>> we are expecting a growth slowed down really much like the rest of wall street at this point. >> we are talking about a soft landing. >> we will be between 1% and 3% gdp growth. >> we are not in a recession. the economy is still growing. >> announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: this is bloomberg

surveillance on tv and radio alongside tom keene. your equity market is very positive. 0.1% on the s&p 500. two hours and 30 minutes away from the big data point of the day. tom: it is a big deal. i will look at this. gasoline prices and will the rest of the all -- it all come down? it will be a mystery until 12:30. jonathan: jefferson and whole host of federal reserve characters. tom: i am looking forward to it. we will do it with a sprightly attitude and not too much seriousness. a little bit of over communication. jonathan: maybe. getting a ton of outlooks on wall street as well. the bank of america fund managers survey, listen to some of these highlights. 76% of respondents say the hiking cycle is over.

80% expect a short raise, 61% expect lower yields and just 6% see higher cpi in 2024. lisa: this is a big conviction call that bond yields have peaked. what i thought was interesting within this survey was that investors were throwing away their cash in order to hold the biggest overweight position in bonds going back to 2009. this is a buy the dip moment that we saw when the yield hit 5%. can it continue? tom: a banner of a wager. listen to this quote from ubs. " we do not see the conditions for why this time is so different. by the time we get to march am of the fed will be looking at real rates which are very high."

their outlook, early 2025 we get back to me one handle on fed funds. you have ubs over here and goldman sachs somewhere 10 years down the road. tom: a conviction call like it was months ago. get the -- look at the certitude, i don't think this is any different. people take an opinion and it makes for good romance and theater. but other than that, somebody will be right. jonathan: the separation between the banks is the story. there is little visibility about the next 18 months. ubs and goldman sachs back in 24, maybe you get one rate cut. llisa: one thing that they said was there's pressure on discretionary items. they seem to offer a more tepid

view of what is expected in the year ahead and these types of outlooks i think are giving people real pause. we don't know what is in the pipeline with long and variable lags. we don't know what discretionary spending is going to do. jonathan: the premarket up by about 1.2%. tomorrow number some target. after that, numbers from walmart. let's look at the broader price section, equity futures on the s&p 500 posited by 0.1% and a bit a lift in the equity market. yesterday a total snooze across the board. tom: we were watching trying to wait. jonathan: just hit snooze. a quiet start to a really busy week. finish on the bond market, will fix it our attention on a 10 year maturity. yields lower by a couple of basis points.

lisa: people seem to be piling in. markets have been extremely dull over the past 24 hours to edify what you are saying. people are stripping out energy given the fact that energy is probably going to dis-inflate given the declines that we'd seen. the dictation is for 0.3% which is not quite for the fed. at what point does that give some pause to the conviction trade right now in wall street? weighing in right now, richmond fed, fed vice chair for supervision, chicago fed president at 12:45 p.m. interesting that these are all coming after that cpi print. do they become a little more hawkish if we get some sort of upside surprise? there is a ceo summit and this is what i'm watching most of all. some of the ceo's, james fraser of citigroup, aaron woods of

exxon, elon musk test. -- elon musk of tesla. the first time you should ping has been in the unit -- xi jinping has been in the united states since 2017. tom: today there is a meeting and it is 9:30? lisa: just a summit for the ceos who are going to be attending. tom: without president xi. lisa: i will happen after meeting. tom: which is tomorrow. jonathan: is this invite only, can you buy a ticket? lisa: i do believe you cannot buy a ticket. tom: hold on. jonathan: i just wanted to know. tom: stop the show. guys, as we speak john pharaoh is negotiating pit ferrari tickets in las vegas. you can go to the for ari p -- ferrari pit and before that you

can go to the dinner. jonathan: so you can't buy a ticket. greg, u.s. head of strategy. busy six weeks for you. let's go through the timeline if we can. you are looking for a correction, not one. then you got constructive and now it is fade the rally. > the broader narrative is one with ben more cautious. we saw a 10% correction, we thought the market was oversold. we've seen that and that we fade the rally. jonathan: why is that the right call? >> we think we see the corrections based on a normalization in terms of rates, normalization in terms of positioning. we think the driver from here is more likely to be the equity fundamentals. when we look at the 2024, one of

the takeaways is that analysts are starting to take those numbers down. tom: talk about the bull call starkly opposite the view in brett. they are assuming brett comes on. >> one of the feature has been this absolute lack of breadth. this hasn't shown any signs of that improving. there's no signs that improving there, either. one of the most startling takeaways with the extent of the downgrades further down the market cap spectrum. tom: i'm looking at home depot coming out of the challenges and then they are turning around 300 and they basically gone nowhere for a year. that pretty much describes the market. >> i think it is really hard to

see that change because our view is we are moving into shallow recession. whether or not that manifests, i think the re-acceleration that has been forecast for some of the more cyclical named isn't going to come through and that is going to continue to weigh on the stocks. the only names the seeing forecast upgrades are those large cap names lent to ai. lisa: why won't fed cuts cure all? >> if we get federate cuts we are going to get them for a reason. historically when the fed starts cutting that tends to be a signal to sell. they are cutting for good reason. lisa: this time the fed is going to cut rates. rates are going to become that much more restrictive as the economy slows. why do you expect the weakness to be more significant in certain pockets?

>> i really think it is just a question of what history tells us. the fed tends to cut when they have to. when we go from a goldilocks environment, it doesn't tend to slow in an orderly way. in unusual to see unemployment just slowly pick up and a healthy amount of slack emerge. what you tend to get to something far more disorderly. lisa: this has been a really confusing economic cycle and not least of which is that each industry seems to be moving at a different pace, a different cycle. can you see an area were even some of the small caps which are already doing really poorly could contain not even as big tech continues to rally based on the fact that they can contaminate market share? >> that is one of the things received. there is this relative size

advantage that have the best free cash flow profiled in the strongest almonds sheet. so if we do move into a kind of softening in terms of the macro data, it's unlikely that is going to do much to narrow the breath, although our view is that if we do see more significant economic acceleration into something they could drive more correlation and ultimately higher correlation is what we need to see if we are to get a pickup in equity. jonathan: can we pick a sector? thanks didn't work with really good growth and higher rates. will they work with less good growth and lower rates? >> my view is somewhat scarred from having been in europe over the last couple of decades. you do see the effect of the rest of the sector becoming a value trap. when we look at equities this year, there is undoubtedly value

to be found for the question is if we are moving into a deterioration in terms of the macro, is this the right time to be stepping into banks? i would say no. jonathan: do you think u.s. regionals could start to look what has plagued europe? >> in some respect they already which is that they've become something of a value trap. it's not obvious to me one of the catalyst outside of the goldilocks very positive super risk-on environment next year that is going to break us out of that. tom: the heart of the matter is the growthiness of the big tech companies. all sorts of institutions who have guessed right on that are loving 2023. that is the heart of the matter. you don't really care what apple does, do you? >> i do a little bit. this differentiation between the large cap tech. one of the things is looking to

chase specific themes. ai and consumer are two polar opposite themes and we look at the large cap tech, there are some of those names such as apple, so we do think that there are those stocks that are more exposed to the consumer even if they are large cap quality, cash-generative stocks. jonathan: thank you, sir. good to see you. very active over the last six weeks or so. i promise you we would return to home depot, solicit look at home depot, just narrowing the guidance just a touch. that scene -2% to -5% previously. eps growth, this is the guidance now, down 11%. the previous range down seven to down 13.

lisa: they talked about how those ongoing pressure and this really speaks of left disposable income that people have with respect to savings. it also highlights as we look through the numbers how much inflation is helping them. sales volume is going down but the overall sales revenue is staying about the same, partly because costs have just gone up for each of those items. jonathan: this week is a massive week for the consumer. how far can a dollar go? some insights for retailers. jobless claims thursday morning, the same morning we get walmart numbers. a lot to look ahead to including retail sales. equity futures just about unchanged from new york city this morning. good morning.

>> the department of defense will shut down. i understand the new speaker of

the house is negotiating and senator schumer is also talking about it. i don't know what the outcome is going to be. jonathan: the president of the united states reluctant prejudge the outcome. the house planning to vote today on speaker mike johnson's temporary funding proposal to avert a shutdown. in a bit of a surprise, democrats are leaning toward accepting the proposal, roughly 60-40 odd that a budget deal can prevent in the next few days but the bill one half one glaring omission. tom, there is no funding for israel and ukraine which may not pass until early next year. tom: i think you are right up on this. the partition here between israel and ukraine, these are two different studies. two different conversations. jonathan: the chief u.s. apology strategist, in your mind from

your perspective, do you think this can get through congress this week? >> i think they can. it has been so humiliating for them for the last few weeks, i think they know they've got to do something. the credit rating downgrade is serious. so yeah, i'm at 60-40. it's possible that a handful -- once again, a handful of of far right radical republicans could kill this but i think they want to get on this first bill a victory for mike johnson. jonathan: that's what i was going to ask, who to this particular offer upset more, republicans within his own party or us? >> there is so much in the bill to hate for the conservative republicans. there are no spending cuts and they are quite upset over that. the white house and the democrats, that there is nothing for israel ukraine is very troubling and we can say we will get them some money in february.

