>> we are switching from inflation fears to recession fears. >> we are in a tough spot right now, but i think more deceleration is to come next year, unfortunately. >> we are going to look at a fairly substantial amount of downgrades. >> the recession is not a question of if, it is a question of when. >> we have these economies growing essentially zero next year. if u.s. fun rates go to 6% or 7%, that can become negative pretty quickly here.

jonathon: live from new york city, for our audience toward wide -- worldwide, good morning. tom keene will come back in a couple of days. equity futures not doing much this morning. slightly positive through much of this morning, up 0.2%. a five-day losing streak, trying to stop it becoming six. looking ahead to next week and a fed decision. lisa: it did not feel dramatic, but a reset in terms of what people are expecting. it is settling into the theory that we are hearing from everyone. bad first half, good second half, done. jonathon: is that too cute or what? it gets bad in the first half, the fed has to back away and they cut this massive recovery trade. you don't want to miss it. lisa: we have asked people if this is too cute. they say there are a lot of variances. there are a lot of bumps and they are important.

what really stuck out to me and not to mock the thesis because it makes sense, it is not about what is going to happen, it's what you want to own on the others. to sort of pick up now versus waiting for that perfect moment where you can understand we are -- jonathon: i think it makes sense and everyone came up with her. because everyone has come up with the same thing, i am how we trade it. that's my question going into 2023. lisa: that's the reason you asked and why we have asked why not just by equities now. the question is, what will be the leadership? that's why your interview with the bank of america was very interesting. it will come with the big names, they won't dry the same kind of shifts and gains that you see under the hood. jonathon: hear more of that and more this, too. lisa: i had a dog named that. jonathon: you sound like tom. he have to stop naming dogs and pets weird stuff. lisa: [laughter] jonathon: is that what that

chair does to people? yields up by three basis points, 3.44 75. euro-dollar going nowhere, 1.0507. we will keep coming back to this on crude, the idea finishing lower on the year. $73.26. lisa: did you hear what ellen wald said, that opec-plus was perhaps right to not cut production? they might have to buy. jonathon: you know what the white house would say. steady yet. if we did not drain the spr, where would crude be? and then you have the s&p saying we are right, look at what prices are. lisa: and she pointed out they are still putting out a release from spr. this market is very unclear and a difficult time to understand, especially if you do expect a pretty bad first half, even though you do expect a good second half. 7:00 a.m., this is what i am

watching. christine lagarde is giving an address. a sixth annual conference. does she talk about the prospect of over-tightening? does she pushback against some of the recent easing and financial conditions? does she reiterate what we heard from chairman powell or does she press on, saying recession will not bring the market down to where we need it to be? seeing softening and a little bit of a tight labor market. lululemon and costco earnings. i need to put out a correction. lululemon does put out suit jackets for men. i think you are asking about where you could find suits. i would just like to point that out. [laughter] costco is also reporting earnings out of -- after the bell, down about 50% year to date. do we see a downshifting and terms of upper-class and middle-class consumers going to lower cost companies, grocery

stores, goods as they face inflationary pressures? jonathon: i've heard a lot of comments from people. no chance, blasphemy, sinful stuff. lululemon suits. we are going to keep talking about this. anastasia amoroso, great to catch up with you in the studio. the blackstone chief dismissing concerns over the $69 billion real estate fund. here is the quote. "the idea that there's something going wrong with this product because people are redeeming is conflating completely incorrect assumptions. this was not meant to be a daily fun with liquidity." can you give me more of what has been going on here? anastasia: this is an industry trend. there's two stories to this. the redemption story and the limit on that. what i would say about redemptions is that it should not be a surprise that investors

want to redeem. if you look at commercial real estate and the performance of it, the first half of the year has been rocksolid, up 9% while the portfolio's down 16%. if that happens, commercial real estate exposure might be a little bit out of balance, over and above the allocation limits. investors moved to right side this. but there's the other side of this, which we know the environment is likely to weaken in the next couple of quarters. i think some are moving to lock in gains because they expect depreciation. that the redemption story. it's expected and i don't think there is anything earth shattering about that. the second part of this is limits on redemptions. i truly believe it is in the investors best interest. you pointed this out. these are some liquid nontraded products. the underlying is the liquid commercial real estate. imagine there were no limits on redemptions.

