>> think long-term. >> if we do go into a recession,. it will be a mild. one -- recession, it could be a mild one. >> a very different story from last year. >> confidence, especially for the large caps. jonathan: i told you if you drink at the airport you miss lights. live from new york city, good

morning, good morning. this is "bloomberg surveillance." what a difference, a four date winning streak. all of the sudden, a 20 23 consensus shattered. -- the 2023 consensus shattered. tom: people are paid to have opinions and they are recalibrating the opinion. this site guys to the weekend was more in the bond market price of, yields down with bonds better but equities have been better than good. jonathan: let's bring in the quote from earlier on, bear markets are like a hall of mirrors designed to confuse investors and take their money. he went on to say trust your fundamental process. for us, merge and earnings are likely to significantly disappoint whether there is a recession or not.

it is from morgan stanley this morning. tom: what do we have at 7:30, goldman sachs? sonali had what they were doing their layoffs and such. and morgan stanley a victory lap as they continue to consolidate. jonathan: good morning. equity futures a little softer on the s&p. a four day winning streak. the longest daily winning streak since last year. in the bond market, yields higher by four basis points, 3.5476. your stocks up 9.6%. if you want to pick a single name, --

tom: we sat at the meetings at the world economic forum, everything is overwhelmed by the presumed china opening and against that the challenges of japan. our lead guest to get us started will help us with that a lot. jonathan: we will talk about the boj in a moment. are things getting better or worse? >> it feels like you have conflicting single -- signals at the moment. real optimism, at the same time, yields moving lower it is the bond equity rally that is the perfect storm for the u.s. dollar. a conflict between the messages.

jonathan: do you think the move we have seen and the dollar so far is sustainable? are there headwinds against the dollar through 2023? elsa: i think the danger is we are falling into the same traps that markets fell into at the start of 2022 and 2021, or everyone starts with a strong dollar consensus. and we spent all of january and then it snaps back. this year may take longer in the back half of the year. tom: lisa abramowicz with kenneth branagh off -- kenneth rogoff talking about the fed and the relentless rate increase. against that is the distraction of japan.

i thought it was just brilliant. the giant wildcard, japanese inflation has returned in the aftermath of covid, pushing the country from a bad but stable equilibrium into an unstable equilibrium. japan owns 8% of france' at public debt. how do you synthesize the japanese conundrum? elsa: this is a really interesting point, because we have seen it in data coming out from japan, turned into sellers of european government debt. my colleague has done fantastic work on this. they have been selling treasuries for a while in the last few months have been notable. it is the cost of hedging. tom: what you do, you take the yen swap yield versus the publish yield, the one that

jonathan ferro follow so closely. where does dollar-yen go on the gap? can you get to 120 or dare i say a stronger yen down to parity? elsa: i look at the other way and say unless the fed is going to cut rates dramatically, really slashing rates, under most of the scenarios, the cost of hedging continues to rise. they will have to continue and the dollar-yen goes higher. that could be what we see. jonathan: there is massive speculation boj will adjust control and may be prove it altogether. what are you focused on? elsa: it is the combination of factors, yield curve coupled with the inflation forecast. a lot of speculation that they

want to leave a clean slate for the next governor. we have gone long yen because we may be getting ahead of ourselves. jonathan: are we looking for a weaker japanese yen? elsa: that's right. jonathan: from the boj to disappoint a bit. tom: it is important that you don't just look at dollar. what do you do in the pacific rim? john mentions europe off the map doing better, but is a specific rim play, what does rbc look for? elsa: we have been looking at a number of pairs. there have been good opportunities in australian.

there has been a lot of speculation and positioning around china reopening. not just the reopening but falling in relations between australia and china. tom: i look at the moment at the bank of japan week and everybody's radar is off europe. what are the freedoms that christine lagarde has right now? she is the least talked about right now in all of my radars up on that. elsa: she is probably happy to be out of the spotlight, right? there wasn't interview -- there was an interview today saying rates have to rise higher but your is facing something in energy that the u.s. is not facing, meaning rates will have to rise less in europe than they have in the united states. that is a reminder that are critical differences between

here and the other side of the atlantic. tom: i look at the moment in the foreign exchange and it is about a certain weak dollar. it is important to reset going into the end of march. elsa: in terms of the year as a whole, i expect, and this will sound controversial, the dollar to end stronger. across the yen and against the euro, where we are now. how far we over extend into the end of march is anyone's guess. i think the momentum for the weak dollar train -- the weak dollar, i would be looking for that as an opportunity for stronger dollar. jonathan: this behind that strong dollar? elsa: combination of the fed not

easing and we have priced a lot of that story in. jonathan: nine trading days out and people changing your mind. we talk about shipping the consensus. the price action shapes the consensus. and it has shaken everyone up. tom: we have to be careful about our and feathering people who got it wrong or giving someone a victory lap. uncertainty because of the pandemic, opening in china and supply-side dynamics and are unknown and original, bouncing to conventional central bank theory. jonathan: we mentioned this earlier, investors aren't

preoccupied with good versus bad, it is better versus worse. capturing that perfectly is the view for deutsche bank. they wrote this, we now expect annual gdp growth to stagnate in 2023. that is not great but better than anticipated a a few -- a few month ago. things are regularly better now than there were three months ago. do you expect that to last? the expects -- mistake you can make is trading for the first couple of weeks and extrapolate that out it will be a bumpy ride. tom: i suggest coming up with recession depth and magnitude is very difficult when you have some form of missile that is supposed to take out aircraft carrier landing on residential buildings in ukraine. the overly the war on this and i have trouble with it.

jonathan: anne-marie is down in washington, d.c. in just a moment. equity futures down 11 points on the s&p, down .3%. a four date winning streak on the s&p, will that stick? we wrap up bank earnings with morgan stanley and goldman sachs. a look ahead to tech earnings later this week with netflix and apple. tom: crude, $85, small matter, underreported. jonathan: is that? tom: sort of nudging. jonathan: good morning to you all. we can now head over to switzerland at the world

economic forum with francine lacqua speaking to the bachrach ceo. >> the big thing is hope. that is my word at the moment i am using and using it here. francine: hope for a better economy? >> the concept of hope. covid has changed how we think, the fear of mortality has enveloped the world, polarization, politics, a war. if you look at birthrates in the world they are collapsing. you don't believe -- bring a child into the world unless you believe it is better than yesterday. blackrock is a firm that tries to sell hope. why would put something into a

30 year investment unless it is better than 30 years. more money has been held. in china, there is an estimated $2.7 trillion more savings in the system. the savings rates in china are in the high 40's here people are not investing in the future and do not have the safety net of health care and retirement. so we are losing hope in the polarization of politics, which media source do i even believe in? francine: bloomberg. larry: you need to get that out. [laughter] more and more people are frightened of the realities of today and is manifesting in a so many areas. francine: if you look at hope, it has to be backed up i a better world, better economic system with inflation going

down. how do you see that? larry: when i talk about hope, i am not talking about whether or not the markets are down or up in the next 12 months. wages have to grow and people have to feel more comfortable. i am not just talking about the phenomena and in western europe or north america, but the world, and there is less hope in the world today. francine: do you see the world getting better economically? larry: best year was a year of transition in so many ways -- last year was a year of transition in so many years. we had the bond market down 13%, mobile equity markets down 18%, and the dow depreciated dramatically. if you were on a desert island for all of last year and had to pull money today, you have greater abilities to invest

today than you did one year ago or two years ago. if you look at eight normal retirement portfolio, and this is something we don't spend enough time on, a typical portfolio, you will own 40% to 60% in bonds and earned your return. by 2020, you could not own a bond, so you had to take so much liquid risk. think about the growth in private equity, why, because you could not make a return in bonds. today, you could get 4% in short-term treasury, 5% in credit. you can now go back and have, i would say, a better portfolio, a better asset allocation today than three years ago.

you could reformulate it and bring down your risk. the question we all have to ask as investors -- do you believe we are going to have more liquidity in five years than now? i don't think so. we are not going to have the support of the federal for years to come or central banks. the reality is, we are going to have less liquidity, and has to be market based liquidity. how most illiquidity do you want? does bond play a bigger role? francine: where you put your money? [laughter] larry: i am an optimist. i have had a portfolio in equities my whole life or some form of equity related assets. even at my age, i am not changing that view. i don't allow markets like

today. pes are more realistic than they were two years ago. we are spending so much time focusing on the tragedy or recalibration of last year, the reality is there are better valuations in companies today than there were two years ago. you have a better return in bonds. we are festering and what happened last year and, gosh, how fast will inflation fall? inflation is falling, but can a fall to a 2% rate? i don't why we have a 2% target and i have raise that question many times. could inflation be brought down by 3% -- down to 3%, 3.5%? jonathan: larry fink of

blackrock sitting down with francine lacqua. new can continue that on the bloomberg terminal if you are a -- you can continue that bloomberg -- on the bloomberg terminal if you are a subscriber. tom: laurence fink is different then most ceos, heavily vetted to be secretary of treasury at given times and someone who has led the charge on esg, which at davos is under great threat. there will be a new esg due to the somewhat end of the war in ukraine. larry is a guy that mixes prodigious fixed income, the foundation of that rock -- of blackrock, with a lot of stuff like we hear, hope. jonathan: taking opportunity to attract capital to bond funds coming into 2023. tom: this goes to the promenade

with 20 years, you walk down and see a change promenade. promenade used to be a lot of by side houses. the answer here is in 2023, they hope for the hope of active management. so mr. fink and others have been a little more indexing. jonathan: m laughing because back then it was called aberdeen -- i am laughing because back then it was called aberdeen. jonathan: he is -- tom: he is consistent that it is blackrock with their earnings. jonathan: equities right now down .3% on the s&p. equity features down 11 points. yields higher, three point 5457

