>> we are seeing some indications that wage growth is slowing and that's probably enough to help inflation come down. >> there is no reason to believe that any slow down couldn't be addressed weekly of policy eased or inflation came down. you >> don't know where were going to terminate the funds rate. >> there is a consensus that that's reasonably restrictive and maybe not perfectly restrictive but also maybe too much. >> to bring from super accommodative to restrictive. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa

abramowicz. jonathan: chairman powell volume two coming up, live from new york city this morning, good morning for our audience worldwide on tv and radio, this is bloomberg surveillance. futures are unchanged on the s&p 500. will we get any change from the chairman later today? tom: you say futures unchanged and equity markets are there but the bond market is not unchanged. it's a two day follow-through to all the fed and central-bank drama we have seen. the real yield is what i am focused on. we are not up to resistance to a higher real yield but we are getting there quickly. jonathan: at goldman sachs, the probability of recession drops to 25% a say -- and they say the near term risk has dropped notably. you are seeing house after house either push out or reduce risk of a recession and certain banks are saying we've been looking for a pause but maybe not so much anymore. lisa: what will the fed do and

how will jay powell respond to a labor market report that came in hotter than expected. they have expectations of a higher rate so does he give support to that? will he say all things being equal, this could be a higher terminal rate and this change the narrative and you hear that a ross wall street area jonathan: what is full biden? lisa: taxes for everyone. tom: no modern president can get up tonight after all the drama and fan there and possibly mention the unemployment rate is the age of aquarius. he will start singing it tonight. get back was coming up the chart for the beatles. the vice president will help. jonathan: futures are unchanged

on the s&p 500. we look like this, in the bond market, yields have adjusted aggressively over the last couple of sessions area look at the two year, down on the session by two basis points but or hundred 42 we were talking about the prospect last week of maybe having a look at a three handle but not anymore. tom: 4.43 is rounded up. you break out of 400 50 and all of a sudden, it is a regime change in this is the market catching up with the jobs report but not so much the central bank. lisa: basically, catching up to the jobs route word. we are past the short squeeze we saw thursday. may be moving in the other direction friday and now a 12 month t-bill yield that is the highest level going back to 2001

which resets the discussion. we will hear from fed chair jay powell at 12:30 p.m. he will be alongside david rubenstein, does he double down on the fact that the labor market will dictate how far they go? they said this changes the narrative. they expect another 25 basis point rate hike at the next fed meeting and the french finance minister and the german economic minister will be seating -- seeking more transparency from the biden administration. they are both in washington d c but it's an interesting time with the state of the union at 9:00 p.m. we will talk about the billionaire tax and taxes and corporate stock buybacks and he will be talking about made in america and materials used for some of the infrastructure plans. they are dueling messages. you have european allies saying what about us?

then you have biden doubling down on a domestic push in the state of the union. jonathan: thank you. do you know how many billionaires there are in the united states? forbes has the number at over 700. would you ask the majority of americans what they thought that number was raised on the political rhetoric, would they come near to the actual number? tom: i think they would say more. it's true of a lot of other studies as well. as a general statement, the media has a tendency to skew the gallup information. i try to do that diplomatically. jonathan: and people become a millionaire, it's all about the billionaires. you create this imagined cordon of people that doesn't resist can you make that a time of

dissatisfaction. lisa: the idea he's trying to cater to populists even though it won't pass raises the question of what is the middle ground in the democratic party? jonathan: i completely agree. this is about conveying your values ahead of the election and not trying to communicate a change in policy. why would we get any changes whatsoever? tom: are we doing balance of power? jonathan: we will catch up with amh later who will talk about it. joining us now on this market, the head of global fx interest rates and emerging-market strategy at goldman sachs. let's start with this, do you expect anything different from chairman powell a little later? >> as you discussed a minute

ago, interest rates have definitely changed. they have been -- they have gone up but you have seen a regime shift which means rates are going up now not because of central bank speak or policy makers trying to catch up to the higher inflation level, they are going up because conditions are stronger than expected. i think you will hear that tone that is quite normal for rates to go up and they have a cyclical beat when activity is this strong, the strong payrolls report but also the nonmanufacturing ism. that's a different flavor of rate increase which i suspect the chair and the bed are more comfortable with than one that has to be pushed up because inflation is coming in higher than expected. jonathan: what does that mean for the dollar? three straight days of dollar strength. it's turning positive on the years who do you see sustainable tailwinds for the greenback later this year. >> the news you heard last week

was dollar positive. you heard not just that the u.s. data and the u.s. outlook was more resilient than many expected and the rate hike cycle will probably go on for a little longer. the rate cuts that were there in the second half of the year are starting to be repriced. you also heard the ecb was perhaps laying out a plan that was less aggressive then people thought and the bank of england was reliably dovish so when you put it all together, i think you had a dxy positive week that will continue a little longer. we are in a world in which global growth is stronger and while the fed cycle might be a little further, the fact that you can see a peak and we're rates will eventually settle means i wouldn't expect the kind of dxy move you had last year. i think this is a very different world. tom: you are lecturing in oxford and you have to dial in all the

dynamics of do i dial in what the dollar will do and at what level of 10 year real rate will it really click in an altered dollar dynamics? >> the real rate has moved up quite a bit already. you are already seeing fairly restrictive level. it is an art and assigns to figure out what that level of real rate is that will be really meaningful and necessary. i think the key here is not just what is happening to the real rate dynamics when it comes to the dollar but also what is happening to the global road picture. the big news last year was the u.s. was very much first amongst equals in terms of the rate hike cycle but also the overall resilience of the growth path. i think the shift this year with the rest of the world, in particular your, china, look healthier from their activity prospects is actually what will

be the thing that switches us from a half where you have an aggressive move in the dollar with high real rate to one where you have a more moderate half and as you move through the year, a decline in the dollar. lisa: how much of the european store is determined by how the reopening of china goes and whether oil and gas prices remain low? >> i think both of those are crucially important. oil and gas prices important in the near term and they are probably more relevant and we know europe is very leveraged to the expansion and china with the booming global trade cycle. what i find encouraging is that despite some pretty positive and optimistic price action across global cyclical assets, oil prices have not moved up that much and gas prices, especially in europe, are actually somewhat declining. i think there is a longer runway here for europe to look a little

bit better. even from current levels. jonathan: can you frame how powerful the flows are right now into that asset class? >> you have seen a big change. you have seen france consistent outflows across emerging-market and starting to see inflows into the hard currency dollar bond market. we had probably the biggest january in more than a decade in terms of issuance from em sovereigns in terms of dollar bonds, nearly $40 billion and january is normally a big month but this was bigger than we have seen over the past decade would speak to the pent-up demand last year but also partly speaks to the inflowing of capital we have seen coming back to the emerging-market space even over the last couple of months. jonathan: wonderful to get that framing from you. thank you. i've heard the same thing from

j.p. morgan. there is a ton of money that hasn't seen fixed income for a long time. tom: and we are adjusting to nominal yields which you cannot ignore. i would suggest there's been a jump there when eight weeks ago there was an understanding of what the yield was and now, it's even more substantial. lisa: it's amazing given cash as an alternative area jonathan: coming up in the next hour, we will catch up with the cio for wealth and investment management at wells fargo. equity futures are just about positive and we will head down to d.c.. lisa: keeping you up-to-date with news around the world's -- the death toll from those powerful earthquakes that struck turkey and syria has now topped 4000.

rescue crews are still searching through the ruins of thousands of those things, looking for survivors. the shortage of gasoline in the quake zone is hampering efforts. the u.s. has begun to recover some of the parts of the chinese balloon shot down off the coast of south carolina. one concern for recovery teams is whether the equipment carried explosives or other hazardous materials. china has made a formal diplomatic protest over the balloon being shut down. president biden will call for a quadruple on the levy on's -- on corporate stock buybacks. the president will also renew his plea for a minimum tax on billionaires. neither of the proposals is likely to get much support in congress. in the u.k., the prime minister plans to reshuffle his cabinet team after a rocky start. he will appoint a new conservative party chair after he fired the last one after a scandal and he had talks about splitting up the business in energy department.

bp has joined other giant energy companies and posting a record profit for 2022. it reported earnings of more than 27.6 ileum dollars for the year -- billion dollars for the year. bp is boosting its dividend and will buy back an extra 2.7 billion shares. global news, 24 hours a day, on-air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ ♪♪ what will you do? will you make something better? create something new? our dell technologies advisors can provide you with the tools and expertise you need to bring out the innovator in you.

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>> it was always my position. once it came over to the united states from canada, i wanted to shoot it down. we made it clear to china what we were going to do and they understand our position and we won't back off and we did the right thing and there's no question of weakening, jonathan: we will hear from the president of the united states a little later. we are trying to bounce back but we are struggling. yields are unchanged on the 10

year. tom: up to 81 basis points. we haven't done a correct look at the bloomberg screen. the bond tension is tangible. it's a political day but the bond tension is tangible. jonathan: lisa was on the right thread when it came that is when it comes to the fed story. is it a disagreement over forecast weather we get cuts later this year? the chairman says he was ok with that but i how much pushback we actually get from the fed chair later? tom: help me with labor -- jonathan: 12:30 p.m. it's breakfast time in washington there. tom: it is. john is serious. and marie hiordern joins us now.

you know that after the state of the union, the place to be is on 19th street and your favorite boot behind the bar at the palm. tell us about the body language in washington during the speech and after the speech. i believe the governor of arkansas will speak for the republicans but forget about the reporting on the policy, what is the body language we don't see tonight at the capital or for that matter at the wonderful palm? >> for a correction, i will be home sleeping. what you want to look out for is just the reaction from the members in the room. are you going to have the rebels on the republican side that caused a lot of drama and chaos during speaker mccarthy's vote? will they be standing up and heckling potentially the president?