what would investors have to do you? they would have to sell all of those properties. that would cause more of a poor feedback loop. i think this is a very good thing and breaks the negative feedback loop cycle. it protects the investors that are staying in the fund. by the way, none of these products right now are struggling with performance per se. none of them are paying is to be shins. they are paying income out to their investors. i think a lot of the negative sentiment is overdone. jonathon: do you think we can ultimately avoid fast sales? is this sufficient? anastasia: i think some assets will have to be sold. there's no avoiding that. but if you look at recent trades in general, a lot of products have rightfully so put limits on products in case they do see redemptions. that in itself should prevent us from having mass fire sales on commercial property. we have seen the reset in rates.

we have not seen a reset in cap rates. if you look at the cap rate on multi family, it is 4% and 4.5%. that's rock-bottom levels. i don't think that's going to incentivize investors to step into the sector until cap rates move higher. the other thing that is not going to happen for commercial real estate is the analyte growth. the operating income growth is likely to slow down. 7% and 8% down to 4% next year, assuming there is no recession. i think we should assume there is a recession, so it will likely be slower. herein lies opportunity for investors. i think the right move is you stick with some of the exposure, you get the income. yet paid while you wait. then, when we see the reset in property prices, you step back in and add more to those real estate portfolios. lisa: there's a larger issue, which is, are we understanding the vulnerabilities of a private

market that includes a whole host of real estate assets that isn't trading, that hasn't repriced, that you haven't seen massively go through some of the turmoil you're seeing in public markets and is becoming subject to more withdrawals? do you foresee some kind of a coming turmoil as a result of that, especially as funds try to transfer into other public assets that are now offering real yields? anastasia: there's definitely going to be a further reset. i think anybody who knows anything about private markets knows it will happen with the lab. it may not happen to the same degree, but it will happen. to your point, rates have already corrected. they are down 30% or so. i expect some of that will show up in private market valuations. whether you are in private credit, private equity, private real estate, you should expect lower marks in the coming quarters. for investors invested in some of the funds, that's the

expectation, but you are getting investors looking for opportunities. i think 2023 will be the year of opportunities. to your point, the second half -- the first half is your reset in risky assets and you start to get back in. what do you get back into? you buy private equity, commercial real estate, private credit, once you have seen that reset next couple of quarters. jonathon: what do you make of that being the consensus? does that make you slightly uncomfortable going into 2023? anastasia: i have consensus and nobody likes that, but we sort of know what the rules of the road are. we know what the fed is trying to solve four. we know they are trying to accomplish below potential growth and trying to bring down inflation. you have to get rates to 5%. everybody sort of knows the formula. given the variables, that's what we are solving poor -- solving for. if you look in the first and second quarter of this coming year, consensus is -0.1% gdp

growth. if the rate goes to 5%, that can be a good recipe for risky assets. jonathon: can i ask you about the balance of risks? is there more chance the recession gets delayed or brought forward? when you give me the answer to that, can you tell me how trade would have developed the other way? anastasia: i think there's a greater chance of the recession being brought forward. there are estimates out there saying this is maybe not a 2024 event, but for that to happen, he had abnormal fed hiking conditions, which is the fed's hiking when the economy is still strong. but they have been hiking while the economy is weakening for the last six months. the typical relationship where you have the yield curve and 15 months until recession, i don't think that holds this time around. i think q1 or q2 of next year is when this slow recession occurs. i think that is why people are starting to pretrade now, to

your point. we think december will be did -- will be positive for equities, but the consensus is the first half will be weak. everybody is pre-trading. i think we are pulling this forward. jonathon: ellen wald --anastasia amoroso of i capital, thank you. lisa: it's a very complicated issue. if there is a downside surprise, people believe the market is slowing more, i am struggling with these nuances. oil prices coming down, gasoline. it gives more money to spend. discretionary spinning goes up, then he had this weird, bumpy cycle. are we accelerating or not? are people feeling better or not? it was easy money. jonathon: i hate that phrase. it doesn't feel easy for anybody. in the next hour, jim polson. this is bloomberg.