well, they need money now and i think to not send our allies this money sends a very bad signal. tom: greg owns the high ground on keeping track of who's coming and leaving in the house and senate. one williams really writes it up of the republicans leaving the house. i think this is underreported. you've got granger, you've got lesko, you've got on and on. is this going to be even a more trump republican party not in a year, but in a matter of weeks? >> it could be. a lot of the names you mentioned are people who can't take it anymore. i also think there's a growing, very good chance that the next senator we will elect a year from now will be controlled with republicans. they have an easy chance to take the senate. tom: i look at this, the focus

on manchin, is this a normal changing of the chairs, musical chairs, or is this something unique? >> i think what is unusual is to have democrats talking now open about a need to get a different nominee. that's really unprecedented. you probably have to go back to lbj. that make the democrats nervous that they could lose the senate and lose it convincingly. the fact the democrats are joining with republicans, isn't this what got kevin mccarthy ousted as house speaker? >> bingo, that's right. i've got to think that we could have a repeat. you only need three or four, at the most five no votes and this

whole thing could fall apart. i think johnson has to worry that he could suffer the exact same fate as kevin mccarthy. lisa: and there are still at least nine ultraconservatives in his party who are going to vote against this as of now. what is worse on the international stage? you were talking about no funding from the crane and israel. is that worth of a government shutdown? >> for government shutdown has become so ordinary a pre-shut down wouldn't be a serious except a signal to our allies that we can't support them. this i think is really very unnerving. i do think the final outcome is johnson having to cut a deal with democrats. i think that the only way we get a deal in the next week or two, to have the two parties unite on this. tom: i call that doing a john weiner. we've seen this before, but what is the outcome if he does that?

>> the outcome is going to be an effort to oust it. i still think it is less than 50-50. i still think they want to get a victory but you can see a lot of republicans say this is totally unacceptable. jonathan: let's talk about the race for the presidency next year. it looks like nikki haley has starting to attract some money. what do you make of the moves we seen in the last week? >> tim scott didn't surprise me in the least. nikki haley has got real lament. desantis does not. he didn't even mention his endorsement in iowa from the governor. jonathan: what was that about? >> i don't get it. she endorsed them, i would be bragging about it but he didn't even bring it up in the debate which was mystifying. but it is still trump's to lose.

he has said some extraordinary things about his opponents are vermin, using even by his standards exceptionally harsh language, but his numbers hold up. he still has the base. jonathan: that means we need to narrow the field potentially even more for the republicans. who is next to drop out? >> i could see him drop out, he's got no traction, his numbers don't look good. i think desantis and nikki haley stay in and probably chris christie stays in, and that is good theater. lisa: maybe the republican field is narrowing but is widening on the democratic. you said there's a real fear and real calls within the democratic party to have some other options than president biden. how realistic is that? who is everyone coalescing around? >> that's the problem, nobody. one of the strongest things biden has is the lack of any clear successor. because of that he will be the nominee.

apparently in the last 24 hours he's been very angry, profane, criticizing people like david axelrod. i think he feels that he should be the nominee. i think he will be the nominee. jonathan: what do you think he is upset about? >> mocking him for his age probably more than anything else. he can't do much about that. jonathan: that's true. don't think any of us can do anything about that. appreciate the update. that question just won't go away. i can see why it annoys some. ultimately it is being asked within his own party. tom: it is percolating for the former president as well. i'm not up to speed on the exact anecdotes, but people are a bit mystified by misstatements by president trump and president biden. it's equal opportunity. lisa: then you have all these independent potential candidates, and who did that hurt more? can we actually get a viable,

independent candidate? it has never happened before, it doesn't usually work that way. it is just a matter of whose votes that cannibalize more. tom: this word vermin, it is a really merriam-webster ugly term. what is so tragic here and probably in your depleted english childhood you miss that, what the president could have done is gone for the southern vote and gone all yosemite sam on us and said something like while you no good varmint. that's a famous disney line. jonathan: you might need to tell me more about my dopey childhood. do you know yosemite sam is? warner bros.. they wouldn't scored major southern electoral's. tom: it's an offshoot of bugs bunny. jonathan: i still don't know

where this is going. coming up, it is a big week ahead for economic data. the week begins this morning, inflation data about two hours away. you will get retail sales in america in between tons of fed speak you will hear from whatever fed official you want to hear from. do you have a favorite? lisa: i have a couple favorites. these people who actually say something and then there are people who don't but they keep speaking. jonathan: do you want to tell me which one that is? lisa: no, i don't. jonathan: maybe people can guess. live from new york city this morning, good morning. morning, good morning. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most.

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♪ jonathan: what a snooze, a start to a very busy week. a quiet start to a very busy week. european market right now looks like this, going absolutely nowhere, up 0.0 4% on the s&p 500. quite a start to what is really a very busy week. that data about two hours away. the bond market shifting up as follows, a couple of basis points. just north of 5%, 5.0 3% on a

two year this morning. a quick sneak peek of what is happening, up again today, three days of gains. there is your price section. 0.2%. lisa: i'm just impressed we got 1.07. jonathan: just getting more interesting is the week progresses. cpi, two hours away. looking ahead to that inflation data. the median estimate calling for 3.3%. down from september, 3.7. wall street's biggest banks estimating is 0.3% rise month over month. does that this inflationary story start to stall going into year-end? lisa: if we get this kind of print as expected, yes. you dig into the technicals and it is because of health care reevaluation of exactly how they price inflation with all of your expenses for medical bills which we all know are going up pretty dramatically.

the question to me, how does the market respond? what is the potential bigger disruption, and upset surprise or down since the prize? this might just give them the all clear if we underwhelm with the inflation. jonathan: it doesn't really matter, but ultimately the bar is so high now for another hike from the reserve coming to your end maybe this doesn't matter as much as it used to. tom: i think it is at a critical point and i'm not sure which to focus on at 8:30. do we look at the non-gasoline, nonoil reduced numbers? i'm going to do what david rosenberg would do witches is tear it apart. some deflationary goods and even some deflationary service sector trends. jonathan: all about just two hours away. the house expected to vote on speaker johnson's plan to avoid a government shut that -- shut down.

the democratic-controlled senate open to accepting the deal as long if there are no deep cuts to federal spending. lisa, this was set up a fight later on because ultimately there's going to be a push for big cuts to federal spending particularly given what referred going into the weekend. lisa: what i find interesting, and the crystallize the issue to me, the fact that johnson needs demographic passes first major piece of legislation undermines the central tenant that the louisiana republican is decidedly more conservative and would govern that way. to me this highlights how dysfunctional is gotten. there is still at least nine hardliner republicans were not going to get on the mike johnson train even though he was elected with the express purpose of being more conservative than kevin mccarthy. jonathan: this speaks of the government issues -- governance issues going into the weekend. the other big issue that is not going anywhere, the debt pile, the size of the deficit.

tom: for people that don't follow this, the annual interest bill, and percolating out there this year, next year, the year following. the annual interest bill that the household none of the united states of america will be the biggest. i don't care what your politics is, that is a new moment. jonathan: we had a big disruption in between with the pandemic which just throughout the government -- blew out the government deficit. tom: g has always been, we are always going to sustain g so we don't need to care about r. all of a sudden, is g going to be there? and in the real rate, r is a critical attribute right now. jonathan: looking forward to those thoughts in just a couple of minutes. officials from china in the united states looking to clean

up back which froze the world's largest bank last week. normal services yet to be restored after a group forced the bank to settle trade through a usb stick carried across manhattan. just an unbelievable story. bloomberg reported it may take weeks to settle all security issues and clear transactions. lisa: the fact that it hasn't been resolved, what are they negotiating? how much they are going to pay? discussions about hiring a google-owned cyber security firm. they are still holding discussions about how to clean this up. now i suggest a story we are all going to read, this is u.s. government banking supervision authorities talking to a foreign bank with a foreign culture.

lisa: zooming out, there has been this feeling that the major u.s. bank there has been a serious investment in cybersecurity, perhaps more so than icbc and some of the chinese banks. if they're going to be some standard that they try to uphold about spending and fiber security protection? how do you even mandate something like that? jonathan: this could happen to anyone, it just so happened happened to icbc. tom: it's not that it is a china bank or a foreign bank. is it random? i don't buy it. jonathan: ultimately this is something the whole industry has been wondering about for years now. tom: joining us now, julia coronado, equity strategist. i want to congratulate you for getting out front of all the stockmarket outlooks that we are seeing this year.

you say the key determinant in what we are doing is a new productivity. there is a complete mystery to the new service sector, what it means for long and area will lag and wonderful economics, but it is how you get to the optimism of --. does your productivity call lead you to a better stockmarket because we are just more efficient than we ever thought? >> i'm not a bottoms up stock analyst but generally speaking i think that is the direction of travel, that if you look at analyst expectations for 2024, you've got very middling, mid-single digit revenue growth, but pretty healthy margin expansion. that relies on a broad-based improvement in productivity and that is common act, the same recipe that has delivered a cooling in inflation and

resilient economic growth this year. i do have some optimism it can continue. it is going to be battling long and variable lag, so we don't think we are in for a boom in 2024 but we do think that the resiliently scene can hang on. tom: lisa, i think this is critical. i don't have a theme yet for 2024 but it is ramped around this complete, total mystery between greg and uber bulls who believe that there is a more productive service sector out there than we ever imagined. lisa: and later this year we will get the theme for 2024 from tom kean. maybe by the end of the show. i am curious about some of the vagaries around the political dysfunction that people keep talking about. it is what was really used as one of their main reasons to downgrade the u.s. from that triple-a rating.