you want to potentially see when you will get a huge even from the democrats on some of these moments? those are the kind of things to look for. afterwards, it will be all spin from both sides of the aisle. tom: the shock is to see the judges there. that's how we know this is a gathering of the executive legislature, judiciary as well. do the republicans look at the people in the black robes as their guys? are they such a conservative majority now in the court that it changes the body language at the state of the union? annmarie: i'm not sure that the republicans will be focused on the judges. when you are talking about body language and individuals in the chamber, you will not seem the same -- see the same body language from the judiciary branch as members of the house or senate. jonathan: the white house put

out a fact sheet yesterday afternoon with a ton of proposed taxes, attacks on buybacks, the kind of ink that might sound good but probably won't get done anytime soon. will there be some agreement in washington? they put out a note yesterday that the white has is issuing guidance to ensure construction materials for copper and aluminum to fiber-optic cable and drywall are made in america? can you frame that conversation in washington? annmarie: they put out this fact sheet in the present will call for a number of things that literally have no life getting through the 118th congress and couldn't get through the past congress when it was controlled by democrats. he's looking at things that could potentially win republican votes. making materials and america,

and we are seeing this could potentially happen because the administration may announce a 200% tariff on russian aluminum which means relying more on u.s. aluminum and allies around the world. other potential policies, maybe don't get mentioned but things that could happen in the 118th congress, things like agricultural bills for farming, that kind of legislation could get through. bloomberg government has a good article out this morning highlighting that the president may want to lean into items that republicans in the senate want to get done. in the senate is where he could have compromise and maybe be able to push the house along. it's a divided congress and it will be incredible challenging and the president will say a lot of things but it won't get done. lisa: let's build on the idea of made in american construction materials. they are pushing back on the

inflation reduction act so how does this complicate the transatlantic relationship at a time when president biden is trying to cater to a domestic audience? annmarie: i spoke to robert havoc, the vice chancellor and he applauded the inflation reduction act and he thinks more needs to be done. he is from the green party so we think and more needs to be done to help renewables take hold. they want to make sure they have a piece of it. there is one thing that potealmost like a shared space r these raw materials which are essential to ev's. this legislation is said and done. it doesn't look like there's any way it can change unless congress wants to go back and change it. that is not happening so you have the french and german foreign -- finance ministers coming here and discussing what can be done but it remains to be

seen that potentially a whole lot on the margins, they can get access with this legislation was about giving subsidies to american made goods and that's how they want to keep it. lisa: as we look at the overarching speech that president biden will give tonight, how will that frame where the gravitational pull is for the democratic party into 2024? annmarie: this evening, the president has do not just convince the electorate. his poll numbers are not very good even though he is going into a speech where he had an absolute bombshell, stellar unemployment report. it's the lowest one mention it in the first five minutes. the electorate is not just feeling the economy he's talking about, he also needs to convince his own party. not all democrats are convinced he should be the leader in 2024.

that's his top mission of the evening. jonathan: thank you, we will catch up with you in the next hour. how quickly could we hear from the president about an official run in 2024? tom: there is also the idea of running but those who are older have the bombshell memory of when lbj said i'm not going to run. that goes to the other side -- does biden come out on a sunday meeting -- sunday evening like lbj did and say i'm not going to run? jonathan: where does that leave the rest of his presidency? tom: it becomes lame-duck the moment he says that but it free s up the party to take on a reinvigorated gop with a conservative shift. jonathan: and they need the time to do that. based on communication from the

outgoing chief of staff, very double indication he will do and lbj. lisa: it might be kicking the can down the road so he doesn't become a lame-duck. how do you build that momentum? i'm curious when he will announce the replacements to the outgoing cabinet members? jonathan: is that where your focus is? lisa: that will be key in getting policy done. tom: can you believe the official from the united kingdom leaving office at 86 years old? jonathan: i'm not going to comment. we will talk about citigroup later.

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jonathan: live from new york city, and witty futures are just about unchanged after two days of -- and equity futures are just about unchanged after two days of losses. friday morning, 2.09% on the bond yields. now it's up. tom: -81 basis points and this is round-trip off the joy we saw of i think the fed meeting and

press conference and now, do we breakthrough? that's the tension on a tuesday morning. jonathan: the two year is back where it started at the beginning of the year. now we are back to where we started. euro-dollar last week at 1.07 and having a look at a 1.06. you get a ton of fed speak with chairman powell speaking at 12:30 p.m. eastern time and later this week, all the rest on the agenda after the comments we heard from rafael bostick. is that what you call full bostic?

lisa: on thursday, they talked about at peak for an -- fed funds rate below 9% in april and march and 4.4% by the end of the year. now we are looking at 5.1% peak fed funds rate going down to maybe four point 7% surprising of rate cuts and a higher terminal fed rate which changes the inflation for assets and people are adjusting. jonathan: we get more data friday and i think those cuts get pushed off the table pretty quickly. tom: if we get more data, what we will hear from the chairman today with mr. rubenstein is no chairman has never been this data-dependent? jonathan: that's valentine's day? tom: it is. cameron dawson joins us now from

new edge well. i love what you have in your sophisticated note about what the speculators are doing. it's not bill gross you are talking about, you're talking about the de-grossing that's going on now. explain what that is. >> we have seen this utter confidence by the bond market that we are going to get much easier policies moving into the back half of 2023 but we continue to see data that flies in the face of that, meaning the strong labor market and inflation that remains persistently high doesn't support any kind of pivot by the fed. we have seen the round-trip and a lot of the bond pricing in the past couple of days. we have not seen it within the equity market. tom: yes, continue. it's amazing the separation from bonds from the equity market. >> if we think about why we've

seen the equity rallies to start this year come is because we so real interest rates fall. they started at 1.6% and fell to 1.1% but now they are back up to 3.5%. we have not seen valuations for these higher real interest rates so we've gone from 23 times on the nasdaq but now we are trading at 27 times. we think the real risk is back on the valuation front for equities because we are at the high end of stork arranges. lisa: whether the risk is in big tech or the broader index including some other names is a key debate. is this just in tech valuation risk or is this across the different companies that have rallied including materials and energy? >> if we look at the growth index, we are back at the height and of the pre-pandemic ranges but also at the high end for the

value index because we have seen such a broad-based rally. it's really hard to make the argument that there is pockets of this market that are absolutely cheap because the rally has been so broad-based. if we continue to see interest rates remain high, i think all valuations would be at risk of rolling over. lisa: i get a lot of messages about how to negative i am. i imagine you also get hate mail or pushback. people say why can't you be happy with good news? why can't you be happy with the fact we are seeing a robust labor market? i'm just curious, how do you respond that maybe we get no landing? >> at the end of the day, the rally was very much supported by positioning and sentiment being so bearish last year. when we think about what the drivers can be, we are at the

high-end of ranges for valuations a we don't think we can push much above that. on the earnings front, a soft landing might mean we have to roll out the worst case scenario so those dire forecasts of 10 or 20% down look less likely given the data we have today. if we get that soft landing, it means we don't get the support from the fed which means we don't get that boost to valuations that could really drive significant upside from here. lisa: are you joining the crowd of people going to europe and hiding out in t-bills? >> i think there is a valuation argument to make within international stocks. we have to be careful because international stocks have only had sustained outperformance over the u.s. during distinct and protracted dollar bear markets. by making a bet on international, you are making a bet on the dollar which means you have to have the expectation of the dollar will significantly

weaken from here, essentially to close that valuation get between your versus the u.s. which has persisted now for over a decade. tom: what is the price for being in cash? all of a sudden it has value but in long-term, what is the price? >> it's optionality, the potential that we could be wrong. we remain invested in this market and the way we have navigated holding risk assets is to be more tilted toward polity. we have not upped our cash position a great deal. a lot of air asset allocation models might suggest that four or 5% caches attractive but you cannot extrapolate that over 10 years so we have this balanced asset low -- allocation. tom: i never look at the standard & poor's 500 at the spx

is at 4100 on february 7, 2023 and the percentage of people out there that guess that is the near side of nil. what do you do if you have had the year rally, how do you stay comfortable in equities now? are there certain sectors you hide in or do you hedge a downsides? >> from the hedging of the downside perspective, it's one reason why we remain overweight energy. we expected to have weakness in energy because of earnings decelerating materially but at the end of the day, if we see oil prices rising in gasoline prices rise again and that causes inflation to re-accelerate, other parts of the portfolio may not do so well so we remain overweight energy. we keep that quality bias. we have not chased this data rally because we haven't seen it supported by liquidity, expanding liquidity conditions a

we are saying maybe we need to raise cash for liquidity needs and we will take it out of those higher growth parts of the portfolio because those are the ones that are the most sensitive to further downside if liquidity remains scarce. jonathan: thank you as always. you talked about 41 hundred on the s&p 500. tom: this is important, it's ok to be a strategist and say we are going nowhere 12 months out. jonathan: you want some strategy or market clarity? they said the payroll report friday pours hot water over the goldilocks narrative. the ultimately expects 25 basis wins hikes in march and again in may. some people are wondering if

they go further than that. lisa: this is across the board, people resetting after friday. alan zentner talking about the pause and the fed would adjust. she said yesterday this change the baseline forecast we saw friday to a 25 basis point hike and boosted the chance of bigger hikes down the line so we see the same thing from j.p. morgan and the same thing from morgan stanley and citigroup. this groundswell is getting behind this. jonathan: does chairman powell have a job to do today or not? lisa: he has a job not to disrupt this. if he wants to be successful, he comes out and says we are looking at the labor market and we are dated the pendant but we are looking at the data and the markets are as well. jonathan: i would love to hear his assessment on financial conditions a in with another

opportunity to address the question and see if he answers it. tom: it's like the equity market has a division of bonds versus equities. the dow closed below 34,000. that's not a bond statistic. jonathan: there has been a lot of moves. lisa: he can't say the financial conditions were the same as two months ago but he could say we are monitoring that as a transmission mechanism and we hope it reflects the data. i'm throwing out some language. jonathan: also the junkiest of junk. lisa: how about tech companies? tom: i would suggest that's a short cover and bonds are the same thing. bond price up and yield down

until two days ago. jonathan: a huge focus on short dated call option activity. a massive volume and it seems like that keeps coming up area tom: it's part of the liquidity story. also they are focusing on spring chaining. jonathan: when does that start? tom: we can't do the red sox, we have to do yankees baseball. we stay at the hotel across from the steakhouse. lisa: it's like all of the high schools. jonathan: will you encourage your son? do you give him reality checks? five home runs and then you say what are you happy about? the number one lesson i took her might dad after playing futbol

is the dancing after a goal. he said down to that. we are going to talk about what happens when high flying gets relegated what happens. the prospect of that happening, we have seen that happening and some of their biggest stars are the -- are a plague on the little league. from new york, this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world -- search-and-rescue crews from overseas are deploying in turkey a day after a pair of powerful earthquakes left more than 4000 people dead. turkey's defense ministry said military has started evacuating some of the injured with navy ships. millions have been suffering without power or heat in the cold.