-- 3.5457. tom: the story of the year, global recovery and you talk about the hope of china extricating itself. some of the death count in china is really -- jonathan: did you sue the headline this morning? tom: out of devils, chinese authority in full presence and confident that china growth will return to normal -- above davos, chinese authority in full presence and confident that china will grow -- that china growth will return to normal. a beleaguered president that spends a lot of time at other houses and documents. how was the weekend? annmarie: he was in atlanta doing a speech at the church that martin luther king jr. was a pastor at, and this was him

salivating the life and legacy of martin luther king junior. if he is in run -- celebrating the life and legacy of martin luther king junior. he was out talking and the debt ceiling came up and he called the republicans physically demented, coming on the heels of the republicans chair of the oversight committee asking the chief of staff to release the individual log of who goes in and out of president biden's home, that they do not do for personal residences of president. the white house said that they release logs of who sees the president in the white house at the west wing. jonathan: i have been briefed that autumn or late summer we would see a debt crisis, and yet right now we see very crisisy.

annmarie: it is crisisy at a moment if that is a word because janet yellen said she would have to use special maneuvers to pay obligations starting this thursday. for me this is the first ringing of the alarm for congress to get in the room and figure out what they are going to do, but we do know representative gonzalez made it clear. tom: were you laughing at me? jonathan: we should make that a word. we will catch up with lisette later this hour. secretary yellen on her way to switzerland, just not davos, a stop on somewhere else and meeting with the chinese, why and what about? annmarie: the chinese premier will also be at davos, and honestly this will be the more important meeting, because

everyone at davos will want to know what will come out of her sit down with the chinese premier, away from the swiss mountaintops of davos. the elites want to know what the chinese trade with united states looks like going forward. it comes on the heels of xi jinping and biden sitting down and we have antony blinken expected to go to china at some point early this year. this is just about them talking a number of issues and follow-up from xi jinping and biden's meeting. there are times that this could be contentious. they do not have similar views on human rights, trade and taiwan. janet yellen told xi jinping's grip on the government and some leaving potentially may change the outlook for how china gross.

maybe this is a fact-finding mission for her. jonathan: maybe the tone is softer based on what you have heard from chinese officials. does that tell you anything about the trajectory for policy and the shifts we could expect in the months and years ahead? annmarie: this is just an opening of dialogue, but in terms of policy shift, it is hard to see that, especially when tomorrow you have janet yellen sitting down with chinese premier and today the head of netherlands going to be sitting down with president biden in the oval office, the u.s. trying to convince the netherlands not to send advanced technology to china, which is a major player and a major customer. this is what they did last week with the japanese. at the same time you have janet yellen sitting down with the chinese and trade is super

important. the united states is coalescing other allies to follow in their lead in terms of this policy. jonathan: thank you. we will catch up with you in the next hour. equities, a focus, but foreign-exchange for you and i. focus on japan later this week. tom: i have about 20 on my screen. you can look at all of the different ones. some of them are doing better. the mexican peso, it is a time to look at the majors. you mention swiss yen and there is economic data. you look at what we don't look at, yen, japan, and a day and a half from now where they will see national cpi statistics. jonathan: we have the forecast

this week. tom: i see a 4% number. jonathan: and we get the forecast from the boj. tom: and all of my work on this, i never thought about japan with a 4% inflation statistic. that turns upside down their domestic status. jonathan: i think it started from the boj in the back end of 2022. we are in the business of selling hope. the boj, a story for later. tom: we hope you stay with us. jonathan: david westin speaking of jane fraser at citi. jane: that translates into energy security, food, water security, financial security these days. the list goes on. we have seen it with supply

chains and company operations. there is a thinking, much more about operations and that has been a dominant part of globalization. as i heard from larry, i couldn't agree more, the trends are driving more complexity into globalization. those complexity costs can be managed, but they are expensive. david: another word might be fiction, more friction from the sources you identified. does that mean there is a drag on global economic growth and does it mean there is a drag on citi growth? jane: we have seen extraordinary growth. we are essentially the bank of choice for clients who have cross-border needs. we operate in 100 countries around the world and we wake up in 168 that we will do business

in. our core counts are 5000 multinationals. we move for trillion dollars just for those $5,000 -- those 5000 companies in foreign-exchange, trade, everything they need to operate their payrolls and core supply chains. that business grew revenues for us by over 30%. the volumes have exploded. clients have moved around and supply chains with additional chains added and looking beyond china, but what is the additional areas of supply chains in india or mexico, or in parts of asia have been benefiting as well. that shift and mix is adding growth opportunities, not taking it away.

david: how much of that is the overall size of the pie growing, cross broder transaction? jane: we have taken market share. we are a year ahead of the plan or two years ahead in the plan we put in place a year ago. when we look at it, the peace i am excited about -- the piece i am excited about is the ones dissipating in expanded global supply chains, and they are growing incredibly rapidly. that is one of the areas of growth we see the biggest opportunities. you see it in the middle east as they at expanding and diversifying away from fossil fuels and diversifying their economies. we seeing it with extraordinary entrepreneurs across the world

taking advantage of the trends going on. david: i believe you said in the past you think it is quite possible there will be a recession in the united states and the second half of 2023. issue view on that changing because some economic numbers coming more reassuring. larry summers thinks it is more likely are not but not as gung ho on recession. where are you? jane: we are seeing different things in different countries but we expect to see a rolling series of country recessions, but short of anything crazy happening geopolitically and this time last year we wouldn't have predicted what happened in ukraine, you have seen the over optimism from some about soft landings and the economy doing well. but equally you have seen the severe case downside coming in. i think the general view in the

states, when we hold at citi, is we expect to see amount recession, largely driven by the painfully driven service division but we expect to see central banks continue tightening as a result. vulnerabilities that amplify previous recessions around the world are not pressing. banks are in good shape. consumer and corporate balance sheets are in good shape. i think that omens well for mild recessions rather than ones that we have to be worried about. jonathan: jane fraser of citi sitting down with david westin. you can continue that conversation on the bloomberg terminal if you are a subscriber.

a couple of calls for amount recession. tom: they love to talk econo babble and she has great ability with others. that is not what banking and finance is about. jane fraser is very different than laurence fink, who did the fixed income route. she did the classic strategy route. mackenzie, and on we go, and was brought in strategically at citigroup to find a new strategy. what i find fascinating and sonali basak alluded to this, the basic idea of what now for citigroup? they have to catch up with a vengeance with the other banks. jonathan: she will drop by later

. morgan stanley results coming up in the next hour. the s&p down .25%. the four date winning streak on the s&p, longest since september. weekly -- four-day winning streak on the s&p, longest since september. for once, the two-year last week didn't do much, flat on the week. unchanged this morning as well. 4.2321. yields a bit higher, up four basis on tens and 30's, up five basis points. we talked a lot about the dollar story, dollar index weaker since the end of september and within 10%. euro-dollar at the moment, 1.0820. it has been said we need to raise rates more and bring them into restrictive territory. that phrase is restrictive.

they had the deeper rate at 2%. a lot across europe think and perhaps they get to 3.25%. perhaps the officials will be talking about that number anytime soon. tom: i think lagarde is the most under discussed central banker right now. christine lagarde obviously at davos and i believe was in brussels over the weekend, with huge challenges, including the small matter of a war and how do you define their restrictive versus easy game in the united states? jonathan: at the end of the year she was blunt and very hawkish, the very -- the most hottest -- the most hawkish thing for her. goldman has come out with a call said we can escape the euro zone session. someone over the we can said germany could escape

recession. tom: from the good professor from ireland, you see hit -- you see he is very astute. we are an hour away. we welcome all of you on radio and television. continued bank earnings of morning then -- of morgan stanley and jp morgan. a citizens company, continuing his work. our goldman sachs and morgan stanley, are they banks? devin: good morning, tom. there are -- they are bring -- banks embracing stable funding, low cost deposits on the consumer side, i think they are

benefiting from that, they are i.b. sleep huge capital markets layers and capital markets have been challenging in the last year and looking for a better year. tom: tom: -- tom: we have been looking at different names in davos at wealth management. can morgan stanley wealth success be relegated -- replicated? devin: it is going to be tough. morgan stanley made tough decisions a decade ago coming out of the financial situation to change the model. they ran full speed into wealth management's and with the smith barney acquisition, that was transformational.

