since 1931. this is the transition year. next year, is it, your rates are higher, what does that mean for the real economy? i am not the only one saying this, it is true the earnings are too high and not reflecting 500 basis points of tightening within 10 or 11 months. we have never hiked this fast. we haven't seen the effect yet. that is down the road, that is sure to come. jonathan: let's talk about leadership. is it to early to talk about potential leadership for next year? alicia: we started to price in a recession around june. then again in september. now, we are pricing in a recovery. we haven't even gotten to the recession. we haven't even gotten to realistic earnings numbers.

i do not think it is too early. there is certain sectors, certain companies that are beaten down and left for dead. that is where you can go shopping for your stocks. i think the bond market is going to look better next year because all the work was done this year. historically, if you look at 10 more starts to the year the bond market, you have a positive year the following year. it is related to the rolling over and the inversion of the yield curve. jonathan: when you mentioned the early 2000, some of those names were left for dead for a long time. can you help me understand what should be left for dead for a long time? alicia: speculation should be left for dead. anything that is a multiple of revenue or no earnings, that will be left for dead probably forever. i will suggest there will be consolidation in those areas. that is not something to look forward to. many of these assets have a ways to go. left for dead is when you are down 80% to 90% from the peak.

if you are in a speculative asset or speculative name and are hoping that the market will stabilize one day, you probably have 20% to go on the downside. lisa: what percent of the overall market cap of the s&p is that speculative quadrant that is going to be left for dead? alicia: i would say, it is about 10%. i think some of the biggest risk, is the large cap names which are still trading at higher multiples. in the end, when you get a multiple compression year and you get the ends of the exuberance on the valuation side, you have to bring value festers -- investors back. some of these growth names are trading at high multiples. the top of the market still has risk. you can see it and how the

overall market and aggregate has traded, the dow versus the nasdaq, the dow versus the s&p. the s&p is over weighted, top 10 names, 20% of the index, a lot of those names still not cheap. still expensive. jonathan: we like to talk about the equal weight. lisa: [laughter] it does make sense. it does. i think it is a good point. going forward, do you think the potential for contagion is off the table considering we still have potentially more washout to go? alicia: i think there is still a risk of sovereign debt issues in europe and i think we are not through this winter. i think we are not through the net gas problem of this winter. after this winter, there is summer and another winter. i think market is very short sighted in piecing this through in who is going to be paying for the sand how it is going to be funded. these are not easy questions. this is an issue that has been left for dead because it is a

warmer than expected autumn in europe. their reserves are high, but that is a one winter story. we do not have a plan moving forward. i think contagion risk is lower, but not dead yet. i think the bitcoin blowup is likely to be contained. there clearly was some counterparty risk, but i do not think it was a big enough asset for hit -- it to have huge reverberation. jonathan: i agree with europe. nord stream, the ability to build up reserves next summer, does not seem so right now. lisa: what you do in an economy where the inflation is coming from something out of control of central banks and even policymakers? it is getting difficult for them to source enough natural gas from enough places over the longer-term with contracts that are not necessarily 10 or 20 years. jonathan: they worry about expectations, a second round of effects, inflation.

going into wage negotiations, a tough spot for the europeans. it will be next year, based on where people think the energy market is going. lisa: have people priced out that bear case from europe -- four europe? jonathan: equities are you up -- are up 20%. alicia: risk assets are back on. the recovery is getting priced in. the question is, is this a bear trap? is this too early? everybody likes picking the bottom, everybody thinks they have the turn. i think the nat gas, the funding, the sovereign debt issue all related in europe is not over yet. the wage issue, we have a wage issue. let's talk about the rail strike prayed really quiet. if rail workers were early concerned about a deepening recession, they probably wouldn't fighting or higher wages. jonathan: is the west coast next?

i wonder if you are interested in a five-part dollar bond sale from amazon. i wonder if that gets you going, that headline crossing the bloomberg. team usa, do they get it done today? alicia: i'm going to say yes. jonathan: there we go. lisa: that is not conviction. i'm going to say yes. jonathan: i am going to say yes, too. four years time. we will be able to go to the world cup together in new york. lisa: i am looking forward to that. jonathan: me too. i'm going to take two weeks off of that. futures up about .1%. lisa: federal reserve policymakers stressing that more interest rate hikes are on the way to curb inflation. new york fed president john williams told reporters that these rates heading somewhat higher than forecast a few months ago. st. louis fed president james

