>> this excess savings conversation is starting to run out. >> the rocket fuel is coming in a less dramatic fashion. >> we are going to have to see growth weaker for central banks to hit their targets and that has not yet been seen. >> the other shoe has yet to drop. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathon: we are back. it was a three-day weekend for lisa.

it's good to have you back. futures right now unchanged, we need to work out if this will be speeding up or slowing down. tom: it's in the literature and market this morning. the fed's head is spinning. you have the global inflation, the domestic inflation story is a mystery of the path down to what? jonathon: in the growth story is a mystery. the ism yesterday picking up in a way where a lot of people just didn't see it. lisa: and we are seeing people like paul krugman saying when the facts change, i change. i was looking at this one data

point, core goods makeup 1/5 of the data. jonathon: the slow down story is becoming increasingly stale. tom: i have the optimism of those a jp morgan and i think we stagger from every report and we go up to inflation report that is frankly more important than the jobs report we just had. jonathon: cpi on december 13. pepsico is laying off hundreds from the headquarters. is that where we will see the hit? lisa: the layoffs have come in

the white collar space than in the blue-collar space. the people who actually do the work is still necessary in a way that the office jobs are not. tom: you known by theme on the x access he is an expert on wage dynamics. he thinks the wage deterioration will take forever to reach where chairman powell wants. jonathon: let's get the price action for you. equity markets, s&p unchanged. futures going nowhere. mike wilson, can we have your crystal ball? tom: we got a move on to year yields in the curve conversion going back to the early 1990's.

tom: new york rooted 76.16. lisa: mike wilson has an almost telepathic view into the markets. today is the georgia senate runoff. it marks a 51-49 mix. sonali basak will be speaking with david solomon and that will be in about two hours time. brian moynihan later in the morning.

president biden is visiting a construction site in phoenix. we will be speaking to ryan deese in about an hour and 15 minutes. there is a question of how sustainable this is when so many of the jobs that are critical to supply chain are being encouraged to move to the u.s.. jonathon: tim cook of apple's on that trip. lisa: how can they move away from china given the supply and the new man side? jonathon: jane foley rabobank from is this u.s. economy picking up or slowing down? jane: this is going to be a really bumpy ride. there are different dynamics here and you had spoken about

it. if we look at the oecd data, they have labor market shortages. this is in part a demographic issue. if you look at the u.k., almost 20% of us are over 65. there will be a shortage of labor. when we talk about our critical industry, pharmaceuticals, food, energy, it will be difficult to continue without encountering these shortages. you have this issue of fed interest rates irrespective of whether it is 5% or five .25. given that the equity market has

rallied, it will be sensitive to that sort of information that leads us to assume that the fed rate can be higher for longer. tom: 18 of 38 oecd countries are enjoying double-digit inflation. how does your world change or adapt to that? do you become more and dollar centric in your analysis? jane: persistent inflation, labor market shortages but europe is where inflation is quite dangerous because at the moment, we have seen the euro rallying. we have seen a lot of relief and gas and energy. people are optimistic, if we get through this winter and the european economy will be ok.

we don't have that view. if we have china reopening, there will be a lot more competition for that energy, that gas. europe trying to fill up its asked storage units without using supplies from russia, that will be difficult and we think winter 2023 will be really tough for europe. if we are looking at other currencies, i would look at the australian dollar are performing the europe because i think europe will be sensitive to systemic inflation. lisa: australia is getting a bit of a boost after there's central bank rate hike. there was a story in the financial times talking about the reliance of german

manufacturing on russia for natural gas. if some of the worst scenarios come to pass in terms of a cold winter, where do you see that taking the euro with germany's main industry flat on its back? jane: it depends on what happens going into winter 2023. i think there is a risk that we can see parity, we have had a warmer. . the market is optimistic how we will get through this winter and things will look fine. winter 2023 is looming out there, it's a concern. we have a lot of commentary about the deindustrialization of germany. you can look at germany's business model and see a big chemical manufacturer, glass

manufacturer, moved or curtailed operations in germany already and that's not just because of this winter but what could be ahead in the next couple of winters too. europe is still in a dangerous position even though the outlook for now seems to have brightened. jonathon: do you think we have underplayed europe and the energy crisis, sterling and the covid crisis, are we still overlooking that? jane: a lot of the geopolitical safe haven demand for the u.s. dollar. china is reopening, a big demand for energy.