janet yellen, treasury secretary said yesterday in san francisco that she disagrees with this action and that the american economy is fundamentally strong and treasury securities remain the preeminent safe and liquid asset. do you agree with certainty that we can say that? >> that treasuries will retain their status? the dollar is quite strong, there isn't any hesitation to hold dollar assets. i don't think we are in imminent danger of losing that status. i do think there is a higher price that investors demand to hold bonds, and the landscape of bond buyers has certainly shifted with the fed, with banks selling securities, with international shifts in demand. we said nancy moore pray sensitivity for bond buying. i don't think that is a broader dollar question. i do agree that the dysfunction within the government is not good. we certainly are testing the

resilience of the dollar status with a lot of mishandling of some basic functions, and it seems to be a repeated thing that is going to be with us through 2024. we are going into an election year and election years bring their own headwinds through uncertainty because the choices are pretty wildly different. formulating outlooks and allocating investment in capital is pretty difficult in an election year, so that is going to be an ongoing challenge. lisa: one of the most interesting aspects has to do with where the physical impulse begins and where it ends. a lot of people saying that one of the surprises in 2023 was just how much fiscal impulse was still pumping into the system, and that it was going to go away in early 2024 and that would lead to a slowdown in tandem with the bite of higher rates.

do you agree that people are underestimating the fiscal drag that we are going to see experienced year. >> no, i actually go the other direction. keep in mind that two thirds of government spending happens at the state and local level. they are getting a lot of transfers through the infrastructure bills and the ira. but in addition to that, they are experiencing a property tax boom. they are experiencing the mirror image of last cycle, where revenues were down, down, down. state and local governments were driving down gdp by several tenths every quarter for five years early last cycle. we've got the reverse now. most of the fiscal impulse has been about evenly split between federal, state and local and i think there is still some gas in the tank. we got both state and local governments flush with cash, and these longtailed legislative's

from the federal government. these investment bills, that money isn't all spend. we might get some phasing in 2024 but at the state and local level, i don't see any pullback on the horizon. tom: help me here, i've got a 4.1% statistic year-over-year on core inflation. what is the difference between 4.1 and 3.9? emotionally, that has got to be a huge deal if and when we print a 3.9. >> the handle at the beginning is going to matter. imagine that, that will be quite a victory. but i think the direction of travel is very important for the fed. yes, the bar is high for another hike. at the same time they are going to want to hold onto that option

as long as we are not making progress, whereas if we continue to make progress, you will see them gradually step back from that threat and that will be very meaningful for longer-term interest rates and spreads. in particular, mortgages. we are still all-time wide on spreads that are locking up the housing market. to get some action there would be pretty important. tom: united kingdom from 6.7 cpi, down to 5.8. that differential is just shocking. jonathan: the question for a lot of people in the street, are we converting toward two and what with the difference before policy ultimately through 2024? appreciate the update, always wonderful to hear from you. secretary yellen is right. just because secretary yellen is right doesn't mean there isn't a problem. this is the issue, that we are

going to have to pay more to finance deficits and ultimately, we are. lisa: and that is really clear by the fact that interest rates doubled from one year to the next to $1 trillion and will only continue going upward. here's the question that we don't understand and maybe we'll get some better sense of it on friday with the government shutdown or not. how much the fed is actually affecting where yields are. we don't know. jonathan: we haven't lost the privilege of acting recklessly, what we are losing it. it is an important difference. your equity market on the s&p just about positive going into inflation. inflation.

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the second quarter of next year. suddenly, perhaps real rates, the real federal funds rate is then going to way too restrictive and then the market and the fed can start talking about rate cuts. who are actually going to continue seeing a pretty goldilocksy environment. jonathan: what is a goldilocksy environment? he says goldilocks's bank, welcome back. your equity market positive by 0.1%. a 10 year maturity. the dollar just a touch weaker, the euro stronger. for a third day, positive by 0.2%. tom: a lot going on and with jeremy stretch coming up, that is important. i was looking up goldilocks, i didn't know she was an intern at

morgan stanley a few years ago. jonathan: is goldilocks writing the outlook now? lisa: she grew up. tom: looking for a soft landing. what is this about? jonathan: it means something different to different people. i remember when a soft landing was just below trend growth without recession. isn't that what it is? lisa: now people are adjusting that, redefining it as simply a sound -- shallow recession is a soft landing. anything is a soft landing that isn't a bigger than expected recession, essentially. that's my sense. jonathan: low, low, low into 2024. when his inflation getting back to target? tom: this goes right back to julia coronado with the call american productivity. everybody has been wrong and it

is a mystery, nobody out here has an answer as to this machine of the labor known as the american economy. jonathan: deutsche bank going as far as saying the data remains broadly consistent with the psychodynamics that is up to you. starting to see claims starting to move out just a touch. it is so subtle. this is why this is so important. you've got retail sales, you've got cpi, are we starting to see that slowdown arrive or is it still too soon? tom: we forget the size. i mentioned home depot, i think it is 400,000. walmart, 2.1 million employees. i did not know that.

jonathan: not just employees, but also people shopping there as well. they've been talking about that for so many quarters now. at walmart, that festival. tom: it is like woodstock. lisa: special bowtie. i works for you. luxurious. you should do burning man next year. tom: you are so lovely on radio that you don't have the cpi countdown clock. radio deserves their own countdown clock as well. we've got one somewhere. jeremy stretch, international strategist, chief international strategist. jeremy, i'm doing audible here. on the inflation that is out

there on this inflation day, i look at japan as the worst offender with a 5% plus nominal gdp and national cpi of a stunning 3.3%. if and when japan this inflates, what does that mean for our inflation? what does that mean for listeners and viewers in the west? >> i think you raise an interesting point, one of the variable that we've been trying to rationalize and deal with over the course of the last decade or so, the impact of goods-priced inflation or disinflation or pressures from both japan and, to an extent, china as well. if we do see a gradual reversal of that negative inflation dynamic in japan which i think is still a story for 2024 if we do see wage for picking up, that may have a little bit further of an inflationary and for local

markets in terms of global goods prices, but i think it is still this generalized moderation price pressures that we are seeing over the next few weeks and months. the question is how long it takes to get back to that 2% inflation threshold but in that context we have to have patience. tom: what do you hope to learn from the 8:30 inflation report this morning? >> obviously we will be looking to the path trend in terms of core prices to see whether that 4% threshold can be reached. i think there is an obvious significance in terms of breaking down through some key significant levels. we will be looking for the sub in the season particularly in relation to things like the rental market to see how that is playing out, to see how the lag impacted this, because of course there is still an obvious

influence that we see this aggressive policy not just from the fed, but pretty much all global markets, and yet we haven't seen an opportunity for the central banks to identify how their policy mechanisms are playing out. that sort of plays into the narrative that there is this risk that policymakers are still very mindful of still thinking about the possibility of some places turning up the dial and what that would do to the policy narrative and policy lags. lisa: for now, the narrative does seem to have shifted yet again, probably the 432d time this year but there is this question of how much people are set up and prepared for us to see the peak in yield, the peak in inflation. is the biggest surprise for markets derived from this print? if it is an upside surprise or a downside surprise, which would generate the bigger response in markets?

>> i think there certainly have been some wistful rumors that perhaps the risks are more to the upside. it's interesting when you look at the inflation expectations components from last friday, we did see a significant uptick in both the one year and the long-term inflation dynamics. that enhances a reflection of the spike resigned gas prices back in october and that has not yet dropped out of the system but i think there is more of a risk in terms of a topside surprise as far as today is concerned. we are still very mindful that there is residual risk, still having one further hike in it and i think they will be very keen to maintain that policy option now the in the context of the inflation backdrop. in terms of december january, there is still a little bit of an uptick in that is the son of narrative i would be very mindful of going into today with. lisa: and what does that mean for the dollar? >> if we do see those

expectations, if we do see a gentle but progressive uptick in terms of expectations, i think that should provide some dollar resilience. you've already talked about the euro looking a little better this morning but i still per -- refer rallies to a degree of skepticism regarding the recovery narrative. but i think that would provide resilience in the broader indices over the next few sessions. jonathan:jonathan: jeremy, here is a guy that agrees with him. here is the fed for you. here is the treasury view. it is likely the next 100 to 150 basis point move in yields is down and not up. here is the dollar view. we expect the dollar to remain strong aided by soft global growth and comparatively higher yields in the united states.

lisa: this is what i find interesting. max is talking about goldilocks and goldilocks includes fewer rate cuts than some of his compatriots. this is calling for more strength but just enough weakness to give a little bit of confidence to the fed to cut rates just a little bit. jonathan: whether to be constructive, tom, going into year-end. tom: he's been absolutely dead on about you've got to participate in the market. that is half the battle. can you believe the wides and you are getting research? it's like 1500 spx points. on the break i will do the math on that, what that means. jonathan: at this point, is there a consensus for 2024? tom: it's going to keep us