lisa m: keeping up-to-date with news from around the world. with the first word, i am lisa mateo. ukraine's president volodymyr zelenskyy is warning of prolonged power shutdowns due to russian attacks. in his nightly address, he said capacity was constantly being expanded, but it will be possible in the short term to return the power grid to its prewar state. hong kong is taking another cautious step toward a full reopening. the city has shortened the isolation period for people who test positive for covid and their close contacts. lust, inbound travelers will be required to take two fewer rapid tests. hong kong has been slowly rolling back the covid rules that cap it isolated from the world brother pandemic. president biden will announce a $36 billion bailout for strangling teamsters union pension fund today. it will help shore up one of the nation's largest multiemployer plans. it will deliver help to the presidents union allies after he

angered many in organized labor by signing legislation imposing a contract on railroad workers. elon musk bankers are considering providing the millionaire with new loans backed by tesla stock. the move is one of several options the morgan stanley group may take to soften the blow of the $13 billion of debt must took on by twitter. the company could face about 1.2 billion dollars in annual interest costs under the current debt structure. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i lisa mateo. this is bloomberg. ♪

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>> we are switching from recession pierced of inflation fears paired the bond market is telling you that inflation is a thing of the past and the fed has done too much. i think that is what likely

drives trading in the next few months. jonathon: that was the investment -- that was the message. lisa: i would ask which bonds? is it uniform indexing or un-indexing? jonathon: they ultimately mean treasuries. it is part of a 60/40 portfolio. when it comes to credit, i hear a lot about investment gray. when it comes to high-yield, that's where there's a bigger conversation. the consensus on high-yield is the overall index has improved markedly compared to what was in years gone by. the argument would be because of those factors, if we get a recession or downturn, you don't get spreads as wide. the pushback comes from people who just think if we get a downturn, spreads are not going to wait for that. lisa: the problem is the right aspect will probably come down.

that's what people are betting. you already solve the rate selloff and next comes the credit selloff. the deterioration in the overall economy, you don't want to own the most leveraged companies. that's what you're hearing from a lot of people. jonathon: equity futures just a little bit higher to kick off trading this thursday morning. we are higher by three basis points on the 10-year. 3.4493. one hour 12 minutes away, we will have jobless claims for you. a couple of phone calls. how do you feel about inflation? lisa: i will make you feel included. jonathon: they cut the tails off of someone comes in at 20%. lisa: [laughter] are you going to try to game the system? jonathon: 25%. i am in the hyperinflation cap when they call. lisa: you have just been blackballed. jonathon: they are never calling me. let's talk about something more

serious. this from vladimir putin, the russian president, talking of russia's nuclear arsenal in the last 24 hours. saying the following, "we won't brandish them like a razor, running around the world, but we of course proceed from the fact that they are there. this is not provoking expansion of conflicts, but a deterrent, and i hope everyone understands this." maria tadeo in london. your response to those comments by the russian leader? maria: whether you think it is bluff not not, when vladimir putin talks about nuclear, you have to listen and you have to pay attention. the response of course from western officials, european officials, is that a nuclear war cannot be fought because it cannot be won. that is a level of destruction that we would see. i know european diplomats are not even willing to use the word. the french president talks about capabilities. he does not even use the word nuclear. but the two things i would say,

and this is factual, is that every time russia encounters problems on the battlefield, vladimir putin likes to bring this issue up again. the second point, perhaps connected to this, there is a big debate about weapons for ukraine. but the type of weapons for ukraine, meaning a long-range that could potentially hit russia. that is the real message he is trying to pass on. if you give ukraine long-range weapons and russia gets hit, you have entered a new phase in this war and that means real escalation. jonathon: in this past week, summer new hope, and we have done this several times in the past nine months or so, that perhaps the u.s. leader and russian leader could open talks. we heard from president biden that he is not shutting the door to it. we heard that vladimir putin would be equally open to it as well. where are we with that kind of thing? maria: for the time being, it is silence. you speak to the europeans,