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this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. >> we are still looking at a recession happening sometime this year but a shallow one where the fed is not successful

in its mission in bringing inflation down to a 2% target. a double-dip recession is likely what we will see over the next few years because there will have to be see ridge -- be serious damage done to the labor market. jonathan: live from new york, here is the price action -- equities unchanged on the s&p 500. it's tuesday. tom: you nailed that. jonathan: when i first started the early shift, i -- they used to write down what day of the week it was on my notes. i always forgot. tom: we are riveted by this. jonathan: manchester city, highflying futbol club under investigation for more than 100 violations of financial regulations between 2009-2014 and they could face expulsion

from the premier league. the two-time defending champions reacted to the news saying the club welcomes the review of this matter by an independent commission. tom: lots of three syllable words. i will say what any american would say about soccer is are these guys the astros and it sounds way worse than the allegations against the houston astros. here is a paragraph from the new york times -- bring it up if you would. this goes into the detail of what you will talk about. [applause] [laughter] jonathan: what was fascinating

is that the premier league put out this statement almost at the same time they were on the phone to manchester city that the statement was out and everyone started reacting to it. josh turner is one who reacted to it. can you go through the accusations here and work out the timeline for how long this might take? >> the accusations are bizarre but you make a good point about that paragraph, you can barely understand any of it. if you try to analyze it, what matters is the premier league accusing man city about being dishonest about its accounts. imagine that for a large bank, there would be turmoil in the markets. how long will it take? they will have some of the best lawyers in the country dealing with this given they are paid by the hour but i can't tell you

how long it will take. a few months at a minimum but it could stretch a few years. they had this whole thing two years ago and they were fined and they appealed and lost the original case. this has been going on for four years find the scenes already. jonathan: can you give us specific examples of what they are accused of? >> there are some things about the manager getting extra payments on the side with peoples agents getting paid extra on the side. the real issue is the accounts. if the club can't honestly say what its accounts are over the past nine years, that's a huge deal. if they are found lt, there will be serious repercussions -- that if they are found guilty, there will be serious repercussions. tom: the stereotype here is

petrodollar money acquiring british sports. do you and your reporting for british reporting assume there are other petrodollar owners that are just as guilty? >> i don't think you can say that. there is plenty of potential buyers in qatar looking at certain clubs up for sale including liverpool and manchester united and they might look at this and say why take this on? are we going to end up in the same boat? lots of people want to see manchester punished for this. tom: joining us now is the futbol expert jonathan ferro.

jonathan: is this an official introduction? tom: button your jacket and make it look like the bbc. jonathan: i will do my best. tom: i am so dumb and the guy for the tots did a great job defending. what is this stuff mean for mr.greylish? jonathan: does it mean they fail to qualify for the champions league and doesn't mean the highflying football stars will have to leave? it was a match in italy in 2006 where the event got relegated from the top tier of italian football and they lost big superstars. one of the greatest goalkeepers of all time, the greatest in the world that time, some of the

best players in football when into the lower league. i think what's interesting about this is it is a different league . events got penalized again. there has always been a theme in the premier league that has protected some of these big clubs and allowed them to do what they are doing. governance of football in the united kingdom is interesting and i wonder if the pushback from man city is this the feeling of the premier league getting ahead of the government? >> the last thing the premier league wants is an independent commission dictating what they say. perhaps it's a power-play but can't read too much into coincidence. the statement was supposed to come out yesterday and it was

delayed. i wouldn't read too much into what the u.k. government will do lisa: and any regulation. lisa:i was wondering what the discomfort level is with foreign investment coming into these london leagues. is this a petrodollar thing or is this foreign investment coming in and taking over the culture of london futbol? jonathan: there has been pushback around that for a while. it's an international game. that's not going to change. this is about not whether manchester city had the better team, they clearly did. it's whether they broke the rules to put the better team on the field. lisa: so if there championships get taken away, will people think they didn't win so they will get the support? jonathan: if you ask about the leak titles taken away, i think that changes the conversation.

i think we will talking about this for a while. just fascinating story of a very popular game in the premier league. they are probably one of the most popular leagues in the world. tom: you got me hooked on this. i went back with the tots after the victory. i didn't pick them. ferro picked them for me. i couldn't do west ham. that's how it happened. was he auditioning for sky tv there? i'm sorry, i don't know what to say. you were born to do this. jonathan: would you like me to go somewhere else? tom: they can give your name an

italian accent, it's a no-brainer. jonathan: i've already said what i'd love to do monday-friday, bloomberg surveillance and then i'd like to do italian futbol. i will take you with me. tk and i. tom: it works perfectly. jonathan: we can talk about italian banks at the same time. tom: we are talking italian futbol. jonathan: the absolute dream is a formula one commentator going around the world and follow the races. that's pretty cool. lisa: any other dreams? jonathan: i want to make ice cream. there is plenty of stuff. lisa: don't leave us just yet. jonathan: you are trying to get

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>> we are seeing some indications that wage growth is slowing and that should be enough to help inflation come down. >> there is no reason to believe that any slogan could be addressed quite quickly if >> >>

policy eased. there is a consensus that's reasonably restrictive >> but maybe too much. >>it will not be painless to bring this from super restrictive to super accommodative. this is bloomberg surveillance. jonathan: a huge day ahead in washington, d.c., live from new york city, good morning this is bloomberg surveillance. futures are unchanged on the s&p 500 after two days of losses and the fed is in focus big time. tom: the bond market is signaling, 4.44 rounded up on the two year yield. the bond market is getting out front of the chairman's comments at 12:30 p.m. jonathan: we've gone from close to 4% to 4.44 in three days? lisa: and there's been a complete shift in the terminal rate of the fed funds and the potential cuts or non-cuts for the funds rate later this year. you always talk about the

courage to be bullish and invested so where's the courage to be bearish at a time when many are talking about the potential of a recession. jonathan: darrellcronk is laughing already. the courage to be bearish? lisa: people have been burned again betting against the spread. you get rate hikes and they will torpedo the rally. jonathan: the courage to be bearish. tom: state of the onion tonight and it brings back jfk and everybody whether you are republican or democrat. profiles of bearish courage. jonathan: the kurds to be negative. [laughter] test the courage to be negative. lisa: there's all these people were being bearish and have been

burned again and i can with nonprofitable companies doing really well. jonathan: we don't need a promo for this show. equity futures look like this -- unchanged. yields are unchanged on the 10 year. euro-dollar is one dollar point seven cents. lisa: let's hear what fed powell -- fed chair jay powell says at 12:30 p.m.. david rubenstein will discuss how much he wants to leave into this move we've seen on the front and twelve-month t-bills are now yielding the most going back to 2001. it's a big deal because you were talking 4.8% in terms of what you are getting. park your money and t-bills for 12 months. this changes the equation for things like nonprofitable tech companies as well as high yield

that used to yield 5%. the french prime minister and the german economic minister are going to washington, d.c. to talk about the inflation reduction act. this is interesting because it comes ahead of the state of the onion, the state of the union address were president biden will talk about domestic supplies going into infrastructure spending and that discussion is it 9:00 p.m. and that's getting paired downing will talk a lot about taxes on billionaires. i think the made in america stuff is more interesting in light of what europeans are saying and what they're doing in terms of the government right now. jonathan: darrell cronk is with us right now. do you have the courage to be bearish? >> we did for all of 2022.

you will hear two mixed messages on jobs today, jay powell at the economic club saying he's concerned about the economy overheating and president biden will say how he's done such a great job creating jobs. you will have this dichotomy that will happen area you've had a subtle change since the fed meeting, the point about 35 basis point move in the two year, the dollar has reversed course and gold has started to come down. you have a different message on the equity market between technicals and fundamentals. tom: the bottom line is you need the courage to buy quality right now. all the media razzle-dazzle and the rest and wells fargo is saying it brave and buy quality, define quality. >> it's everything that wasn't

this rally. there were only two themes that have driven this entire rally, its long-duration assets, not just equities, gold is a long-duration asset. on till the fed meeting, the long and the bond curve, rates were still falling so you see a long-duration rally and its low quality, all the things you don't want to own that were just either some form of a january effect or some form of short covering were some form of reverting to the mean after a tax loss. that's not the basis for good, sustainable rally for here. now you have coiled the 50 day, 20,000,000,100 day moving averages that have to break out and they broke to the upside in the short-term but near-term indications suggest you are probably overbought at this label -- level.

we think it's a bear market rally with four or five of them and 2022 and and fails in resistance and goes back down before you move higher. lisa: do you faded with options or bet against the nasdaq or that against specific companies? >> i think you sell on the margins. is giving you a second chance to unwind lower all if you want to or reduce your equity positions. you take them down if you need to you can hold that dry powder because you're getting paid handsomely in the short side of the yield curve and for the first time in a long time, you're getting positive real rates. if you look at the three month run rate on the cpi, they are 3.1%. if i get 4.82 on a real month treasury, they are in a positive place. that gives you some nice yield

as you -- as the fundamentals catch up. lisa: how distorted is your portfolio weighted to fixed income versus equities and other assets? >> it's definitely underweight equities. on the fixed income side, we were overweight fixed income. sure term makes all kinds of sense and the value of the yield curve, you don't want to be there because set of roll down, you have roll up in the yield curve which is not the place to be. the 10 year peak on october 24 own went -- and we went long-duration on october 29 but it's been a heck of a trade. it has headed mid double digit returns to portfolios. at this level, i would be careful going to the backside of the yield curve and we think the 10 year curve is between 380 and

390 so i would be careful at the level we are at. jonathan: if the data keep surprising to the upside, with that change anything for you? >> the obvious is to dish is it has to praise and more hikes. it's all about march and then another 25 basis points. it takes of any hope of cuts in the back of the year. you have to let this thing play out. earnings growth is just now turning negative. in the last 30 years, we've only seen that happen four times and it ends up being a recession when we see it happen and yesterday, use of the senior loan survey with financial conditions tightening. every time you think about a recession, you have interest rates going up, inflation spikes and lending conditions tightening. jonathan: perhaps the chairman

is more focused on the loan survey than public arcus? >> he is focused on financial conditions. you can look at a whole bunch of financial conditions to this time last year -- jonathan: what was wednesday about? >> that was his attempt to be hawkish but the market interpreted it as dovish. he's going to try to walk that back i think today in subsequent speeches to try and continue to pound the pulpit about having more work to do and we are not there yet. i think that's an important thing for markets to reconcile. the equity markets on the bond market have not believed the fed. jonathan: it seems like the disinflationary process has started. lisa: that was what they are looking at and hoping for, any kind of failed communication. >> that's right. tom: can we give you a year and

eval. sarah house killed it. she described better than anyone i know this path of disinflation down and she used the amazon challenge of the last mile to get to your house, getting from three to 2. when you listen to her, what is the yield you are trying to get to? >> i think that's the mistake the markets are making now. she did great on this. the markets are missing is the keep using in elation data on year-over-year but who errs about last year? as we speak, there is a rolling run rate of three months. at three, you're a stone throw away from two or 2.5%. we will get there faster and

that's what we wrote in our outlook. the great surprise this year was how fast inflation will come down. in november and dissenter people -- and december, people were like no way. jonathan: and then they were expecting cuts. you wonder why your bonus is not happening but is becausetk is flying into zurich. tom: we had a huge response of going to spring training. jonathan: they want is down there? tom: we are going. we will talk about it. jonathan: that was a joke, credit suisse has big enough problems. the chief investment officer atverdens capital will join us next, this is bloomberg.