now there is a lot of scale and that will be tough to stick their toe in and do that. tom: you right where i want to go, which is the idea of scale. does mr. solomon have scale at goldman sachs? that seems to be under discussion. devin: big debate is around what is happening in consumer business. we have been more constructive. i think goldman should continue to think about how they evolve and what the bank should look like over the next 20 years. sometimes critics want instant gratification over the next one or two, but they are coming from essentially a small base consumer. they have had a wealth management business for a long time. there is room for them to scale back. opportunities in areas like custody. they need to get much more disciplined around the consumer, because they have to really watch their costs.

tom: what does global wall street need to look for in the vicinity of 7:30? devin: you can't have a big revenue shortfall and that is something people care about. the bigger thing is what are people saying about the economy and is it a mild recession or something worse? mild recession is the word you have heard over the past few days and that is a good thing for businesses. a little choppiness near-term but we are more constructive on 2023 then most, particularly the capital market businesses. jonathan: we have heard so much more of that. devin ryan, thank you. morgan stanley down .8%.

those numbers due in the next 50 minutes to wrap up earnings on wall street. tom: different companies, and we run on the drama and soap opera of it, the overarching theme is everybody wants to do what james gorman has accomplished. they want to do wealth management because of the persistent fees and the capturing of blackrock-like assets and on and on. forget about what we will see with kevin -- kenneth leon we will see in a few been -- few minutes, haven't figured out the wealth management. solomon is doing that in consumer banking. the per account acquisition costs of doing markets is difficult. jonathan: they are doing it

organically, aren't they? tom: very good, very mba of you. organically. avocados, bananas, they do it. talking about organic strategy. jonathan: nice, have a coffee and move on. do they play golf? tom: they do not do golf at davos. we tried that at 3:00 in the morning. jonathan: rachel did good she had the guy from coldplay in the head with the golf ball. [laughter] tom: i remember being horizontal in a mercedes, me, i could barely fit in. jonathan: you had to lie across the back. tom: it was peter, i don't remember his last name, he was holding my legs of just to be sure i could get home. jonathan: i am sure that was

quite a night. we will catch up with ken leon. 49 minutes away to catch up with him. we will break down numbers when they come through. equity features down .3% on the s&p 500. yields a little higher at the long end. yields higher by five basis points. crude is an 80 handle, up .5%. from new york, this is bloomberg. ♪ >> keeping you up-to-date with the first word news, i'm leigh-ann gerrans. in the ukrainian city, rescue crew searching for 25 people

missing after a russian missile hit an apartment building, at least 41 killed and dozens wounded. for the first time in six decades, chinese population is shrinking, latest milestone in a worsening democratic -- demographic crisis. data says at the end of last year, china had 1.4 billion people, 850,000 fewer than the year before. the number of births was the lowest since at least 1950. a new report says international trade that the global economy will slow over the next decade. according to a consultancy group, the war will reshape alliances and alter the flow of cross-border commerce. they forecast growth for 2.3% through 2031. in venezuela, public-sector workers mounted the biggest anti-government protest in years.

workers organized at least 50 protests in caracas and teachers were joined by nurses, pensioners and others demanding more money from the government. they have been falling behind in an economy that embraced the u.s. dollar. microsoft will add chat gdp to its cloud -- chat gpt to its cloud services. microsoft may invest as much as $10 million in open ai. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪

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advancing flight for future generations. ♪ welcome to a new era of flight. the first time you made a sale online was also the first time you heard of a town named... dinosaur? we just got an order from a dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. godaddy. tools and support for every small business first. >> i do think the opening up of china and consumption in china,

energy need, come on the need in china, is a very good signal. it will be supportive to an inflection point that we have not seen yet. we have advised them to go long on china and be overweight on china. jonathan: they are not the only ones. that was rough hammers sitting down in -- ralph hammers sitting down in davos. big banks and betting on a stronger economy. bank of america expected growth of five cents or higher -- 5.5% or higher. tom: all of the sudden, summit he said a 6%. there is a recalibration back to something that remember.

edna karen -- edna curran is aware. let me cut to the social chase, there was codified out of the time of one child. there was some form of amendment to that. does china need to be 84, 5, 6 child nation? edna: they are seeing the end of that one child policy. china's population has shrunk since -- for the first time since 1961 when they had a great famine. they have changed to eight two child or three child to encourage people to grow their families and have more children and offering subsidies.

the working age population is shrinking. there are more deaths than births. we don't know what level they are experiencing, but much more important structure for the economy than the headlines around covid. tom: for those of you and radio, the degree of change in births in china is free covid -- pre-covid and it is stunning. i hope jonathan ferro let me use the word stunning. what do they do as a policy to increase birth? edna: they are talking about subsidies and looking for ways to coax families to have more children. the cost of raising a family is more expensive and typical living pressures like work and

commuting. marrying later, all of these social trends are weighing against expanding. i think it will be a major headwind for economic policy makers in years ahead. tom: looked to pan, korea and that is what they are worried about. jonathan: i wonder what is more important, the population growth the urban population growth. is that what you focus on? edna: it is the labor force that you focus on. it is what is happening with the labor force, how skilled and educated are there. it is not necessarily where the employment rate but the workforce in china is shrinking.

jonathan: the chinese premier speaking. life is being restored to normal in china, that headline just in. edna: it is better in hong kong. there is still a fairly subdued feeling here. we need to get over chinese new year. tom: i just think, you, me, lisa in hong kong. jonathan: it is reiterated that china poses unilateralism and protectionism. can you make sense of that? how can they say they oppose protectionism? edna: quite right. chinese officials have typically

used davos to sell themselves that they are open for business. this is specifically being aimed at the u.s. they are pushing back. you can be sure part of the upcoming conversation will be trying to get out of those hopes . tom: it is mood music. when you travel, usually the plate fleetwood mac. it is not my favorite but that is what they play. jonathan: china would always promote around opening up. that is the kind of thing the west wants to hear.

tom: this is what we have done for 20 years. we don't take it at face value. i love beating up on david rubenstein and this is an example, he dishes it right back. david went hand a few years ago, that was on fire. they want to talk about hope. jonathan: i remember brian -- remember when president xi spoke to the audience in davos and all the articles came out. what was that nonsense about? i have been inside and outside of the world economic forum and

people get carried away with what happens there, don't you think? tom: i have seen you outside of the wall and those two hockey players, they go from unit and then come up to davos -- from munich and come up to davos. there is a whole second davos going on. jonathan: what is it? tom: it is a lot of people and relationships and there are a lot of people there to be there looking to make one or two relationship contracts. i get stopped on the street with people who don't know and just trying to sell me something.

jonathan: equities right now on the s&p down .2%. head of equity strategy at wells fargo will join us in just a moment. i love this line from morgan stanley, bear markets are designed to confuse investors and take their money. isn't that a great line? tom: it is. brent crude will be the story in davos. jonathan: a bullish concoction, they see. they are trying to catch up this week. tom: a lot of good oil voices. jonathan: coming up, chris

harvey of wells fargo. sonali basak will drop by the studio and ring the latest numbers and push forward to tech results. welcome back from the long weekend if you are joining us stateside. the s&p 500, down .2%. equities down eight points. yields higher by at five basis points. euro-dollar not giving me much. for those of you interested in data and retail sales, later this week. we will hear from mr. williams at the new york fed. that is scheduled for three cop p.m. eastern time. the new york fed giving welcoming remarks enter. -- later. this is bloomberg. ♪

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>> i pull the camera back and think long-term. >> if we go into a recession, it will be mild. >> consumer spending, labor market strong. >> a very different story to last year when the u.s. was accelerating. >> we are getting confidence from the large banks. jonathan: later this hour,

wrapping up earnings. live from new york city, good morning. for our audience worldwide this , is "bloomberg surveillance." equities negative, earnings later this hour. tom: i love what you mentioned, the hallmark will not be cpi thursday, but 70% of the american economy to get that we will all die and have the recession call recalibrated. the rally in european equities. jonathan: we have had nine trading days. tom: the equity market absolutely, coming into an 18 level, 20.0 at the cusp of a 19

handle. it has been growth versus value certitude. jonathan: nine trading days stateside i should clarify. it is european equities, high-yield credit the dollar is weaker and commodities are corralling a cyclical story of of china. jonathan: $30 -- tom: $30 for the famed barley soup. risk assets go up. is it enough?