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♪ >> we are expecting a growth slowdown pretty much like the rest of wall street at this point. >> we are not talking about a recession, we are talking about a very soft landing. >> it's going to be fine if we are between 1% and 2% gdp growth. >> we are not in a recession. look around, the economy is still growing. announcer: this is "liver surveillance" with tom kean,

jonathan farrow and lisa abramowitz. jonathan: your trading week begins this morning. live from new york city, good morning, good morning. this is "bloomberg serveillance: early edition", your equity market positive by zero .1% on the s&p 500. 90 minutes away from u.s. inflation. >> the inflation report critical and i'm going to go to the 10 year yield at the benchmark off of a difficult auction last week. the two standard deviation study, the trading envelope is going to bring that yield down 4.46% if you get a move within trend. right now in two basis points, that gives you an idea of the potential we can have. got to jonathan: do a few things this morning. work out what it means for financial markets and then get the politics. this from politico, some private polling presented to the white

house in mid-september and recently obtained by politico, seven out of 10 people surveyed believe the economy wasn't getting better. lisa, even after they were told explicitly that inflation had eased and unemployment was near record lows. bidenomics is not breaking through. lisa: we intentionally put our finger on the scale and 100% of people here, good economic indicators before saying if the economy is going well for them, we still get walloped. it doesn't matter what the facts are on the ground, people are not feeling good and that is being reflected in president biden's poll numbers. jonathan: where are we going to land? i don't know. worth going through again. 76% say the hiking cycle is over. 61% expecting lower yields from here. just 6% c higher cpi in 2024.

a lot of people write about that maybe. maybe that could be the paint trait next year, just 6% cpi would be higher next year. jonathan: what do incomes do? we seen this with the view of what is cumulative inflation? nobody is going to talk about that. 110% of the audience is living the cumulative inflation rate because incomes for many people, not all, have really not kept up. jonathan: they don't feel good right now. we will see what they are doing in here from the retailer throughout the day. we had home depot. tomorrow, we could target. after that, walmart as well. a decent snapshot of financial markets at the moment. equities just to have positive on the s&p by 0.1%. the euro, just a little stronger, the dollar weaker.

lisa: you just said something and they want to sit on that, the biggest pain trait next year may be that we don't see in massive disinflation. it is not going to show a massive disinflation, at least when you strip out energy and food. you can actually see that stickiness, on average annualized basis. not the 2% that the fed wants, month over month expectation moving in the wrong direction. if this idiosyncratic? that is what we are going to be talking about in about 90 minutes. then speakers will also address this. maybe he can do a real-time live commentary on the cpi report. fed vice chair michael barr at 10:00 p.m. how much has their rhetoric underscored this new consensus in the market that bonds are a good bet, that the fed is done,

and that the next move is going to be a rate cut and that they are really setting the bar much higher to raise rates yet again? today we are looking at san francisco, and not just because they cleaned it up for the apex summit but also because the ceo -- jonathan: that's exactly why am looking at it. lisa: and you are right to, and we can talk about that later because that actually is a big issue for a lot of cities, and that one in particular. but there is a welcome recession -- reception and i'm interested to see who shows up. the confirmed guests that we know so far, darren woods of exxon, the microsoft ceo, elon musk, not a big surprise given how much business they do in china. the coveted seats at the dinner to be had with xi jinping, they are interesting to watch to see whether they get the confidence they are looking for to possibly reignite their effort in the world's biggest economy. jonathan: i said this yesterday, can xi come to new york to help

us clean things up a little bit? i know everyone does this, i know everyone does this, bigger city, bigger country, this is what they do. but does this speak to ability and not willingness? they can do this, why haven't they been doing it for the last several years? lisa:lisa: it's a good question, wish that we weren't getting used to things like garbage and rats on the ground. jonathan: -- so the staff can go back and get them. lisa: basically this is just a breakdown in the social contract and that is part of the problem. jonathan: society in decline. lisa: let's be hopeful. jonathan: the head of u.s. equity trading, we are not going there, don't worry. we're going to talk about stocks. why are you comfortable being long equities right now?

>> because we are comfortable with volatility. the picture, we still think the macro backdrop is pretty good. if the labor market and services holding in, you can be comfortable running long equity risk. momentum tends to do well into year-end. we think that is going to repeat itself this year as well. rates have calmed down a little bit but as you know, the court viewed this year has been the underlying macro is positive and you want to be net long equities in that environment. jonathan: i'm leaving that there. in other words, he is just doing this for you. do you have a narrow forecast? >> of course, i was just looking at it on tom's screen, actually. jonathan: you said if the labor market held in. is it holding in? >> i think it is. it is strange that people are trying to talk about it like it was super weak.

the previous even unrevised basis was almost 300,000. i do think the labor market remains pretty strong, at least strong enough to keep equities moving higher. tom: if we get kaiser optimism, do we get better breadth? >> i think the rotation discussion is much more a 2024 discussion or a broadening out scott kronner, a key part of his forecast next year is a broadening out of earnings. this year has been very narrow, next year it will be broader. tom: but with disinflation do you get a weaker top line of revenue off of a nominal gdp? >> i was surprised that earnings were nominal so i think we've been reminded of that. next year if you do get a slowing of inflation it could put the pressure of the top line.

are they able to maintain margins of revenues are a little over, given that a lot of the wage growth has been pushed through? tom: walmart is 2.1 million. if they've got $2 million, they can fire 100,000 and that is a 5% reduction. that is the cost visibility that is there. do a disney, if you will. lisa: we are going to be checking that as we get some of the earnings reports. i am wondering how any of the features into trading. yesterday, jim reed said this, markets have been extremely dull over the last 24 hours. is that because people are tired of narrative relent or because they are waiting for something in particular to be a trigger to go for bull? >> yesterday was in the quiet. it is when the market is waiting for information.

we had a lot of information coming out this week. if we were quiet yesterday i think that has a lot to do with it. now they kind of sit on their hands until he get the data. lisa: what is the potential surprise? >> it actually ran counter to our credit card data, counter to a lot of the spending data received from a lot of places. wednesday is going to be a really interesting test for that narrative. people are going to get very bullish about the holiday spending to year-end, or does that mean last month's retail spending looks like a bit of a head faith and we start to compress that down to the credit card and they can mark there's a lot of potential outcome from that data. where lisa: does that catalyze stocks, because that could mean fed rate stock.

his head spinning in terms of what this means for a stocks go. for me personally, if you get another solid retail spending print, that is net positive for equities. if you get a very weak print, the market is not going to like that. i am still in the good news is good news camp. jonathan: what if the difference between you and them, is this what has worked? >> i lived in new york city in the 1990's, it doesn't freak me out. i like the volatility. it can be too complicated and we tried to really simplify it down. you want normal growth remain positive, it is the equivalent if you are driving a car. the hope the carbo breakdowns he can go to the mechanic? no. lisa: it depends on the car. >> it depends on the mechanic. jonathan: you have raised up a

really important market question. i really do think you have. when you look at crime in certain cities you can always have an extreme benchmark like the 1980's and say it is so much worse but it is better now. you can do the same thing with equities. is that a decent way of looking at markets, just picking an extreme benchmark to make yourself feel comfortable about where we are currently? >> it's recency bias. i think that is one of the big things this year, the most recent is 2022. we had a ton of tail risk from both growth and inflation, a huge amount of volatility. succumbing into this year, it really just made equity markets more investable, i think, and allowed people to really engage that way. the other thing this yields are very high right now from a cash perspective. i think a lot of folks who are not used to that are saying i can do 5.5% without doing anything.

i think to your point, because 2022 was so uncertain and so volatile, it has made 2023, the bar is low. that is probably why we are more optimistic. jonathan: if you are just joining us, welcome to the program. a little bit lower by a couple of faces points. embrace the question just how high that is into 2024 now. how have we reset things this year? >> a lot of economists have taken out the recession for 2024 which i think is raising the bar a little bit. if we enter 2024 on a 45 or 4600 handle, the bar will be higher. i think the bar is higher for next year. luckily there is still a lot of opportunity. the narrow leadership is a really interesting dynamic because you have a lot of laggards to choose from and last two years, frankly, january has

been very painful. we've had very violent kind of rotations in the early year. jonathan: just ripped at the start of this year. >> unexpectedly. you have this huge move by europe that got derailed. early 2024 is going to be really interesting. are people willing to sell the stocks that have driven the market higher and move into the laggards early in the calendar year? we will have to see. jonathan: this was good fun, we will catch up with you hopefully before year-end. equities right now just about positive from new york city this morning. good morning. cpi is just around the corner. (sfx: stone wheel crafting) ♪

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get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app. >> on wednesday as you for it, president biden and president xi will meet in the bay area for a

summit. we anticipate it will discuss some of the most fundamental elements of the u.s. prc bilateral relationship including the intent you'd importance of strengthening open lines of communication and managing responsibly so it does not turn into conflict. the way we achieve that is through intense diplomacy. jonathan: that was what has national security adviser jake sullivan previewing tomorrow's meeting between president biden and china's xi in san francisco. if you are just joining us, here is the state of play, discourse if you will. positive by 0.1%, yields a little lower by a single basis point. a bit of an update on thanksgiving travel, don't know if you guys saw this but the thanksgiving travel period is shaping up to be the busiest since 2019.