lisa: keeping you up-to-date with news from around the world -- the death toll from the powerful earthquakes that struck turkey and syria is now topped 4000. rescue crews are still searching through the ruins of thousands of building, looking for survivors and the turkish president has declared an emergency intent of the country's provinces. in india,adani stocks surged after he prepaid some debt and traders covered short positions but the group is down $112 million in market valuations. they were accused of market manipulation and one topic is there is no change in the capital management plan. >> capital management is working and that's the purpose. current -- currently, i don't see any changes in the management picture. lisa: he has called the

short-sellers report bogus. an unpleasant surprise for bankers and credit suisse, struggling swiss lender is delaying much anticipated bonus talk that had been set for today. the talks may be rescheduled in the coming weeks. credit suisse would normally pay their annual bonuses at the end of february. global news, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ three nights, esg... the broker will take your bonds. -diversification, futures, options. fiduciary. leverage. [whispering] -frothy markets. psst. virtual real estate is a lock. ♪ cold hard cash ♪ j.p. morgan wealth management knows the world is

full of financial noise. i'm looking at your asset mix and plan. you are right on track. great, thanks. our easy-to-use app and local advisors are here to help you figure out what's right for your investments. j.p. morgan wealth management. i'm bill lockwood, current caretaker and owner. when covid hit, we had some challenges like a lot of businesses did. i heard about the payroll tax refund, it allowed us to keep the amount of people that we needed and the people that have been here taking care of us. see if your business may qualify. go to getrefunds.com.

>> we believe dialogue and diplomacy is always important when it comes to a competitive relationship. we think it's especially important when tensions are further heightens. we will remain steadfast with her counterparts and there will be opportunities to engage in face-to-face diplomacy. we did not cancel this meeting, we postponed it when it will be appropriate for the secretary to travel to beijing. jonathan: the state department spokesperson, the meeting was postponed, not cancel. tom: what an honor to speak with

james travitis yesterday and we talked about the courage necessary to go down 50 feet and ice cold water and put a hook on this thing. he really got emotional. he said this is what they do. there is no optionality, you were ordered to do it. jonathan: you don't get to turn around. tom: it was a real snapshot of the reality. jonathan: you will hear from the president a little later and you will hear from the fed president and we are looking forward to that. equities are up around 1/10 of 1%. tom: resilient. jonathan: after a couple of days of losses. the nasdaq is down 2.6% over the last couple of days but impressive gains year to date

with the s&p 500 up seven percent. tom: 19.40 four is the vix. let's talk about ukraine and maybe word this into the discussion. we've got to go to mr. rubinstein's discussion with the german and what the president will say about 1969 and a fully employed america. powell and biden are not on the same page. what will you listen for in your reporting on the powell/biden jobs report? annmarie: i think the president was given a huge gift coming into the state of the union. he can tell this in my the last time unemployment rate was this low, the president was 26 years old. tom: thank you for pointing that out. annmarie: if he does not start

his speech with this, i will be shocked. we talked yesterday about how the economic part of the speech is front and center and it will be a major theme. he wants to convey to the american people that the economy is getting to a better place. inflation is starting to come down in the jobs market is picking up and there is this indo for a soft landing. that's why we want to hear what jay powell has to say because he will be the one to be more of a predictor because the president will not but potentially jay powell will get more insight on that. tom: how do they treat ukraine? it's almost a second-tier part of this with china and the rest of it. do you expect republicans will sit on their hands when the president mentions this war allies? annmarie: the ambassador will be sitting next to the first lady as she did last year.

last year, the speech was rewritten six days before it was given and russia invaded ukraine. that's why it was forefront last year and it still going to be a major part of a theme this year especially as this present faces a divided congress and he will lean into republican senators that want to make sure they are continuing the aid to ukraine. as we have heard for many house republicans, they want more oversight on that money and the weapons that are going to ukraine. i don't think at a state of the union there will be boos, this is a sensitive time but really, the top two teams of this state of the union will be the economy and secondary is china and then speak because china was front and center over the past seven

days in the speech has to adapt to what's going on. i'm told economic portion of what the president will say regarding china has not been changed by the balloon incident. obviously, the president has to address the elephant in the room. jonathan: we've seen the fact she that was presented -- sheet that was presented yesterday afternoon. what in their can actually get done? annmarie: it's difficult because it's a divided congress and there are things in that fact sheet the president talks about like a billion or's tax hike per share buybacks, those items, although the excise tax did get done in 1%, they want to buy drupal it because it's not making a dent in companies. this was a congress that could not even close that carried interest loophole so there -- there are agenda items when they had debts that they couldn't get done when they had control of

congress. when you hone in on things like ringing more manufacturing home, making more of what we use in america, these are top things but in the future, this is hard to do when you have a tight labor market. lisa: what will we get in terms of the 2024 run for president biden? annmarie: it's making the case to the american people and his own party that he should be the man to lead them into 2024. not everyone in the democratic party's sold on the so this will be where the president says the state of the is good and we have more work to do but i am optimistic. we have come out of the pandemic and the supply chain and we have held nato together when it comes to the ukraine war and you have to give me four more years to do this. that will be the message without him saying he will run. this is continuing all week. the president will be in lord. tom: making it an extravaganza?

annmarie: they are doing a blitz in florida janet yellen going to tennessee and gina ramonda was going to new york to tout the last few years to promote their next four years. tom: bramo said is biden speaking to centrist democrats or will he shift to the progressive? annmarie: centrist democrats, he is going to make clear that the american people have spoken and they want to see democrats and republicans work together. i'm sure the president will make sure he is showing a divided look about how he wants to manage in a mature way and have their of members of the republican party that and he wants to make sure he is painting them different from the republicans what -- but will give an olive branch because he wants to work with this congress and he has to if he wants to get

anything done including the looming debt ceiling. jonathan: thank you very much. they talked about the deficit of the former president. tom: it's part of the sport. she gave a great summary of the alley that happens tonight and she said it's beltway nirvana but does america care about this speech? jonathan: it depends what's in it. lisa: i wonder whether people stand and the party is the same as the president has to stand and clap after everything and whether they are tired and don't want to. tom: then they get a beverage of their choice. jonathan: some great ones where they say serious stuff. that wasn't it.

lisa: and everybody joins with them. tom: we've got a problem. april 5, the three of us have to go to spring training in tampa, but denver -- a double dare for team surveillance, yankees-phillies and then we go see the tampa bay lightning play the new york rangers. it could be a surveillance jonathan: jonathan: junket. is that ice hockey? lisa: they have ice hockey in tampa? jonathan: that always confuses me. tom: they salvaged tampa hockey. jonathan: thank you for that, that's important stuff. ♪

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jonathan: you are trying to work out. but you don't. tom: willing to portugal? tom:cuba. jonathan: cuba? [laughter] lisa: on the way to florida. jonathan: i had your team said you were moving to portugal. tom: i am. this is true. what happened? donna, all of a sudden it's totally in the iberian peninsula. jonathan: because of madonna?

jonathan: 10% on the s&p by the last couple of days, s&p done 1.6%. monster moves in the bond market on the two-year last week, 4.09%. now back to where we start the year on the two-year. 440 three rather at 440 330 on the 10-year 363. there's a spread right now of about -80 basis. will that stick? some say that it will. all year. yield curve and version the whole time through told thousand 23. tom: first thing i did on a monday, you look at that first chart and for me it was taking two onto the month with the bill that lisa mentioned, really moving. four? lisa: 4.8. tom: 4.8% on a one-year t-bill

with a benchmark that has massive inversion if you look at the entirety of the yield curve. jonathan: when are the banks going to get on board and sorted out? lisa: they are suffering as a result because of the deposits going out. tom: why not raise rates? lisa: this is going to be the pressure, what's the need for the cash. tom: brian moynihan, you are listening. you should come on "bloomberg surveillance" and tell us. jonathan: sign up for zero interest rates accounts. this is a part of the offering. lisa: there was a long time where they had too much cash and it was a liability but when does it cross into wanting the cash to attract deposits. jonathan: you are thinking that the toast is coming back? tom: you want a goldman sachs solution for your bank, give out toasters. $400 toasters. lisa: airpods. jonathan: airpods?

toasters? people eat bread. lisa: i eat bread. [laughter] jonathan: poisonous stuff. looking at 106 early on. i know. 100 1033. tom brady doesn't eat bread, does he? lisa: aspiring to be tom brady? [laughter] jonathan: what greater man is there to aspire to be? lisa: i like bread, i'm sorry, i won't apologize for it, especially fresh and good. specific names that are moving this morning. bed, bath & beyond, downgraded to zero dollars from one dollar because they are a possibly careening into bankruptcy but they are coming up with a plan to have a financing situation to avoid chapter 11. shares are responding by dropping already .4%. baidu, this is really interesting, the american depositary receipts of this chinese company surging more

than 13% because of the rival to chat gpt. this is all the rage. if you look at the tech companies in the u.s., cloud computing unit -- cloud computing -- cloud computing units are looking for robots to replace us and all search engines. jonathan: up 80% since the lows of october. the chinese names have rocketed. lisa: you wonder how much it is because of reopening and how much it is because of certain kinds of reevaluation within the tech space of chat gpt and pinterest. i know that tom likes this name in particular. he's been spending a lot of time on pinterest to find out his travel road -- wardrobe. tom: are they still a going concern? seriously. lisa: decent earnings in the fourth quarter. but there was concerned that it was weaker than expected revenue and analysts felt that there were people possibly engaging a bit more. it's a more female audience that

tends to use this. jonathan: what for, i still don't get it. what is it? lisa: if you want to redecorate. jamaica idea book. tom: -- you make a idea book. tom: i tested it years ago for surveillance. like i looked at tiktok. jonathan: you made a pinterest board for "bloomberg surveillance"? tom: i don't know, i said i would look at it. lisa: did like it? tom: i was just curious about pinterest. at the time, didn't know what it is now, wedding board. divorce boards? [laughter] jonathan: you brought up that. lisa: why would someone advertise on pinterest that? tom: are we done? jonathan: main event, sherman powell. i will get us out of this. investors trying to work it out. from invesco, who i still hope is here, saying the base case

