jonathan: not -- live from new york city. we have a speaker on around the studio so we will have to turn that off and hopefully someone can turn off said speaker because you and i can hear some strange words back-and-forth around the studio. lisa: that is the way that people are feeling because what we are seeing a complete reset with the trump trade really taking hold and that is what i can say. really the main question, a

repricing simply donald trump winning the white house and senate with republican control, are we pricing in a red sweep with treasury up 20 basis points. jonathan: there are some people who have not gone home since yesterday morning. can we started again. good morning, bloomberg surveillance starts right now. before sunrise on the east coast donald trump cleared presidential elect. equity futures up by more than 2%. the moving small caps is absolutely stunning, up by 6.5. in the bond market, it started at 7:30 eastern high with yields on tens, and 30's and up i-20. in foreign exchange once you see a move by that you know what is happening. the dollar is a whole lot stronger. anne-marie: trump won the presidential race and this is the greatest political comeback

that we have seen in our lifetime. there is only one present historically who has done this which is grover cleveland in the late 1800s. what is likely also being priced in, we know that the gop has control of the senate and we will see how big that majority will be that they already have control and now we are waiting on the house. whether or not the house remains republican you will be going in as the 47th president with a mandate. all of those election campaigns slogans and promises, some of them might come to fruition and that is what you see playing out in the financial market. jonathan: it is clear that a lot of people were up all night and whether it is speakers or trading desk issues we have gotten a bunch of notes out of a different -- a lot of different desks. deutsche bank saying that he expects a euro-dollar of 1.05. citi saying that there are two key risks. the first one is a further surgeon bond term premium.

at what point does the selloff end up curtailing some of the euphoria we are seeing? jonathan: he wrote an earlier and said i am a buyer of bonds and you can quote me on that so we did. lisa: we heard a similar note from academy security as it was on about an hour ago. he basically said that not sure treasuries are screaming by but i do not think trump will not be as bad for deficits initially as getting priced in. and now comes a game of who is coming in and what the personalities going to be and what is the composition of the house. we have 19 tossup races yet to be called. jonathan: welcome to the program we begin with our top story, donald trump heading back to the white house. >> i want to thank the american people for the extraordinary honor of being elected your 47th president and the 45th president. this was a movement like nobody has ever seen before.

and, frankly, this was i believe the greatest political movement of all time. i will not rest until we have delivered the strong safe and prosperous american that our children deserve and you deserve. this is an amazing victory for the american people that will allow us to make america great again. it is time to put the divisions of the past four years behind us. jonathan: donald trump securing the necessary 270 electoral votes. vice president kamala harris expected to speak later on today. our team coverage starts with kyla -- tyler. you have been up all night and i imagine that some of the campaign has been up all night as well. walk us through the move. tyler: i was there at the palm beach convention center where

president-elect make those remarks saying things as you heard that he is moving the greatest political movement and to try to bring some unity and i also want to pull on what jd vance said there have been repeatedly talking about it since it is the number one issue for voters. it shows that 48% of those surveyed on election day said that they were concerned about the prices of gas. 51% say that they are concerned about the prices of housing. and pair that with the council pole which showed that now president-elect donald trump leading vice president harris when it comes to voter confidence on handling the economy giving us some insight on what propelled him and some of these battleground states like wisconsin which landed in the last hour or so.

you alluded to it at the top, another critical thinker president-elect donald trump was that republicans flipped the senate. no matter what type of agenda economic and otherwise a president and new administration needs to work with congress to get legislation through. the house is still too close to call but we do know that house speaker mike johnson was there on stage with him last night in palm beach and he is spending the day working with the trump team. it was a bruising defeat for the democratic party and it could get worse in terms of the down ballot races. what are we expecting to hear from the vice president? >> yes. the harris campaign has been pretty quiet yesterday and this morning. we know that the vice president will speak today, but this is a hard pill to swallow for the democratic party. they have not only lost the white house but the senate. that was expected.

we thought the senate would go republican but the harris campaign said the race would be close when it comes to the presidential and that is not the case. they said it could take days and now we know less than 24 hours after polls close that donald trump has won the presidency. perhaps the hardest pill to swallow is a fact that this party pressured joe biden to step out of the race less than four months ago hoping that another candidate could carry the baton. vice president harris was not able to do that and not able to overcome donald trump's advantage on the economy and immigration and she will have to face that and voters across the country and women voters will have to face the fact that we are still not going to have a woman president and people hoping that she would break that barrier but not the case today. jonathan: you both need to get some rest. thank you for the hard work overnight. isaac of btig joins us now.

what went right for trump and what went wrong for harris. isaac: it will take time and there will be a number of postmortems. and talking to democrats and i have heard a fair amount of focus on the economy, obviously, that is the number one issue and that is what they are starting to see from the exit polls. but there also claims and concerns of misogyny and other issues that are in play. i think democrats will have a a lot of soul-searching to do. this was a resounding shellacking that they received. when you go through some of these numbers, trump expanded on his previous margin in 2300 counties. the only decrease was in 240 counties. that is absolutely astounding. just the fact that he won the popular vote is something that i do not think anyone had the

bingo card. i think for democrats, they are in the wilderness and it will be a long few years before they figure out who their new standardbearer is and what their messages. annmarie: when it comes to the standardbearer, the sitting incumbent president are the fingers going to be pointed at him or the vp? isaac: i think we are going to have a circular firing squad for the next few days. i think that everybody is going to have to eat a little bit of blame for the strategy. and realizing also that there was a tough hill to climb. and i think that we are going to have a lot of revisionist history in terms of when we should have had biden exit and if we should have had a full primary. all of those things will take up a fair amount of time and air. the question is are they going to be able to govern from the house or are they going to be in the minority as well. and that is the biggest question

for me and everyone else. annmarie: what are the tea leaves telling you about the two dozen that we are waiting to hear from, house races? isaac: all of the republicans are optimistic that that might be the broader euphoria that they are feeling. it might take two or three days and we will have to buckle in. ultimately, what i have tried to highlight to clients is no matter who is in control of the house, it will be a very slim margin. you will have the same dysfunction that we saw with the speaker fight just last year. and i think that will be a theme that markets will have to deal with, especially when we get to the big ticket spending efforts that we all care about. lisa: just to build about that and it is one of the big questions. the bond market and broader markets in general are pricing in just donald trump at the top of the ticket, not a red sweep. what are you hearing from

clients about how much you could get a very much accelerated move on the idea that those 19 still undecided votes that could flip a house to go the way of the republicans? isaac: it is a huge procedural issue. if you have republicans in charge of the house you are able to use budget reconciliation which is an incredibly powerful tool. and i think we would have to change some of our assumptions regarding what will be spent over the next two years. to me, if you have the red sweep and that is confirmed, then i think the deficit will have to be ticked up because of the budget reconciliation process. to me, that is the ballgame. a lot of what we will do over the next few days is separating rhetoric from reality. how much of his immigration proposals will he advance and how much of tariff proposals will he actually advance.

on a spending side the most important issue is to republicans have control of the house because that unlocks budget reconciliation and that is an incredibly powerful means of advancing your agenda. lisa: there has been a lot of discussion about who his cabinet would be and what tenor it would be, whether it would be hawkish or -- and whether it would be more expansionary or hardline or not. do we have any early indications based on who was with donald trump last night and who he is surrounding himself with early this morning? isaac: i found it interesting that we saw the return of his daughter and son-in-law to the stage. i think that is something that we have seen recently on the political side. that is noteworthy and something we should continue to track. we will also see the return of other folks who have maintained their place in the organ it whether that is steven mnuchin or robert lighthizer who we will

have to keep our eyes on for treasury secretary. though her are some of the names with a pronounced focus on wall street. john paulson is part of this conversation, for example. you have seen a number of hedge fund managers who are going to have the year of the president. i do not have the answers but we have some of the names that are heard mentioned. jonathan: no doubt we will be talking soon. isaac mentioned the financials. check out the banks in the premarket. if you have a moment in your morning and i know that everyone is tired. just tack out -- just check out the banks. jp morgan is up 7.5% and we are talking about the biggest financial institution on the planet up by 7.5%. lisa: how much of this is that donald trump will make de regulation in issue. sherrod brown ahead of the

financial committee kicked out and overturned in ohio. how much are you looking at races like this to give you a sense of what will happen not just to jp morgan but pnc up more than 8%. regions financial, a similar type of move. annmarie: a bruising defeat. it was very telling at that moment when that headline dropped and you realize that people were not voting with a split ticket in mind. they were voting red and a lot of these states that it was going to be tougher senator brown to pull that off. but, there was a lot of money spent on this race. the most expensive senate race in history and it was telling that this was the red wave that they never got in 2022. jonathan: bank of america up by 9%. let us get an update with the bloomberg brief. dani: israeli prime minister benjamin netanyahu fired his defense minister yesterday. it sparked protests by citizens and opposition politicians.