emmanuel macron says he is willing to meet with him if it takes this forward and you see a diplomatic solution. the problem is, at this point, it is ukraine that will have to set out the terms. the ukrainians have been very clear that this is not the time for diplomacy yet. they want to see more victories on the battlefield and they remain, and this is incredibly important to stress, convinced that they can get everything back. that also means crimea. lisa: how much, anne-marie, does this mean for more weapons from the united states? how much is there willingness to pump more into this, given the growing pushback? annmarie: at the moment, it is the same. the united states continues to send aid. we just have that defense spending bill. you have republicans signing up for this, such as mitch mcconnell. he is behind defense and financially going to ukraine. we have in january a fresh new house.

republicans have control of that. the individual that is likely going to be speaker, kevin mccarthy, we have talked about this. he said "there is no blank check of --check anymore." he has walked this back before. the issue has become, we want more oversight on aid and where the money is going. one interesting thing maria pointed to that i would like to pick up on is that when vladimir putin talked about nuclear, potentially he is trying to signal about ukraine making inroads into russian territory, which we did see with those explosions not that far from moscow. what year from the united states is that they are not encouraging that. they say that is ukraine's decision, not something they are actually encouraging. what the west is trying to do is, they do not want escalation in this crisis. lisa: but that's a hard thing to do if you have bombs that are hitting near moscow. how much conversation is there, perhaps off the record, in the

background, with the u.s. morning ukraine against any kind of escalation that could lead to some sort of broader conflict, especially with the prospect of nukes on the table? annmarie: they say they are not encouraging this. this is not something they want, but there is the washington journal report out that they had amended the range of those high margins. we also know the united states has not gone to the next level in sending even longer-range missiles. this is something they really want today. they want to make sure that while, yes, they are helping ukraine, sending tens of billions of dollars, making sure they are getting weapons. also, i saw a headline about estonia. united states will be helping and sending high marks there. yet, at the same time, they want to make sure they keep the centralized. they do not want this escalating, because once you have more of these missiles potentially going into russia, that is a writer risk of western countries, i.e. the united states and nato, getting involved in this war.

putin said yesterday he expects us to be lengthen. jonathon: the president has done a pretty decent job of keeping on the outside. i think a lot of people are congratulating him on that drought this year. the other issue is georgia, a win there. coupled with falling gas prices, a summer of legislative successes, it makes it more likely that the chief of staff will depart. can you weigh in on this reporting coming out this morning? i've heard this about a million times over the last 12 months. annmarie: there's always rumors going into a midterm election and coming out, what is the shakeup? these are taxing jobs on people in their families. you work 24 hours around the clock. the president wants to keep the chief of staff. a number of individuals and allies want him to stay in the job. i think people familiar with the matter say he has been in the job longer than his predecessors.

a shakeup for this incredibly important position. there is a number of wins in the white house, so he would be living on a high note. we know that ron klain has been obsessed with gas prices. that "washington post" report that when he first wakes up, he checks gas prices. this would be a good time for him to maybe say goodbye. jonathon: annmarie downing d.c., fantastic to catch up with you, alongside maria tadeo out of london credit suisse, our latest reporting reads as follow. "they expect nearly all of those rights to be exercised. bank rates in the deal currently expect investors take up 90% of stock on offer." this according to people

familiar with this, asking not to be identified because information is private. it looks like capital rates will be somewhat of a success. lisa: you are not seeing a pop in the shares. a lot of questions around credit suisse. not only will it implode, but what does it look like? what is its role going forward? jonathon: what do you want to be when you grow up? that's often what we ask european banks and can't get answers. we talk about two handles. lisa: it just shows you the lack of faith people have had and lack of conviction. jonathon: futures positive 0.2%. from new york, this is bloomberg. ♪

david: j equityo market pushing higher through most of this morning. on the s&p 500, futures positive point two percent. on thenathan: small caps up .3%. picking up on the bond market, two-year right now for 28 - 4.2 8. john mentioned the be mode note. two-year faces a or 50 fed's rate and a higher sum of economic projections. higher. plot at the fed meeting