for the fed is the delivery of an additional 25 basis points in march with fed funds at 5% with a risk of continuing, tom, a 25 basis point pace for one or two additional meetings. i think that's where a lot of the street are right now. tom: the heads are spinning. joining is now christina, portfolio manager of global debt at invesco. i assume you are not hanging on every word of the chairman today but yet all of our heads, institutional and retail, are spinning right now. how do we get control back of a thought process to the future? >> i think that's right. obviously we came off of a massive data leak last week. this massive leak. seemed that the market took them narrative it wanted to find rather than listening to what all these central bank speakers gave us. if you look at the statements from all of these central banks,

you have obviously seen a correction the last couple of days. the fed speak for the next couple of days has been echoed this morning. you are going to have this back and forth of no one has said we are done, right? we have made progress. i think the friday payroll report is a fly in the ointment. it doesn't give them the green light to just back off. jonathan: the pushback might be wednesday. chairman powell was asked about financial conditions that had eased over the last couple of months, saying they hadn't changed too much. what's he trying to tell us? kristina: i think when he spoke the one nod that he gave is that it seemed to shift to a singular focus on inflation where before it was the dual mandate of inflation and controlling the labor market and i still believe they need to see both but perhaps inflation coming down,

if we fulfill the market narrative to get us back to the 2% target by june is sufficient for them to pause. where i have trouble with market pricing on that narrative is on this turnaround using in the second -- easing in the second half of the year even with a soft landing. if the fed navigates a soft landing, there's no real case for them to ease. jonathan: great point. market pricing and fixed income, credits rallied so hard. lisa talked about the investment grade, high yield. do you move away from certain parts of credit now, it has rallied so much? kristina: look, i think you do. and i think that across, i think that some of the easier trade of 2022 of a duration trade and directional has been taken off the table. in the last two days we have done a lot of work to reprice off the extreme richness of the

treasury market but i don't think it is a duration trade as much from here. spreads are tight and the underlying health of the corporate sector remains strong and global growth, taking a step back, looks better than we thought we would be six months ago. six months ago in the summer we talked about a massive energy crisis in europe and a very deep recession. european growth has continued to impress to the upside. china reopening has come to the table sooner than expected. there's a lot of positive momentum. but yeah, credit is less appealing. of the options. lisa: this is fascinating, building on what they set up wells fargo, the duration trade, talking about when they got in, calling it over for now, range of 3.4 to 3.9 on the 10 year. do you agree? would you sell duration and just go into the areas that are not the barbell? which won't work now?

kristina: i think the price action in the last two days, i guess three, takes the compelling we are too rich on the spectrum off the table. but i think that on the margin, yeah, duration isn't so compelling here. it's more of a curved trade. i appreciate the argument on the curve and she has been right before but i don't think that the un-inverted curve is sustainable in the long run. i think that's where the market will pushback. but i think that positioning in these markets continues to be a very large driving force and you see it in equities and you see it in foreign-exchange the last couple of days. you see it across the board and i think the price action on thursday and the reversal on friday speaks to positioning with capitulation out of things. tom: i got any mail from elizabeth who said my god, kristina is on. in the world cup i don't know nothing. i'm rooting for france. there's a kid from end -- argentina, fernandez.

would you explain -- we've got the all-time fan ever with us here from invesco. will you explain why chelsea paid $100 million for this piece of meat? jonathan: it was a big buyout where even if they wanted to keep him, you meet the claws and he's gone. so much money. this is not a fernandez issue. it's a chelsea issue in the transfer window where they spent $400 million. tom: why are they different? jonathan: ben fico? where's the money coming from? that's an important question. tom: i did ok there. ok, ok. would you like to join us in our soccer analysis? jonathan: she's going to take a pass. lisa: like hard pass. tom: the other night. jonathan: the other night? you on top of this?

kristina: preparing for that move to lisbon. [laughter] lisa: wikipedia. [laughter] tom: $100 million on us -- a player? jonathan: i think it was sterling. pound sterling. tom: he's that good? jonathan: no, he's not. too many questions. he's not as good as messy. i just think that the transfer valuations for these players have gone insane. insane. unlike american sports, that's the fee for the club. not what the player gets. he's got to negotiate a separate salary. tom: thank you for playing this up. jonathan: christina, thank you. kristina: she didn't. -- lisa: she didn't. [laughter] jonathan: rbc, gerard cassidy, up next. lisa: keeping you up to date with news from around the world and first word, i'm lisa mateo.

search-and-rescue crews deploying in turkey a day after powerful earthquakes left 4000 people in the country and syria dead. the military has started evacuating some of the injured by navy ships. millions suffering without power or heat in the old. in the u.k., the prime minister has reshuffled his cabinet after a rocky first 100 days. he broke up this brawling department responsible for business, energy, and industrial strategy, creating a new department of his son energy security had another dealing with science innovation and technology. president biden looking to quadruple the levy on corporate stock back -- buybacks. renewing his plea for a minimum tax on billionaires. neither proposal is likely to gain much support in congress. the softbank vision fund reported another quarterly loss, their fourth in a row. global tech investors lost $5

billion. the collapse in valuations last year pummeled vision fund, which holds stake in hundreds of startups. disney has almost two months to convince investors that they don't need activist investor nelson peltz on its board. they scheduled their annual meeting for april 3. he is trying to persuade large shareholders he has the experience to turn disney around after the stock price floundered. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪ conventional thinking delivers conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible.

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i'm looking at your asset mix and plan. you are right on track. great, thanks. our easy-to-use app and local advisors are here to help you figure out what's right for your investments. j.p. morgan wealth management. >> we will have a couple of quarters let's say until the summer that might these somewhat more impacted when it comes to

growth. but after the summer we anticipate it to pick up again. what it basically means for us focused on institutional and corporate. jonathan: the cfo there catching up with berg earlier. into the opening bell about one hour and 45 minutes away, equity futures are positive. yields basically unchanged. chairman powell is coming up later this afternoon. 12:30 eastern time after last wednesday saying the disinflationary process has started. not rushing back against easing financial conditions. bumping then into a monster payroll report. will today be any different after that report on friday? tom: it'll be interesting to see. what do you think? three of us here talking about this for a few seconds, is his radar off saying nothing? jonathan: he's bound to say something. i do think, you know, watching

david rubenstein, it's unlike getting a direct question in a press conference. not at all. we will see how direct things get over things like financial conditions but ultimately, lisa made this point and we are on the same page i think, the market has adjusted to incoming information suggesting that there's a problem with the interpretation of the federal reaction function. catching up with a lot of economists who have cuts priced in later this year with a softer growth profile and a quicker deceleration. the federal reserve clearly doesn't see the same thing. lisa: building on that to give you a sense, neel kashkari was building on this from the federal reserve in minneapolis saying he was surprised by the big jobs number, that so far we are not seeing a tightening in the labor market. do we get a reiteration of that from chair powell? jonathan: when they started on that kimye lit of tightening,

that would be interesting. that would imply that they've got a ton of work to do. tom: it will be interesting and we will again have full coverage of this. look for jay powell on bloomberg, radio and television as well. this is a joy for us right now in a real symbol here, john, of everything moving beyond the pandemic. having gerard cassidy with us remote from main. tucker anthony for years, onto rbc. having him in studio. gerard: it's almost three years to the month. jonathan: when we first talked to you a lobster roll in maine caused $18 and now it's a bottle of champagne. what happened? gerard: even the lobster men are facing higher inflation costs. fuel. labor costs. all very high. jonathan: let's get right to it right now. gerard cassidy, securities analysis with a 4% return.

i got that with a doglike citigroup versus the 14% return i got from harrison passing off jp morgan to james dimon. that differential, how do you, the legend that you are, how do you grind out not to pick the dogs in banking? gerard: it's all about execution, as you know. jp morgan chase has executed, citigroup has not. under new leadership they are trying to execute and divest many of those businesses outside the united states. mexico's the big one and i think if they get that done this quarter it will help the stock. tom: it's such an emotional lodestone for the heritage of the company. gerard: you are quite right. either a local bank or a spanish bank is likely to be the buyer. not american bank. jonathan: how much more defensive are these names? how much of these banks actually changed? tom: that's a good question.

we will find out. if we go through recession and they have been de-risk because of the stress test that they go through every year, it will prove, assuming they get through without a major earnings problem and that none of them cut their dividends, imagine what they are going to look like coming out of the next cycle if this all takes place, which is what we think very well happen. jonathan: what does it mean for valuing these banks? tom: -- gerard: do they become so-called financial utilities? they will never be duke energy, but maybe they get revalued. they will never be market multiples of course but the point is we could have a reevaluation coming out of this whenever we go into this slow down/recession assuming they don't blow up like they did in 2008 and 2009. lisa: one of their main utilities, banks saw the biggest outflow of deposits on record

going back to 1984. at what point do they have to start attracting deposits with higher rates? gerard: that's the question of the high rate environment but we have to remind ourselves that back to 2019 the system had just over 13 trillion in deposits, growing approximately 600 billion per year. today the system is closer to $18 trillion because of qe. i would argue that the banking system has over $3 trillion in deposits that shouldn't be there. you will see continued outflow because of qe as qt. lisa: another way to put this, do they want the deposits? are banks happy to see them go? gerard: in a way i think they are. they don't want to lose a good core deposits on like tom's account. tom: course. [laughter] gerard: they will lose some of the hot money, that's ok.

what's interesting is the loan to deposit ratio is still very low. the normal ratio is over 90% and in the system today it's under 70. tom: can i digress here? [laughter] this was real from yesterday. you and i knew brian moynihan when he was unheard of at the bank of boston a long time ago. you and i every year would go to the st. patrick's day party for the irish banks. i remember sitting at one of their drunk festivals on st. patrick's day, 400, 5 hundred people going this is going to end ugly. you saw the collapse of the regional bank experience. moynahan and lewis helped pick up the pieces. what's out there right now that's the same emotion that you and i felt on that st. patrick's day morning long ago? gerard: we ask that question to ourselves all the time. because every cycle we have had something blow up.

one of the things i find so amazing is fed funds rates have gone from zero to 25 basis points to four and three quarters and there hasn't been any debacle yet. tom: exactly, where is it. 30 seconds. gerard: we are digging, turning over every rock we can. we believe that doan's -- loans to nondepository financial institutions could be the place where it grows -- blows up. that's where the valuations have come down dramatically. tom: is harvey schwartz watching? [laughter] jonathan: it's going to be a conversation about private markets. [laughter] tom: come on, you are dead on. gerard: look anytime you have rapid loan growth in a specific asset class, that's where we take our news and we haven't really seen that. tom: is this the question that he asked rubenstein today? jonathan: that return? [laughter] lisa: financial divisions, j? [laughter] jonathan: fitting this in,

bonuses with pay. if the banks become utilities what does it mean for the salaries of the people at these companies. credit suisse talking about delaying bonuses. what's the message for the college graduates wanting to go into the industry. gerard: the bay has come down quite a bit but it is still quite good. you have to remember, 2021 was all-time records. we are coming off a high base. that being said, pay is not what it was 12 or 18 months ago, but there are cycles as we all know in there will be a capital market cycle. ecm will come back, ipl will come back. that's when the bonuses grow. it's very cyclical. jonathan: let's -- tom: let's do this more often. i'm thrilled that you brought three pounds of lobster. [laughter] jonathan: talking about that trip to maine? tom: we fit it in but the weather is tough. lisa: he doesn't like the weather.

that's the reason. jonathan: you went there a couple of times. tom: it was a one day sabbatical. jonathan: three-day weekend. i remember that. tom: we went to bar harbor. we look for cassidy. he was out on his picnic boat. in the portland harbor. that boat that you have is gorgeous. gerard: i wish i had one. but they are gorgeous. i want to make that clear, i wish. tom: that's a hedge fund boat. you can go sideways and it. it's got little thrusters on the side. jonathan: sideways question mark you ever seen the riverboats? that's a proper boat. that's a beautiful boat. i'm more of a lake kind of guy than the open waters. lisa: i'm a pup but of girl. [laughter] -- putt putt kind of girl. [laughter] jonathan: coming up on the program, the chief investment officer at fearless capital advisors joins us shortly as chair powell gets ready to

speak. and the president gets ready to address the nation in a state of the union address this evening. this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

>> double-dip recession is most likely what we will see over the next you years.