he had pushed for a hostage release in exchange for a hotspot -- a cease-fire. the prime minister wanted to press on with the war. they clashed over domestic political issues, input -- in particular the conscription of ultra-orthodox israelis. musk has more lawsuits coming. his super pac were sued by two swing state voters. they allege that it profited from the contests -- from the contests. the second suit claims that the giveaway was partisan and eliminates anyone who is not a republican or trump supporter. nvidia has become the largest company on the world on tuesday, suppressing apple just underscoring how dominant ai has become. the shares rose 2.9% yesterday and they are up 1.5%. the market cap hit for -- $3.43 trillion in accounts for the 7%

of the s&p 500 and is responsible for a quarter of the 21% gains this year. jonathan: more from her in about 30 minutes. up next, trump's pledge for his second term. >> i will govern by a simple motto, promises made and promises kept. we will keep our promises. we will make america safe, strong, prosperous, powerful entry again. jonathan: equity futures on the s&p 500 up 2.3% and the small caps flying. from new york city, good morning. ♪

jonathan: equity futures flying on the s&p 500 higher than 2%. the move on small caps is nuts, up by 6.5%. under surveillance, trump's

pledge for his second term. >> i will govern by a simple modern -- motto. promises made, promises kept. we will keep our promises. nothing. me to keep my word to you. we will make america safe, strong, prosperous, powerful and free again. i am asking every citizen to join me in this noble and righteous endeavor. jonathan: the trump trade gripping markets worldwide with donald trump winning the race for a second term as president. anastasia writing "there is a sense of certainty and clarity as to what the playbook should be, long stocks with the focus on domestic companies. expect higher rates and steeper yield curves. the negatives are that the tariffs could come sooner this time around." anastasia is with us. some moves on the screen that you might think people should be fading? anstasia: small caps are up big

this morning. if you look at the performance of the russell 2000 index, we have not gone anywhere in two or three years time. i do not think it is a fade. there are election trades that have been whipsawed around but we have a new investment regime most likely for the next four years until the next midterm election so that means you can commit to some of those trades. the reason why small caps are rallying is because they are more sensitive to republican majority. and that is helping sentiment and they are more sensitive to the domestic orientation and potential for lower tax and sensitive to rate relief. we have this perfect combination of factors. annmarie: there can be too much of a good thing, a concern that if it is a full red sweep then suddenly there is a fear that yields keep climbing and it curtails some of the trade we

have seen, particularly in risk assets. how much are you looking at that tipping point or reject that saying it will come on stronger growth and an economy that can -- that show that it can handle yields. anastasia: the 10-year yield has risen by 80 basis points. and if you look at the reaction in november and december it rose by 80 basis points. and then it flatlined. the regime right now is different than 2017 or 2018. the fed was raising interest rates and was in hiking mode. today they are in easy mode. it is a very different backdrop. the other point is that you are right, we have to reprice for higher growth or higher inflation expectations or maybe less rate cuts but we have done that. if you look at fair value estimates from bloomberg or analysts at jp morgan, the 10 year treasury is above that fair value estimate. the last thing, it is not a done

deal that we have a red sweep and i know that people worry about what it could potentially mean for a budget deficit, but i think there are a lot of republicans in congress that dude want to rein in a budget deficit but it is not a done deal that a red sweep results in out-of-control spending. lisa: you do like regionals and small caps. you like some of the trade. do you also lean into the dollar at the strongest level in a year. the bloomberg dollar index search the most going to the march of 2020. do you lean in and say ok, it is over and let us figure it out? anastasia: as i mentioned it is a new regime and it will focus on protecting the domestic economy and bringing more flow back into the united states and all things equal that should be dollar positive. maybe the fed moves a little bit slower than they could have otherwise.

all of that is supported by the dollar. i look more to the equity markets and think what does this mean for the places that i want to be in the equity markets and that is why you go to small caps and regionals and why you actually put together a basket of stocks with a high percentage of domestic revenue. we have done all of that in 2017 and 2018. you might need to dust off some of those trades. annmarie: it might be days or a week or two before we find out the full composition of congress. this might come down to california absentee ballots. then i want to talk about tariffs because unilaterally trump can come in and do this on day one and it could be sooner than 2016. you just got back from asia. how is a places like china -- is a place like china preparing? anastasia: what they are preparing for is negotiation. and the sentiment that i picked up from some of the

conversations is that policymakers are not afraid of trump. they might actually be welcoming it and the reason for that is their mentality is transactional and they want to get a deal done and they want to negotiate certain things. the ability to engage in negotiation is what they are focused on. annmarie: would your advice the this was donald trump on the campaign trail having negotiating tactics or do you think he puts blanket walls up as high as 60 or 70%? anastasia: i think he might and there has to be some consideration given to what does that do to the consumer that voted for him and lower inflation. you probably want to be careful as to how you phase in the tariffs. at the same time in the bloomberg interview a month ago at this point he did talk about this being a negotiation tactic and how you cannot put a 10%. if and expect to bring people to the table. 60% people want to negotiate. once again, i think the ultimate

end game is not to have 60% tariffs in place but is to commence china to build factories in the united states. so, that is hopefully what the markets will be focused on. jonathan: it is good to see you. bond yields are higher by 20 basis points but the dollar is stronger. is it fair to say that we are baking in a better profile for growth, neighbor higher inflation and the prospect that the fed cannot cut too much and not real deficit concerns? if it was the latter you would expect to dollar weakness and we do not see that? lisa: this is an embrace of american exceptionalism and you see that in the dollar even with higher yields. what people are looking at is the idea that they will get de regulation and that the tariffs will come and there will be some sort of regulating force and the deficit will not become as problematic as we currently see. watch the 30 year auction and

see what the clearing option is and then we will go from there. jonathan: the 30 year is up 23 basis points and it is quite a day to have an auction. lisa: there is questions about the sequencing and what type of push whether it is growthy to use the language, or coming with some disinflation. jonathan: big moves in markets worldwide. coming up, live from pennsylvania and michigan. what went right for trump and what went wrong for harris. live from new york city, this is bloomberg. ♪

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jonathan: many are waking up to this. the new started at 7:30 eastern yesterday evening. we started to see some things and counties starting to shift trump's way and the market rallied really hard and never looked back. the small caps up by 6%. in the bond market, yields up by double digits, more than 20 on a 30-year. 19 on tens. twos up nine basis points. the federal reserve meeting this

week, snooze. december gets a lot more interesting. if we get this sweet confirmed and start to look at the 2025 and beyond with the policies and the market is starting to pricing a much growthier inflation outlook, can the federal reserve keep reducing interest rates? lisa: td securities was asking this morning. it is likely the fed will remain on hold for the first half of 2025 after cutting rates 50 more basis points because of exactly that. it raises a question of a higher benchmark rate going forward. we have to see how the policies trickle out. a question about growth versus inflation. this is the worst case scenario for a lot of bonds. at the same time, it has not mattered for stocks. that is one of the main questions. jonathan: best case scenario for the u.s. dollar. dani did a phenomenal job yesterday. the difference between a tariff

trait and a rates trade. the euro, a rates trade. down 2%. euro-dollar holding onto just about 1.07. dollar-mex. lisa: the biggest going back to 2022. the dollar strongest versus the peso going back to 2022. a question about the target of tariffs because of their role as a conduit of chinese goods. how much of this is a sequencing matter? how quickly this gets into effect because of the issues that can be done unilaterally? with the euro region, that is a real question where you have a real differential. now it is growing and you have the ecb loath to cut rates because they don't want to widen the differential too much. jonathan: for berlin and brussels without a doubt. people are saying things like they're prepared for at this time in a way they were last

time. people might say the same things about nato as well. i would say this. the eurozone economy is not a good place. the germany economic model is not a good place. i don't think we can sit here and say they are better prepared this time around. the european economy is weaker this time around. annmarie: it's going to get worse. if the walls go up, they're not just going it for imports coming from europe into the u.s. they are going up for chinese imports. china, where they have left to go? where will they dump? on europe. i got messages from washington. they were bracing for impact. the biggest thing they were most concerned about was how we are we going to deal with tariffs? how are we going to deal with former president's rhetoric when it comes to nato? jonathan: former president donald trump winning the u.s. presidency for the second time.

taking key swing states of pennsylvania, georgia, north carolina and wisconsin. another projection just crossing. annmarie: senator jon tester has lost his seat. tim sheehy has won. tester, three term incumbent. montana has soured on him. this was the feeling everyone thought. he was going to be kicked out of the senate. you cannot bet against jon tester in the sense he's had challenges before and been able to come out on top. this was his toughest challenger yet. this just says this is another r in a column for donald trump to go in with a bigger mandate and basically more maneuvers he can do in the senate. maybe he can pull in one center to go to the secretary of state or another department. maybe he can play around and have two because this is deftly a red state. jon tester, political fight of his life and he lost it. jonathan: the latest on the senate.

republicans winning a majority in the senate. the gop defeating banking chairman sherrod brown in ohio. picking up an open seat in west virginia. we should talk about the senate banking committee. banks are a big time this morning. jp morgan up by something like 7%. bank of america more than 8%. lisa: donald trump ran on the deregulation campaign. gerard brown, the head of the banking -- sharad brown, the head of the banking committee getting tossed that in this race. also coming with higher rates and potentially more mergers and acquisitions. who do they put at the head of the ftc that could give more clarity onto deals it can get done? annmarie: we know how jd vance felt about the one person in the biden administration he thought was doing a good job and that was lina khan. bernie moreno picking that up. this was the most expensive

senate race in history. eclipsing the $412 million spent in the georgia 2020 race between jon ossoff and david perdue. a ton of money was spent to try to keep sherrod brown at the top of the banking committee. for him to win this race you had to see more split ticket voters. what did we see last night? no one was splitting the ticket. this was not a red ripple. this was potentially -- we will see how the hell shakes up with this was a red alarm across the board. jonathan: that's an alarm for democrats. which way does that housebreak? the federal reserve kicking off its policy meeting today. expected to cut central -- by 25 points tomorrow. have to put out new projections. there's a big difference between campaigning and governing. we don't know whether the campaign promises become legislative reality.