it was said bear markets are like a hall of mirrors designed to take your money. for us, margins and earnings are likely to significantly disappoint whether there is a recession or not. tom: the structure of a big wall street firm. you have had a nice lift with china reopening, and that is where we are. jonathan: let's start there, bear markets are like a hall of mirrors. chris: this is a rally no doubt. it has a lot of the hallmarks,

sprays are tightening. i don't know if i would call it a bear market rally. we think we are facing economic malaise than a sharp recession. as a result, you have to place your bets in the suites not -- in the sweet spot. we think things will trade higher but you can see a big downside. jonathan: can we separate futures and focus on earnings. what are you expecting in the outlook for the rest of the year? chris: there has been a lot of

fear mongering. so when you fairmont or, -- fear monger, we have lowered expectations. the phrase things are better than expected have been true and that will be true this time around. we are at the time where you lower guidance. what we are worried about is when you first reported numbers, we think ins be ok for now. tom: you are beautifully concise , speaking of a tactical shift. everybody has gotten the recession goals wrong. help me if may is june and how do i prosecute tactics now to survive in the second quarter? chris: that is a great question

and a question we are having with a lot of clients. a lot of clients performed well and what they are saying is, do i shift tactically move? and our answer is no, because ultimately we will see some sort of downside and pain whether it is economic, earnings or macro. we have 12 months in the year, too early to shift and a lot of room between now and then. ultimately, the worst isn't over yet. tom: the financial media is guilty of this and bloomberg and myself are as guilty as the complete focus on the big banks and what wells fargo is doing. after the big banks, which earnings matter to you? chris: what we are looking for is we are looking at cyclical

earnings, because we think that is where the pain will be. the old economy out priced their weight last year and that is where we think the pain will be. if you believe the economy will slow down, which we do, that is where we see most of the pain and that is where i think stocks are most viable. jonathan: are the banks part of that store you described? chris: banks are part of that but we worry about credit. the job should is better than people expected. credit should be ok and what we have seen his credit is not great, but it is normalizing. it is where it should be put not were sent expectations. jonathan: please talk about -- we used to talk about tech as being the grower. are you thinking less tech and more cyclicals?

chris: semis are cyclical, software, less so. a lot of industrials are becoming more growthy. the big debate we are having is is it energy, a tech come back? we think there will be a lot more idiosyncratic market and don't look so much for this one big trade. really get back to the fundamentals and look at the mid-growth space. tom: that is great. i am focusing on the s&p 500 up .2% in nine, 8, 10 days. will we get a double-digit return in 2023? chris: we think you will ultimately get to 4200.

we think inflation is coming down and we think the economy is slowing. that is a growth market. the s&p 500 is a growth industry. at the end of the year, the market will believe it will cut and we should see that reflected in the yield curve in interest rates. tom: this is the heart of bloomberg surveillance. do we have two opposing muse from what we see from wells fargo or morgan stanley? jonathan: you talk about the potential for a real side -- real downside. chris: we think the downside is there but we do think we end up higher, 4200 is the high for this year and we think we get there. what you are facing is more of an economic malaise, not a sharp selloff or something that will be horrific so we can muddle

through. the fed will rethink and stop raising rates and that is a positive. if we get to a situation where it is more economic malaise than a sharp selloff, they won't collapse. jonathan: chris harvey of wells fargo. looking at the downside to 3400. he thinks we could get to 3400. the average for year and is north of 4000. tom: being a strategist, you have a supply-side shock in an historic moment, once-in-a-lifetime pandemic, and you are supposed to gain economics and central-bank dynamics with a fixed income

always placed before equities, the income statements and revenue line and hopefully a distinction of profitable and unprofitable companies, it is really difficult. tom: i keep going back to this -- jonathan: i keep going back to this, we can have a conversation about what is good and bad and a market conversation about what is getting better and worse. what came from bank of america today, investors expect eight weaker economy in the coming months. it is bad, but is it better? it is optimistic. and captured by the fall we have seen in cash position is what we have seen and it is cyclical in europe. tom: the end of last year, a general statement, i am

fascinated by what the big tech is doing, laying off and all of this. i have no idea what they will give us in a couple of weeks. jonathan: economic recovery will be the first stop. we talk about the banks saying by risk, by cyclicals b --uy risk and cyclicals -- buy risk and cyclicals and the banks have become restrictive. tom: they will sell to the street how profitable and responsible they are as they cut the bonuses of those not in davos. jonathan: equity futures on the s&p, down .2%. this is bloomberg. ♪ leigh-ann: keeping you

up-to-date with the first word news. in china, the economy proved more resilient than forecasted. it was the second slowest in the 1970's. data came in better than what economists had expected despite a covid outbreak, that suggest the worst may be over. china and the u.s. on track trade to beat records. it suggests imports and exports in 2022 will at of to an all-time -- will add up to an all-time high. in the u.k., teachers joining other workers who have gone on strike to fight for higher pay. they voted overwhelmingly. they are due to state another walk out next month. the european bank said rates will have to move to a

restrictive territory to tame inflation. he said we need to raise rates but we need to be flexible in both directions. targeting a prominent chinese company, a meme's stock investor has taken a stake in alibaba. the president xi jinping -- global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪

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>> they went up during the recession, raising tax on working families, making inflation worse. let me be clear, if any of these bills happen to reach my desk, i will veto them. jonathan: the president on policy on the other side of the pond. tom: sometime -- someday i will be that old. jonathan: equity features down

.2%. we will catch up with sonali basak. morgan stanley earnings around the corner. tom: let's get to annmarie hordern in washington. what is on the president's agenda today? annmarie: the president will be sitting down with the prime minister of the netherlands and they will talk about ukraine. it comes on the heels of the conversation with president zelenskyy. also on the agenda is the fact that the u.s. wants to make sure the netherlands is on board with curbing advanced technology for semiconductors to china. this is a big deal in the netherlands. this is an important meeting and comes on the heels of his meeting with the japanese prime minister.

they are also trying to coalesce around this. tom: how does the president adjust to what we saw with the missile that can take out an aircraft carrier? annmarie: and also restructuring buildings, the death rising, a number of children. devastating images, horrific. the president of the united states, we recently sent advanced equipment, including the patriot missile battery. there is a lot of pressure on germany to send tanks.

it is going to dictate and push them into the direction of potentially sending those weapons. jonathan: olaf scholz talking with a reporter later. our base case remains 50 basis points for the february meeting despite the price we think it will be comfortably about 5%. tom: you have data up to february 1 and people made fun of me for saying it, we are massively data dependent with just the dynamics of the control sale. we are data dependent, that is all there is to it. jonathan: the fourth quarter

coming in at 3.32. net revenue at 10 billion. we are looking for trading with goldman sachs. sonali: they came in blowing through estimates when you look at the trading data. this year to ask is whether it is stable. $3.5 billion a quarter in the fixed income unit, a much bigger number. you see coming in above line when you look at the equities trading. looking at morgan stanley, looking for another quarter if goldman is coming ahead of them. looking at net revenue coming in a tad shy.

when the rubber hits the road for goldman sachs, will they be on the core businesses they came in a strongly will they be judged on the moon shots they are looking to now reorganize? jonathan: fourth-quarter revenue , the estimate, bonds down, equities down, significantly lower revenues. tom: that is what they do. i am looking at 14 pages of data in detail. do people look at this as a normal analysis day or is it completely focused on mr. solomon's consumer experiment? annmarie: there are questions on the -- sonali: there are questions on that. to the point you're making, this is a tough business for everybody. no matter if you are playing asset or consumer, let's talk

about the number we are looking at of 10.2% is well above estimates. the expectation was 7%. you are watching goldman sachs come back down to earth quite a bit. last year it was 23%. so what is normal, the medium-term target is 13%. jonathan: can you compare and contrast the numbers we are seeing and this report to some of the severe cuts expected in the workforce? sonali: i was looking back five years for goldman sachs and they are more efficient than morgan stanley. but because the are oe is not coming in as hot, you have questions about how you bring the overall profitability up. five years ago you did not see that efficiency number.

now you certainly do. the cost cuts are very important. tom: for those of you on radio, running a reddened -- a red banner. i give great credit for doing this, net revenue for 2022, platform solutions is 3.17% of net revenue. we are talking about markets like it is 3% of the bank. why are we so upset if it is 3.17 percent of revenues? sonali: that is the question. tom: it is minuscule. sonali: there was a presentation that showed the deposits they came in changed the funding

meaningfully. small business loses money. we had provisions for loan losses and that is part of the cost in addition to the overall costs you are seeing at that business. that is why i am saying management business is all the more important. tom: will they be organic? sonali: the focus is what you are seeing at morgan stanley starting to float in here there is a line that talks about the private investment, 20, decrease in equity values. this comes as you are watching goldman sachs, private markets,

a competitive business. jonathan: goldman down 1%. we will break down numbers and catch up with ken leon. all of that is still to come. debt equity's -- equities down but trying to recovery. this is a bloomberg surveillance. ♪

jonathan: no real drama here we have the 1.7%. we will break down the numbers for you. equities shaping up on the s&p 500. more than a 10th of a percent. on the nasdaq down about 1%. in the bond market a bit of a snooze. 423 .21. -- 4.2321.