bullard says markets are underpricing the chance of higher rates. china plans to increase covid vaccinations among its senior citizens. it is a step that health experts regard as crucial to reopening and economy stuck in harsh covid zero restrictions. beijing stopped short of announcing mandates that helped raise inoculation rates in other countries. the move comes after a weekend of protests demanding an end to covid limits. a bill in the u.s. senate protecting same-sex marriage has cleared another procedural hurdle. a vote on final passage could take place this afternoon. if it passes, the measure goes to the house. the bill would recognize same-sex marriages under federal law and issue benefits for all married couples. hsbc has agreed to sell its canadian unit two royal bank of canada. the price, $10 billion in cash. the deal will allow rbc to expand its roster of business clients and bulk of its retail

presence on the west coast. the transaction presents a domestic acquisition for one of canada's big banks. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

girls... the chess club has gained an edge on our bake sales. we need more ways of connecting with customers, fast. i know some consultants with great ideas. can they help us improve our digital experience? absolutely. they've invested over $2 billion in tech.

that could really help us manage inventory. and save us a ton of dough. then let's take back our market share. checkmate, chess heads. girls, i said “bedtime”!

>> further tightening monetary policy should restore balance and bring inflation back to 2% over the next few years. it will take time, but i am confident we will return to a sustained period. jonathan: that was john williams, the new york fed president. let's get you price action going into the opening bell. equity futures higher by 0.06%. that bounced this morning and faded quickly. yields higher by a single basis point on a 10 year. 3.69.

yields lower a couple of basis points. euro strength this morning, 1.0365. positive .25%. euro-dollar, everything against the euro -- u.s. dollar. euro-dollar at the lows of september, 95. sterling, the lows of september, 26. 103.50. now, 2021. let's talk about what went wrong for so many of these calls around sterling, which has pushed through 120. >> there has been -- a sense pricing out of the excessive risk premium related to the fiscal policies that were getting announced at the end of september. during that period, there was an

enormous build up of selling short. given the fact we are now in an environment of the lid of dollar weakness, sterling has pushed higher. you get the unwinding of this sterling short. if you want to gauge the direction of sterling, cable is the mirror image of what the dollar is doing. it is going to bend the dollar around one. i would be mostly looking at euro sterling. i am surprised it is still hovering around 85, 86. jonathan: you would reload sterling shorts against the euro. vasileios: absolutely. the trigger point for me to do that is, i think we need to reach a point in which position, especially whether speculative, is itching relatively neutral levels. we are getting close to that if you look at the cdc data as well as proprietary indices. i am confident in that call for euro sterling higher. lisa: how much are you trying to

move away from the dollar in terms of your crosses and pears? the dollar story has been dominant and predictable. vasileios: i think 2023 is going to be a year in which relative value is going to make sense from a training perspective. i think the biggest thing is going to be the housing market. on the back of strong monetary policy, one needs to identify the places where housing markets are most vulnerable. in europe, if you look at sweden and the u.k., by far the most vulnerable. aside from that, i would like to add as far as the dollar called is concerned, i am inclined to believe we are in an inflection point in the dollar. it is the fed and the elephant in the room, china. lisa: inflection point to a weaker dollar. vasileios: yes. if you identify the different

states of the world, what matters for the dollar is what the fed is doing, but what global growth is doing. i think the market sees anything that basically, the genie is out of the bottle as far as china reopening. jonathan: what is your base case? do you think for reopening? vasileios: it depends on what you mean by full reopening. i think there will be a gradual reopening, it is not in the authorities interest to do it overnight and very quickly. there are a lot of political sensitivities in that respect. think it is going to be a gradual reopening. we have a comprehensive package putting a floor underneath property prices, which will release some consumption impacted by the wealth affected. it is going to start putting upside pressure on chinese impulse. i think the genie is out of the bottle as far as china is concerned. jonathan: what do you think the china proxy is to push that view

through? vasileios: euro china. the reason for that is, the initial stage of the gradual reopening you are going to see an increase in -- china, a deterioration in the current account of china. on the flipside, you will still have a positive impact on the current figures. in general, everything that basically increases activity from china and asia move generally is going to be good for the euro. euro china will be my best trade. lisa: can you pair this into what you were talking about earlier with the housing market and how that dictates the future of certain nations, pointing to sweden and the u.k.? walk us through how a very weak housing market, what kind of deterioration you are expecting to lead into currency weakness. vasileios: as far as the direct impact, that is a direct impact

into economic truth. therefore, there is direct impact to consumption and central bank decisions. the bank of england is aware of properties in the housing market. that is why it puts a lot of weight in growth right now, that is why it seems unlikely it is going to validate further expectations. why these places are more vulnerable, in the u.k., and vast comparison within the great difference with the u.s., where you have a 30 year fixed rate mortgages. in the u.k., you have two year and five year fixed-rate mortgages. every point in time, you get a bigger percentage of the population going out to refinance. compare it. you have about 2.5% mortgage rates in the past 10 years. right now, you're potentially going to gravitate towards 7%.