if you have to put out some promises and forecasts in december at a time a we have a better picture of what the outlook is for policy in washington, how off-site is the federal reserve going to look? lisa: i have heard dartboards are on sale on amazon and i believe they are putting went up. blindfold. they will have targets and throw them at the. what this does is it puts the fed on the backseat. people are not going to be paying as much attention to what the fed says or does at the meeting tomorrow or potentially in december. next year it makes it very interesting. you will understand as policies take shape doesn't put the fed on hold? they are not going to mention this. they will stay far away from this and that is what markets are trying to suss out. annmarie: it was months ago when no one was talking about a mandate for republicans that he was saying potentially next year it will be inflationary if you have tariffs. the fed may have to start

hiking. you have to think, what is jay powell going to say tomorrow morning? how difficult is this going to be as the former president said it is the easiest job in washington. it's a coin toss. jonathan: this might be the easier one relatively speaking compared to december. he doesn't have to provide projections, provide a commitment to december and can stay well clear of any conversations regarding washington, d.c. the december meeting this gets a lot harder for the federal reserve. the market is already trading 2025-2026, now with greater clarity. the federal reserve can't play the game just yet. lisa: this market is basically tightening. financial conditions tighten on the heels of the cuts they have made. if it continues they need to respond to that if nothing else. if they want to see it easier, make some sort of statement and give a sense of what the path could be. jonathan: coverage from two key swing states with david gura and romaine bostick.

something you said this time yesterday morning stayed with me . you said foreign policy. in the data you see so far, how are things stacking up? romaine: we have not gotten the full breakdown on the precinct by precinct basis but it does appear some of the swing voters, some undecided voters who were concerned about some of the foreign policy stances of the biden-harris administration did manage to swing the vote in several key areas. i want to talk about a differential here. i will throw this back at you. you said something overnight during our coverage that stuck with me. what is joe biden thinking right now? michigan is no longer a blue state. let's make that clear. it is not just that harris lost the state. she underperformed biden in on most every way imaginable. biden in the last election 111 of the 83 counties. harris will only win nine.

seven of those counties she underperformed biden versus trump on a percentage basis when it comes to the margin of difference here. it gets worse than that. when you look at the house races, based on the final counts coming in this morning, it looks like the 13 -- of the 13 house seats the michigan has in the u.s. congress, seven of the seats will be held by republicans. that will be the first majority they have held on a house basis and quite some time. adding insult to injury, one of the seats that got flipped him democrat to republican was the seat elissa slotkin vacated to run for that vacant senate seat. it looks like right now based on the vote tallies she will lose that race, making mike rogers the first republican senator in the state of michigan going back to the early 2000. only the second republican senator in the last 67 years. annmarie: it is shocking. i imagine the incumbent

president joe biden right now is thinking i could have done better with rank-and-file voters in detroit, in the suburbs of detroit. what are you hearing about the individuals? voted? who swung the selection for donald trump? romaine: i will tell you, annmarie, it is early here. i will spend a lot of day asking those questions. the harris campaign will spend a lot of time asking those questions as well. it is not quite clear why this long so forcefully -- by this swung so forcefully. trump is up by 100,000 votes in a state that biden one by 150,000 votes four years ago. it wasn't third-party candidates who are the spoilers. it does appear his message did resonate with a lot of swing voters, including arab and muslim americans, jewish voters come a lot of the eastern european voters and a lot of hispanics and a lot of black males. annmarie: we just heard from

romain that it looks like the republican open senate seat in michigan may go to republican mike rogers -- a democrat held as the incumbent. what is going on with the down ballot senate race in pennsylvania? does david mccormick beat casey? david: he's in the late and i think that is something we will watch closely over the day. kenny hold onto the lead -- can he hold onto the lead? a lot of people look at the polling and saw a few weeks ago bob casey, the incumbent democrat with a nine percentage point lead over dave mccormick. that narrowed in the latest poll from the new york times and siena college. you cannot overemphasize how much bob casey is a son of the state. he's been in the senate for three terms. looking for his fourth. this heritage going back to his father who was a governor of the state. someone who was a real

institution. this is a huge move if it plays out the way it looks like it is. yes, the topics and issues are different. i don't think foreign policy played as much of an issue here. you look at this date and where harris won and didn't, she underperformed joe biden in the last race. this is a story of the rust belt cities. we had a lot of conversations last night about how big and varied and diverse the status. i'm here and a city that historically has gone for democrats. we saw that in yesterday's race. you move west, very red. that is where donald trump was able to capitalize on here in 2024 in much the same way he did in 2016. you look at the data thus far. i will be talking to folks over the course of the day. he appealed to the same voters who ushered him into power in the 2016, quite successfully this time around.

lisa: it is early days but are we getting a sense from the exit polls, from what people observed in terms of the number of voters about the size of turnout and the composition? david: we don't have a huge amount of detail on composition. turnout was huge. the number of people who turned in the mail-in ballots early was a big number as well. maybe not nearing what we saw during the pandemic but getting close to it. as you have said over the course of the morning, so much money was poured into this race. so much effort to turn out voters from both the two candidates and their campaigns and outside groups. that effort paid off. what path forward harris might have to challenge this? but i kept hearing from every county official yesterday was how big the turnout was but how seamlessly everything ran. there weren't aberrations like we saw in cycles past. there is a recognition among the harris campaign they had very

little movement in terms of what they get to do challenge anything here in the commonwealth of pennsylvania. jonathan: romain said this but truly world-class over the last 48 hours. david gura, romaine bostick. equity futures on the s&p 500 up by more than 2%. with an update elsewhere, here's dani burger. dani: novo nordisk shares are surging in the european trade 6%. nearly 80% sales last quarter. revenue climbed 79% after medication became available in more countries. sales rose by 50% in the u.s. even as prices fell. they have an edge over its rival eli lilly who reported disappointing obesity sales last week. a ballot measure for protecting access to abortion in arizona has passed. arizona was considered among the most restrictive states for reproductive rights. he was one of the 10 states were voters had a direct say on the issue at the ballot box.

the state will now amend the constitution to establish a right to abortion and prohibit interference before fetal viability. in nebraska, ballot measure limiting abortion access one by slim majority, prohibiting the procedure after the first trimester. shares of tesla are surging nearly 13% in the premarket as donald trump's retur -- donald trump returns to the white house. musk was arguing the most prominent supporter of trump during the election, backing republicans with more than $130 million in spending. that is your bloomberg brief. jonathan: more from dani and 30 minutes. king dollar. >> the dollar is strong because the united states has had exceptional fiscal policy. the biggest threat will be inflation. you will have to change some of his policies if he wants a weaker dollar. jonathan: this is bloomberg. ♪ ♪

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jonathan: a snapshot of the price action. equity futures up by 2%. check out the euro, holding onto 107.07. -2%. under surveillance this morning, king dollar. >> united states has had exceptional fiscal policy. it outgrew the world spectacularly. trump once more growth. the biggest that will be inflation. he will have to change some of his policies if you want to weaker dollar. jonathan: here is the latest. the dollar surging the most since 2022 as donald trump claims victory. "they trump win or red wave is

bullish for the u.s. dollar. mark joins us for more. it is the equity piece that makes her call more original. what is it about the equity market that will basically feed what happens in foreign exchange? >> one thing that's interesting -- you talk to clients and one thing you try to figure out is the gap between productivity. it is on the linchpins of all fx behavior models. the thing we get from equity markets, they tell us real-time about innovation, sectors, how markets are performing. you can actually see which countries are generating the most potential productivity over time. that is where u.s. equities perform relative to europe and china are the thing to watch in terms of how well the dollar can perform. it is one reason why the dollar has continually outperformed its overvaluation on a lot of these slower longer-term models. lisa: let's go there given the

fact is a difference when it comes to currencies that are differentials in interest rates versus those that are a tariff trade. we are hearing about that from dani burger last night and through the morning. how much are you seeing this more as a trade from interest rate differentials, growth differentials and less relevant when it comes to some of the tariff trades? i'm thinking of the yuan and the mexican peso. mark: you have to unpack it is a lot of the major things that drive fx. equity performance, growth outperformance, rate differentials, the risk premium that comes through on the trade uncertainty. if you look at the wcrs screen on bloomberg, a broad dollar move. this is u.s. exceptionalism. they key tenants is basically emerging market currencies will underperform largely because with u.s. exceptionalism outperforming equities you have

a steeper curve. the one thing the market will talk about is the higher terminal rate in the u.s., where that lands. whether the fed is going to be on pause now starting in december. all those things are very bearish for every emerging market currency. asia is more focused on rate differentials. if you go back to latin america, think about the mexican peso, this is the worst case scenario. trade uncertainty. you have the usmca sunset clause in 2026. you have the underperformance of the carry trade. now you have the uncertainty of whether or not trump wants to strike a deal with china and find a way to cut mexico out of the supply chain or find a way to basically say to mexico we are going to renegotiate the trade standards we have which puts them down a rung. those are key concerns. what the euro, we have uncertainty around the german government which is likely to collapse in the near-term. potential elections in germany.