the estimate 5.2 billion. the estimate 6.14 billion dollars. some of these numbers for you what do you see? >> the revenue missing expectations goldman not only upbeat but the biggest jump on wall street 44%. what are they going to do to get competitive fixed income? the equity sales revenue you have to come in below expectations. remember that is the most rate coming in higher than goldman sachs but absolute numbers so they still inked out the game there. again, why the miss is the big question here. kind of mixed results here if you look over all, the trading desk obviously the reason is important. it is a twofold question. also because remember we had jonathan on his way towards it

stepping down this over at morgan stanley. it is a lot of pressure among two other major deputies here. as we have been talking about getting more and more today. tom: rotc and some of the other measurements the answer is there is some more profitable than goldman sachs. is that the short answer? >> they aim to be. in a few minutes we also look at the posts they put out. they do that to see if anything has changed. they are in line, the high end -- higher than goldman sachs targeted to give you. but today at least they are not, tom. tom: they are really getting these releases.

management business delivered 6% annualized growth rate from the beginning of the year. i believe the stock market was down 20%. i believe the bond market 14%. i think i'm impressed. maybe i'm impressed by the plus 6% statistic. jonathan: stock is down by just 4/10. reporting about 15 minutes ago. just take stock of everything we've heard over the last week from friday into tuesday. how defensive are they going to the rest of 2023? >> all of these banks are playing offense here. in terms of risks being taken on by each of these banks, he saw that over at j.p. morgan and with pressure on the trading desk here.

questions, i think also interestingly here if you look at the numbers for morgan stanley they come in slightly below expectations. they have a wealthier client base. how much net income can you see them boosting from their asset and wealth management this year? jonathan: thank you. after breaking down all the banks in the last couple of days you always complete about banks hype away the report all at once. tom: yeah. i agree. i do agree but i will say that the clarity of presentation i was a huge critic. jonathan: you've upgraded them? tom: i think they've really listens. anybody can look at this and get a feeling for distinctions between the two. jonathan: when you say they listen they listen to you? tom: they listen to show ali.

she publishes for linkedin. jonathan: are you on the distribution? tom: i never read it. >> you read it. i'm taking it. jonathan: are you promoting your newsletter? >> people should read it. times are good no one is hiding behind each other. until you things are bad in this business. equity director and cfo joining us right now. ken, a mystery to me is the duration of the challenges, particularly to break out what i'm going to call underperformance collegially. i don't think they're coming back how far out is the equity weakness?

equity will come back a market but there is a lot more here in terms of morgan stanley versus morgan -- goldman sachs. i think they are under big pressure. four weeks ahead and the question then, who does goldman want to be because there's not going to be a consumer back. they have 1.7 billion operating loss in the platform. including consumer and eight there going into private equity, they are going to make an acquisition. tom: looking here at the acquisition, great. we talked about this before. they grow it organically or is

it out there? is it in index manager? >> it doesn't really matter. and james gorgon at morgan stanley he also got e*trade which put him in the top two or three. goldman spent way too much time in consumer banks and they can get their --there appeared to do that in private equity they're going to have to look beyond organic. that puts a lot of pressure on david spell and -- spellman. no one cares about fix income trading and the market never gives you a higher multiple for trading. but is the best investment anchor but you're still not going to get the multiple. tom: let's call it the lead on urgency. looking back at the greek

financial crisis really intertwined something happened at the bottom of the pandemic. goldman sachs 165%, morgan stanley up 243%. jonathan: let's talk about valuations. relatively speaking morgan stanley should have a premium. can you talk about the absolute story for the whole sector? can and should they be valued? >> we have to say the right thing. financials put out before this year and outperform the s&p 500 also, there is another area of the financial sector, you need the banks. if we have a goldilocks economy and stable loan that's pretty good. investment banks you need a risk

on versus a risk off and to my point before if we are not going to be there in the first quarter but all of a sudden the stocks can take off we just don't see it. jonathan: there's two ways of explaining this. the economic downturn and the other is the quality of the institutions. some of those names have over the last 10 years do you subscribe to that theory? >> they are. we are sitting here in 2010, 15, or 2019. we tend to the more traditional banks j.p. morgan, chase, and we still think it's a little bit too early on morgan stanley and goldman sachs i really want to hear what the strategy is because that's the only way for

our shareholder value. jonathan: ken, thank you. breaking down the big numbers. when should we be following the headlines from now? >> i would also say whatever they said about headcount would be important you are seeing headcount up 10% ahead of those cuts you are also seeing morgan stanley decreasing despite headcount. jonathan: so you've got golden -- goldman sex. -- goldman sachs. what do you make of that, tom? on the labor force, morgan stanley, goldman. tom: of all this over the last few days of thinking everybody's got a plan. all the rest of them i'm with mr. lyons.

i don't think anybody is surprised i'm saying this. jonathan: thank you. we will catch it at the 9:00 hour but the back of these hours. we have a plan for the next hour. the head of u.s. economic research. is going to join us. is it an stadia? i hope it is. tom: he is here in new york. he missed the flight. jonathan: when he ordered the extra round, that's what happens. flights get missed. tom: yeah. they tried to get me there. you comes on the plane. well the suitcases. yeah. the luggage. i cut back.

i used to take 7, 8 suitcases. walk up the mountain from the train station. jonathan: was anything in them? tom: free stuff. free stuff is great. the box of chocolates that you get, it's pretty good. jonathan: i remember the bloomberg chocolate it was pretty good. tom: milk chocolate. jonathan: nice. equity features right now done about 2/10 of 1% and i heard a rumor we will catch up with promo next. there has been a lisa siding. -- citing. this is bloomberg. ♪ >> keeping you up-to-date with the first word news, i'm leigh-ann gerrans.

russia wants to reduce the size of its military and create new command areas. what calls a proxy war. russia's military currently has a target level of more than 1.1 million personnel's. for the past six decade china's population is shrinking. it is a worsening demographic crisis for the world's second-largest economy. trying to have over 1.4 billion people that is 830,000 fewer than the year before. the number of jobs in new reports international trade will grow more slowly than the global economy over the next decade. according to the boston consulting group the war in ukraine will take a strategic alliances. to report forecasts the trade will grow at an average of 2.3%

through 2031. to take over measurement systems and it's made a cash offer of $53 a share in november. proposing $48 back in may national instruments have refused to work over the past eight. global news 24 hours a day online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪

>> inflation will eventually come down. maybe to 2.5% but if the rates

-- interest rates are not going to come down to the same level as they were before. they are not going to come down to the same level that we saw. i wouldn't be surprised of 3.5 quite a while from now. jonathan: the harvard professor and chief economist sitting down with lisa abramowicz a little bit earlier. equity features right now negative by about a third of 1%. self delighted negative for those of you that enjoyed a long weekend stateside. welcome back. for basis points, 10-year 3.5476. tom: to me it is the unspoken story you singled out the stock market move. 20.15 and i'm sorry west texas well above 180. and brent crude oil is moving. jonathan: i think the data could

have said absolutely anything in this market and investors would have looked right through it and said things are going to get better at the end of the year. tom: the pressures of beijing and he made very clear on air and off air into talking about hong kong opening i've got friendly conversations over there talking about going back to normal. we don't have that knowledge but we can say within the heartache of covid the real issues are old people, unvaccinated. jonathan: that is the message they want to sell this morning, that's for sure. china is back to normal, tom, you can decide for yourself if you think it is or not. tom: we will have to see. one more thought here, john. i am trying to we have retail sales coming up later this week

in the february 1 fed meeting. it's a different world over there but the big number is japan's cpi. the bloomberg terminal is a 4% statistic on japan inflation. that's like the netherlands. jonathan: fascinating. what's fascinating is all economists except one expect no change. i'm really focused on what happens and i think the forecast alongside the decision. tom: right now, lisa abramowicz this at the meeting at the economic forum and joins us now after doing what you do, did you talk to somebody with legitimate academic and engineering confidence and the auto business? lisa, visited mercedes to talk to the guy totally up to speed on gas, rv, and the hybrid. what did you learn?