-- few years. >> some technicians i respect have called this a new bull market. >> it's clear, we are not done. the terminal has not been hit. >> it looks primed to come down. >> there could be huge revisions from one month to the next. i would be tempted to sit back and see what happens over the next month or so. >> this is "bloomberg surveillance." tom: good morning, everyone. jonathan ferro, lisa abramowicz, tom keene, on radio and television. a long day for television and radio. from here to the state of the union this evening. the president confronts ace -- a phenomenal labor economy from the report that we just saw. also volatility in the bond market that is jaw-dropping. jonathan: the labor market changed a lot for jay powell. it meant these speechwriters for

the president could edit the speech on the labor market. look, we have unemployment on the lows that we haven't seen since the 1960's. i don't like this story that it's terrible for the federal reserve, ripping up the script to go further. we will see. what's remarkable is the lack of understanding about the labor market at the moment. seeing a drop to 3.4 percent, payroll growth at 500,000, wage growth kind of not picking up in any kind of material way. let's see that develop. jonathan: that state of the union, the financial is asian of the debate of the -- financialization of the debate, as an equity guy i'm riveted on the signals, the tea leaves of the bond market. i don't know what to make of it. jonathan: high terminal rates for the federal reserve, still inking about rate cuts. tom: i don't buy that, i don't buy that. jonathan: that's what it is.

tom: it's in the market pricing but lisa, you go to the terminal rate. john mentions the rate that's out there but then there's this idea that we are going to sustain at the terminal rate for a long time and we need to get used to that. lisa: given the backdrop that the market is getting used to priced into the fed fund futures , there is counter programming going on this afternoon and evening. jay powell on the one hand talking about a jobs report that perhaps creates a fly in the ointment as opposed to president biden, using this as a pitch for his reelection campaign. something has to give. is this sustainable or isn't it? it's what we talked about, a mystery underpinning the labor market. jonathan: ultimately they will be seeing today -- two ways of thinking about the same thing. the labor market is great for the president, problematic for the reserve. tom: well it will be 6, 7, 8 hours before we hear the state

of the union. we have gone round-trip, essentially. the fed statement to me was not a shop -- a shock. not accurate. it was huge moves. to be clear for those not keeping score at home, it was 1-0, beating those people people from man city, but the bond market came back quickly. lisa: christina address this --kristina campmany address this and i liked what she had to see -- say. it wasn't that shocking of a press conference. disinflation was a word that he used. the market took it, ran really fast, headed to a place that was stomping out shorts. jonathan: things have changed for chair powell and i will repeat this many times. there was that jackson hole speech where you had that pain and said it was blunt and we have to do it. doing too little outweigh the

risk of doing too much. then all of a sudden came the brookings conversation in december where he started to sound more balanced about the risks around policy, doing too little versus doing too much. we arrive in this news conference and he's talking about a disinflationary process beginning. i'm interested in the changes through the several months of hearing him speak. i'm not interested in that consistent message of staying on theme and having more to do. the work is not done. if you are in the market are focused on change. tom: paul krugman was writing brilliantly on whether this was 70's inflation of persistence and crisis or do we go back to what's called the korean analog of the two bouts of sharp disinflation. he sang he doesn't know. this is krugman but he saying nobody is tilting towards the disinflation that they are talking about. jonathan: personally, i don't

know, whatever that's worth. two, the market on aggregate has made a decision that inflation will fade quickly and the cuts will come. the question you have to ask about the cuts as it's more nuanced than that, are they in the fed funds because you believe there will be deceleration in inflation with monetary policy that's too tight or will the cuts be there because we are going to get a real rolloff and economic growth? those things are different. if i'm long on risk assets on the idea that i get cuts in the future, cuts in the future on growth collapsing isn't actually bullish. i think that because it's coming down quicker than anticipated, that's pretty good news but they are not the same thing. lisa: and this is what kristina campmany was talking about, pricing and rate cuts and a soft landing at the same time. tom: and i think the thing we haven't talked about through the week is lisa's observation of where treasury bills are trading. jon, you have the data check

starting here. i've got the equity market in the bond market, moving. jonathan: fields are down a basis point with a big move over the last couple of days on the two year yield through 440 on the 10-year back through 360 and the difference between the two is it's still negative by 80 points. tom: joining us now, megan, chief investment officer at verdin's. changing asset allocation there off of that tumultuous week that we saw last week. megan: not yet. he came into the year and raised a bit of cash in our portfolios because of the rally we saw in 2022, getting ahead of itself, pricing and what you guys have been discussing is rate cuts that were a possibility this year. we don't see that as a possibility. one thing that isn't getting a

lot of attention is the job number. we have had some consistent lower in postings and last week saw the number higher. we still have tightness in the labor market. keeping that foot off the pedal, what you are seeing now is a repricing of expectations or what could be a great hike this year. lisa: last year it's felt like every week was a year, 2023 with such whipsaw, how do you position that when you look at the risk on the table? what's the risk in how much things have rallied? at that point is this a risky place? megan: i think that duration is a very risky place. this is one of the many things in the market that doesn't make a ton of sense when you look at the inflation environment and what the fed is doing, the long end of the curve hasn't risen to the level we think it should be. below 4% on the 10 year in this

environment is basically pricing in weaker long-term growth -- weaker long-term growth prospects without expectation on hikes into the rest of the year and that is something that we expect. we are seeing the duration staying in the maturing bonds but there will be opportunity at some point this year to stand out of that a bit and we don't think we are there yet. lisa: are you listening to chair powell or the data? responding to the market well? megan: the market is going to move on his comments, it always does. but we are looking beyond that and at the equity data. equity data shows us we still have inflation and we are looking at cpi next week after the negative month that may show an overt increase of tense of a percent at this point. i think that when you look at the economic data, you have got to focus on what the economy is doing, how fast are we slowing.

some areas of the economy are slowing pretty quickly. look at the consumer, housing, manufacturing, it's weakening at a radical clip. the inflation story we think will eventually get better but right now the labor market just continues to be a stubborn kind of nuisance for the fed to. jonathan: megan, thank you. and thanks for teasing cpi next week, i was looking at the estimates there. i can go through those estimates for you. morgan stanley, 0.4% month over month. stephen stanley, good friend of this program over the years, 0.5% as well. not all the estimates are in just yet but there is a small survey pool saying 0.5% month on month and if you strip out energy and who do that's 0.4. headline year-over-year, whatever it's worth, tom, 6.5 to 6.2 and 5.7 to 5.5. jonathan: moving closer on the

twitter, -- tom: moving closer on the twitter, i'm not big on bar chart's. really, really works on the components of inflation. as you say it's amazing the energy effect from last summer. food, i didn't know this. thank you to the terminal team for doing this. food has become teeny-weeny in terms of price change. jonathan: the base effect will be part of the story in the year-over-year. it was in the program looking at month over month. it was that, the program over the last couple of months. lisa: the number of people that have spoken on this. [laughter] jonathan: i said look at the three-month average. we are almost there. that's why he thinks we get deceleration on the cuts. thanks for helping out. lisa: any time, that train of thought. [laughter] but this was the issue, getting down to 3%, then what?

the year-over-year isn't such a difficult top. that's what people are grappling with. not so much the disinflation but it is what happens when it stops. tom: this is where we are going, three-month annualized. 90 days of data and then you annualize it. that used to be a convention years ago. we sort of got away from it. i wonder if that is what we are looking forward to this year. jonathan: how tempted would you be to do that after the progress report that we saw? tom: some people called it a fluke. i'm not there. jonathan: we will see at the next one. difficult stuff, difficult story for the president of the united states delivering a state of the union address. i would like to share with you the three-month annualized projection. can you imagine republicans, ripping up the speech? headline year-over-year, changing the rules. equity futures unchanged. this is bloomberg. ♪ [laughter] lisa: keeping you up to date

with news from around the world with the first word, i'm lisa mateo. the death toll from the powerful earthquakes in turkey and syria have topped 5000. rescue crews are still searching for the ruins of thousands of buildings looking for survivors. the president of turkey has declared emergency rule intent of the country's provinces. the u.s. has begun to recover some parts of the chinese balloon that was shot down after -- off the coast of south carolina and one concern is whether the equipment carried explosives or other hazardous materials. china has made a formal diplomatic protest over the balloon being shot down. the annapolis fed president neel kashkari says the january strong jobs report shows the fed needs to keep raising interest rates. he told cnbc that he thinks the fed funds rate go to 5.4%. in december the fed officials rejected a 5.1% rate this year.

investors who lost money in the now function of the new york stock exchange can recoup all their losses but that's only if their trade fits certain parameters. the rest may end up with nothing. we have learned the exchange will cover all losses for any orders routed to nyse but lossmaking trades on other venues won't be covered. it appears that bed, bath & beyond will be able to avert bankruptcy. the home goods chain has lined up investors for an 11th hour cash infusion. the company plans to issue convertible securities in a deal that would ultimately raise more than $1 billion. global news powered by 2700 journalists and analysts in 120 countries. i'm lisa mateo. this is bloomberg. ♪ even if you got ppp and it only takes eight minutes to qualify. i went on their website, uploaded everything, and i was blown away by what they could do.