making it the third-highest thanksgiving travel and records going back to the year 2000. i think lisa: to myself which is a reason i don't want to travel with you, so many people on the roads. how much of this is gas prices and how much of this is simply people are going back and doing that thanksgiving that maybe they were not doing and going on trips instead for the post-pandemic years? i'm just suggesting people are going to get back to their routines. jonathan: any signs we are getting back to normal or welcome signs. tom: i think it's underrated. we are still in pandemic psychology. granted, there's different flow and all of that. jonathan: you just say your other half is scared. lisa: that only works for a year or two, that doesn't work anymore. jonathan: we are not having a large family gathering, we are

very concerned. tom: i will be cooking in the kitchen and mrs. keene is looking at me. jonathan: have you booked this year? tom: we have, yes. we are going to a restaurant that i can't say enough about. they do the usual beautifully and then they have one or two other things. it is a prefixed menu. i will be cooking. jonathan: -- in dorchester in london, no? tom: i'm not going to be at the dorchester. a more basic restaurant. jonathan: does it start with a b? tom: it starts with a b. jonathan: and with a t? benoit? tom: this is a sign of the optimism we deterred heard from stuart kaiser. everybody is cautious, cautious,

cautious. i'm fascinated to see what holiday spending is like. jonathan: for me, it is retail sales with the consumer in this country going into q4 and beyond. tom:tom: right now we are going to see, there are so many things to talk to and reordered about. i blew washington correspondent, but we've really got to move to tomorrow. percolating out there if the domestic reality for the president of the united states. the senator from ohio and others are saying look, uaw, the big brown, ups, and let's just generalize, the afl/cio. how is big labor going to be in san francisco with biden and xi? >> i think a lot of what drives biden when he talks about foreign policy is the domestic concerns. so he's going to want to tout

the manufacturing legislation that his administration got through, some of that in a bipartisan fashion, but more things like the chips and science act, bringing manufacturing back into the united states. if you look at things like electric vehicles, china absolutely dominates. and i think what biden will try to sell is that not only with the uaw workers were able to get what they would say are much fairer wages, but also looking at the future. some of these contract negotiations. , on the fringes at least, start to look at the future of what the electric battery of a car in that type of manufacturing might look like with union workers. the president himself said he would like tesla to unionize next. i think when the president talked about foreign policy we are going to see them try to pivot back the domestic policy because polls show americans are not going out on those issues.

it is domestic issues. fentanyl will be a huge topic of discussion tomorrow and biden and xi meet. tom: i think of former president trump in the theater, if you will, with his meetings with the great and worthy of asia. what is going to be the theater tomorrow that we should anticipate? annmarie: i'm not sure president biden does theater the same way you see from former president donald trump. when they met at the g 20, it was really on the sidelines. they came out, they did a few photos. i think this will be a little bit more of a grand opening, red carpet welcome for xi jinping. the new york times, when they lead the story, talked about it with san francisco cleaning up. they said they had the air of college students cleaning up after a house party before their parents come in. clearly everyone is trying to put on a good performance and it is not just the biden administration that is meeting with their counterparts leading up to that.

but it is the executives that are joining, as well as everyday americans from iowa that xi jinping met 35 years ago, they are being invited to this dinner, these farmers. so this is where you're going to see a little bit more of the theater in terms of this grand welcome, and the number of meetings he has. but you are not going to see the way the former president did either -- theater vs. this president which is definitely more muted in that realm. lisa: how much is xi jinping's presence muting some of the other discussion he had around the event given the fact that in some ways, president biden is trying to revive some sort of transpacific partnership type of agreement that has run into quite a few obstacles? lisa: that has definitely run into quite a few obstacles, especially since we are going into an election year.

it is a great question because other discussion that might happen on the sidelines are not going to get a full on press. everyone is focused about the meeting that is taking place adjacent to the summit, and that is biden and she should ping and his dinner with chief executive officers. but for everyone else that is there on the sidelines, depending on how these meetings turn out, that will give them a path forward of how they may deal with relations with beijing , especially when it comes to economically after this meeting between the u.s. and china. jonathan: in all seriousness, what do you make of the cleanup of san francisco and isn't going to stay that way? annmarie: i think you pose a very good question when you say it shows the ability of elected officials to clean cities up which americans are showing in the polls that they are very

hungry for but also i shrug a little bit because this is nothing new. i wanted to write a story about the mini-economies that world leaders basically build around them when they travel. i've been in far parts of russia and president putin would show up and they would re-tarmac every road in these tiny cities. this is what happens when heads of state visit cities. it happens all the time. but i think probably for san francisco they are saying thank you, about time, others are saying why did it take so long and why did it take head of china to come to this the for elected officials to actually start carrying? >> maybe that means the san francisco giants get a new shortstop. jonathan: how is baseball doing? change the rules? tom: quicker was very successful

but i am shocked at what you've done to me with english premier league football. annmarie warned me about this. jonathan: you gravitate toward that. tom: i just think the slow motion and the endless commercials is too much. english premier league, they throw the sponsor up there, and they just play. >> coming up shortly, the credit market. right now on this equity market, equities just about unchanged on the s&p 500. we are one hour and about four minutes away from u.s. cpi data. that is your main event coming up a little bit later. from new york, this is bloomberg.

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jonathan: equities on the s&p 500 we will get to the inflation outlook it just a moment. in the stock market positive by .06% and nasdaq of .2%. down 1% on the russell. treasury, two-year unchanged, north of 5%. you think about where we were the morning of the last inflation print the two-year

opened at 5% the 10 year was that 4.55 and is back at four .6. yields have had quite a journey but almost back to where they were last inflation print. in foreign exchange, the euro looking at a third day at 1.07. lots of earnings as well. home depot came out with numbers but looking for a revenue decline. the line that jumped out for you is the pressure in big-ticket categories. lisa: is this a housing specific or is it broader? walmart earnings on thursday we

are seeing the stock is been beaten up on high mortgage rates and people are investing less in their homes how much does this crossover with this big-ticket discretionary spending? tom: to the question to stuart kaiser the basic idea is what happens at the top line? this company has student solid opal single digit and now it's lower single digit they're lucky. that's the key to me today. you frame how you fix that and as mr. kaiser mentioned you cut costs. maybe disney is out front with the cost and streaming. jonathan: it's a structural issue. tom: i take real issue with a ratchet socket wrench is that a

discretionary purchase? it's over $200 but it's a staple. i put together my grandchildren's kitchen with that. jonathan: this is from axios this morning. jpmorgan chase ceo according to a top banking source jamie dimon has been speaking with nikki haley about the global economy and believe she has the potential to bring the country together. according to this source, dimon says she can drive growth by working together. i don't know if that generates more intrigue about nikki haley or jamie dimon? lisa: everyone has been speculating about jamie dimon

there is a question about what his involvement is that it crystallizes his idea of support from the establishment for nikki haley she just has to get through the primary and she has a win against president biden but that's a big if because trump is the front runner. jonathan: the support from the establishment get you support from the electorate? lisa: or does this actually hurt her chances? this is an ambiguous moment where the primaries skew very much to the polls rather than the center but the entire electorate is skewing towards the center. tom: secretary dimon is out front on this looking at his annual report, potential trouble brewing from unprecedented spending qualitative tightening and geopolitical tensions.

sec. dimon is out front as he considers the central office. jonathan: is your intrigue more with jamie dimon and jp morgan? tom: i think a lot of people have talked about a sec. dimon. we also talked about sec. laurence fink, these are in the zeitgeist. jonathan: i think we will see a lot of stories like that. on surveillance this morning where an hour away from data. it should show consumer prices excluding food and energy rising 0.3% for a second month

in october. the house of representatives will vote on the plan to fund the government but he is facing opposition from hard-line republicans who want spending cuts his proposal would need a two thirds majority to pass opening the door for a bipartisan solution. lisa: which is exactly what got mccarthy can. how is it different this time? can we see michael johnson retain his position even if he moves ahead with the bipartisan plan? jonathan: this one will linger all week. president biden set to meet with xi jinping and. they see an agreement over

fentanyl. they want to stem the flow of fentanyl in the source material used to make synthetic opiates. tom: there are three methods jan fred, e-cig freed and cooped method something as an organic as fentanyl, this is deadly serious limiting inorganic chemicals that come out of china that make up this killer 50 times more powerful than heroin. jonathan: it has become a huge political issue. tom: this is the real deal with inorganic chemistry killing people. we will continue on here focused

on 50 minutes away on the cpi report. winnie cisar is joining us now. let's go to the inflation report. how does your world react to inflation what do you expect winnie: we expect that could come in a little hot. were not worried that there will be a massive gap higher in yields. we saw the 10 year head 5% and come down since then. we expect deals to be relatively stable and for corporate credit we think the outlooks pretty good. a high yielded 9% with double b's and that 7, 7 .5% area that is still attractive.

as we expect inflation to continue through the next 6-12 months. lisa: it's attractive if you're an investor but not an issue where. there was a report from calc bench that showed that nonfinancial companies have 100 billion of debt coming due next year with coupons below 3% refinancing and current rates would add 1.3 million two what they are paying. how would this alter the fundamental profile of these companies? winnie: you have to be careful in discussing which universe will be most impacted by the cost. for the investment-grade world where you have larger structures for that with segmented maturities and also robust cash

balances which is allowing a lot of corporate's to operate like banks and generate positive net interest margins that is not a threatening issue. in the high-yield universe and the leveraged loan universe you have large percentages of capital structures maturing in the next 2, 3 years for the loan only capital structures there are a number of companies where 100% of their outstanding debt will come due in the new term so they will have to refinance capital structures of material ly higher rates. but for a lot of the market the higher financing costs will not be as detrimental. lisa: some of these companies are acting like banks and they

can offset increases in borrowing costs. how much are they building those cushions? winnie: during the pandemic we saw borrowing cost out rock-bottom lows and earnings were good there was solid profitability across a wide range of companies. cash balances have come down but their elevated to pre-pandemic levels in aggregate. i realize is not evenly distributed but in aggregate they are still quite elevated and we are seeing management teams are still focused on cash management, balance sheet management ensuring their capital structures are appropriate for the next move be it a continuation of higher borrowing cost or a deceleration and earnings. jonathan: winnie cisar there, we

have been talking about subtle signs. delinquencies are starting to climb, is a slow down around the corner? lisa: this is what people are banking on which is underpinning the conviction of bonds. that is why retail sales is so important tomorrow and on thursday with walmart. jonathan: if you are ubs saying that fed funds is going to a one handle you would have to believe treasury is a screaming five. tom: we are up 3% on the four-week claims.