it is going to be a major hit. jonathan: going to be brutal. u.k. mortgage approvals, i think the lowest since covid 2019. how bad do you think this is going to get in the housing market in the u.k.? vasileios: very bad. the other issue the u.k. is facing is, it is facing a more structural problem into the inflation outlook. compared to the rest of the world. the reason for that is related to brexit. as a result of this, it will put the bank of england in a much more difficult spot compared to other central banks. it will be faced with a structurally higher inflation and a much faster deteriorating economy. jonathan: governor bailey speaking later this morning, 10:00 a.m. eastern time. lisa: how much does he discuss the ramifications in the housing market that can be decimated, not just because of interest rates, but because of --did you

see goldman sachs? london do milan, partly because of this? vasileios: what was unprecedented was during the last press conference by the bank of england, billy said i hope that the market is getting the message of mortgage rates are going to go lower. after an interest rate hike -- jonathan: i do not know. great to catch up. futures up by .1 percent on the s&p. yields higher by almost one basis point. live from new york and radio, as seen on tv, this is bloomberg. ♪ make this december one to remember. together. happy holidays from lexus. ♪

if your business kept on employees through the pandemic, innovation refunds could qualify it for a payroll tax refund of up to $26,000 per employee. all it takes is eight minutes to find out. then work with highly qualified professionals to fill out your forms and submit the application. go to innovationrefunds.com to learn more.

millions have made the switch from the big three to the best kept secret in wireless: xfinity mobile. and submit the application. that means millions are saving hundreds a year with the fastest mobile service. and now, introducing, the best price for two lines of unlimited. just $30 per line. there are millions of happy campers out there. and this is the perfect time to join them... add a line to your existing plan, or see for yourself how easy it is to save by talking to our helpful switch squad at your local xfinity store today.

jonathan: equity futures positive .1%. broader price action looks like this. yields higher by almost a basis point on the 10 year. 3.6940 on a two-year.

didn't get the downside surprise on german cpi. it did ease relative to last month. early to of to what we saw from spain going into the seb and a couple of weeks. lisa: a move in the european bond market. the idea you're getting a softer then inspected inflation print driving home much more than any rhetoric from ecb officials, a similar story to the u.s. where the data speaks louder than monetary policy. jonathan: yields lower germany and across europe. the outlook from bank of america the last week or so, looking at the global economy. a recession is likely in the u.s., the eurozone and the u.k. all other regions will continue to weaken with the exception of china. inflation will come down, it will take time for central banks to declare victory. outlook is not looking great for 2023. lisa: a lot of it hinges on china, how bad it will be or potentially what shoots could come in turns -- in terms of

demand. it all depends on china, how are going to deal with covid zero and where that is going to leave the economy. jonathan: the outlook is much more uncertain than normal, we continue to worry about geopolitical shocks and sticky, high inflation. i think it is more uncertain than normal. i'm not sure how much value is in the 2023 outlook. at the moment, it feels like a lot of these outlooks you would rewrite month after month, week after week. lisa: i think stephen majors outlook was interesting for this point. it was different outcomes, probabilities of them, and what the scenarios looked like. it was gaming out how people respond to different outcomes that we cannot predict. that might be them new format for the 2023 outlook. jonathan: the outlook for the next several years. the chief economist from ian why parthenon. great to catch up with you. let's start with what lisa mentioned, what do you think is more important this week, the chairman powell address or the data in the labor market?