europe facing a very difficult winter in 2023. the market may be thinking the dollar is a better trade and that is something that could mean we are going to have a choppy picture of this peak dollar but it could be a lengthy. of a strong dollar. this could play out for months. jonathon: jane foley over at rabobank . we focused on this massive rate hike, but it is the other side whether it's the european energy crisis, china and covid zero. there is a lot going on outside of the u.s. dollar. lisa: everybody makes the story being the u.s. is doing so well

which is part of the story. if you do get that chop that jane was talking about, what does that do to the leverage on interest rate swaps. jonathon: 11 minutes into the show and we haven't mentioned the world cup? tom: could virgil van dyck be messi and a head-to-head? jonathon: did you watch brazil yesterday? tom: it's a beautiful thing. jonathon: have you seen anthony at manchester united?

coming up a little bit later, amy wu silverman of rbc. lisa: in china, the china outbreaks seems to be tailing off. they reported a little less than 270,000 cases, infections have fallen each of the last eight days. there has been a pullback in the testing regime. bloomberg has learned that the u.s. and the european union are considering new tariffs on chinese steel and aluminum. it would be a bid to fight carbon emission. they would use tariffs to advance their climate agenda.

president biden is likely to announce that he is running for reelection. that's according to the white house chief of staff. the president turned 80 last month and is the oldest person ever to occupy office. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo, 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?

>> don't dance too much. don't spike the football. not before we get into the end zone. we are going to when. >> a vote for me as a vote for georgia values. jonathon: another runoff in georgia. tom: i would go back 40 or 50 years to the giant john mcphee who change nonfiction writing. it had a lot to do when he wrote an essay on georgia from south to north.

particularly, a foreigner up in the north, do we really know georgia? i think it is hugely misunderstood. jonathon: i want to get you up to speed on the price action. equity futures are slightly lower, down .05%. the 10 year yield around 3.56. you have the deeper curve inversion. tom: ian lingen post a near vulgar - volker level. i'm

in ago was some great graphics on how volatile georgia has been in the heart and soul of it is the northern suburbs of atlanta and the vacillation this way and that. one day before the election, how are they vacillating? it does appear they are vacillating towards the incumbent who won the election just a month ago. they did not get to 50% which is why we are doing this runoff. as he is said, he has run for this job five times. we are drilling down here to

200,000 voters. they are focused on the voters that voted for brian kemp but not herschel walker. i was with warnock at his event last night. it was pouring rain. you should be able to see peach street behind me. it is pouring rain. there is so much fog you can't see the tops of the buildings. if this rain does come down to turn out, the weather could be the biggest story. tom: is early voting the story here? joe: it's a massive factor, a most 2 million people voted early. we know they are from democratic

strongholds. a lot of black voters voted early this time. senator warnock has taken his tour around independent voters he could pick off. lisa: what is the importance of 51 votes for the democrats in the senate versus just 50-50? what policies could they go after with just an even split? joe: it gives them more control over the committees. we are talking about the senate. this is where judges are confirmed. this is where nominations are set. when joe biden fills out his cabinet, it's the senate that will deal with that.

likely as we see kevin mccarthy take the gavel. tom: annmarie hordern torrance joins us, what is the best outcome? >> this is in the need to have but it's a nice to have when it comes to the advanced ability on committees and make sure they are getting their individuals and candidates through. you have to look at 2024, he expects the president make an announcement to run. 2024, the republicans have to defend 10 seats as opposed to

the democrats 24. it will be crucial to have this seat for the next six years. lisa: you mentioned john mclean potentially announcing his run. is there any pushback for him to anoint as successor even where he is in the polls and where he is in his career? >> coming off the midterm election he has abused. they lost the house but it was slim. this keeps republicans and check and they will have to work in a bipartisan way. this was the better outcome for the president which is why he feels that he has this momentum to be able to run.

president trump already announced his intention to run. likely, he will continue his mantra going into 2024. people in the democratic party, he is already the oldest president. they are thinking about who is going to be next to lead this party into the future? jonathon: let's pick up on those comments. ron maclean saying i expect the decision will be to do it. it's not shocking to a lot of people. tom: when she says 80, i don't care who it is. how did we get here? speaker pelosi stepped aside

with some grace and steny hoyer did the same thing. when did we become a tok received? you asked the question what's your take on it? i would lean on experts here but i don't have an answer for it. lisa: how much of this is a moment where he is trying to keep consistency so he can push its agenda through? tom: this is a nostalgia back to another generation.

do we need john major to come back and run? that's the equivalent here. jonathon: this president seriously believes that if donald trump is the candidate that he can beat him. bottom line, he believes it. tom: i think so. i can disagree. jonathon: we have the bear market rally. tony dreyer is next. ♪