this is an acclaimed guy who stops audiences in southeast asia for ubs. jonathan: if you're just joining us s&p is positive 5.03% yields are lower by one basis point. do you think the world has changed? is this a new regime post-pandemic? ubs is saying that this is no different and were going back to the old world. tom: williams talks about we are going back to the regime he envisioned before. the debate is do we still go omg bad news like lisa talks about or do we go back? lisa: you said he's not a young turk, what's wrong with young

turks? people coming in and seeing the new technology? jonathan: carry-on, i'm loving this. lisa: at a certain point we are seeing fundamental see changes in the structure of how we do business intact and how much does that change the baseline? tom: cancel the break. are we going to go back to the growth macro we knew before or is there a new regime out there? i would suggest we need to be sober about saying it's 2019 again. jonathan: this is great, i enjoyed that. i can't wait until the next commercial break. ♪ ♪

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>> last month you had strong positives in retail spending

that counter data we've seen from other places. we're heading into the holiday season so i think wednesday will be a good test for that revenue. will people become bullish about holiday spending or do we start to compress down to what the credit card data say. jonathan: looking ahead to the retail sales data we get tomorrow morning. this week the retailers and consumers, huge week. and then retail sales are just around the corner. scores are unchanged on the s&p 500. we will see if that changes the fate of the session is in the hands of the data point we get later this morning. the yield sub .25%. there are three days of euro strength against the dollar positive by .25%.

home depot out with earnings earlier this morning, the ceo weighing in on earnings saying similar to the second quarter we saw continued customer engagement with smaller projects. experiencing pressure and big-ticket categories. tom: that's the story of a company that's up 20% per year and you wonder how they dip out of this? it's a question of how do we move on beyond the pandemic? it comes down to how does america adapt to this? jonathan: a massive merchandise problem they couldn't get enough and then they had to munch. tom: they are working through it you are looking at one of those

refrigerators with the double doors. lisa: i am buying a refrigerator. jonathan: mind has class in it and you can see into the refrigerator. so it's very well organized. lisa: and if anything moves? jonathan: everything has a place. i am not mental, i'm not. i'm just well organized. tom: can you imagine his refrigerator? jonathan: it's like my christmas tree, just right. tom: here is what we know in western massachusetts there are all sorts of academics and the acclaim of smith college in their applied mathematics program is legendary.

joining us on applied mathematics of big-box retail is elizabeth suzuki from bank of america. when you were going through polynomials and applied math did you think you would be on il-4 of home depot? >> i never thought my work would include in big-box stores and as a homeowner i'm in home depot every other weekend. it never stops. tom: i've never even been to the one downstairs. the post-pandemic home depot world can they fix the problem on the income statement? can they take expenses on like disney? >> i would not categorize it as a problem. what when we think about what

home depot will do for sales. putting that in context with the industry were tracking 20% above 2019 levels. we are coming off these high levels of spending during the pandemic. homeowners had easy rates to borrow against and they had stimulus money to spend. they were moving at a much higher frequency. we have seen a slow down and that and what has been surprising to the downside and where we've seen that pressure is mostly from housing turnover coming to a standstill. as rates start to moderate or come down towards the second half of next year, that will help spur housing turnover and we will see a return to

normalization. jonathan: given where mortgage rates are do you think we can normalize? elizabeth: once rates stabilize, maybe come down to take. -- a tick. if rates aren't going to continue to go up and i can move. the rate is higher than i would like but there's a chance he could come down. it will mean that some people who are moving will have to absorb a higher rate but because households have a high level of savings they can absorb that but it's uncomfortable. we are feeling that discomfort with existing home sales lowest

rate in 13 years. lisa: at a certain point does it help these companies? elizabeth: the sector is not as sensitive to housing turnover as one would think. when you see negative reports on housing each one of those data points confirms your bias and you will think of course things are terrible. we tried to look at every macro factor you could and this is where applied mathematics comes into play. we built a proprietary indicator of supply and demand and nord it down to 14 factors that are reported on monthly that we correlate to home depot and lowe's. that is what drives the stocks. we built an indicator off of it and that helps inform our views where we don't have to be dependent on the company's guidance or third-party

forecasts. we are able to look at the factors that matter and we will track those factors and not get distracted by the noise we hear. lisa: how correlated is home depot to other companies not related to the housing sector? elizabeth: when we boil it down and look at the broader sector and bank of america's credit card data, home depot assad perform that group pretty consistently -- has outperformed that group pretty consistently. the market shared gains are pretty material which is something i want to hone in on that even though their sales are down 3% we've seen that category down year-over-year for most of this year. in correlation to other retailers is pretty independent. it's a factor of the broader

consumer but because it's related to housing and home prices are one of the most important factors driving home improvement demand, that's where differentiates. jonathan: were always surprised with the strength of the economy were trying to work out if were approaching a precipice? elizabeth: there are categories that are struggling more than others. appliances, the volumes have been under pressure margins are coming under pressure. we saw promotions starting in october. these promotions will be pretty attractive this year. jonathan: you are so impressed with yourself what kind of discounted you get? lisa: no i want to hear what she

has to say. elizabeth: pressure on big-ticket discretionary products, consumer electronics, appliances. tom: the bottom line after three years of the pandemic malaise can they get back on track to the total return that we were weaned on? can i get back to 16, 18, 20% share return? elizabeth: in this environment it's tough. were coming off of this sugar high of the past few years. as we look to 2024 we see no reason why there should not be growth in the home improvement sector beyond the broader economy. jonathan: liz, it's great to see one person. tom: we could see her at home depot. jonathan: will take a visit to

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>> right now you are seeing different signals in different parts of the market.

how big of a slowdown is it? and what will the fed's reaction be? what has not changed is cautious outlooks. if we lose the labor market we lose consumers. >> this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. tom: it is cpi tuesday. in the next 30 minutes your world will change with the direction of disinflation in the character of disinflation in america. jonathan: i think it is a three-part act. we get inflation data, retail data tomorrow. what is the state of the u.s. consumers? from deutsche bank it remains consistent with end of cycle

dynamics. as the slow down around the corner because we've been talking about that for 12 months? tom: what a great job by our team, stuart kaiser and nadia level in a moment. the cpi report falls into where will the stock market go? jonathan: we believe stocks and the risk reward remains unattractive. restrictive monetary policy will remain in place for some time and consumers will retrench. i go back to that last line, our consumers are likely to retrench in the q4. tom: part of this about the wide dispersion we have seen.

the bombshell of 5400 on spx. we have a calculator that a divided spx is 10,000 down points thus the separation. lisa: i will have to translate that somehow. i think one of the biggest question points is this time different? if you don't believe this time is different there needs to be a slowdown and increase in unemployment that is commensurate with the slow down. if this time is different we don't know what the new normal is which explains the 10,000 doubt points tom: in the china visit with president. as their goods inflation or that subset that mike mckee will tell us about with the core service sector. lisa: i think it will be as

simple as if core inflation could throw some cold water. tom: george sarah velez with the trauma and japan with the inflation report here in the u.s.. jonathan: what are we converging towards, 2% or 3%? we have had 18 months, close to two years has not become embedded in inflation expectation? i know we joke about u

mich, gasoline prices have pulled back but inflation expectation was higher in consumer sentiment lower. has higher inflation become embedded into consumer expectation and what is that mean for fed policy? when they are calling for a recall on the old story. tom: in 26 minutes we are not going to get a cumulative inflation study back to 2019 and yet 110% of our audience are thinking right now. lisa: i was reading a report on the psychology of inflation because that's what i do in my spare time. people focus on how much prices increase even if their own salary increases.

that is the reality underpinning this. jonathan: that's why people don't feel good about this economy in a lot of places. tom: i'll go with the really old at 2.31%. jonathan: it's a quiet start to the week but it's about to get busier. equities are positive by .01% yields coming in at 4.61 and crude settling down this is not the picture we expected a month ago. back in the 70's and low 80's on brent crude. tom: team surveillance has outdone themselves on the stock market and where equities are moving. we have a hat trick of quality with nadia level from ubs financial services.