there is political uncertainty in europe and pretty much -- lisa: it is a straight up to the right. it will be that much more damaging to the dollar because it does undermine what you are talking about. how much do you take notice if there is a selloff? mark: i think you have to work for the first and second order effects. as a lot of people mentioned, we underscored all the policies if there is a red wave and they have the house as well. this will be inflationary. the first order effect does this is very bullish for the equity market. this is a steeper curve. puppet ever reflation trade with a theme around u.s. exceptionalism. we saw this in japan and the u.k. budget and all over the world. we are continuing to see a coordination of easier monetary policy, easier fiscal policy but

pretty much every country around the world has inflation about target. central banks are dealing with something that is very challenging. you can't ease financial conditions and boost fiscal policy at the same time when inflation is about target. the second order effect is that is a huge concern. the bond market is going to have a significant impact on whether or not the equity market can trade as exception list as many will expect and extrapolate it to. that is not the first-order effect. that is the story that comes through the second half of 2025. that is something we will be focused on a lot given you can't get as much growth as you want, can't deliver unprecedented fiscal stimulus and not worry about inflation. inflation will be the major driver of the fx market starting in 2025. annmarie: the former once a weaker dollar. is that any chance in the cards for him? mark: is an old saying, don't tell me, show me. i would say the second order

effect is quite interesting. everything happening down as we talk about the trading sc ene's u.s. exceptional in the dollar. this is a bit of a game changer. i see the ability to weaken the dollar through a couple of channels. the first is striking a deal. what does trump want and what this trump need to deliver on? they need to deliver on industrial policy to the states and the rust belt that want to see manufacturing come back. you can do that through a weaker dollar. the other way is by revaluing and trying to figure out how to get asian currency stronger. there could be a deal in 2025-2026. all these currencies are extreme the cheap on our models which would be a way to see the dollar go lower. jonathan: good to see you.

mark mccormick of td. coming up next, mohamed el-erian, libby cantrill. where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research.

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jonathan: president-elect donald trump. check out the moves. if i told you the russell was higher than it is right now a little earlier, he probably would not believe me. we were up by 6% this morning. now by 5%. we are seeing some big moves in the bond market.

two-year,e 10-year, 30-year higher. 23 on a 30-year. in foreign-exchange, the moving euro, two full percentage points against the dollar. the biggest move going back to spring of 2020 of euro-dollar. lisa: on track for the biggest move going back to 2016. how much of this is a knee-jerk lean in to an exaggerated 2016 trade? that is one big question with the bond selloff. this is a different moment then it wasn't 2016 from a deficit perspective, from a growth perspective. at what point do yields become self-limiting and the risk rally we see tearing the markets? annmarie: i want to pick up something romaine bostick said. he is drilling into what went wrong in the state. alyssa slotkin left her

district, the michigan seventh the run for the open senate seat. double whammy. not only has that seat flipped to read but according to romaine she is on course to lose the senate. a double whammy for democrats when it comes to the congressional district and the senate. that is just basically foreshadowing the entire not just looking back to the evening but what could come for the house races. jonathan: did is a beating. welcome -- it is a beating. welcome to the program. donald trump heading back to the white house. >> i want to thank the millions of hard-working americans who have always been the heart and soul of this really great movement. we have been through so much together. today you showed up in record numbers to deliver a victory. really probably like no other. this was something special. we will pay you back. we will do the best job. we will turn it around. jonathan: what a comeback.

trump taking wisconsin and making his comeback official. vice president harris expected to speak later today. joining us now is mohamed el-erian of queens college cambridge. we have a lot to work through. how much does this redefine the outlook from your perspective? mohamed: in a major way . this is not just a big win for trump. not just a big win for republicans. this is the emergence of a new power structure in the united states. the markets are reacting in an incredibly rational fashion. if you look at how the markets have treated the last few months, they have done much better than political scientists in terms of predicting what could happen and then reacting to what has happened. jonathan: i would echo that. before we even saw any real clarity in the vote this move started at 730 eastern time -- 7:30 eastern time yesterday

evening. equities up, small caps outperform. let's separate this from asset class to asset class. we will sit on fixed income for a moment. we are higher by 20 basis points. do you see that is a move off the back of a better outlook for growth, higher inflation, a recalibration of interest rates relative to what we thought was going to happen? maybe they have to stay where they are or consider hiking interest rates. howdy think about breaking this down? mohamed: all of the above. it is consistent with what is happening elsewhere. there is an embracement of higher growth that comes from deregulation. there is concern about higher inflation. there is also a revisiting of the conventional wisdom of the fed. all three are playing in. you know -- we have seen and over 70 basis point move since the fed delivered its jumbo cut on the 18th of september.

there has been massive moves in the market. we see the curve steepen. it is all of the above. over the next few weeks and months we will have a better feel for which one will prevail. lisa: if bond vigilantes are screaming equity markets don't hear them. this is one of the big questions. at what point does the rise in yields really create concern about the deficit versus simply, by the way, that's another sign of growth and potentially these other issues? but don't worry about. mohamed: two of the three reasons are such the equity market is right now to hear the bond vigilante screaming. higher growth is good for equities, because the fed not having to cut rates for the right reasons, that the economy is doing well, that is good for equities too. it's only the third one, higher debt, higher deficit, higher inflation they should worry

about. i totally understand what we are seeing in terms of reaction. when i look at markets today at the broader level, the headline level or in terms of components, they are behaving very rationally. lisa: at a certain point you have to wonder what playbook we are going to in terms of the economic trajectory. we were playing with no landing, soft landing, hard landing. before this election nobody noticed the u.s. services index that came out stronger than expected. i want to talk about the economy looks like it was on solid footing coming into this. what is your fear we could see a real big re-acceleration of economic growth and inflation that becomes unsustainable? mohamed: let me tell you what the upside is. you could get supply-side improvements. you could get a faster productivity boost than most people expected. that is clearly on the cards.

if you remember, there was a third scenario. everyone focused on no landing. is it a soft landing? is it recession? there's a third one -- a fourth one. bigger but not harder. the probability but not hotter went up relative to what it was yesterday. what can go wrong is that we get inflation coming much earlier than the productivity improvement. where does the inflation come from? mainly the imposition of tariffs. that is the balance the administration will have to figure out, the balance the market will have to navigate. jonathan: it is trying to navigate it right now. that averages we are starting to see transatlantic. i have a german two-year down 10 basis points. u.s. two-year up 11. it is unusual to see things like this take place and trait is the right place to start to have the conversation.

the prospect of a more inflationary impulse to u.s. policy and the bottom line being the europeans will have to eat chinese overcapacity, take a hit to growth and the ecb will have to cut interest rates. how are you considering the divergence we might see ecb to federal reserve growth, interest rates, inflation, transatlantic and what it means for the spread? mohamed: i remember coming on your show when the market was expected the ecb and the fed cut by the same amount. these economies are fundamentally different places. you put it really well in the previous hour when you said the difference from 2016 is that if you're in china, they are in a weaker position. that is what the market is feeling. the market is reacting in that manner. two things europe is worried about. one are the consequences, the spillovers from what happens in the u.s. on them, especially. of

relative performance the other thing we are worried about is the big sucking sound u.s. will have, which is mop up even more of foreign direct investment on the move around the world. this should be a wake-up call to europe to get its act together on productivity, on growth. they have the draghi report that tells them exactly what they need to do. annmarie: olaf scholz saying america has voted but trying to make sure they are putting out the all the branch that the u.s. and america have a partnership and friendship. what kind of reciprocal measures could we see out of europe if we're are basically heading into potentially a trade war? mohamed: i am less concerned about the trade war with europe. i was concerned about the trade war with mexico to tell you the truth. ultimately, these will be negotiated. i think there will be more tensions with china. you will see that across the board. at the end of the day tariffs

and president trump said it himself are used as a weapon to threaten to change behaviors. behaviors change, then you don't have to impose tariffs. china is a completely different story. china has got some really difficult decisions to make, including whether they are in a position to implement the big stimulus. i don't think they are in a position to implement the big stimulus. they will have to figure out how to navigate this more difficult environment. annmarie: some analysts at goldman sachs were basically saying they were waiting on stimulus, waiting for a bazooka, holding back fire powder -- firepower because they wanted to see if trump was going to win. you are saying it is the opposite. mohamed: they have been holding onto that bazooka for a long time. i thought from the assumption people are rational -- i start from the assumption people are rational. you will bazooka has unintended consequences that you want to avoid.

your bazooka puts on steroid-year-old growth engine that is problematic. there is a reason why for the last two years they have not used their bazooka. the argument is they will use it a bigger bazooka ignores the fact that the chinese government understands it has to move to a new growth model. i'm not in the goldman sachs camp that we will see a massive bazooka because they are worried about what is going to happen in the u.s. they will have to accelerate the reforms they need. lisa: if there is no bazooka on friday after the results, american exceptionalism and fulltilt that is not necessarily going to bleed over into the rest of the world, there is increasing fear this leaves the euro region getting closer and closer to recession. james knightly saying even renewed uncertainty on trade war fears can drive the economy into recession as soon as the turn of

this year. do you agree with that? mohamed: i think europe has problems. i have been saying this for a while. they really have got to get their act together. they will benefit from a positive demand effect coming from the u.s.. so will emerging economies. they will suffer from a negative price effect coming out of the u.s. they have to navigate that and suffer from a negative investment effect. there is a positive effect but it's not big enough to offset the others. this has just made it more urgent for europe to move on the social reform the draghi report details well. jonathan: mohamed, we will miss you tomorrow when we cover the federal reserve decision. what do you want to ask at the news conference? what is your number one question for chairman powell? mohamed: it will not be answered but how do you think about the election? that is what i would like to ask.