lisa: people want to believe china is going to reopen the optimism people are looking for and the energy crisis and potential risks. somebody is dealing with that in a more concrete way. without having to head supply chains. take a listen to what he had to say. >> in the middle of one of the biggest and most important transformations of the industry and decided to or three years ago to invest more than one billion in our u.s. operations. now we are skin thing up electro mobility production. i think we will still have interesting situation in the supply chain. whenever our biggest is out of

china. so this fast decision making a lot of creativity china is in a very important market for us. what we are focusing on is to create the most efficient and the most resilient supply chain. lisa: what was clear to me from the conversation was china is such an important market for germany, for a lot of the world and yes, a lot of the potential optimism hinges on the reopening there. also the decoupling is not happening as quickly as people think. germany in particular relies on a lot of economic momentum. tom: how has mercedes adapted to the issue of a war in ukraine? lisa: they focused on

diversifying their energy. they deal with wind power, they have a host of batteries, old batteries from cars that they use to power parts of their operations. they are trying to insulate themselves that way but this has been a huge issue. that was one of the things from the conversation. mercedes thinks most of the world is going to be mostly affected by 2030 and this will accelerate that. i was saying to him what about the people investing in fossil fuels right now and are it going what's going on and he said no this is really what's going to be there. there were robots everywhere. there were little robots, big robots, one of them almost ran me over and it's interesting how much they are investing. the technology to replace or to make things more efficient and they said it's about 20, 20 5% more efficient. they said all their colleagues are doing the same thing. timmy this is very interesting, it could potentially transform

certain parts of certain industrial complexes. jonathan: let's talk about the lives -- news last week. across the united states as well how are the likes of mercedes going to respond to that? lisa: they also recently announced a slight -- whether it is the lack of demand or whether it's working for profit margins and i don't of the answer to that. it does seem like there is still quite a bit of demand globally

electric vehicles. jonathan: that's for sure in the last 12 months having a good time. we are going to catch up with mike a little later. >> i want to know about when they expect to see china's demand come online given the fact that everyone is talking about how it's going to generate growth. i know you and tom talked a lot about when it will cause prices of oil to rise. how much more coming down the pipe, where are they changing some of the drilling. how do they regenerate some of that? and are they reinvesting in fossil views and reporting them or for making investments they would have kind of shunned because of concerns. i'm curious about that change now. jonathan: lisa, great work. looking forward to the we can as well. tom: the engineer from boulder

and i know him well. all i can tell you is the biggest headache is how to compete. it is so bad it's not how to deploy capital. the real focus is how not to screw it up. how to buy siberian oil, things can go wrong. jonathan: there are companies that might have done that. tom: exactly. you are way ahead of me on this. the bottom line is all of these guys are a generation behind massive is deployment of capital and that's really where his head is. jonathan: and its conditional. that is why we had to rally the last couple of years. tom: can i bring up something? i think it's really important.

back-and-forth this weekend. she has written a brilliant story on what matters. we are making fun of the davos jabber. larry fink talking with fran. what i think is his third railing which is esg has blown up. i questions will be brutal on this. esg has been run over by the work on ukraine and i say this somewhat in spoof. larry fink saying esg narrative has become ugly,. this is his public policy. i am fascinated by what the next looks like. i really am curious about it.

it's really toxic is in it. tom: where'd we learn that? we missed you. ♪ welcome to a new era of flight.

>> the market is in a wonky state that this point. we are seeing a lot of

irrational trading. >> we focus on the focus of truffle coming down. >> we continue to see the fed working and bringing it down. jonathan: u.s. inflation now decelerating. >> that all shows a significant slowing in demand and also a recession. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: we welcome all of you to our studios. lisa will be there so look for that here. as you mentioned earlier the shock of nine days better than good then the gloom crowd of december 29. jonathan: what a difference. up 10% today.

up about 8% year to date before today mention a couple of single names. tom: jonathan: yeah. jonathan:copper prices, take your pick. high yields, united states. tom: i like how you run copper this is about reopening and i would suggest that china reopening is not a score they people that predicted that or a call. -- goal. i would say it's about shock the total unpredictable shock. jonathan: when we go to china, it will be a lot more tolerant. it wouldn't have mattered with the data was overnight. it was better than estimated. whatever they want to tell you about china. people appreciate the idea and things are better now than they were a few months ago and the fact that you can see not just

out of china but also europe goldman coming out last week and saying europe can escape recession. germany can't escape recession. that is why we have seen the massive move we have seen. that is why we are seeing some of the moves we have seen. we have high yield spread in america. she's doing the work. the heavy lifting. bunko that is rounded up brent crude. this is the path. jonathan: people --

[indiscernible] you cannot come up with the more bullish concoction. whether it is inventory or production capacity that's being exhausted. tom: this is a week for japan to decide. jonathan: handout individual if it takes over. tom: let's finish with that before we move on. here is underplayed and 70% gdp we should focus on that. jonathan: the ism data for of little bit that's happening. tom: right. then the survey markets are

doing well in the face of that. tom: and the thing that i saw here, to finish this up was goldman sachs, the urgency we are coming out of earnings season, the pressures under goldman sachs management to move forward. are greater than i thought. jonathan: so we put two things together then. layoffs at goldman. tom: the character. jonathan: bonus, did you hear about the left right and center? and at the same time the research division now indicating we can escape recession. that perhaps we can have a self landing site you have corporate leadership getting defensive and conservative. tom: i agree with that. jonathan: and at the same time you have people trading this stuff. tom: we see that as you mention big tech companies i'm going to start you on a 2/10 spread. jonathan: equity features right now. yields just a little bit higher.

up six or seven basis points on a three year -- tenure. 10852 on the euro-dollar. the chief commerce more rate hikes to come. the decision is february 2. tom: we are going to recalibrate on something we don't do enough of. the decision to change things, everybody looking at that after the death of 60/40 foster. the cio of america's morningstar. we are thrilled she can join us this morning. morningstar lodestone is page after page of data excellence on funds to make a rebalance decision. after the carnage of 2022, should you do more or less rebalancing? >> good morning morning, tom. you are breezing the point of

the 60/40 and no question in 2022 i think we got to see the 60/40 finally we can see it a little more clearly. it was just dissented and then the past year we saw some of the correlation that exists within the 60/40. maybe not the protection we would have thought and no question as ecb price moves. it calls into question whether you should rebalance vector target. the real value of that is of course you are taking advantage of price movement in your favor. you are adding to the things that have sold off. you are trimming a few things potentially in your portfolio that have rallied and it gives you the opportunity to rent valuation on your side. tom: they were trotted out 10 years ago and i'm going to give morningstar great credit on this for not selling them to the public like most of the firms did but there was this whole contrived thing of getting out

10 years. we have the great financial crisis and the small matter of a pandemic to target funds do they work now to allocate funds for retirement? >> i think the general idea, and this comes back to the broad stock fund. simplistic allocation between stocks and bonds based on may be your time horizon but that can be a really powerful tool, especially when markets are moving in your favor but when you have surprises that challenge the fundamentals and maybe we are seeing some sort of reaching shift and we are seeing the pressures from inflation, from interest rates, i think it's worth remembering there is still an importance to having a smart fundamental understanding of what you are earning and how it should be complementing, diversifying one another. i think the debt the 60/40 the

simplistic allocation i think there is a lot of people doing victory laps around the difficulties that had in 2022. i think it's a little early to say it's an ineffective strategy. no question that we have to understand that there are weaknesses to every strategy and the weaknesses are simplistic. jonathan: i want to pick up on a phrase you just used. he said think about how they complement one another can we do that just a little bit now. is there any reason to believe that the correlation between bonds and equities is going to break down and return to what i think is a little bit more cumulative for people out there? >> i think it's a really critical question and when we look at timeseries, the correlation between treasuries and equities i think we always assumed that its baseline and negative correlation. actually overtime it can vary quite a bit. i think when inflation and interest rates are the markets focus that is when we will start to see a positive correlation and a negative sense.

i will remind everyone that we saw a lot of positive correlation over the past decade. they were all moving in the right direction. should we start to see a recession come into the fold? that is were i think you can start to see some dispersion between how fixed income treasuries might behave and what you might expect. jonathan: it's great when they are both going up. thanks for being here great to catch up. when equities are up and years were lower, and yields were probably there weren't many complaints out there or there? tom: i'm a huge user of morningstar. everyone is looking at it, my brain isn't working right now. but the basic idea is it's simplistic to look at it as five

stars or for stores and the answer is it was easy there for 15 years. or even longer. all of a sudden, it grabs the colleges -- gravity back. i have strong opinions about rebalancing. the bottom line is allocation concepts now are we more serious than they were three years ago or five years ago. jonathan: i think the both -- point you both make the simplicity. 60/40 is not great for everyone. if you know, if you and i sit down with a meth advisor we would have different conversations. what we want to do with that portfolio. tom: don't get me going. jonathan: >> i think this

marketing. as clear as i can make it. jonathan: how much of that? how much of that we can adhere this year? they believe the bonds are back. tom: if you are modeling retirement of six-month strategy you have a license to fail. theory is correct. jonathan: he joined us from run mac looking forward to that conversation on why he thinks the economy is doing better than good at least for now. this is bloomberg. >> keeping you up-to-date with this from around the world i'm leigh-ann gerrans. the economy proved more resilient than analysts forecast.

still data from the fourth quarter and what economists had expected and that is despite a covid app eight. it was the second slowest in the 1970's. data came in better than what economists had expected despite a covid outbreak, that suggest the worst may be over. china and the u.s. on track trade to beat records. it suggests imports and exports in 2022 will add up to an all-time high. in the u.k., teachers joining other workers who have gone on strike to fight for higher pay. the teachers union says members voted overwhelmingly in favor of industrial action. meanwhile nurses plan to stage another walkout next month. tesla ceo will be the star witness at a jury trial that starts today in san francisco. the issue his infamous tweets about taking the electric carmaker private. lawyers for shareholders argue

that must light in the statement and that it caused them losses from wild stock price swings. and emerson electric has gone public with its pursuit of national instruments. it has a 70 million dollar bid to take over. emerson made a cash offer in november. emerson says national instruments refused to work with them over the past eight months. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪

>> we are already falling behind. we need to invest just to keep production at current levels let alone pay for additional demand which we see rising by at least $10 million a day at 45. jonathan: live from new york city, good morning to you. don't a third of 1% the s&p 500 coming off the back of a 40 winning streak. can that continue? tom very focused on crude. 85 on brent. here is the latest from an opec report. opec expecting global supply demand to be imbalanced in the first quarter. the top official from opec saying he is cautiously optimistic. the opec countries will need to provide an average of 28.8 5 million barrels a day the first

three months of the year. roughly 120,000 barrels a day less then it pumped last month. just the latest from that report from the opec countries. tom: there is a lot of unched in the report. i believe they model 3.1%, china growth and that is far below what we are hearing from some street observers and i wonder what the dynamic will be. jonathan: that is the bottom line. it will increase by 2.2 million barrels a day. while supplies will expand by 1.5 million barrels a day. do your point, tom, china clicking beckon. we will see what kind of damage that inflicts or what kind of rally that fuels. tom: and you are looking at a gallon of gas, lease and -- lisa and i always click.

i know there are many other prices out there. i'm going to take it back to the pandemic. remember to dollars a gallon? five dollars a gallon? we are done to $3.32. sort of mid-level. jonathan: refilling the spr now. tom: i agree. i have trouble with that because i'm not an expert. i listen to the experts and they are sort of mystified. let's rebut the script. julian from london, we will get to supply and demand in a moment but you are an academic elite. brief us on why the spr discussion in america matters. >> i think it matters because we have become very used to having this huge inventory of oil in

the ground but can be called on a very short notice to meet any supply disruptions. i think it's important to bear in mind that the spr and the size of the spr are really it goes back to the 1970's when the u.s. was a huge importer of both crude oil and refined products. that has changed dramatically. in order to meet the import needs of the united states now, you actually need far less oil in the strategic petroleum reserve than you did 10 or 20 or even 50 years ago. so i personally think that some of this agonizing over rebuilding the spr to historic levels is somewhat misplaced. yes, an awful lot of that has been taken out of it and some of the overtime needs to be put back in again but i don't think it's quite as urgent as perhaps

some people are arguing. tom: i want to go back at your work and your basic idea is guessing supply and demand as we just saw opec and iea and the rest of them do it. so me about the certitude of guessing oil demand. can you guys actually calculated? >> i don't think anybody can really calculate it. a lot of the estimates are based on people's forecasts for economic growth and for population and, you know, models have been developed over time that have match the growth in gasoline demand or any sort of demand. if you start looking at these forecasts and more importantly looking at the revisions that are made to estimates not even of a future demand, we see that

those agencies that care about what happens in the past are revising their demand numbers often as far back as five years or more. and that to me says that, yes, you can get a pretty good broad picture of the direction that demand for various oil products or even total oil products is going. but pinpointing the actual number is a game. jonathan: i'm sure you have read already but for our audience that may not have seen this, jeff curry had this to say at a presentation. you cannot come up with the more bullish concoction for commodities, lack of supplies apparent in every single market you look at whether it is critical operating levels or production capacity exhausted. i think there has been pushback. lack of supplies apparent in every single market you look at. is that true with crude? >> i don't think it is.

i mean i think we've got -- there is certainly production in the opec crunchies. saudi arabia has spurred capacity. that united emirates has spared production capacity. it started to successfully increase its production in december, getting to grips with some of the issues that have kept a proportion of its supply off the market. so there is, a degree of spare capacity there. what i think is concerning people about oil supply in 2023 is what's going to happen to russia, how big a hit is there going to be too russian production from sanctions? there hasn't been much of one so far but i noticed that opec is

forecasting that production will drop by 850,000 barrels a day this year compared with last. others see a slightly bigger drop of one million barrels per day or maybe admit more so. there is certainly that concern. there is a lot of countries in the world that perhaps production looks a little fragile given the political situations. and there is this long-running, and this is really a long-running underlying problem that people keep highlighting about a lack of investment in new capacity. that has been, i think, hidden for a number of years. but if you strip that out the investment in sort of conventional oil fields has been low for years. opec keeps arguing this is a problem and they are not wrong.

but that investment does trickle through and the places with the cheapest reserves are largely the opec countries themselves. jonathan: julian lee, thank you sir. coming from goldman sachs, here is the outlook from broberg tv -- bloomberg tv. the latest bank earnings. i have to say sonal is pretty punchy about the idea that we are getting too comfortable. tom: and professor touched on this as well with lisa abramowicz in davos where are we headed towards the idea where we are going to. essence of three is possibly -- i want to point out that the most expensive glass of wine i ever held in my hands was troy

guy ascii at a skybridge one party. jonathan: what was it? do you remember what it was? tom: it was red. it wasn't boom's foreign -- boone's farm. you are not a wine connoisseur but troy, bring it up with him he absolutely nails it. and he can see here and do the whole sniff thing. jonathan: i'm off the drink this year. tom: or are you? jonathan: are you along for the ride? tom: more or less. jonathan: live longer, all that stuff. tom: i'm pickled. ♪

i screwed up. mhm.

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tom: our studios in new york. lisa abramowicz at the world economic forum in davos. right now, a tertiary statistic. we are so desperate, looking at everything we can. it is going to be most interested to see -- interesting to see, the manufacturing index. we have never covered this and make key said shut up and cover it.

michael: it is an absolute collapse in the manufacturing index for new york, falls to -32.9 from negative 11.32, the lowest since the gaps of the pandemic and second lowest in history for this index, which goes back to 2000, 2001. new orders fall to -31.1%, employment falls from fort teen to 2.8. very bad news on the production side. the only good news a few see in this report is that prices plunge to 33.0%. maybe what you are seeing is the result of the fed and its tightening policies and you could spin this as good news. tom: come on, mike. michael: i see you laughing.

things could look terrible for new york manufacturing or better for inflation overall. tom: the broncos probably wished they were in when the bills had to move their game to detroit because it was so cold. you can't tell me this isn't whether adjusted for 30 days after the cold in western new york. remember that, mike? michael: yes. this is a january number and does not include the snowstorm in buffalo. you are right, this is considered somewhat of a tertiary index and does not fall to other regional pmi indexes. however, it is something on this tuesday morning that gets your attention, the only number out today. tom: retail sales coming up on thursday. michael: we expect a drop. tom: control group and that comes down.

michael: what you would normally expect in january but seasonally adjusted. it does like americans pullback somewhat. tom: if inflation comes down, retail sales come down, that is the theory. michael: that is the theory, it came down but not all that much. we are still fairly high year-over-year. in the last couple cpi's, apparel prices have gone up. tom: thank you, as we go to ppi in retail sales. right now, for global wall street, the important conversation for those pushing against the bloom crew. neil dutta has nailed the ability to go to recession and market reaction to better than good news with china reopening and more resilient economy really -- economy. what is the distinction of your

optimism right now, the thing you would describe as the dutta optimism? neil: maybe they surveyed people before the giants win against the vikings a month that could be what is going on. i think the composition of growth is improving. even though inflation is moderating, growth accelerating. i think that commendation of growth is the challenge for markets to deal with. tom: your comments with ken rogoff with lisa a prominent -- with lisa abramowicz in davos, you put out a blistering chart eight days ago that said wait a minute, if you get disinflation and incomes do ok, we'll incomes could stabilize or dare i say inflation adjusted and incomes could actually go up? neil: they are accelerating.

real incomes are accelerating good that is not a debatable point. in december, we know that aggregate wages and salaries rose .2% or .3% and you have to basically make the assumption, what do people come to do with the new found income question my answer is they spend it. i don't think could can make the case that people will spontaneously raise rates of savings. that should keep a firm underbelly to consumer spending. we know housing is picking up again. tom: in davos, i would do algebra, but in new york i will do davos. all of the sudden come and ask is a mystery -- nx is a mystery. with china reopening, does that

give you more optimism we could avoid a recession? neil: stanley fisher did a speech on the impact of dollars on inflation and growth. at the time, the dollar with -- was strengthening and the fed was backing off. now it is reverse, off 10% since september. the dollar has a mechanical impact on the fed's models. the fact that the dollar is declining, it introduces upside core inflation. i think the dollar selling off as a sign that global growth by patients are improving. tom: what is your 2023 gdp number for the united states? neil: out so you wouldn't is not, it is not 0.5%. look, i think something slightly

above intentional is plausible, maybe two. tom: help meet with the dots, the dispersion of the dots. are any dots as optimistic as dutta? michael: there is not. but what you have going is a situation and neil and i argued this on the bloomberg message system the other day, the fed makes its forecasts and they make 19 forecasts and we arbitrary -- arbitrarily pick the median. wall street changes its mind about what growth and unemployment and interest rates are going to be every day, every five minutes. two back and say the fed is wrong by saying .5 percentage point growth in december is not really fair. the fed changes their mind and

they will have a new forecast in march but even at the upcoming meeting, i suspect you will hear jay powell say that growth forecasts are rising. we heard the philadelphia fed president say he has marked his up to 1% for the year. neil: let's assume that is right, taking up growth forecast into the march meeting. at the same time, for of a 25 basis point move is solidified. the identity -- idea they are going another 50 is going down. look at your own bloomberg consensus, the cfc -- efce, q over q annualized, zero point 1%. q2 coming in at minus 0.6. this is the consensus. i think that is dramatically offsides considering we are going into a year something

closer to 3%. the consensus has a lot of work to do in adjusting their expectations. tom: where is the dutta.? when will we go plural? when do they migrate and how many meetings out today migrate where the dispersion list up and there is optimism about one or two or 3% gdp? neil: the risk with the dots right now is that the cuts that are currently baked into the 2020 for outlook get priced out -- went to 24 outlook get priced out. all of these -- the 2024 outlook get priced out. to go up a full percentage point and growth coming in slightly above potential, that means there is room for the unemployment rate to follow. if it remains low, then the likelihood of them putting in