at 4700 spx you have a lift to the market how do you respond to the side of things we need to shock and get a much better number? nadia: i think you need to see a healthy acceleration in earnings growth. if you can get double digit earnings growth you will have bond yields coming down because inflation is come down not because of a slowdown in growth and you can see further upside to the market. jonathan: do you still like energy? you think crude will be in the mid 90's next year? nadia: it continues to be on the supply side. oil prices have not shown the

supply picture which continues to be constrained and the demand picture remains pretty solid. the strength in china and europe, we believe the oil market will remain supplied and that will help the support of oil prices. we think this provides an attractive entry point to capture that upside. lisa: can you be bullish on oil and not bullish on consumer discretionary which could benefit from some of those trends? nadia: it is concentrated within the first two companies. it's more reflective of those top two companies and the

reality is the recovery is somewhat uneven the lower in consumer struggling. within consumer discretionary is driven by goats less so than services which is where we are seeing a pickup and spending. lisa: we've been talking about the events that could be market moving including what we will get and 21 minutes time. which data point do you think will be most important for you as you carve out the nuances for 2024? nadia: everybody is watching the inflation numbers coming in shortly. we are more focused tomorrow on retail sales numbers. we know they've been strong and this will give some clues on

student debt repayment and is the consumer remaining resilient. the consumer does have the propensity to spend so will be able to respond to earnings to see how the holiday season is going. we heard from some retailers that picked up delinquency. we want to see what the overall health is of the consumer and will that continue. there is an expectation that is coming in hot. jonathan: there has always been a long list for why the consumer is weakening, can you think of some tailwinds for growth in

2024 that may persist beyond the warnings we have seen. the disinflation continues in the labor market can remain strong. where are you on those points? nadia: we think we will get some slower growth in the third quarter. we are looking for something in the 1.5 percent range. the job market does remain strong consumer wealth has been pretty strong this year and we think that continues into 2024. that could help support economic growth in 2024 despite the headwinds.

jonathan: nadia lovell for ubs wealth management. if you're joining us anticipating u.s. cpi is about 18 minutes away. the equity market right now we are positive by .01%. the state of play looks like this, we will hear from jay bryson from wells fargo ira jersey a bloomberg intelligence and jp kelly, we are pretty stacked up you're just joining us your equity market is positive. tom: david kelly is a key interview here.

he was way out front suggesting that we will seem nonfarm payrolls braked to a positive statistic. lisa: a lot of people are looking past cpi which was once the most important read of metrics. the biggest mystery of how much people are willing to keep spending and excepting higher prices that feeds into the cpi print we will receive in 15 minutes. jonathan: is a soft landing a moment in time or is it just a destination? the price you have to pay to get inflation lower is softer growth. you can do a lot on the supply side but if you believe in these longer variable acts growth will be hit on this massive tightening cycle. lisa: the only way you can get inflation to come in as a people

protest against prices going up too much. jonathan: mcdonald's on uber eats over the weekend. it was delicious. i was doing research ahead of cpi. did you see how expensive it was? is $15 for a meal. lisa: it's a price point is being paid. tom: they are testing the consumer and so far they have said fine. jonathan: i didn't say fine, i walked away. i was watching the golden bachelor and i wanted a milkshake and i did not get it. i was very busy. ♪

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rating but indicated that there is a negative outlook. this is a decision i disagree with, the american economy is fundamentally strong and treasury securities remain the world's preeminent save and liquid asset. jonathan: that was janet yellen at the apec summit. how do you argue against the last line that treasuries remain a safe liquid asset. it's hard to argue against the american economy being strong but that is not what this downgrade was about. it was about governance issues and it was about the debt trajectory of the u.s. which is on the wrong trajectory. it doesn't matter who you speak to. bill dudley said it was a unsustainable fiscal path. lisa: in some ways moody's is

making a rate call which is something you pointed out and at some point janet yellen is making a rate call which changes the interest payment trajectory and this is underpinning a lot of the uncertainty in markets in the credit profile of the united states. jonathan: it's almost as if you should not get a credit rating for america they should be the sign in the middle of our universe and everything goes around it. jonathan: how do you really feel? jonathan: if you don't believe that and if you think they should be based on what dynamics look like relative to other aaa countries, america is so much worse than those of other sovereigns. that comes back to the same issue, do you believe america has a unique privilege to act recklessly?

i think it's a losing that privilege and you have to pay a higher price to get the deficit away. tom: i grew up in the house that worried about this 24/7. the real question is, is the rate of change recklessness? a rate of change of entitlement expense is moving in directions that are distressing. jonathan: is not just governance issues and our ability to talk to one another it's about successive governments blowing out there deficit. to have a deficit 6% of gdp and unemployment in the mid-threes make sense of that for me? tom: unemployment has been bailed out by quality economic

growth versus the rate structure of fiscal policy. many people say that is changing where are will be more than ge. jonathan: i'm not saying where going bankrupt tomorrow it's the next 10, 20 years. tom: michael is going to join us and we will do the economic babylon cpi. this could be a three hour conversation with jonathan miller president of miller samuel and when he wanders into the three guys, the place goes into a hall. he's the most important person for real estate in new york city. do we have a housing crisis and do we see and placing and housing? jonathan: it's a crisis of

affordability at all levels. if you think about the fed pipit 1.5 years ago it's had a disproportionate impact because mortgage rates are such a big driver of the housing market itself. markets like new york, is too third cash buyers but they are still looking at the financial markets. is not that they are not impacted by rising rates they are impacted by fed policy and as a result, we have seen as sharp drop in sales over the past year and a half in cash sales and an finance sales. cash sales are down 20% and finance sales are down 40

-50%. lisa: how do you see rent and homeownership feeding into inflation next year? will it reinflate or to simply further discussion? jonathan m: i think the rental market will continue to do some plate using your parlance. they peak in the summer and we are seeing rents come down but they are coming down nominally the opposite of rising rents is not falling rents but stabilizing rents. we are looking at rent lower than pete but not low. affordability has not materially improve. lisa: for rates to go back to where they were before the

pandemic he would have to see if the in house prices. you would have to see a material shift for one of the biggest cost for americans. do you see that on the horizon? jonathan m: no because inventory is at all-time lows in most of the markets around the country. that is the housing metric. tom: we will get this report and seven minutes. we are all living in our viewers are living pre-pandemic. you have published the miller rent inflation statistic up 30% since the pre-pandemic. how long will it take to lose the pain? jonathan m: i would say 2, 3 years even with rate cuts. rental markets have momentum of being sustained at a high level.

tom: so where going to be miserable here until 2027? jonathan m: there will not be a rental price or purchase price correction. unemployment is too low, wages are elevated, it is hard to imagine. if you look at a fed rate cut in the second half of 2024, that's a year from now and that's not going to change overnight. one positive component, any kind of rate cut on the sale market will have a disproportionate high reaction in terms of sales activity. the rate pivot interrupted what was this rocketship of demand.

i think in a minor cut, we are not talking about going to three, 4%. were talking about getting down to the sixes. in most suburban markets we are looking at a bidding war of 40% of closings. tom: still in the bidding war? jonathan m: the suburbs around new york, 40, 55% were bidding wars. tom: could you see jonathan and bronxville? jonathan: there is no supply coming online is the same houses. jonathan m: is much tighter in the suburbs. the city relative to most market

is has more supply. tom: do you have anything in the 60's, 70's for john? lisa: he's looking for houses in the city? jonathan m: is that why i was brought on to give you house finding advice? jonathan: it's always good catching up. the housing market in this country but coming up short we will be getting inflation numbers. from new york, this is bloomberg. ♪

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tom: worldwide bloomberg surveillance on radio and television we are commercial free for the rest of this hour. we say this every month but it supersedes the jobs report. lisa: for an inflection sideways year-over-year the fed is looking to get down to 2%? we have eight or nine lines on

aco go. mike: cpi comes in flat and it had been 0.4 and the headline number is .3% court is at .2 from .3% and that is a tick below what we anticipated and purposely year over year number 4% and that is down from 4.1 percent which was expected. a feeling that we could see a stall in the numbers this month. it has not happened. inflation is not a sticky. gives the fed a chance to say we don't need to raise rates and

probably see market reaction. tom: when equity search we have to be thinking about record highs with spx up 1%. the dow we are not to 35,000. nasdaq is up 1.6%. lisa: i am looking at two year yield senator tim kaine down to 4.8. people are shifting down their expectations for how long the fed will remain on hold. they are celebrating science of disinflation. tom: the 10 year real yelled i'll have to get the chart out. plunging 14 basis points as lisa mentions 2.18%.

what do you see in inflation? mike: things have turned out the way they thought they would. gasoline prices drop by 5% during the month which pushes down on inflation. fuel also down 5%. food is up .3% and shelter costs , up by .3%. transportation services of .8% and medical care services. it is up .3% which is less than anticipated. the government recalibrate its health insurance and this month the stop on and while the

estimation would show a big increase in health insurance. tom: i want to make clear, international ramifications, futures are up 53. euro-yen is weekend. lisa: what i am looking at is average hourly earnings which ticked up. people are getting wage increases and more buying power. can we hold? is this something we can hold onto? as you parse through the specific data points does this feel like a sustainable trajectory downward in response to people protesting the higher prices? mike: i have to look to see if i

can see what refrigerated prices are doing. but you are not protesting. we will see you tomorrow with retail sales, americans are protesting inflation that they're not doing anything about it. they are not staying away from the stores which has been good news until now. health insurance, rising one point 1%. down last month. arise in health insurance offset by other things. rent and shelter, up .3% in rent of .5% and owners rent is up .4%. tom: so it is so blessed?

you mentioned 30% to me of housing. let me reset on bloomberg television and radio. markets are seizing up, huge moves. in the bond market, 14 basis points, 4.5 for the 10 year. the two-year was 5.04 and now 4.47. spx is up 51 and the vix under 14 says it all, 13.99. lisa: what is strong trip the last few weeks, are we looking for the all clear sign for the fed? does this sound the all clear for the fed? >> it does for now.