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>> the debt is high. too high. the problem is getting worse, not better. we can have reckless spending or we can have responsibility. we cannot have both. responsible debt limit increase begins eliminating the wasteful washington spending and puts us on a path towards a balanced budget. that's not only the right place to start, it's the only place to start. jonathan: house speaker kevin mccarthy. the president of the united states later this evening will have his opportunity to put his case forward. tom: absolutely textbook, jon.

you laughed at me last time i brought this up, i don't know if it translates to other nations. when he talks about the debt ceiling there will be a moral message for mostly republicans as the speaker of the house. this is a heritage item for a certain kind of republican. you can call it john calvin 101. it's amorality about the debt and the deficit as it moves ever, ever higher. jonathan: an idea, clue, a sneak peek of the address from the president later, in the faq sheet they put out yesterday, there's a section on this that reads as follows, emphasizing that the economic strategy has been fiscally responsible, his predecessor passed a $2 trillion tax cut with benefits skewed to the wealthy and large corporations and the deficit went up. lisa, every single year, under his watch. i imagine that might come up in

some way, shape, or form later. lisa: it's the parity of what it boils down. -- boils down to. republicans want to paint democrats as giving candy to everybody. democrats want to paint the republicans as hypocritical. on both sides the problem i'm seeing is where is the middle to get anything done and progress forward at a time when you see a real push to the center from both parties, frankly. jonathan: good politics not necessarily good policy? tom: we will see this as well with our guest to's perfect for this discussion. folks, robert hile braun and peter bernstein of the new school of social research, stocking up on economic traffic a good 30 years ago when they wrote the monograph called the debt in the deficit. joining us right now, the director of the data partners

here with what we just heard from the speaker. i want to talk about the moral overlay, the moral politics of omg, we are in debt, omg we have a deficit. bernstein and bronner wrote brilliantly about this two lifetimes ago. what's the moral debate in the congress that you know so well about our debt and about our deficit? henrietta: it's a great question. you mentioned heritage. i want to circle back to that. the heritage foundation, the linchpin that you were referencing, they try to figure out how much defense spending how much republicans can cut to balance the budget. a tremendous morality question that isn't just democrat versus republican but republicans within their own party. are they a party trying to reduce domestic spending and increase defense spending? do they want to keep parity?

they are launching into an investigation to see where the defense apartment can cut. a unique segway for the republican party that we haven't seen for as long as i've been on -- been alive, for sure. there's been a lot of soul-searching on both sides on what to do about this. jonathan: and to the memory of pete peterson, massachusetts, i will put it in here, flaunting the debt and the deficit, where do, as trump would call them, republicans in name only, stand? where is the moral fiscal politics of the middleground of republicans and democrats? henrietta: i will answer that in two phases. one, there's a middle that's achievable in fraud, waste, abuse trimming. that's a drop in the bucket compared to the $31.3 trillion

for the 2024 presidential election. that's your moral middleground that's achievable. but then you have republicans, i think they would call them rhinos, members who have tried this before, they want to tether spending cuts to the debt ceiling hike on a one-to-one ratio. you are looking at cutting one trillion at a minimum for federal spending without touching social security, medicare, defense, to get you 218 votes in the house, 60 in the senate. it's unworkable. then there's that possible theory where you try to tether the debt to the gdp ratio. if you get or exceed a certain amount you exceed that you trigger automatic cuts. it's currently 124%. they've never been able to identify a ratio they are come to bow with and certainly never been able to identify an automatic trigger of what gets cut. so there really is no middle ground. tom: and what's so important

about what you are saying there, 124%, i'm shocked by it, a lot of people on the room -- in the room think we are on the edge of france. lisa: that's some of the messaging we may hereafter the state of the union. i'm curious, pivoting a bit, henrietta, domestically and internationally when it comes to china, the biden response to the latest increase intentions. henrietta: great question. there will be no fewer than three hearings today on the house and senate side at 10 along with groupings of the gang of eight around the sort of spy balloon fiasco over the weekend. i think that what we have heard consistently from everyone from former ambassador ty at ustr, even going so far back as to the trait committee, it's an area where you can actually get agreement from democrats and republicans. especially heading into the 2024 presidential, republicans and democrats raising to outdo each other and we are looking at what it means for additional

sanctions and what it means in terms of treasury automating the financial services industry in china and what it means for a potential ban on tiktok. those things are on the table and they will be at a minimum headline missed -- risk for investors and be a real prospect. lisa: quickly, what does that mean for large international companies based in the u.s. betting on a rebound to juice those profits? henrietta: you got to be careful of the sector you're looking at. obviously it's a macroeconomic headwind that benefits from the reopening on the prospect of the fundamentals but you must layer on the risk of the fundamentals from the united states when it comes to the pentagon and congressional action. the risks are very real. in the battery space they would tell you that in a recent and clear illustration and you've got to be able to understand that the american administration is ready, willing, and able to maintain existing tariffs,

ratchet denim up. we saw 200% tariffs on russian aluminum yesterday. those are all the kinds of things we should expect for the foreseeable future with a greater instance of going into it into thousand 24. jonathan: when does the president announce he's running for 2024? when do we get that announcement from biden? henrietta: this is the second time you have asked me that so let's see if i can get it right this time. my understanding is it's coming in the next couple of weeks. at the latest, a month or two from now. nikki haley will be announcing next weekend and more from the republican side. jonathan: there we go. next couple of weeks, one of the best. awesome. how do the republicans defeat the former president in the primaries, tom, if you get a big field? haley, pompeo? maybe some others?

tom: it's an overwhelming question of american history and i don't have an answer other than i think a lot of americans are looking at our gerontology. lisa: why are you looking at me? [laughter] tom: i don't know, the age of politics in america. it's not like this in britain, is it? jonathan: i'm just saying you have to look into it quickly, who you want to coalesce around. tom: 14 people are running, mike pompeo in the rest. it's about the ancient nest of american politics. jonathan: you like to go there, don't you? things you can talk about, yes, tom. yes of course. tom: i never get questions like this. [laughter] ♪ welcome to a new era of flight.

tom: "bloomberg surveillance," talking about the debt ceiling, the deficit and all of that. there are between deficits and part of that is the trade balance. pandemic influence has been amazing, the expansion you have seen in the trade balance in one symbol. recovering america has been clearly what we have seen and it's been amazing to see that recovery in the trade balance. lisa: well a greater deficit, right, we just got those numbers, decline from the prior. to me this really shows the importance of the relationship

between the u.s. and china that we talk about. trade is actually coming back and roaring back to the same degree of was pre-pandemic. tom: fitting it into the math with michael mckee there in washington, michael, explain why trade balance matters. michael: it's a component of gdp and when we have a wider and balanced it subtracts gdp at this point it looks like we are widening a bit. the question we have to look at is why. is it because we are exporting more or is it because we are exporting less? that's the real question. a lot of it has to do with the strength of the dollar as well. it's been a long time since the dollar started weakening and we should start seeing the effects of that by u.s. exports rising a little bit more. but it is a component of gdp and it was a component of gdp in the fourth quarter. these are december numbers. so a stronger number, a strong

fourth-quarter. maybe a little bit weaker because the trade deficit is a bit wider. lisa: this number doesn't move the needle like the one on friday that changed the narrative in a meaningful way. particularly for fed watchers. what are you expecting to hear today from the fed chair, jay powell, when he addresses the reaction markets and subsequent labor market reports that were not good. michael: jay powell is a dignified public servant and i don't think he will stand up and say nya nay i was right, but that will be the message. the fed is going to keep interest rates high. they see a much rockier path to 2% inflation with a soft landing than the markets have and now the markets seem to be coming around to that view. powell will have, i think he's got an hour-long questions session about the fed and what

they do, but i think the message he will walk in with already prepared is -- we are going to stay the course. that's the thing he will want people to take away from today. tom: help me with michigan i believe it's friday on february 10. will there be value, michael mckee, to the michigan confidence series, plural? michael: there's a little bit of value in the numbers on inflation if they think it's still coming down. that helps the fed case forgetting to 2%. it's an opinion based in large measure on gasoline prices. gas prices hanging in there, they have gone up a bit. hanging in at lower levels it should continue to improve. then the question is what do they think of the economy? there isn't a direct link but there is an implied link. it's more coincidence that anything else. so if we see people getting more confident in the economy, then

that suggests maybe recession is a little bit farther away. tom: michael mckee, inc. you so much again. chair powell and david rubenstein today, noon time. michael darter, good morning to you. i thought you and paul krugman, you're always on the same page. he said look there's a battle as to whether it's 70's inflation or korean war inflation where we went up and we went down. which is it? back to 50-50 one with true eisenhower inflation or is this a more tangible, persistent, higher inflation? michael: tom, i don't think it's either one. this was a milton friedman money supply aided by fiscal policy monetary inflation. essentially a one time shot that has now reversed. you could see it in the explosion of broad money that never happened.

the fed ignored it, you could see it when the residential real estate sector took off like a rocket and ignored it and the nominal gdp was booming in that double-digit annualized effort in recovery. so that's the inflation. but it really started to reverse course last year, nominal spending growth in the domestic private sector being under 5%. if that persists, this inflation problem is going to go away over time as figures are exceptionally weak. if that's your framework, i think you are optimistic about inflation coming down. if you are in the phillips curve slack based framework like a krugman and most of the fomc, you are probably more pessimistic. tom: looking at that wonderful new monograph from olivia blend chard, -- blanchard, are we

still in the biden stimulus as he speaks? michael: truly the fed determines that with their monetary stance. their rapid adjustment in short-term interest rates last year is ongoing. they will continue but at a slower pace. the ongoing quantitative tightening will continue in the background. i think it's fully off any of the additional fiscal tailwinds that are out there. so the fed can always offset a fiscal impulse over time by adjusting a monetary stance. and that's what's happening. what is the fed telling us? the reaction and function is restrictive and it holds there so that growth is below trend. that's how the fed believes inflation will come down. when we get hot data like we did in january on the employment report that was shocking and jaw-dropping, it's simply going to reinforce fed resolved.

they will slow the economy and put us into recession, most likely. if the data surprises, you are to get a more hawkish fed to. dammed if you do, dammed if you don't. lisa: shocking, jaw-dropping, some people calling the labor market report hard to believe. how many people call you up and said do you really buy that. michael: a lot of my clients thought that something was fishy. it's really hard to explain those numbers. conspiracy theories aside we will have to see if the data is revised or if it was a flash in the pan. what we know is that last year, domestic real final sales to the private sector were up less than 1%. you know, barely 1%. that leads employment growth by a quarter. so you know, these figures didn't make a lot of sense. either the economy is suddenly

accelerating, which will force the fed to tighten a lot more, or the figures are more of a flash in the pan and we will see weakness reassert itself. i think that's the most likely scenario if you believe the leading indicators of an krugman being--inc.--recruitment being lagging information. lisa: talking about it being lesson lice likely with a no landing scenario over at apollo, do you think that the idea of rate cuts are incoherent with a soft landing? incoherent with the no landing situation? they are both currently being priced into the market. michael: it's a good question. i don't think you will have any rate cuts unless growth is pretty weak. these lagging indicators and price level pressures, the services, cpi and pce components appear to be pretty backward looking. the fed wants to see more weakness before they relent.