i think he will sidestep that question and wait. he is right to wait. he needs to see what emerges in terms of policies. jonathan: in december, they have to come up with a forecast. good luck to the of them. mohamed el-erian with an update --. mohamed el-erian. here is dani burger. dani: bitcoin hit a record high overnight. the largest gupta currency topped top $75,000. it is you does a trump trade because he has embraced digital assets during his campaign. crypto related stocks are also rising in the premarket trade. bmw shares falling in the german trade, down 6%. it reported its main measure of profitability had fallen to the lowest level in four years. the costs have risen from a faulty braking system that forced it to recall as many as 1.5 million cars. it is dealing with faltering demand in china and europe. apple is set to face the first ever fine under the eu antitrust

rules for big tech. according to people familiar with the case, watchdogs are readying the penalty levied on the iphone maker for forcing app developers to stay within his apple app store. months ago, apple was hit with a $2 billion fine. that is your brief. jonathan: more from dani in about 30 minutes. trump 2.0. >> we will make our country better than it's ever been. this is a great job. there is no job like this. this is the most important job in the world. jonathan: shaking of the market worldwide. from new york city, that conversation is up next. good morning. ♪

jonathan: number 45 becomes number 47. donald trump, president-elect.

these are some of the moves you are seeing off the back of that decision by this nation. check out the rally in the premarket. jp morgan higher by 7%. citi up by almost 8%. trump 2.0. >> we will make our country better than it's ever been. the test before us is not easy but i will bring every ounce of energy, spirit and fight that i have in my soul to the job that you have entrusted to me. this is a great job. there is no job like this. this is the most important job in the world. jonathan: here is the latest. stocks surging and treasuries tumbling as donald trump wins another term in the white house. libby cantrill writing, there are more risks for both inflation and growth perspective as it relates to tariffs. you never really left, libby.

libby: nice to be here twice within 12 hours. lucky me. jonathan: let's talk about what we can take away from last night. libby: we have been characterizing this as an eye fight in a phone booth between the two candidates -- a knife fight. this was a resounding win for former president trump. the senate looked like it was going to flip regardless. looks like republicans are doing better in the senate. open question in terms of what kind majority they have in the house. they probably will keep the house but by a narrower majority than what they had when trump was first president. when he was first president, he had about a 25 seat majority in the house. he mailed have a five seat majority. -- may have a five seat majority that's important what we talked about tax policy and spending and what have you. annmarie: when you look at his outperformance from his 2016

numbers and how harris was not keeping pace where joe biden was, this feels like a mandate for him. libby: i think that's right. going back to tariffs, he can do a lot from an economic perspective unilaterally. he does not need congress to impose tariffs. we know that from trump 1.0. from immigration he can do quite a lot. will this embolden him in terms of advancing that agenda unilaterally? absolutely. what can he get there a nearly united congress? he will have a bigger majority of the senate the most expected. that bodes well in terms of who he wants her treasury and the fed. annmarie: in washington, personnel is policy. dan ives, lina khan, out? where do you see these kind of positions stacking up? who does he go to? libby: lina khan is likely out.

per term expired several weeks ago. she's basically a lame-duck. he will have to nominate someone else and get them confirmed. that shouldn't be a problem. the cfpb is out. some of these independent agencies like the fed very unlikely he can fire powell. for the cfpb and hfaa, he can change through the structure of those agencies. what he can do unilaterally is going to be pretty significant. lisa: you think a base case is a red wave but is not necessarily as red as it was or as much of a mandate. what is the main question you are hearing from clients? libby: we have not heard from any clients yet. [laughter] we've heard from a bunch of our traders. we were talking about this last night. the curve has steepened a lot. our view on this is that the

curve should steepened regardless of who won because they were both going to be bad for the deficits. you can argue this is a new wants. get -- a new wants. get -- a nuance. there could be more offsets to attacks bill if he had of -- a tax bill than if he had a divided congress. you can get rollbacks on the inflation reduction act. scaling back some social entitlement spending. you could get -- i don't think this idea, the narrative that he will be as bad or worse for deficits is necessarily justified. lisa: there's a question about the cutting and elon musk's role in all of this. the elon musk proxy as tesla is surging. $2 trillion of budget cuts slashing the government by a crazy amount.

is that something people are looking for? libby: i'm not sure if it is crazy or not. it is more likely just given where the senate is. even though he has a pretty commanding majority in the senate, he will not have 60 votes. this is quite important. the filibuster is not going away. you need 60 votes are most spending bills. all the things that elon musk was talking about. we go through an appropriations process and you need 60 votes for that. he won't have that. will you see some deficit reduction at the margin? maybe. it'll be very difficult to do something significant like that. annmarie: i want to go back to polling. you nailed this even though you are shying away from it last night. i'm paraphrasing but you said for quite some time if polling is correct, trump wins. polling was to your mind accurate? libby: yes. what we were talking about is the idea, maybe a systemic

polling error in 2012 or 2020. this was much more a 2020 election. i think polling more or less got this right. polling was within the margin of error. trump absolutely did better and outperformed what he was polling but within the margin of error. pollsters probably feel ok this morning. this was not a miss like we saw in 2016. annmarie: the queen of polling. libby: she was wrong. annmarie: let's talk about the potential pink wave. libby: those women turned out, but they turned out for donald what she saw, the tea leaves -- she's been good about identifying national trends historically. not this time. annmarie: where does the democratic party go from here? libby: that's an open question. probably too early for the recriminations. i think you are starting

to see it on twitter. the dust will have to settle. folks will be focused on what 2026 looks like. not that we should be talking about another election but the same map is bad for republicans. you will see democrats running candidates who can actually win. the country has spoken. we are a center-right country. for democrats to be able to compete in these centrist purplish states they will have to field candidates they can appeal -- that can appeal to them. jonathan: the people who are the quietest might become the loudest. progressives did not complain on anything. did not remind her of what you committed to back in 2019. the press tried. i would how forceful they will be in the next few months. how angrily will be. harris tried to run as a pragmatic mother, did she not? it didn't work out. libby: we didn't really know

exactly what she -- what platform she was going to run on. there will be a lot of monday morning quarterbacking. jonathan: were doing it now. libby: i'm not sure if she had picked some is a ready-made more progressive than tim walz, and tim walz was more progressive than josh shapiro. annmarie: should she have not chosen josh shapiro? he's beloved in pennsylvania. the one state you have to win. libby: more monday morning quarterbacking. i'm not sure it would've made a difference. you think at the shift across the country. maybe picking schapiro would have felt marginally. annmarie: what would have made a difference? should biden have dropped that after the midterms and maybe the democratic party could have picked someone who could untethered themselves from the white house? jonathan: do you think a moderate would have come out of that process if they had a primary? there is no way that party was going to select a moderate. annmarie: one thing that

could've happened was if kamala harris would have been a better candidate. maybe you would have the view gaff. to go through a primary to become a better candidate. or, they would have gotten somewhere that could have put distance between them and joe biden. libby: maybe but the big issue we have been talking about for months is gas and groceries. this was a huge headwind for who have or the democratic candidate was going to be. i agree. what was the primary -- with the primary process have fielded better candidate? there was a huge incumbent headwind. maybe the knock on biden was maybe not recognizing how inflation has basically been a regressive tax for voters across the country. jonathan: we have got to go. ♪ did you ever worry we wouldn't get to enjoy this?

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jonathan: equities on the s&p 500 up by 2%. the russell up by 5.9%. a phenomenal rally off the back of the nation's decision to give trump a second term. in the bond market, selling bonds and yields higher across the curve. up by 20 basis points on tends. 23 on 30s. two-year and germany down nine basis points. 10-year unchanged on the session. very different picture. lisa: there's a feeling the euro region will be hurt disproportionately by what

happens, by the united states, by the donald trump administration. the ecb should be cutting rates more aggressively to offset the weakness. what you see and currency markets tracked so that with a complete plunge. the most since 2006 in the euro versus the dollar. do we start to see policy that underscores this or will this be considered in retrospect dislocation? jonathan: we are back to those levels now. down by 2.1%. the biggest and potentially since june of 2016. june 24. her member that day well? that was the brexit fallout. euro-dollar negative by 2.1%. lisa: mohamed el-erian pinpointed this is the same seismic shift in global reordering of power. you can look back to the brexit vote or potentially more. that is really what markets are trying to sniff out right now. you can see that across the board with the dollar stronger across the board. not just against the euro but

the mexican peso with respect to tariffs. that is what people are looking at. how does it play in the markets? jonathan: peso move is painful. up by 2.8%. under surveillance, donald trump winning another term in the white house. the former president flipping key swing states of georgia, wisconsin and pennsylvania. it was just a feeling overnight this was done and dusted pretty quickly. annmarie: definitely. the reason is because donald trump was outperforming his 2020 numbers and kamala harris was underperforming in key counties where she was not even matching what joe biden was getting. you saw the strength almost medially in the sunbelt in places like georgia. then he grabbed north carolina and winning pennsylvania. it is all over. when it comes to what libby cantrill was talking about, we have to wait on the house. when it comes to this mandate, donald trump's speech felt like he had a mandate because of the fact he is winning the popular vote, because he over performed last night. certainly feels like 2016 when

it comes to this market. jonathan: feels that way and a big way looking at small caps flying. republicans winning control of the u.s. senate, giving the power to the party. the house is the democrats' last hope for power. this was a high conviction call for most people that the republicans would take the senate with a took a bigger lead than many people thought. annmarie: the conviction was they would take it but the question was by what margin and we still don't know how big the margin is going to be. i'm looking at these races in pennsylvania, whether or not dave mccormick at bridgewater can unseat someone like senator casey. potentially the margin is going to be bigger. when it comes to the house, beware. this could take time. some of these absentee ballots out of california could take days, maybe a week or so. lisa: libby cantrill was brilliant when she said it sounds mindnumbing but it matters incredibly for just how

much we can really count on the deficit get a better -- getting bigger. if you have a narrower majority, you don't necessarily get the same and that -- mandate that he had when he took office last time. that's what i'm watching, not simply the color of the overall majority. jonathan: the backdrop is so different. the differences between now and then. in 2016, the market was hungry for fiscal stimulus. we were talking about this all the time. the only game in town was the federal reserve. the government needed to spend more. that is not where we are at now. we are at a very different place. lisa: i think it is fascinating for the economy. how much are we seeing productivity gains? how much a we seeing an acceleration of a recovery we already had? how much does that sustain risk assets when bond yields were thought unsustainable at the levels we are currently seeing? that is one of the key existential questions behind some of the moves.