gregory: both are equally important. we are going to get from the labor market increased evidence there is a slowdown in the labor market in the u.s.. there is not yet visible in a broader basis in terms of the latest data we have had. we have seen a slowdown in the peaks of hiring, but it is still positive. i would expect that as we move into 2023, we will see a turn in sentiment and increased evidence of layoffs, a pullback in the labor market. it is not evident in the data yet. powell's speech will be important. we have this paradox where markets are pricing the fed to go probably as high as 5% with the fed funds rate, influent of a couple rate cuts on the back end of next year. the fed wants to lean hard against that narrative, once markets to believe it will go to 5% and potentially higher. more importantly, hold at that mark -- hold at that level over the course of 20 20 three not currently priced in markets. jonathan: i am not looking at

unemployment, i am looking at growth, two. unemployment of 2023 at 4.4%. they have growth the last set of projections at 1.2%, that is way above some of the projections i am seeing on the street. what do you make of that divide? gregory: what the fed wants to do now is twist from a speed paradigm to a destination paradigm. it wants to indicate it will reach a higher terminal fed funds rate, higher than the 4.6% in the september economic projections and look at a fed funds rate higher than 5%. at the same time, the fed is likely to indicate it will tolerate an unemployment rate that rises perhaps above 5% and growth that will be weaker, if not slightly negative over the course of 2023. generally, an environment in which we will have a likely recession. we are in a highly uncertain global environment. i think we have to be careful and humble about the fact there

is a tremendous uncertainty as to the direction of the u.s. economy and global economies. a global recession is generally larger than the sum of its parts. if every economy of every large economy around the world, china, europe and the u.s. are headed into a recession, that is likely to pull activity and is a downside risk to global activity overall. lisa: do you expect this to be a short and shallow, the way a lot of people have been talking about, or do you expect this to be a more prolonged downturn? gregory: we do not know. we are in a environment where there is a tremendous amount of uncertainty regarding the global economic outlook. i have talked before about this hot trick of forecasts and the contexts of the world cup, we have a consensus there will be a recession likely to happen in the near term. that is going to be mild and shallow. if that were to happen, that would be the hat trick of

forecasts for forecasters. we do not know. there is upside risks in terms of the resilience of the economy today. we have the labor market in the u.s. adding a decent number of jobs. we have consumers that are spending, spending at a slower pace. we have this high inflation environment. there could be an unraveling a financial conditions, a turnaround in the labor market starting next year and it could be or caution on the part of consumers pulling back on their expenses, which would make this recession a bit deeper. we have true member context on the policy front is likely to be less supportive of economic activity. we are not going to get a big bailout from congress in this high inflation environment. lisa: it is hard to get a handle on what is going to happen and what is happening when you take a look at housing prices. -- was talking about that being a massive driver of currency differentials and growth next year. i am waiting for the s&p corelogic composite.

jonathan: [laughter] you cannot even say the full name of that data. lisa: you have blown it for me. they need to rebrand. we will get your view on what they should rebrand to. how quickly is this housing market in the u.s. deteriorating , how much further do you see it going? gregory: i think it has further downside in terms of overall home sales. that are likely to follow suit. we are in an environment where the affordability of homes has deteriorated sharply, that is preventing new homebuyers from entering the market and making investors think twice about entering the market. we are likely to see this ongoing weakness in the housing market, which will feed over time into prices. i think women -- one key element we have to highlight and note the possibility is, while inflation persistence has been the key theme the last 18 months, we should be careful that in an environment where economic activity is slowing globally and when some of the sectors are turning around fairly privately, there could be

more of a drag on inflation going into next year. we could be in for a faster decline in inflation in the backend of next year, i think that is something to pay attention to especially in this context where you have a lot of uncertainty regarding monetary policy. jonathan: it is a dangerous game, wherever this confidence in the global economy is going. is that the point think we should be most humble about going into 2023? gregory: i think we are talking about the framework of navigating this world of uncertainty. we are advising our clients to look at old people scenarios. having one key baseline is not enough in the credit environment. you need to look at a multitude of scenarios that could unfold over the next 12 to 24 months. if you have built that resilience to navigate this world of uncertainty, you are going to be better equipped. take advantage of whatever conditions appear over the next six to 12 months. it is not about banking on one specific scenario. it is about being prepared,

resilient on the talent front, resilience on the organizational front, the pricing front. these factors are important to be able to navigate this highly uncertain and highly volatile macroeconomic backdrop. lisa: what is the one consideration heading into 2023? is it china reopening, the price of energy, the war and ukraine that sets cases? gregory: it is lying at the intersection of macroeconomics and geopolitics. we are in an environment where, if you look at what is happening across the world and china with zero covid policy, the political reappointment of president xi, what is happening in property sector in china, that is having a big impact not just on china's economic activity, but also on the broader context in asia. you look at what is happening in europe, we have elevated tensions feeding into the energy complex, that is feeding into the food complex, feeding into the supply chain strains.