>> good morning to you. equity is going nowhere on the s&p 500. a break after the chaos of yesterday. futures unchanged on the s&p trade on the nasdaq, up about 0.1%. the russell down after about a month. if you look at the ism services indicator, two-year yield is picking up as well. your two-year is back to 4.3664. on the 10 year, 3.56 nines eight -- 3.5698. the 30 year yield, still

negative. almost 80 basis points. >> oil dropping down again. right on the 75 handle. on oil, the low was november 20. $73.60. i will simply state the chart is an elegant. >> love that you say we do not do chart with an you follow with a chart opinion. we are seeing evidence everyday that slowly and incrementally covid -- china is making its way away from covid zero. i say slowly because we have to look at the policies we are seeing and what they are adapting day by day and week i week. we are not anticipating this full reopening that may or may not materialize. we saw testing requirements stop in shanghai and we are seeing them in beijing this morning.

>> there are others. one is the diesel prices current up in the northeast. i saw a number of blurbs over the last 24 hours for you get a lower gone of gas and diesel, etc. >> lisa has been focused on that. you're worried about that at one point. are you still? >> i am. you can come up with a narrative that makes sense but we are seeing ships being backed up over in turkey, trying to figure out the russian press cap and what is going to happen. the narrative makes sense but the price action less so. >> is there a narrative? tony dwyer, chief and narrative strategists. anthony dwyer has been a confirmed bull for years wrapped around his singular call which is if you do not have a recession, it is tough to go down. when the facts change, he

changes in joins with a short outlook for next year. tony, your outlook for next year is very un-dwyer. >> we come up with great formulas and big words but ultimately what it comes down to is you need money to buy things, do things or invest in things. the issue we have had since last spring is when the fed is tightening to the degree they are, it is restricting the amount of money out there. we were given a lot of money just after the pandemic that i don't know about your household -- my household spends it. we need new money to spend more money. >> i have never seen so many outlooks gaming out turns to a week, a day, or an hour. how do you prosecute earning

equities if the term in the summer of 2023 is so opaque? you do not find a moment to jump into the market. how do you get in if you are more optimistic later on? >> despite being so cautious this year, there were two opportunities to have significant rallies. there was a summer rally which came out of extreme -- -- pessimism. then a same one happened in the fall were you had the year end rally. there is a lot of historical precedent there. anytime you have been down for the first three quarters of the year more than 20%, anytime you put up a range between 8%-12%, we met that, so it comes down to every rally starts with an extreme oversold condition. that is what we are expecting once we go back to lowe's next

year that it will start as an extreme oversold rally that will hopefully be kick started by a fed that is not just taking its full off the market by adding air. >> physically the market is so convinced that it will be down for the first half and up for the second half that's it will ride the ship which will lead to a downturn in the first half. what is going to be the trigger? we have seen from companies things that are not that. >> some people have said that four months ago, things were great. his car prices and everything. but now there has not been enough time for the fed's actions to anchor into economic output. now we are starting to get it. the i.s. in below 50. the household employment data has leaked. we are starting to get the idea that bad news can become bad news. until now, we were in the sweet

spot that caused the narrative for the year end rally. we have seen where the fed has height rates quick enough that it slows goods inflation. we went from the pandemic where, i don't know about you guys, but my house about stuff every day. it was on the front stoop. we went from buying stuff to doing stuff. goods inflation has come down because of the transition to that and the fed. but jerome powell is very clear. it was also evident in the payroll data last week that there is labor inflation that will not peak until next year. the sweet spot that drove the rally was the inflation off the peak. you are not yet at the point where you have a recession. to make a long-winded answer even longer, when you get the earnings declines next year. >> but i heard is we are going

to hear tony go home to his children say santa claus is not coming today. >> i am getting heat already on twitter for calling him a bowl. tony dwyer has been in this market and participated in this market forever when everybody else was here. >> he is not alone. this is the key question that you both are getting at which is when do you get out and when you get back in or do you just stay in? there was a goldman sachs setting -- study saying that they were hinging on a soft landing even as more analysts say such lending is not in the picture any. think those are positions that will get slammed out? positions for example at cyclical companies and if there will be soft and -- softening. >> everyone is jumping on industrials but the time to do that was earlier this year. it is funny.