2024, i think that goes away. michael: march 22 is the fed meeting where they will have a new update. tom: we will reserve dutta dots. set this up for me. the answer is retail sales matter, 70% of the economy, inflation coming in will be dampened. how do you interpret retail sales with the dynamic with this inflation? neil: if i'm not mistaken, december 2021 was a really weird month. we had a big decline in core retail sales. there might be seasonal adjustments going on following the pandemic that depress numbers like retail sales in december. we probably make that up in seasonally adjusted terms sometime in the spring. i can tell you, it looks like

the inventory adjustment is largely over. i think that could be one reason why prices in things like apparel art collapse in as much. tom: dana toll see -- the dana tulsey has been on for this. are you surprised that we cleared inventories, it seems, really rapidly? michael: i don't know if i am surprised because there is a point for a company to hold onto inventory that won't sell. if you go to t.j. maxx or marshalls you will see that inventory and it will be marked down because people are trying to get rid of it. also in the retail sales report, we saw in december, gasoline prices continue to fall, so that

will take some of retail sales. auto sales were not as high, but that is a difficult one to translate into the retail sales report. tom: is so important that we have people. people are talking on the internet about your socks right now. these are extraordinary socks. are those optimistic socks? neil: if it is a donut, it reflects the doughnut on inflation. tom: neil dutta with the doughnut socks giving us a optimistic economic growth. the vix, down. stay with us. ♪

leigh-ann: russia wants to increase military. the kremlin is saying it is in response by a proxy war being fought by the u.s. and allies in ukraine. they have a target level of within 1.1 million personnel. in venezuela, public-sector workers mounted the biggest anti-government protest in years. workers organized at least if the protests yesterday. in caracas, teachers were joined by nurses, pensioners and others demanding more money from the government. they have been falling behind in an economy that has embraced the u.s. dollar. a new report says international trade will grow more slowly than the global economy over most of the next decade. according to the boston consulting group, the war in ukraine will reshape strategic alliances and alter the flow of cross-border commerce. the report forecasted that trade

will grow at an average 2.3% through 2031. for the first time in six decades, china's population is shrinking, latest milestone in a demographic for the second largest economy. government data says that at the end of last year, china has over .4 billion people, fewer than the number the year before, the lowest birth since 1950. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪

tom: bloomberg surveillance. welcome to all of you from our

studios in new york. features -11 out to negative eight. the vix coming in better, it quiets and take -- a quie scent take. this up ron what's is in both, and what lisa doesn't know the way you will run an oil but he is you study the mathematics of the legendary ruth rebecca strew uac. i can't tell you how my view changed under her and the mathematics of colorado as well. lisa: from the davos alps, we are talking to mike wirth of chevron.

so happy to have you with us. everyone here is talking about china, the reopening, how much it will juice the economy. how will it affect prices? mike: i have met with people from china even today and what they tell me is the pandemic has largely moved to the big cities and people are back at work and the economy is beginning to move forward. we are not seeing it in commodity markets but the absence of demand is why we are seeing profits soften and the return could from them up. lisa: some say china is getting supplies geared up from australia, all sorts of different supplies, huge stockpiles they will unleash to dampen any kind of sudden surge in demand. do you agree with that assessment? mike wirth the data --mike: the data is hard to interpret and

difficult to see in the short term what is happening. longer-term, we can see oil manned out of china has been down during the pandemic. they will use liquefied natural gas but oil as well. as their economy returns to full strength, we will see it in demand in a row that is tight right now. that is the case for upside in commodity prices, a strong return of the chinese economy. lisa:, which upside could that be? mike: it is hard to say, and we try not to predict because you are always wrong. supply and demand are fairly balanced. as economies have open, supplies struggling to keep up. that is why even before the war again, we saw strength in prices. there are rules on which countries can buy from other countries and what prices.

shipping lanes are longer than they were before and strain on these markets. it wouldn't take a big surge from china to push on those constraints. lisa: concerns in frictions, have you changed where you do your production and where you focus some of chevron's drilling and exploration? mike: we haven't. those are long-term views we make on supply and demand technology. we need to be nimble with logistics with the way we manage supply relationships with our customers in order to make sure we meet our obligations. there is a lot of commercial and logistics activity to respond to the kinds of things we are talking about, but long-term decisions made on the fundamentals of the geology, orchids and a long-term view of those things. lisa: do investors reward you more for investing in production the way they haven't a couple years ago, sibley because of this renewed focus on fossil fuels -- simply because of this

renewed focus on fossil fuels? mike: the last decade has not performed like the rest of the market and some of that was a lack of capital discipline by companies in our sector, some was the narrative oil and gas were going away sooner than they likely will. we certainly saw last year in the sector reports strongly and investors have reinvented themselves with the fundamentals of the energy business with the cash companies generate in this sector. i the end of third quarter last year,havegenerated record cash in our business. there is more capital discipline in the market is beginning to come back with us. earnings in our sector through three quarters of 2022 represented 10% of s&p 500 earnings. by market capitalization, only 5% of the s&p 500, so there is

still upside. lisa: the biden administration came out in the year and said we are going to do releases from the strategic petroleum reserve. do you think that was a good policy? mike: i think it certainly provided oil supply to a world that was concerned about the reliability of oil supply. the reserve wasn't set up or price excursions. it was set up for true supply outages which we did not experience last year. the risk in having used the supplies with a have been used is it we were to run into something that is more serious, in terms of availability of supply, there is not enough dry powder left as her has been for the last several decades -- as there has been for the last several decades. it has had a calming effect on markets but left us in a delicate situation. lisa: saying they will potentially repurchase around $70, perhaps they have missed

that and start refilling it come february, is this the role of the government? mike: it is very interesting the amount of intervention we have seen governments engage in into markets that historically they really have allowed to function on market fundamentals. my personal view is that a price that the government said we will referral -- refill the strategic reserve, does work for us. if we want to sell it at a certain price we can go to financial markets and do that today. these kinds of things will not change the way we invest but i cannot speak for others in the industry. lisa: do you think it will change prices next year if they choose to refill or the supply if it is not there, do you expect that to change the dynamic the market is not fully reflecting? mike: incremental demand would

buy the commodity which has been selling it over the last year. my guess is, and they don't have any unique information. is the government will reveal -- is that the government will refill slowly. it will be a measured way that will be something the market can handle. lisa: a lot of people talking about renewed focus on fossil fuels. people are flooding back and saying, perhaps we get carried away with esg. evie stopped investing some -- have you stopped investing into so much renewables? how are you playing that given the dynamic position has shifted? mike: our strategy has been to leverage strength to lower carbon energy to the world. we are spending the same world and investing the same technologies and working the same projects in new energies, renewable, hydrogen, carbon

capture, geothermal. we take a long term view of markets and investment. i think the dialogue being reset , and i wouldn't say it is fully reset, but it has become full arise. -- it has become polarized. i have been stressing recognizing supply for national security and protecting the environment and an approaches from governments and companies that balance this out. lisa: i am curious about some of the sanctions put on russian oil , some of which will come next month, particularly around diesel in europe. how much has that been priced in and will be an additional shock? mike: markets are forward-looking and this has been telegraphed for quite some time. just as we saw when the oil price cap and european sanctions came in, the market was

generally prepared. i think people anticipate it. the risk is unintended consequences. products tend to move in smaller quantities to lower markets, not being asked the -- not moving estate supply in europe, they will have to get that from markets. more is likely to follow. there is the risk for disruptions. lisa: mike wirth thank you for being with us. tom: as we w speak to mr.irth, 86 on -- as we speak to mr. wirth, 86 on brent crude. there seems to be a chevron distinction. stay with us to the morning on radio and television. this is bloomberg.

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jonathan: good morning, good morning. do we snap back today? the countdown to the open starts right now. ♪ >> everything you need to get set for the start of the u.s. trading, this is "bloomberg: the open," with jonathan ferro. ♪ jonathan: live from new york, morgan stanley wrapping up earnings.