the set up for rate cuts on the back half of the year for a dramatically weaker economy, if that doesn't happen the fed will continue to tighten until the economy weakens. it's really not a soft landing reaction function so i think investors have to be a little bit careful here because the s&p 500 was just up at 18.5 times forward but falling. earnings estimates, you know, that's a soft landing scenario priced in. i don't think it's going to be allowed with the reaction function. tom: let's piece three things together here so we can be sure you come back to talk to us again. nominal gdp, the animal spirit of the economy. i want to fold it into the analysis of the dynamics of the inflation-adjusted interest rate and the real growth rate of america. r minus g. boilerplate economics, that's a

wide set of dynamics. what should listeners and viewers focus on in that animal spirit of the joe biden nation? michael: so the first thing we can focus on is what is nominal gdp doing throughout the recovery? does it explain inflation? advancing double-digit annualized pace. going back to any business cycle , the nominal spending drawn is associated with elevated inflation. the phillips curve models didn't really capture that. what we saw at the end of last year was nominal spending slowing dramatically back to trend, just under 4% if we look at five it sector final sales in nominal terms. that's less than the average of the last cycle where we were just over four. that was associated with sub 2% inflation. total nominal spending equals aggregate demand and if it softens in a sustainable fashion, inflation comes down

and it does tend to lag behind the business cycle and right now we are seeing more weakness. but the fed rate hikes and the balance sheet contraction with the weakness of fraud money that's consistent in the previous recessions and residential real estate, it's a leading indicator of much slower growth and more likely recession. tom: michael, we've got to leave it there. thank you so much therefrom roth. lisa i think it really goes to some of the observations you had here on the leads and the lags here. beautifully explained by the path of his belief of what we are getting to in late summer early fall. lisa: the dammed if you do dammed if you don't idea was really popular last year. i don't know how much you love that but we are not seeing that as much. we had been but now we are reverting back now, given the labor market report that people are not treating as a flash in

the pan. including fed officials. tom: i me not to make a joke about transitory but some of it, there's all this other mumbo-jumbo and all we do is grab onto things that matter. the changing price is in all its complexity that we can grab onto and i'm taken by people like mr. darda and others modeling out sub 3% inflation. i don't think the body of the street believes that. lisa: and what does it do to corporate earnings question mark did you see the tyson chicken prices, how it gave them worse earnings? it's a really complicated kind of equation. tom: we will continue that complication. chairman powell joining us at 12:00 noon. across the lisa: keeping you upe with news from around the world with first word, i'm lisa matteo.

search and rescue crews are deploying in turkey after a pair of powerful earthquakes left over 4000 people in the country in syria dead. the military has started evacuating some of the injured in navy ships. millions have been suffering without power or heat in the cold. president biden delivers his state of the union address tonight against the back drop of two big issues. pressures with china are rising and it's a brewing showdown over the debt limit with house republicans. the president is expected to highlight the accomplishments of his first two years in office and highlight his vision for the next year. hertz rental car says that corporate leisure and travel are on the rise but falling used car prices inflated profits, declining from one year earlier. bp has joined other giant energy companies as posting record profits for 20 -- 2020 two, reporting earnings of more than

27.6 billion dollars for the year. shareholders will now reap the benefits as they boost their dividend and will buy back an extra 2.7 billion in shares. an unpleasant surprise for some bankers at credit suisse. the struggling lender delaying much-anticipated bonus talks that had been set for today. we have learned of the talks may be rescheduled in the coming weeks. normally they do bonuses at the end of february. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. three nights, esg... the broker will take your bonds. -diversification, futures, options. fiduciary. leverage. [whispering] -frothy markets. psst. virtual real estate is a lock. ♪ cold hard cash ♪ j.p. morgan wealth management knows the world is full of financial noise.

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>> i think the next big risk is recession deeper and longer than

what we have been accustomed to. every time the economy slows, it's painful. banks will want to ease but at the same time will be struggling without sticky inflation. that will be exacerbated by the political situation. tom: the newly minted cio at bridgewater. look for this conversation. you can see this. the big ones going to be tomorrow night, 9:30 p.m. as well, we are looking forward to that. henry mcveigh will be there. a beautiful thing, he's got some real experience in the up and downs. we are waiting for chairman powell at 12:00 noon. the bond market, moving. looking at the two year yield, lisa, i would say 4.4%, it was near 3.9% two cups of coffee ago. my only analysis is peter thiel has aged. lisa: i think a lot of people

have. [laughter] two things we have heard from all our guests, has the rally of duration been overdone and basically do you need to pair back? the other is the bearishness on tech names. peter will have a few of those, which will be interesting to hear given that it's one of the big questions into the rest of the year. tom: not -- that is definitely one of the big questions. let's bring in peter right now. lisa: given that duration has been the big bet, is it time to give that arrest and see 10-year note -- 10 year yields going higher? peter: i do see them going higher. in general it will be lower yields for the course of the year but when we moved too far, too fast, what i understand now is the moved to the zone gives inflation a creep back up and it will turn out to be incorrect. we are on the trend of lower

inflation or deflation. though that won't stop the market from pricing in a bit of deflation making the market a bit hawkish after the jobs are for on friday. lisa: you think that we will be hearing some real definitive statements on the risk of inflation and talking down frankly some of the easing we have seen around the financial conditions? peter: i do. i think he tried to say it wednesday. he might have been too generous on the balance and data dependency. this first piece of data, you have already seen a couple of fed speakers come out to say that they are going to follow the height more and take away the interest from last week. tom: the heritage of academy securities i suggest speaks to an older cohort that has a collective memory of other times. part of the angst right now is the younger cohort feels that if we raise rates, omg, we are all

going to die. push against that. if we raise or sustain rates year, lisa mentioned, what was it, 5% t-bill, something like that? omg, rates are so hard, we are going to die. push against that. peter: it's still only a part of the equation. we have been going five steps forward and two steps back. some of that growth was pre-covid. but then you had the valuations with all of these disruptive companies. everyone chased technology and needed as much time as possible. what tech do i already have, what do i own? i think the fed should just stop and let these things settle out and we should talk about how to build supply chains and foundries in the u.s., bringing back medical equipment. those things are what are important. driving the economy for the next few years.

guess what we will have inflation if we do that but that's good. people remember the good days where jobs were plentiful, you had inflation, people could make money and have good lives. tom: the president is going to stand up for a victory lap like you've never seen. age of aquarius, you are too young to remember that, i'm not going to sing it, last time the unemployment rate was here, i've been banned from bermuda if i sing. lisa: do it tom: one more time? tom:one more time and you are done. [laughter] do they adapt to the gyrations of fed policy? peter: yes but i think they have been and that's where the market got ahead of itself. things take months in corporate america to take place. people pinning decisions made in december on the now. i think the spending slowdown has continued. freezes and slowdowns

continuing. it will be unique where it's this mid to high level person that got overpaid in the code -- post-covid break out at these disruptive companies, they are most at risk. this will hit low and -- low income earners more, that swath of people. it takes time to pay out -- play out. lisa: middle-management quadrant is the one hit the hardest by some of the layoffs now. you said 3% to 4% inflation looks likely over the long term if the u.s. does invest in these supply chain issues. what does it mean for credit given where the yields have been for so long, for the nasdaq and tech valuations? peter: i think that ultimately it will be very good, heading to the higher costs, people realizing there's safety in this. the most interesting discussion we are having now is that people are thinking at the corporate level, what's the costa vote widget? is it the same?

i think that people are taking into account supply chain and job security, these things much more than in the past, it's one of those things where the government kicks in. the inflation reduction chip act is helping that, right? we have to nudge it along but that's where the job growth brings it to be ok for these companies. lisa: you are calling this good for companies even though people have been talking about higher inflation meaning higher yields for longer challenging the inflation of the last few years. so are you seeing strong returns from equity and credit over the next five years despite the higher rates? peter: yes i think we are having a bit of a shakeout with a deflationary spirit. but as soon as we do the right things and start rebuilding supply chains and work with countries that are easier to work with we will see great

economic growth with a much more stable middle class. this political divisiveness i think we'll to receipt as well. tom: -- lisa: one person watching asked where do you think real rates need to be in the situation? peter: probably in the 3% to 4% range. we don't need to have significant returns but we do need some real returns. negative returns are a disaster. positive returns bring us to rates where the fed will leave us alone over time. tom: peter tchir, greatly appreciated this morning. just a nice summation there as we head to the chairman's conference at 12:00 noon. we haven't spoken on turkey today and is something that all of us are absolutely stunned. i've seen earthquakes and i just don't think i've seen anything that equates in my lifetime to this. lisa. the usgs, world-class, they

adjusted the number, not cast in iron. 59 aftershocks off of the original earth wake. as we went to air this morning there was a 5.4 aftershock and in the last hour or so, four point four. which is smaller but nevertheless with the broken buildings, the broken people, the smaller earthquakes are not to be underplayed. lisa: it's heartbreaking, some of the stories there. especially the area on the border between turkey and syria that was hardest hit. this one town that was the epicenter was home to 2 million people, including a huge number of syrian refugees who had just been homeless, uprooted from their homes because of the civil war. how do you dig your way out of this in a real and figurative sense after such incredible disruption? tom: seeing those buildings falling in real-time in the

bravery as people try to make the effort in the cold is really something and it will be interesting to see how the president addresses it this evening. lisa: given that balance of focus right now in other regions. tom: i don't know which to go to, the chairman powell comments or the president. what will you be listening for in the state of the union? lisa: i think the international will be really interesting in terms of the potential headline risk for certain corporations who lean on china but in terms of also how he sets up his campaign. whether he opens the door to anyone else in the democratic party or heads to the center. tom: we will see if he speaks with elizabeth moran who says that if everyone stops in the late naval gazing, we are employing america. how he addresses the stunning

unemployment rate, wait and see. david westin leading the coverage tonight. this is bloomberg. ♪ i screwed up. mhm. i got us t-mobile home internet.

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jonathan: two days of losses on the s&p, will we make it three? equity futures down about 0.1%. the countdown to the open starts now. >> everything you need to get step for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪ jonathan: life from new york, chair powell taking