annmarie: mohamed el-erian nailed it when he quoted jfk. when it's times of sunshine now, when the government has the time of sunshine, u.s. exceptionalism, fix the roof. you don't dig deeper into holes. when you look at the campaign promises, potentially when it comes to the fiscal deficit, you are digging deeper into holes. jonathan: a running budget deficit of 7%. we have heard complaint after complaint over the last two years. lisa: i will not beat my drum but interest rate payments on the u.s. government debt more than tripled over less than four years. $900 billion in interest payments for this year. you look out, that goes up into the left -- to the right significantly, especially if the yields are sustainable. jonathan: we get a fed rate decision tomorrow. the market won't expect a 25 basis point rate cut. donald trump sharing his thoughts on the fed chair just last month.

>> i think is the greatest job in government. you show to the office once a month. you say let's see. flip a coin. everybody talks about you like you are a god. i think if you are a very good president with good sense, you should be able to at least talk to him. i don't say make the decision. jonathan: 20 is now is thomas earning -- thomas hoening. does that job about to get harder? thomas: parter but not that much harder. the issues with whoever was elected so that continues to be the challenge and the challenge, as you were saying, there's a huge deficit. there's a growing debt problem. the federal reserve is unwilling at the moment to speak out and say if you give that up we are

not going to be able to control for interest rates go. that is a major problem for any politician. i think the problems are only going to get more acute but not necessarily different than where they would have otherwise been. jonathan: walk us through the process of the federal reserve. we want to understand the december meeting with a have to put up projections. the market is making a projection of things like growth on interest rates and inflation for the next year and maybe beyond. how stale with the fed projections look in december given they have to look at campaign promises but can't do anything until it becomes legislative reality? what do you do with that at the federal reserve? thomas: those projections are based on what they think will happen and if they think the deficit is going to get worse, some of the members will take that into account and you will see a change. the ones they just it will be stale. you will see a less decline in interest rates other than the

pressure they will feel to lower interest rates. i think it will be a very difficult period for the fed to outline the future in terms of their dot plots. it's a matter of degree. it is hard for me to say whether they will do one thing or another. basically, they should show a less steep decline in interest rates going forward. you have to look at what has been promised. we have tariffs to deal with. we have tax cuts to deal with. that has impacts on the long-term debt and what the fed can do with interest rates. lisa: how much is this a warning signal to the federal reserve to curtail any further rate kospi on this year? -- any further rate cuts beyond this year? thomas: the market is saying the debt will be a major problem. you will not be able to control that even though there will be

on pressure to buy the debt. the market knows that. what i don't understand is the fed carefully should be making the public more alert because there are limits to the fed's limited we don't get the debt under control. lisa: let's talk about those limits. you are at the federal reserve during the financial crisis, during the initial round of quantitative easing when the reserve did exercise its ability to monetize the u.s. debt. i'm wondering how high that bar is to do that again if certain people are put into the federal reserve, on the federal reserve by donald trump to potentially buy more debt and extend the balance sheet and offset increase in issuance? thomas: that will be the pressure. if you don't do that, but the debt that has to be put out there, there will be enormous pressure on the fed to buy the debt or the race will continue up -- rates will continue up.

the problem is there is supposed -- they are supposed to be independent to say no and alert the congress that kind of spending and that kind of debt cannot be sustained. therefore the fed will not monetize that debt. in a crisis, yes, the federal monetize but the question is will they stop doing that as they should? in the recent history, the last 15 to 20 years, they continue their easing well past the crisis. that enables the congress to continue to spend without constraint and therefore the debt continues to grow. the fed has to say we are going to put an end to this. that will be one tough job for any fed and any chairman of any fed. lisa: what is the potential consequence if they don't do that? can you give us a range of potential outcomes if there is a greater willingness to monetize

some of the debt? thomas: first of all, people tend to focus on consumer price inflation. what is going to happen is asset inflation is going to reignite beyond what it is today. you think a house is unaffordable today? look what happens when they monetize the debt and asset prices go up. the stock market will go further up. the divide between the haves and have-nots will grow in the united states. the fed has to know that. that is why they have to put the alert out in a prudent way. these things can be highlighted by the fed. that is part of its responsibility. it is limited in terms of what it can do for a full yield curve under the circumstances of debt growing at these kind of rates. jonathan: this was super thoughtful. tom hoenig, former kansas city fed president on the outlook of the reserve. adam posen, chair powell should make it clear the fed's monetary policy starts could reverse

after the election even if it sets separate cuts in the coming weeks. he should remind markets and healthful of basic economic realities. pr commit adam has made is that they should take a page of the playbook from governor carney of the bank of england. i would caution when you start playing that game, even if you believe it is sound, economically sound to make these points you attract the wrong kind of attention when it comes to political independence. lisa: if he stands up on that podium and says we don't delve into political issues but then starts to give a warning about the consequences could be, all of a sudden he takes a page from carney and people are saying, what you think you are doing. it's a slippery slope. the federal reserve is not the bank of england. the u.s. economy is not the british economy. they are going to have to grapple with and walk this fine line between independence and being economically prudent at a time that we don't have clarity on what economic policies will be.

jonathan: we are in a strange place with the federal reserve for a few months. they're on a planet over here and the markets on another planet over here. we are seeing that play out now. the market is taking a view on rates for 2025 away from the federal reserve and the reserve will not be able to talk about it for months. lisa: i remember when the fed worried about tightening of financial conditions. they don't have to worry about tightening of conditions but they have to reflect that. why is that happening? at what point does that become a constraint? when does that indicate a higher terminal rate? when did they have to reflect the fact that markets are showing a different economic reality than they were even two weeks ago? jonathan: bonds down, yields up. let's get an update with dani burger. dani: cvs shares are rising in the premarket 8.9%. third-quarter revenue came in over 6% higher than a year earlier. they opted not to give investors guidance for the remainder of the year or for 2025. they did announce a new

president for its troubled insurance unit facing headwinds on rising costs and decreased government payments. shares have fallen 30% so far this year. amazon co-founder any signature jeff bezos sold over 213 million of his shares of his company according to an sec filing. amazon recently reported third-quarter sales that surpassed expectations, and 11% increase from a year ago. phases salt 13 -- bezos has sold $13 billion in stock this year. world leaders are congratulating donald trump. blood we are zaleski congratulated trump on an impressive election victory. the manual macron said he was ready to work with trump again for four years. leaders of germany, australia, india and the u.k. also offered their congratulations trump. that is your brief. jonathan: with ukrainian bonds do? they rallied. lisa: do you get some sort of

resolution to this sooner? the fallout effects are massive. that was actually a move that was a bit counterintuitive from what some people were expecting. jonathan: seismic changes potentially. that was the words of mohamed el-erian. the message from mohamme -- mohamed about 40 minutes ago. a big repricing in the bond market. >> the 10-year treasury is about the fair value estimate. it is not a done deal that i read sweep results in out-of-control spending. -- red sweep. jonathan: you are watching bloomberg tv. ♪

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jonathan: mornings like this are really rare. stay tuned. up to .4% on the s&p 500. in the fx market, a move we have not seen on the euro going back

to 2016. in the bond market, yields a lot higher. of 17 basis points. under surveillance, a big repricing in fixed income. >> we had to reprice for higher growth. maybe for some higher inflation aspect tatian said maybe for less rate cuts. we have done that. the 10-year treasury is about the fair value estimate. we will worry about what a red sweep could mean for budget deficits. a lot of republicans in congress do want to rein in the budget deficit. it is not deal that a red sweep results in out-of-control spending. jonathan: treasury yields surging to four-month highs as the bond market prices for donald trump's return to the white house. joining us to discuss is vishwanath tirupattur of morgan stanley. what a move we have gotten fixed income to start the conversation with you. i want to understand have you changed your mind about anything in your outlook for fixed income

based on results overnight? >> we are processing a lot of the change that has happened and still awaiting whether it will be a red sweep or not. that is still processing. the thing we spent the most time thinking about is sequencing of policy. we imagined under a red sweep what could happen. we would think about -- i would put that in three buckets. tariffs, immigration policy and changes to tax policy. a lot of the conversation you just had focused on the deficit extension and tax policy. that actually takes time. even under a red sweep scenario legislation is a messy process. a lot of interest groups are involved. a lot of details.