what is happening in the u.s., you have this intersection of political developments, economic developments. all those combined make this very uncertain environment. it is not necessarily one pocket of risk we have to monitor. it is monitoring the whole spectrum of risks around the world and the intersection of geopolitics and accurate economics is the key to understanding the outlook and making sure you are well equipped and well prepared to navigate that environment. jonathan: wonderful to catch up with you, as always. speaking of some risks he is talking to, this is from andrew hallman horst. the house urged by president biden will move forward with legislation to force rail workers unions to accept an agreement that includes a 20% plus wage increase over five years after four of eight unions failed to approve it earlier. a deadline of december 9 and a 60 vote threshold in the senate, passing legislation may be difficult. he goes on to say, a potential alternative would be lengthening

calling off period. this could be the biggest story in america. lisa: if rail send up not becoming functional, that will cause prices to surge dramatically heading into year end. a lot of gained this out because this is the main way a lot of goods get transported along the nation. that is why president biden is trying to go ahead with this. very curious to see the fact citigroup is talking about bullard and williams, both talking about this. i wonder how much they end up trying to respond to this. do they end up pulling a andrew bailey and trying to say, if you guys do that, we are going to have to raise rates more because you may have to counter the inflationary push? jonathan: central banks trying to get involved in negotiations, isn't that something they have to respond to? lisa: how do you respond to it? you are responding to it by raising rates. jonathan: when they go into a speech after they have left the fed.

have you seen some of the antics of yelling at the post federal reserve? lisa: not enough time to discuss this. i know you have disdain. jonathan: i am happy people go out with no money. lisa: what is your motivation to public service if they cannot make bank? jonathan: i think you are not in a good position to be commenting on how much people should earn. lisa: i think everyone agrees on that. jonathan: thank you. tony rodriguez is coming up. victoria green, all coming up in the next half-hour. lisa: so is the s&p corelogic 500, core price. jonathan: someone break that down in 20 minutes. from new york, this is bloomberg. lisa: president biden and house speaker nancy pelosi moving forward to prevent a strike that would shut down the nation's freight railroads. the house is preparing to take up legislation to impose a labor

settlement despite objections from some unions. the labor strike could hurt the economy by crippling supply chains. nato discussing how to improve ukraine's defenses against russia over the winter. speaking in romania, the alliances secretary-general out nato will stand for ukraine as long as it takes. >> this is a critical time for our security and we are sending an important message. nato is here. nato is vigilant and interested to defend every inch of allied territory. lisa: he also said the war has demonstrated what he called the dangerous dependence on russian gas. opec and its allies expected to consider deeper output cuts when they meet this weekend. saudi arabia and its partners surprised traders when they announced a 2 million barrel a day cut back last month. sale prices have faltered since then as demand weakens. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700

journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

>> the yield curve is telling you a recession is coming. it is not here yet, but the check is in the mail. to and tens are inverted. further hikes coming. that tells you a recession, probably a lock. lisa: probably the least contested point of the year, there will be a recession in the united states and will probably happen next year. head of chief investment office at fixed income and strategy joining us yesterday, this is to me one of the most interesting points everyone seems to be saying. there will be a recession. if everyone agrees, will it happen?

joining us now, president and founder of -- there is going to be a recession at your, isn't there? >> everybody expects a recession. because of that, everybody expects the fed to pivot. cutting rates in the second half of the year. everybody expects what is going to drive that is going to be falling inflation. we all love to whisper to each other, the inflation rate is going to come and lower the second half of next year. we all say that. what is happened, transitory never went away. inflation is going to fall, the fed is going to pivot. that is where we will -- lisa: we appear to be having technical difficulties. we will try him again and see if we can reestablish that. what he was saying, there is a stealth transitory that has been taking hold of markets and is perhaps what is underpinning the

belief in rate cuts next year, which is what the market is indicating despite the feds protestations when they are saying, no, we are not going to cut rates next year because we have to compact -- combat inflation and bring it back down to 2%. stealth inflation has been a concern. the short and shallow, is that the new transitory that we are going to be able to come out of this quickly, because inflation will write size itself one thing fed officials keep saying again and again is that, no, it will not. this is different, it has a persistent yield to it and that is the reason we have to hold braids at i percent or more for the entirety of 2023. the market is pushing back because of what jim beyond go with saying, we are saying the stealth transitory argument is underpinning so much of market action. since we have been talking, the s&p was up in premarket trading. it is now basically flat.