next week. i keep going back to a few payrolls ago. got close to 4.80 on a two-year intraday. lisa: hollen horse came out with, we have been perplexed. our kits are pricing a terminal fed funds policy above current levels but arising probability of cuts in 2020 three despite commentary to the contrary. jonathan: it is bizarre. it makes sense for some people. however far they go, they are going to cut it back in the months afterwards. lisa: the fed is saying we are not going to cut. we are going to hold them there for a long time even if we are dovish. people are saying, we do not buy it. jonathan: is that fed credibility? i think they want to signal type policy for a long time. i think they want to signal no

interest rate cuts. the chairman has told you at the last news conference if we cannot correct it with interest rate cuts, he is telling his part of the playbook. lisa: it is so annoying, we are saying this, but going like this. calm on. this is a retaining. if it is a game, that it's a credibility issue because they do not have trust in what they are trying to signal to the markets. jonathan: it is not exactly a game. you know what i am saying. crude wti with a possibility to close the year negative, up 2.4 percent. brent crude up -- brent crude at $78 a barrel. what happened? lisa: just wait. it will happen. here we are with china potentially reopening, i do not understand the story. it is complicated. a couple names catching my attention, rent the runway shares skyrocketing this morning after reporting that are than

expected earnings. it is fascinating as you see every buddy going back to work, this is a reopening story and how much they see subscriptions going up as people try to dress up and go out of lululemon pants. jonathan: have you used this? lisa: i have. it is fun. i do not know if i have the attention span to go with it. jonathan: i thought it would go away after the pandemic. i thought people would be weird about sharing clothes. that is what i thought. lisa: i see people who do not wear masks and cough all over people. we are back to normal. reopening story from china, yum china up re percent. wynn resorts, up as well. when macau is relaxing rules for chinese and overseas visitors who have seen pops in casino stocks. you are seeing people buy into the front run of the reopening story. is there a pain trade, it is not easier is my guess. jonathan: stop, start.

we spoke to damian sassower our yesterday, you've got to decide is this taking the next step towards a full reopening or is this about policing the people who went out a couple of weekends ago. do we get by the end of 20 23 something that looks like a full reopening and do we experience -- we experienced in the west, we didn't have a vaccine. we saw in europe, i was there. we worked reopening, locking down again. i just wonder what will happen in china the next couple of months. lisa: there is a lot of tension in companies. i think about the tesla news, demand is going down in china. maybe we do not have to be as committed to being in that market as we have been. jonathan: let's get to the bond market. greg, always great to catch up with you. bonds are back, bonds are back. >> i think bonds were back.

we have had a stupendous rally the past six weeks. we have come down -- a space i like a lot, mortgage-backed have come a lot. i thought there were good opportunities back then. i would posit little bit. i think alleyway shuns are rich and there is going to be a bumpier couple of months ahead. jonathan: where on the curve is rich? greg: the long and. 10 year treasury, probably three and three quarters is rich. it wouldn't surprise me to test for percent to the first quarter of 2023. you're talking about breakeven inflation at 220. that is a real hurdle. long end is rich. short end is a target. lisa: for percent fed funds rate. 4% 10 year yields paired what does that mean in terms of the economic outlook? that the fed will not go as far as people think and the

inflationary impulse will be more protracted than a lot of people are pricing in? greg: we think as we get into 2023, the market will settle. there is volatility in between. we are not looking at the next two or three months. we are looking at where we are in the end of 2023 into 2020 four. a lot of our clients are long-term investors. we went to put's in their portfolios they will hold for a period of time. there valuation for the 10 year once we merge through 2023 is in that three and three quarters or 4% for treasuries. lisa: that is shocking to me. i am looking at a market that has grown up under this idea that treasury yields would be under 2%. how does that get completely transformed as companies have to lately refinance any 4% treasury yield environment? that is a different scenario. greg: there are a couple things going on. huey something of the past. -- qe is something of the past. we also think longer term