we don't know if it is a red sweep or not. given that scenario, the thing that perhaps happens most to be the are. it is consistent with the first term, what he did in the first term. it is consistent with the campaign messaging. it is something that does not require a congressional approval. the sequencing, that is the first-order of -- first order of impact. are we going to see all the tariffs? are we going to see tariffs that actually are 60% for china? we don't know yet. those of the details the market will have to come to terms with and with the potential impact of harris -- tariffs would be on the economy and inflation. really digging into the effect

on the deficit expansion, which will still take time. jonathan: let's pick up on the last point. we can explore guard rails regulating forces. do you think the bond market will act as a regulating force on the tax cuts, hopes and dreams of the republican party? vishwanath: we don't know. it is possible. we have seen bond markets do some of this in other countries. we saw that happen in the u.k. the bond market will have to evaluate the effect on both inflation and not growth from tariffs and how that were interlinke with the deficit expansion under the new tax policy. i don't think the market quite knows this yet. the market will have to come to terms with these competing issues. that will take some time.

i would consider some of the knee-jerk reactions we have seen may be reevaluated. lisa: the real issue to me is that you say the knee-jerk reaction needs to get reevaluated but that reaction is fascinating. given this massive climate yields at the long end has not at all diminished the trade we are seeing in small caps, and bank stocks, across-the-board some of the more procyclical aspects of risk assets. i am wondering whether we have to rethink what a neutral rate in this society is and this economy currently and the trajectory is heading on. vishwanath: i will push back on that. we have to rethink a number of things, including what you said. how do we price in the animal spirits and how to the fixed income markets react to that. as a credit person, i'm thinking in terms of credit lacks

motivation and we may have more motivation. if we have a high level of -- if interest rates or yields stay elevated, that will start putting some pressure on the parts of the market, some of the ratios will be challenged. the way i am thinking about this is that how the animal spirits play out in the bond market, it is not entirely clear this point. i'm a little concerned from a credit investors perspective, the animal spirits may benefit more of the equity investor versus credit investors. lisa: interesting at a time when there are certain companies that are having to refinance. are they going to be able to manage through? haven't we seen that? vishwanath: yes, we have seen

that. the fixed rate borrowers for ingressive -- investment greater high-yield, we have not seen a lot of pressure testing in those companies because issued a lot of debt. they did not have to deal with a lot of pressure on the higher interest expense. that didn't really show up because of their fixed rate debt. where it did show up wasn't leverage loan borrowers. we did see the effective high-yield rates put pressure on downgrades and selloffs. we have not seen this fixed rate borrowers experience that an incremental -- they have not been stress tested in that sense. they had locked in higher rates. jonathan: we have all been stress tested for the last 12 hours. we have to leave it there. i want to make an observation, not a forecast.

it's an observation. what we are seeing now -- let's start with what we are not seeing. we should be talking about deficits and if it will constrain what is happening in the bond market. i don't think you are seeing that fear around the deficit. i can point directly to foreign-exchange. the dollar is stronger. like, really strong. the point you can make from an observation across markets right now is what we are seeing evidence of as a positive growth shock in the u.s. specifically. small caps outperforming. financials rallying. yields higher across the curve, including the front end. lisa: i agree. you can also say the russell 2000. that typically has underperformed when the yields went up. this time around it is the opposite. that points to what you are saying. jonathan: we will see if it sticks. certainly not a forecast because of not in the business of providing them. , a man who is. robert pelosky and we will catch

up with tyler kendall and torsten slok. this is bloomberg. ♪

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jonathan: the financial market

price section worldwide is gripping. cross asset collectively, you only see this a few times every decade, playing out this morning. equity futures on the s&p up by more than 2%, small caps up by more than 6%, regionals, financials doing really well. the bond market, repricing yields, up 18 basis points on a 10 year, 4.45. some dollar strength against the euro, euro-dollar breaking 107. down -- 1.07. a little up by more than 2%. lisa: all of this together looks like the pricing of a growth stock more than something else. i would like to build on that, there seems to be a feeling that higher yields would not curtail the risk on field markets and that higher yields would not

curtail american exceptionalism and higher yields will not stymie american borrowers from continuing to borrow, the reason regional banks are doing better than expected because of deregulation. you put this together, it sticks depends on the actual policies that come into place and the margins at large in the house of representatives. annmarie: we're still waiting on the composition of congress, is it a trifecta or two out of three for the republicans? conviction call was there would be a red senate and margins were waiting on how big the margins are going to be and the wiggle room republicans have in the senate. this will take days, maybe a week for california. the market is talking about trump got a mandate, why? he is on track to win the popular vote, the third time a republican nominee has done so since 1988. jonathan: the pieces of the puzzle coming together. welcome. we begin with our top story, president-elect donald trump. president-elect trump: i would

like to think the american people for the extraordinary honor of being elected your 47th president and your 45th president. this was a movement like nobody has ever seen before. and frankly, i believe, this was the greatest political movement of all time. i will not rest until we have delivered the strong, safe and prosperous america that our children and you deserve. this is a magnificent victory for the american people that will allow us to make america great again. it is time to put the divisions of the past four years behind us , it is time to unite. jonathan: trump gained wisconsin, sending, with their 270 electoral votes to seal a return to the white house.

jay his back with us, good to see you. i feel so bad to start with this but you made a bad call an election. landslide. what went wrong? >> i appreciate that. always love that. lisa: no elephants in the room here. jay: it is a good thing we are not paid to be political prognosticators because we were of the view the democrats would win, the women vote, the youth vote, etc. none of that materialized. what materialized was a good idea of economics that turned into by politics for the democrats. the biden-harris administration, best economic outcome in generations, the u.s. is envy of the world. and the trump policy next, which i think economically speaking will prove not to be very good, but was fairly good politics, so with an investor, here we are sitting, you need to think about what we just discussed, is it

going to be a sweep? that means the policy is more likely to materialize. if it isn't a sweet, we will see how it plays out. fort asset to pw, we are focused -- for us at tpw, we are focused on good global growth, risk asset opportunity, and a lot depends on policy continuity, and i think what we will have in the u.s. is clearly policy discontinuity and the question will be how does that play out? in this set up right now this morning on the way in, i was thinking you have the u.s., and over owned, expensive asset, foreigners have never owned more of u.s. financial assets at a time when the policy is deteriorating versus china, which is a cheap asset, under owned, and arguably the policy mixes improving, with surprise index turning up pmi's above 50,

and at the end of this week, we will see a further policy response by china because they understand that their growth right now is export driven, and with tariffs, that could be a problem. lisa: before we get to china, sorry to interrupt -- jay: don't worry about -- lisa: don't interrupt. [laughter] jay: third-down, fourth-down. give me the vote. lisa: [laughter] there is a question here about whether you you are going to fake this move and do you believe that actually this is not the right policy to put money where your mouth is. jay: great question, and i thought about that. tactically, you have to enjoy the balance. the reason our multi-fault, first, seasonality, the best three months of the year for stocks, positioning is pretty right. 5%, 2% moves in s and p, so people have to re-risk,

technicals are supportive, and most importantly, fundamentals are supportive. we are coming out of q3 earnings , double what the expectation was into the earnings season, the projection was 4%, and most importantly, we have seen a complete collapse. that is what needs to be up on the charts. the vix has gone from 25 to 15 in a matter of hours. jonathan: he is producing now. jay: i need a new job. lisa: let's go. jay: i need a new job. jonathan: the last thing he is producing. annmarie: we got some sleep tonight. so even though your political conviction was wrong, your market conviction in a sense was accurate. jay: because back to what i said last night, i think it was 12:50 last night, the old market saying, would you like to be right or do you want to make money? i struggled with that for years

because my background is a strategist. as an investor and advisor, we would like to make money, so we are fully invested. we are long equities, we are completely out of treasuries, so this treasury move is not affecting us in any way, shape or form other than helping us meet our benchmark. jonathan: what would it take to get back in? jay: that is the question to be asked i think. it is a little tempting tactically because as i said last night, going in to this week, the long end of the treasury market is are presented by etf's, and it was massively oversold. the rsi, relative strength index for seven to 10 year was 15. they don't really get down around 15 often. tactically, i would not be a seller if i was the owner of treasuries right here, the long end, with the bigger question is the deficit.