if you look at a chart, i know tom does not use charts, they seem to peak just before recession starts each cycle. what is happening is typically what happens. then the idea that we are going to have a soft landing. everybody has their favorite yield curve. even -- governors use yield curves. that's use all of the yield curves. any that exist between three months and 30 years. 84 present -- 84% of them were inverted. the philadelphia fed index says any time it hits this level, you have had a recession. indicators being 2.7, anytime you have been anywhere near this level, you have been in a recession or are coming the one. the idea that we are going to have a soft landing means so

much of the data would be historically unique. it would be historically unique if we do go to the session to have already made the low. >> what sectors do you hide in given the dwyer globe? >> i would say the defensive's. remer the range of outcomes for the year end rally was 8%-12%. i would shift into a more defensive exit and exit on a more defensive partner. that means health care, non-energy units. >> what is your base case with respect to the reopening of china? >> i have such a hard time with that because it has been fits and starts. is it a great idea? yes we have seen some changes with the stocks five not want to pretend i am a great global

strategist. all i know is when you have china tightening interest rates and restricting money and liquidity, it is very hard to grow because you need money to do that. >> are one of the best and one of the few that would admit to that. >> you missed yesterday lisa that we had a guy come in with a 55 page outlook that was beautiful all fancy outlook. dwyer is writing on the back of a napkin. like a three-page note that is right to the point and what people want. you can read this in 45 seconds and that is it. there is a place for this on wall street. >> i think he is right. when you speak to people on the ground in china you have questionable coverage of vaccinations in the country and therefore, if you are going to be open in china we have to

member the kind of reopening as we had in the western u.s. and europe. it was very stop start. i wonder if our pastors in their future with regards to that of just how clean the so-called reopening with would be? >> i do not think it can. >> companies have to try. they have to decide whether to build out there capacity. we have seen the moving away from shanghai because of some concerns. this is important for companies on the ground. it is not just theoretical for investors by take your point that it is very hard to get a clear line is respect reopening. >> mr. son of an coming up with sonali basak. that is going to be an interesting conversation. where are we with the bonus? >> do you have a solid full hour with them?

there is enough to talk about. we can talk about the reporting with them and others and the dearth of bonuses for mere mortals at some of these firms. also, you have to ask them about what is perceived whether right or wrong which is there failed consumer bank. i am saying that. ms. basak can say that in the heat of the interview. she will be more delicate than i can. >> that interview coming up in one hour and 20 minutes. lisa: keep you up-to-date with news from around the world. georgia will decide today with the u.s. senate will look like for the next two years. they will choose between senator raphael warnock, a democrat, or a republican, herschel walker.

bloomberg has learned the u.s. has proposed selling taiwan as many as 100 of its most advanced antiaircraft missiles. that deal along with the radar equipment is valued at $842 million. it would only add to tensions between the u.s. and china. the biden administration is concerned beijing is becoming more aggressive toward taiwan. the u.s. federal trade commission is investigating several crypto firms over allegations or advertisements were deceptive or misleading. the agency enforces laws that require truth in advertising, and rules that people know when they are endorsing. pepsico reportedly laying off hundreds of workers at the headquarters of his north american snacks and beverage commission. the company told employees job cuts will have the company operating more efficiently. that will cost employees about

300 thousand people worldwide. intel is on track to regain leadership in making semiconductors. intel will reverse market share losses to rival nvidia. the company is relying more on equipment vendors for help instead of trying to do all the work itself. global news 24 hours a day, on-air and on newbury quicktake, powered by more than 2700 generalist and analysts. 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?

>> we are likely to see the euro area in technical recession. i expect that q4 this year, we will see a very slightly negative gdp number and we are likely to see that for q1 next

year. on the other hand, my expectation is to not see 2023 as a year of recession. >> fantastic to catch up with the irish baking -- banking official. they will be anticipating a technical recession. >> we sometimes see these and we are like ok, an important official like that and has experience in new zealand rated but i started at the big and broad euro cd. >> a slow down to a 50 basis point hike in december likely but we should expect to maintain our call for another 50 basis point hike in february and a terminal range of 555-550. >> that is the key determinant.

and as be clear at the end of the year that can we all agree on andrew hollenhorst and his team? >> i think they were laughed at in spring of this year when they started to talk about how far the fed might push it but it was the right call. >> deutsche bank had the recession call early and andrew hollenhorst had the -- vector. the chief u.s. economist at citigroup joins us. i'm going to cut to the chase. the fancy math of the bloomberg financial and that is not good for powell and goes against your thesis. we are accommodative. it is in research notes this morning. they were off of the chicago financial conditions series. how much of these measurements are going against the chairman or the fed? >> i think you are right.

going in the wrong direction from what share -- chairman powell would want to see. i watch these every morning and every morning i am thinking, what is chairman powell thinking when he sees this? i think that is true today and was true after his comments. the brookings institution a week ago, where he was trying to send a hawkish or neutral message and the market took it as dovish. it is just more hawkish risks down the line. >> if we extend the x axis out and remove to a higher nominal rate, even the more advanced real rates, does that give our economy time to get used too a new higher rate regime? >> i think the idea was slowing down because it gives the fed a chance to evaluate in real-time what has been the effect of raising interest rates and tightening financial conditions? see that in the housing sector.