the euro is up against the dollar, it has been more of a dollar story than the euro story. 1.0351 there. yields up a touch higher. 3.71, up 44. crude underpinning so much of the story with people saying that could intentionally give more buying power to consumers, that is what evan brown was saying of ubs asset management. if you get more buying power to consumers next year, you could end up with a stronger economy than many people have previously expected because they can keep spending. we heard again from other people that we do have some sort of the inflation that we see with respect to the social security payments, as well, that are going to be risen i believe more than 8% come next year. stealth inflation, jonathan ferro joining us from his other location. really interesting, probably underpinning what here from so

many people about rate cuts next year. jonathan: i thought i had gone away. just bring me back in. you hear it from the -- coping -- speaking to colby, we heard from chairman powell in the last news conference. they believe the risk of doing too little outweighs the risk of doing too much. the biggest fear is that they move away from prematurely, you have a flip-flop into terrio warned about earlier this summer. i think you heard that loud and clear yesterday, with the cleveland fed president said the cost of stopping to high, we want to be diligent about this. there is a risk, some people are worried about this. this bed is committed to over timing. some people thought they have gone too far. lisa: jim was referencing this idea that under their breaths, they whisper, it is coming down more, do not worry about it. we will let you go and prep.

i had to bring you back. that is what i do. mike mckee also here, as we hear about this, as we hear about the fed officials pushing back and we hear about the stealth tightening, do you think people are starting to say it more loudly and there are certain fed officials listening that inflation is rolling over faster than expected? michael: i think they are all listening, looking and keeping their fingers crossed. you do not know. could be a one time thing or they could be surprised again. since they were surprised with the transitory that did not happen, they are going to be more cautious going forward. and a lot of them have said there was not only more tightening in the global system, as reflected in the markets, but there is also a good chance that inflation starts to come down in many categories every quickly. the problem is, the fed looks at the pc index as their metric. the cpi is going to come down slowly because of the way

housing is in that index. it is a balancing act between what the public is going to focus on and what the fed sees behind the scenes. lisa: the labor market, we get labor market data tomorrow as well as jay powell speaking at i believe 1:30 p.m. for a panel. we get the jolts data, which i think is going to be interesting. friday, we get the job support. what are you watching most closely? this is something we have been talking about all morning. all the fed speak hasn't seem to matter, it has been the data in the front seat for the most part. michael: it is still the data in the front seat. i think jolts will be important, people want to know our job opening starting to go away because the fed has focused its whole policy on the idea the labor market is tight because there are so many job openings? we have seen it bounce around a little. does it start to change? we get the jobs report and

unemployment is what people are going to be watching. the fed has said it is going to go higher. a lot of people will make the case the fed is going too far, saying it is going to reflect a lot of people losing jobs. the problem with on employment, it is a lagging indicator. it takes sometimes several quarters before the unemployment rate really starts to rise. it may not be a completely reliable predictor this time. i will throw in that last caveat, this is a weird time coming out of this pandemic. there are no models that tell us what is going to happen. lisa: perhaps weigh in quickly on something you can give a concrete answer on. if the s&p 500 corelogic composite price index were to rebrand, what do you think the rebranding should be to have a more digestible name? michael: i call it case-shiller. [laughter] it has been so long. i am sorry to the s&p, i know

they want to get their name on there. lisa: case-shiller. [laughter] mike mckee, rejecting the d branding. coming up, mary kay henry, international president of the services employees international union. a fascinating conversation, where there is this question on whether that agreement that president biden is urging will get passed through congress to bring the unions to the table. citigroup's andrew hallman horst raising questions on whether he has enough support for that agreement which includes a 25% wage increase over the next five years. in markets, a bit of softening in futures coming up earlier highs. 3,967. this is bloomberg. ♪ for a payroll tax refund of up to $26,000 per employee, even if you got ppp. and all it takes is eight minutes to find out. then we'll work with you to fill out your forms

and submit the application. that easy. innovation refunds has helped businesses like yours claim over $1 billion in payroll tax refunds. but it's only available for a limited time. go to innovationrefunds.com to learn more. ♪♪

announcer: from the world of politics to the world of business, balance of power david westin brings you news, analysis and insight from power players. weekdays on bloomberg. >> live from new york city this morning. good morning from our audience worldwide. futures just about unchanged. the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. training. this is "bloomberg: the open" with jonathan ferro. jonathan: the