inflation is going to be above the 2% that the fed is targeting. it is something the fed will have to wrestle with longer. 3% is perhaps the right number. there is a lot of fundamental things going on with the u.s. economy as we emerge from covid. think about work from home, the gig economy, quiet quitting. it is going to make incentives to work a little different. think about what is going on in terms of on showing her you see the tsmc plant that broke ground yesterday, that is not going to low us as ship producers globally. think about the investments being done in decarbonization. that is going to raise basic mobile costs and i think we will settle into a level of inflation higher than 2%. jonathan: we have had a multi-decade bull market in bonds. every cycle, lower lows in the treasure market. lower peaks in the fed funds hiking cycle, as well. is this something you think is going to change in the next

several decades in the way it did over the last three? greg: yes because if you extrapolate those lows, you get -10 rates. i think in the experiment had over in europe, that is not going to happen again. negative interest rates are tossed aside as policy. i think because of fundamental structural changes, you will see increasing rates. not back up to the 8% or 9% we saw in the 1980's, but i think the market will get comfortable with the percent or 4% sovereign debt yields. jonathan: this is how to answer. go with me and explore further. do you think in multiple cycles we could see higher peaks in fed funds? is this something that feeds on itself over time? greg: without the political environment changing, that is unlikely. if you truly talk about stepping in and cushioning some pain we will have to go through with more physical stimulus, what is going on in england they are talking about massive issues of bond -- jonathan: you brought up the

debt in england. the push back to this would be, we cannot do it. we have added too much debt. that is what is behind the bull market the last several decades. the lower peaks in fed funds in every cycle was this belief that ultimately this economy cannot stomach it. we've got too much debt. do you push back against that? greg: i do because i do not think the level of rates is set by long-term expectations about inflation. i think inflation unemployment trade-off the fed has to deal with, i think they will settle for a higher rate of inflation if that means we can keep unemployment at the 4.5%, rather than 5% or 6%. if you are talking about 6% on up limit rate, people will say give me more on -- give me more inflation. lisa: people have been saying it is shocking the market even how much debt is out there has survived and sustained itself as well as it has. it seems this is an environment that could be protracted.

how does this change the consensus view that credit could be a fertile and good place in upcoming years? the default cycle will not necessarily be that nine if you have a 4% 10 year yield longer period of time. it is not that far away from high year bond yields were. greg: a 4% yield is ok. do not think of it in terms of 3% real rate, that is too high. he corporations cannot deal with that. inflation at the racing prices if they are able to pass that through, they are comfortable with 3% inflation, paying 4% nominal coupon and make the capital equation work. lisa: do you expect stock investors to come to you instead? stock investors who went from income to say, bonds or the place to go and divert money away from equities and risk assets? greg: it is going to be a competition. if you can lock in a 4.5% or 5%

coupon, is going to be attractive for income investors. jonathan: were you busy this year? are you getting busier? are you getting new clients that are coming to you in a way that haven't before? greg: seven years in the wilderness as a fixed income investor, it is great. jonathan: i hear the same from the pimco guys. lisa: so excited. we are cool again. jonathan: no, they are cool. you are still laughing. why? lisa: you look at me and you're like, you are not cool. jonathan: relatively speaking, i think the fixed macro guys are cool. that is relative to other people in the market. lisa: [laughter] carry on. let's look at the markets and move on. look, it is fascinating when you get to see eyes light up when you start talking about yields and spreads and people start showing value. it is a huge change. jonathan: what a stick. lisa: i do not know.

so far, we have seen a term in this rally. citigroup's andrew hallman horst says it befuddles him why there has been such a incredible rally. there is steve majors aside and most of the people. jonathan: this is greg staples, eric nelson, i think the long end is too rich. a few times in the last couple of days, even the guys at -- said the same thing. lisa: it is not a wholesale buy, it is a nuanced call. jonathan: coming, jobless claims. then, we catch up with kathy, chief economist at nationwide. this is bloomberg. ♪ lisa: the european union has announced a nine set of sanctions against russia and it includes restrictions on drones and more chemicals and technologies used for military purposes.