that is where interest rate policy is very potent and effective. the issues that this fed is facing is a really tight labor market and they are trying to loosen that with a really blunt tool which is interest rate policy. not clear that has moved far enough yet to see that loosening. >> warmly missing? we keep thinking there will be a much more sustained downturn. john was asking earlier, is this economy speeding up or slowing down? we cannot tell based on the recent data. what explains the surprises we keep getting? >> you have seen some areas slow down who are talking about housing which is going to be reversed. good spending has changed and got to weaker. we think back to all of the savings that built up the last couple years, that has come down. it looks like there may be even more of the excess savings to work through.

look at credit card balances which are rising. that cannot continue forever. consumers are under levered. there is a lot of room to grow credit so that process is underway. all of that is stoking continue demand. as long as demand is out there, you are going to see terms that want to hold on to their workings. very hard to loosen this labor market. >> we are hearing about white-collar workers getting laid off first. exactly to your point of the rank and file that make things go on a tangible level are needed and necessary. how much do you think a soft landing is off the table despite the fact so many people are betting on that being the outcome? >> i think we need to be clear on this. it is an unfortunate reality to acknowledge the likelihood of a soft landing is probably not happening. yes it is possible but we need

to be realistic. the balance of the historical evidence and that inflation is running so high and it is difficult to bring that inflation from these levels. if you acknowledge those facts into acknowledge we do have a wage praise -- a wage price spiral. there is no question wages are rising and prices are rising. it is a self reinforcing dynamic that will likely take a recession to bring inflationary forces back down. >> in what point is a financial accident going to be the trigger for a where rapid decline rather than just waiting for godot confirming their experience further downturn and specific data? >> think that is when you find a bounce in financial markets in the real economy. financial conditions tighten very aggressively if not loosen from the titer levels and we have seen the economy slowed

down in sectors but have not seen a broad slowing or cooled demand to bring inflation down. it could be the case that financial conditions continue to tighten further from here. then the risk that there is a more significant breakdown in the financial sector becomes higher. king at the world today and the u.s. in particular today, pretty clean consumer balance sheets. all of this makes us feel more comfortable about the ability of the economy to withstand higher interest rates. >> what drives me nuts here, maybe it is my fossil them, do you know what castle said for me yesterday? >> do you want to repeat that for those who missed it? >> i go home and -- is screaming at me. we will talk about that in a minute. older people know that we somehow survived a 5% terminal

rate. the youth in america think we are going to die. can't we survive where we are going to with a citigroup call? >> there is a really important concept that we talk about all the time but is important to emphasize which is the nominal interest rate minus inflation. that is really what i think officials are focusing on more here. we just saw in the wage stated that there is wage growth that is 5% plus. we have known for some time. and the price inflation data is 5% plus. when you look at that, we were saying 5% policy rates or 5.5% policy rates with upside risk to that. that is because getting to 5%, we get interest rates back to zero. if you think real interest rates need to be positive, the fed would move jan that level. to your point, in a economy that is with high inflation, 5%

interest rate should not be surprising. >> andrew hollenhorst of citi. i thought it was unprofessional that the doctor share his public opinion so publicly with our audience. just straight up telling tk to loosen pounds and brutally. >> i asked about vitamins for seniors if he said i do not know anything about vitamins but you need to lose some weight. >> do you have something to add? >> no. >> we are back to 10-0 full-time. -- tang zero full-time. >> says going to sound quite familiar to many of you i am sure. this poses significant downside risk for evidence of core inflation peeking should pave the way for more risk-taking in the second half of 2023.

that is not a dig on only credit and that is in europe, not the u.s.. we are hearing that from every bank on the street. the second half of 2023 is going to be a better place to be for equity markets. >> it is a joke like a double pivot or triple pivot. well said. >> thank you. >> can i notice something i learned yesterday? a roco and spain are nine miles apart. you swim the english channel wants and it was like 18 miles or something. i had no idea. this again today, they are wicked close. >> are you watching that game? >> yes. [laughter] >> from new york, this is bloomberg.

>> this excess savings conversation, from my perspective, is starting to run out. >> the rocket fuel for consumer spending is in a dramatic fashion moving >> to say we are already headed into a liquidity crisis is a little immature. >> we are going to have to get weaker for banks to hit their targets. >> we have shoes to drop that we are going to have to wait for in 2023. announcer: this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. >> good morning. thi