these numbers will bounce around on a month by month basis. i argued that the fed is non-but i don't expect fed officials coming out because of this report saying it's all clear. they will continue to be biased to tightening. in the next few months of these numbers reverse some pop-up in the economy spends at an accelerated rate you can see them going. lisa: this is the reason people are talking about a soft landing because you haven't seen the cracks you would expect ahead of a recession. is that an accurate categorization with prices not going out as much as people expected? jay: if we were still clipping

with the court 5% we would be talking about the fed hiking more and that's when you have the problems. the potential for a soft landing is still there. what i am still watching is the real fed funds rate, the nominal rate continues to drift higher and that matters for the real economy. i think the fed is going to delay easing at this point so we may or may not have a downturn next year but the next few quarters because monetary policy will be restrictive you will see headwinds on economic growth. tom: is it mission accomplished. our history, are we getting to a transitory point where the federal reserve can say mission accomplished? jay: i don't think they will say that at this point but what i would say is that the bar for

further rate hikes is getting higher and higher. many of the members they have done enough at this point in today's rally in the 10-year notwithstanding, we have seen relatively high long-term rates so there is a fair amount of headwinds on the economy. they will not come out and say mission accomplished they will need to see a few more months before they feel confident. this is a good start in that journey but you would need to see a few more months of .2 before mission accomplished. tom: mission accomplished december 12 the cpi report before december 13. lisa: the bar is getting a bit lower to cut rates. they are pricing in the first 25 basis point cut in june as

opposed to july. are we seeing a fast enough pace of disinflation to believe that 2% is on the horizon? you've been excellent about this last mile, how far along are we? jay: i think if you look at the three month and change in the corner where at 2.5%. if you want to get down to two, you need a few months of .2, .1 to get you there. we are looking at a number of months before that. we don't think we will see that kind of number until the second half of 2024. but i don't know if you need to be 2% annualized before the fed cuts. if they are confident that things are going to slow down

then they can start to cut rates . tom: thank you so much, jay bryson. chief economist for wells fargo. mike: the interesting number that everyone has been following for the last six, eight months is super core which is core services minus housing and that comes in at .2 for the month of october from .6. on a year-over-year basis that puts us down 3.7%. a major change in super court because of the drop because of those slower rising core numbers. in lisa, you are a winner.

appliances went down 1.2% and major appliances down 2%. congratulations on your new refrigerator. tom: every single thing sums up to where we are and price change. lisa: which leads to the idea of a soft landing because real wages are increasing at an accelerated clip on the heels of this. how are we getting a sense of the goods and services divide? our services going up as you see refrigerators go down? mike: i can call that up on the bloomberg model. it gives us an idea of whether services and goods, core goods were up less than .1 while

services were up .4. we are seeing a steady decline in both categories but services prices are seeing increases. airfares were down .9% and that was a category people thought would be higher. tom: what is that mean for retail sales tomorrow? jonathan ferro was seeing that might be more important? mike: i don't know if it will be a shock report that the drop in good prices affects the report. we will talk about refrigerators tomorrow as well. it would show as less of again because you're not including inflation and that. there will be a separate category for lisa abramowicz' refrigerator. tom: michael mckee and his excellence on tv and radio.

we welcome all of you commercial free on this bombshell inflation report. david kelly will join us, your thoughts on bonds? lisa: the volatility is shocking. you can see 15 basis point decline on the heels of of .1% difference in inflation highlights how tightly wound everyone is. does this steak or is this the beginning of the big bond rally have been calling for? tom: joining us now is ira jersey. there are so many moving parts i will give you an open question, and the matrix, the mixes you have of the bloomberg terminal what is the fixed income pair, statistic that matters right now? ira: it is really that this is

all from real guilds. this rally is not coming from a reduction in expectation. when you look at what tips are doing versus nominal. tips are driving everything. is this the start of the rally? if this were the start it would have to be a continuation because yields were higher a few weeks ago. but you have people starting to price for the fed to cut earlier and real yields coming in much lower which is a sign that people think there will be a soft landing and the market is just reacting a little bit to this data. tom: what's a character in a december 12 report, how does that change or endure the bond

world? ira: you will have the belly of the curve rally a little more but the rest of the curve, if we get another three handle on inflation you were going to have the fed on hold if not cutting rates earlier. that's what the market will price. the big reason you are seeing these moves in the bond market is the expectation that data like this takes another hike off the table for now and if you get that three handle on core inflation the fed will be pretty comfortable in saying we will leave rates where they are until we see inflation come down further but we are not hiking anymore. i think today's move is an acknowledgment of that. lisa: why do you think the market is overreacting? ira: liquidity is not good in

the market and is not this time of year, is the entire market. deficits have been huge and likely to be big going forward. you wind up having a situation where you don't have the capacity and people who intermediate trades cannot take the volume that has to go through. you wind up with relatively modest data and people who are short need to cover in that little bit just can't go through the way that it has in the past. it's all about liquidity. tom: this trend continues and you see it moments ago in the euro, 1.08, weaker dollar and stronger euro. lisa: this is also tied to the

fed and the potential for them not hiking rates. the lack of conviction that some people have been having with the recent news. this time it feels different if you look at the global fund managers where people are going long bonds in a material way. why does that not signify a real money shift that underpins these moves? ira: it could. people are looking for an excuse to be long and data like this is long. i think a lot of people are very cautious so a lot of investors have been burned earlier this year. they got long at 4.5% in the selloff in 10-year gilts up to 5%. i think people are legging into these types of longer positions

and at the same time, if you think of the front end of the curve and one thing that is attractive about two-year guilds is that within the next year you would need interest rates to go up to 10% to lose money by buying into year. there is a risk or word people are trying to figure out. tom: look at the two year yield, all of these dynamics continuous ira jersey speaks. lawrence mcdonald one of the essays of 20 23 says forget about the nuance, there is just trillions and trillions of dollars out there. how does the wall of money in the global system react to the shock report? ira: i think people still like the fact that they can make over

5% sitting in cash. you do have people who want to come out because of the fed is done, duration does pretty well so you want to be long and take a price appreciation a by bonds. some treasury bonds are trading at $.50 on the dollar. so people can pay that price return rather than setting cash but that will be incremental over time. tom: mr. dutta saying that it is a soft landing nirvana. lisa: let's see how long that can last? tom: oh there's the lisa abramowicz gloom.

futures are up 56, up to 3.37 in the vix under 14 and the right guest at the right time to advance this conversation. david kelly will adjust. with his years at putnam and when the facts change he will change. how does your analysis change with the shock report? david: we have a technical issue there. there you are. start over again we want to get that insight. this report is close to what we are looking for here. as were tracing out inflation coming below 2% by the fourth quarter of next year. what's important about this report, there is a large cap of people singing the last mile is

sticky. but we don't see that at all. we want to step down inflation through the fourth quarter of next year and what this report is showing that across the board there is disinflation and were heading back to 2%. lisa: it's not necessarily coming with pain and this goes to the soft landing nirvana, real hourly earnings increased, people's earnings are exceeding the pace of inflation for the first time in a long time. how much does that lead to a stickiness because people have the means to keep paying the prices? david: i don't think so because we have had periods of real wage growth before but what i see from the earnings reports is that companies are trying to hold earnings in check. from a workers perspective, they

are not caught up from the inflation they saw over the past two years. what you see is partial compensation for previous inflation but i don't see a lot of evidence that companies are beginning to push higher prices. we are not seeing up price wage spiral, they are both gradually coming down the stairs slowly. lisa: there is this question around bonds, is this good for stocks over the long term if it's accompanied with the cooling in the economy? david: things could go wrong and surveyed parts of the stock market that are overpriced. but i think were returning to where we were 10 years ago, a 2% inflation was slow growth and it can allow for lower interest rates.

stocks are the ultimate long-duration asset so they will benefit from this lower rate environment. for right now, this does show that inflation is steadily coming down. we have to recognize that is going on whether the fed officials say we are not there yet. i dare say, we will win this thing. it looks very likely get inflation down to 2% by next year. tom: russell up 4% nasdaq up 1.1% standard & poor's 500 up 50, of 55, and now of 63 at 1.5%. i want to sum up the angst that lisa abramowitz has on our nation's debt.

if we get inflation down and have a successful fed, does not give you confidence we could have a long-term are minus g -- r-g, that are debt and deficit are less fear. david: the amount of debt will mean permanently higher interest rates. i see no evidence that there is any consensus to do anything about it. i am still worried about populism pushing this higher and higher. tom: i could be wrong, i have

never seen this. it's just that simple. lisa: we are seeing a rally in bonds coming off the discussion from bank of america that indicates a shift in mood. the fed is off the table and terms of a rate hike and rate cuts are being brought forward and people are saying we are going to win this thing. there is a feeling that this is not inflation that will lead to seven, 8% treasury yields. tom: 4.48%. i will look at the two year yield at 4.87%. lisa: that is the right yield to look at, we are looking at it 10 year yield down .1575. tom: stay with those through the

shocking day, ken griffin and the 1:00 p.m. hour. good morning. ♪

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jonathan: the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪ jonathan: live from new york, coming up, stocks pop and yields drop and inflation is coming and cold with speaker johnson lookin