the measures were made public hours after russia's president vladimir putin warned the threat of nuclear war is rising. bloomberg has learned the netherlands is planning new controls on exports of chipmaking equipment to china that could align touched trade rules with u.s. efforts to restrict beijing's act 62 high-end technology. washington has been pushing allies to join efforts to cut off china. in peru, the country's sixth president in four years begins her first day in office. trying to build a cabinet and restore confidence in the economy. she took over wednesday after president pedro castille tried to suspend congress and call for a new constitution. castillo's moves were described as an attempted coup. congress voted to impeach him and now he is being detained. unilever considering selling its portfolio of u.s. ice cream brands. bloomberg has learned brands such as wires and klondike could bring in as much as 3 billion dollars. international labels ben and jerry's and magnum would not be

part of the deal. ceo alan joe pez indicated unilever would look to divest certain underperforming businesses. more than 1000 new york times newsroom workers had a one-day walk out today after a stalled contract according to the new york times, which says the company and the new york times guild have failed to come to an agreement on salaries, health and retirement benefits and other issues. employees have been without contracts since arch of 2021 -- march of 2021. global news 24 hours a day, on air and on "bloomberg quicktake." i am lisa mateo. this is bloomberg. ♪ even if you got ppp and it only takes eight minutes to qualify. i went on their website, uploaded everything, and i was blown away by what they could do. getrefunds.com has helped businesses get over a billion dollars and we can help your business too.

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from one company committed to building a world that works, to three that will focus on a future that does too. this is ge healthcare, creating a world where healthcare has no limits. this is ge vernova, helping generate and move the energy that our world needs. this is ge aerospace, advancing flight for future generations. this is the next generation of ge. >> look, a recession is not a question if, it is a question of when. we think a recession will come at some point. maybe late 2023. the point is, between now and

then, markets have large -- both equity markets and credit markets. jonathan: that was alessio of invesco. a different view going into 2020 three, talking about overweighting equities yesterday, increasing risk. saying the recovery trade is right now. lisa: talking about how perhaps the base case consensus is wrong. what happens if this recovery or if this sustained momentum last longer than people think and we do not get that downturn until the second half or first half of 2020 fear -- 2024? jonathan: can we erase some of this at the opening bell? might depend on what happens with jobless claims 43 minutes from now. yields high up by another basis points or so, for basis points on the session do 3.46. stronger dollar, stronger euro, weaker dollar.

almost $74 a barrel on wti. negative on the year so far. let's see if we can change that going into year-end, even with this china reopening story. this the commonest -- communist party flagship people's daily local newspaper across the country. here is the quote from commentary. the past three years, the virus has become weaker but we have become stronger. we have gone through the most difficult moment. are we truly on a path to reopening in china? lisa: does the market by we are? on margins, yes. it is going to be rocky. what does reopening look like? we have talked about the idea of reduced testing, but you have to be quarantined if you've got contact with someone who has covid for a period of time. i do not understand what the nature is of what the reopening looks like. jonathan: let's get to tom on that, the chief economist for bloomberg economics. what is your read on what is developing in china the last couple of weeks? >> if you would have asked me a

few weeks ago when is china going to make substantial pivot towards reopening, i would have said, march 2023. get through the winter, get vaccines into people's arms and reopen. i have been surprised. they have moved substantially earlier than that. the pivot is already here. you read about it in the people's daily today. going forward, it is going to be far from smooth sailing. we know from experience around the world, the -- when you reopen, infections rise and sadly, hospitalizations rise and , yes, deaths rise as well. china hasn't got to that moment yet, but it is coming in the next few weeks. when it does, there is the potential for another pivot. does china -- on reopening and say, we have come this far, let's finish the job? or, is there an attempt to reimpose controls to contain what could be a public health

emergency? we do not know what is going to happen at that moment. until we do, it is hard to make a definitive call on the outlook for china's growth or global growth or global inflation or what the fed is going to do in 2023. jonathan: if i gave you a pin right now and ask you to draw a chart of what gdp will look like in 2023 in china, do i do a lot of up, down, reopen, close? tom: i have given china's government a lot of credit for their capacity to control the virus over the last three years. yes, it has imposed a enormous cost on china's population and we saw that bubbling up in the protests in the last few days. but, they have been hugely successful saving lives. just a few thousand people dying from the coronavirus in china so far. my question going forward is, can you be half locked down, or is there a point where the virus

just spreads so far that returning to lockdowns is not possible? is the path from here just a reopening one? if that is the case, if you take reopening and the boost that gives to gdp, additional support to the property sector which is already moving into place, and you take a low base for comparison in 2022 --42023, we could be looking at chinese growth around 5%. lisa: we talked about how the protests possibly helped accelerate this process. is that what is going on, or is it that you are seeing international corporations pull back from china? we saw this morning tesla shortening production hours of one of its factories in shanghai. it is not alone and not because of the supply chain disruptions. it is because of the lack of demand in a subdued chinese economy. how much is at the forefront of the minds of the people's bank of china and the economist

party? tom: there has been a remarkable shift in the mobile view on china over the last few years. -- global view on china over the last few years. heading into the pandemic period, there was still a lot of optimism about chinese economy with huge growth potential, with a government that basically got it on the importance of markets and opening and the opportunities that brought business and investors. if you look at the situation today, you've got businesses who cannot get their executives into china. you've got businesses that cannot sell in china because of lockdowns. you've got the drag on growth and sentiment from the property lockdown. the global view on china has swung from a lot of optimism to a lot of pessimism. now, it seems that message is starting to get through in beijing.

after party congress, that crucial moment in october where xi jinping got installed for a third term and got his loyal followers into the standing committee, we have seen a series of moves which look aimed at addressing pessimism and turning it around. exiting covid zero, more support for property and that xi-biden meeting which put a flaw under the crucial u.s.-china relationship. lisa: is it too late, tom? tom: china's got big structural stresses, lisa. they've got a demographic drag with a shrinking working age population. they've got a huge burden of debt. they've got massive overcapacity in real estate and industry. the global environment looks pretty challenging. we have heard today the netherlands potentially will join the united states in blocking sales of semiconductors to china. let's not forget that china has

a track record of defying the data is. in beijing this week, we have had the memorial service for james and men, one of xi's predecessors as china's president. he took over at a moment of peak pessimism for china in 1990. over the course of the decade, he turned down rain, made china into a global growth darling by the time he exited in 2002 era i think there is a lesson there for people who are counting on china today. they define date is in the past. let's see if xi can do that again in the 20 20's. jonathan: the west may that happen in a major way in the last 20 years. thank you so much, as always. amazing how much things have changed from the chinese communist party and if you were to ask when we get that reopening, the many people would agree with tom. perhaps the first quarter in the end of 2023.

the people's daily said in mid november china could a code -- could achieve covid zero. if you protests later, here we lisa: this is something we were hearing from tom. can you partially reopening -- reopen? if you start getting a incredible spread of case counts, how do they handle that? why are they not opening up to certain mrna vaccines that have been proven to be more effective and make it a mandated policy to get into everybody's arms? jonathan: it is not clear how many people have actually died in china from covid. we have a report from the country, there is suspicion it is larger than that. the lesson the last couple of weeks is, despite the fact this is an authoritarian state, they did not respond to those protests in a way some people thought they might. with strength coming down and beating people back, they have had twofold and capitulate on just around the edges on covid

zero. it is why i go back to what we heard in the people's daily commentary this morning. it is radically different than what we heard a month ago. lisa: this is not just one protests. it is so unusual to see many different protests in china. this is something that harkens back to the tiananmen square issues in 1989 and the protests there. perhaps that is part of it. i keep going back to the business side of things. this is international standing at a time when economic data is deteriorating. they are to proxy here. jonathan: do you see a smooth reopening or a volatile one, stop, start, stop, start in the same way we did in europe and america, to? tom: do you emphasize the international america picture, as well. jonathan: five-day losing streak on the s&p, trying to prevent it from becoming six. this is bloomberg. ♪

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>> once we get into our recession, things can break unexpectedly. >> wages are rising, prices are rising, that is likely going to take a recession to