clearly, the trump policy mix is not just my point of view but pretty much every independent or person who looked at it, moody's, peterson, etc., it is bad for inflation, it is bad for the deficits, rates, and theoretically, it should be bad for growth, but i think there is idea that this will be a hothouse effect. annmarie: what are you looking for to decide whether or not to bite the bullet, sell stocks, by bonds? -- buy bonds? jay: part of it is to see the makeup of the house, is it a trifecta question mark in part of it is to see what china does because there will be a response. we are global, so we have the whole world as our moisture, -- as are oyster, and there will be opportunities. we enjoy the ride, and we think about at some point, it might lighten up. i think the call for us will be

if we believe in the tribe polar world, competition between china, the u.s. and europe, china has taken the high ground in the clean energy space. trump would like to end ev's, etc., the real fight now is ai, and the two countries are separating their tech, that is our whole thesis with china tech, and the issue now is would you like to press that? so you reduce the u.s., and you go further into asia, which has been down five weeks in a row. those are the things you would like to play. annmarie: as you say, you would like to end ev's, tesla is soaring today. who is the biggest loser in terms of the tryopova world with this composition in washington? jay: the u.s., clearly, because europe is going to respond, the whole draghi report on competitiveness was we have got to do more of the things that

china and the u.s. are doing. to us, there is a new industrial policy mix being implemented on the world. to compete in ai, climate mitigation, conflict, need public-private partnership because there is too much money for the private sector alone, and the public sector does not have the expertise, so who can marry that best is going to be the winner, and i think you also have to think about immigration, who can leverage the immigration to improve their growth profile is also going to be a winner. and the policy mix that is laid out to date, it is anti--pretty much all of that. strategically, as i said, the u.s. is the most over owned, it is expensive, and the policy mix is deteriorating. jonathan: there is a lot to unpack but i would like to pick out a few things. the president-elect has been clear that he would like

national champions, which is why there was the proposal to drop the corporate tax rate to 15% with conditions for domestic manufacturing. you said when asked to is the biggest loser, you said the u.s., clearly. i'm going to push back because it isn't clear to a lot of people watching, at the moment, you called it a hothouse right now in america. that is what it feels like. it feels like if you are investing in america, you will do well. if you try to export to america, you might have a problem. what is the biggest hole in the window in the hothouse theory now? jay: jp morgan laid out the case that if trump implements 60% tariff on all china imports, that will lead to almost the having of the earnings growth that is expected for 2025. in other words, earnings are expected to grow 25 to 24 from this year to next. the tariff effect will carve out

$15. this is jp morgan estimates. so you are basically talking about taking your earnings growth and having it at a time when you are not going to get multiple expansion, so it is all about the earnings growth, your three in a bull market tends to be the year of rest, and we are going into year three. typically single digit returns, so i think that the idea of national champions, share, that is probably why china is rocking and elon musk will be one of the champions, but, overall, the whole thrust of the u.s. policy mix has been reassured. re-shoring with the dollar, getting more expensive, those two things do not compute. jonathan: i will suggest the jp morgan analysts are not too unhappy, up premarket. appreciate your time overnight in this morning. jay: one of the things that is great about this is you have to think real time. coming on and engaging in this

debate and dialogue makes our process better, so we appreciated. good luck to everybody. hopefully the next time we see each other, we will have had more rest. jonathan: we will see you soon. we have an update on stories elsewhere with your blue, let's cross over to dani burger. dani: abortion access act has passed in arizona, establishing the right to abortion and prohibiting interference before futile viability. arizona is one of 10 states were abortion rights were on the ballot this election cycle. shares of the u.s. biggest banks, as mentioned, are surging premarket. investors are hoping president-elect trump will make good on his promise to reduce regulation for the industry. during the campaign, trump vowed to cut the corporate tax rate to as low as 15% from 21 to eliminate 10 regulations for every new one. nvidia we the largest company in

the world on tuesday, surpassing apple and underscoring how dominant ai has become on wall street. shares rose 2.9% during yesterday's session, resulting in the market cap of $3.34 trillion, topping apple's which accounts for a big part of the s&p and a big part of the game this year. jonathan: thank you. next, the morning calls plus this, tesla up close.to 13% premarket . we will catch up with ed ludlow in a moment. from new york, this is bloomberg. ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

jonathan: is there some tension? equities up by 2%, yields higher

by 60 basis points, the bond market down but for how much longer? if treasury yields were to rise into what we call the data zone, appoint at which higher-end expectations can trick a higher selloff, such gains may proved short-lived, and the danger zone is 4.50. lisa: citigroup did not put a number to it but there are two risks to the equity rally and one is duration, and the first is the further surge in the bond premium. is it 4.50 or more? jonathan: let's get you morning calls, first up, universal health downgraded to neutral, viewing trump's victory as a negative for health stocks. the second call from bank of america, downgrading five below to underperform with a $75 price target. analysts citing exposure to china and possible trump tariffs. down by more than 30% on that name.

finally, barclays lowering its price target and the brand increases focus on value. turning to tesla, the stock surging as donald trump secures a return to the white house. in a speech to reporters, the president-elect praising the ceo elon musk. president-elect trump: we have a new star, a start is born. elon. he is an amazing guy. we were sitting together tonight. he spent two weeks in philadelphia in different parts of pennsylvania campaigning. jonathan: joining us is ed ludlow on the west coast. we missed you overnight. i would like your thoughts on the election and what this means for not just elon musk but for the companies he runs and owns. ed: i was awake and i spent a lot of the night on the phone, as you would imagine. it is not just the alignment between elon musk and donald

trump. it is essentially an endorsement of elon by trump on stage, the president-elect, but the potential policy platform that trump brings, you discussed it with your last guest, the winners and losers of the outcome. tesla strategy as a global company fits the idea that trump would want to have conditionality around manufacturing. tesla has had a policy where it would like to manufacture in the markets it sells into. in other words, don't build cars in america and sell them to europe and vice versa, but one thing we should talk about is what is elon musk going to do himself? the assumption of sources i have spoken to, and it is an assumption, any role within a trump administration or federal government role would be advisory, and what i heard from people overnight is that the plan internally and all the

companies is elon musk remains at the helm, which is an interesting idea. lisa: that is one of the main questions, how much can he be a beneficiary if he has to sell out his shares, freeze them, and then leave? some of the space program in the united states is in boeing and nasa take more of a backseat, and then there is the question about the left vehicle policy. there is a broad feeling that donald trump will be terrible for electric vehicle policy considering his product stations -- prognostic's about it, and then you see an ev vehicle maker surging, how much will the policies of donald trump and his administration helped haslinda broader market? ed: for every winner, there is a loser and tesla is up significantly, but i look to european automakers and how significantly lower they are in the european session, going back to the same logic that if president-elect trump moves

forward with the idea of tariffs on imported vehicles, the way that company has organized tesla, it would set up to be a beneficiary in that market environment. space is highly regulated, but spacex is the contractor of choice for the u.s. government and its activities as it relates to space. one area musk has pushed back on consistently is that tesla and other contact -- context is not an either, which we could debate that with the tax credit has helped tesla lease more vehicles, but, again, it would push back as a company and say we have not taken handouts, we have done a lot of this organically. the forecast is bloomberg intelligence or whatever, they all feel that under a trump presidency or a trump term,

there will be repeal of the inflation reduction act and of the ev laded policy. annmarie: on the campaign trail, he said elon musk was a genius and we need to protect our geniuses, he runs six companies, and if he had one ask, what would it be? on the basis and assumption -- ed: on a basis and assumption that the role is advisory and not becoming a formal u.s. institution, i think that looking at clues, elon musk would seek for things to move faster. the bully for i'm in at silicon valley, the reason they believe trump is the right candidate for technology, it was that he would cut red tape. if you think about autonomous driving, the biggest barrier our roles and getting vehicles on public roads, and as we discussed and as i've written about, elon musk talked about

that on tesla/turning call and that might be one asked, make some rules or cut some for the future of economist writing -- autonomous driving. jonathan: today face state or federal hurdles? ed: both, but the risk can be a tailwind. it works both ways, to california or other state-by-state manufacturing policy. that help us automakers. but, again, it is difficult. one complaint i hear from ceos, and if the ceos are watching, speak about it publicly. they have been very frustrated with organs of federal government and how little public officials understand about supply chain, so for all of the legislation, be it the chips act or inflation reduction act, getting money out of the legislation and into the system has been hard for them, as has

been navigating the ability to access raw materials. china is something we have not talked about, but we could talk about it more given the supply chain and the end market, as well. those ceos are frustrated that that happened the last four months or so. jonathan: we have months to talk about china but i would like to squeeze this in, where is he going to find time for this? where will elon musk find time to do all of this? ed: fair and reasonable question. he spent a lot of time on his cell phone and his jet, which is starlink wi-fi enabled and does not sleep much by all accounts, and you can see that from his social media presence. he is just one of those people. jonathan: incredible. appreciate the update. looking forward to your coverage alongside caroline hyde when they go through some of these issues. what a phenomenal character, we talk about the biggest companies on the planet, if you could own one or run one, that would be a win, but we are talking multiple platforms. lisa: spacex, tesla, x, the ai

company he is starting and potentially will have his advisory role, so at what point will upon -- policies benefit him versus the broader industry? you are seeing auto manufacturers in the u.s. getting a little lift, not like his, but it doesn't seem to mean in the market size that this will be wholesale terrible for carmakers. annmarie: i would like to know where this to truly and he says he can cut from the u.s. government is coming from. because even if you fire everybody, you're not saving $2 trillion. jonathan: i imagine he feels pretty good about that this morning, we will speak to our guests next.

jonathan: here is the first upgrade, chris harvey, was fargo, raising the price target on the s&p from 5535, they say that paint trade is in rotation. let's talk about what is happening on the small caps. absolutely flying into the opening bell. the russell up i more than 6%. some movers this morning, take your pick. good morning. >> it really is take your pick. you spend a little time on

tesla, but you have to do is say to yourself, this is the personification of fomo, but disaggregate between the affiliation of trump and musk on the trumpet -- campaign trail together and the financial. daniel ives tries to do that and says this is a 40 to $50 boost for tesla for pricing and scale. if you have got the president's here, how much of the ev laded provisions will be rolled back? that is about access to conversation which creates policy. it is probably what we do best at bloomberg, bank of america is a mere representation of those fargo. this is about capital status quo and deregulation. we don't know what kind you will get, but capital status quo is different and what bloomberg says is you can stave off the 9% capital increase and you get a version of that. the offside is higher yields, and what is that do to your

consumer in the u.s.? and i leave you with bitcoin smacking a record high, but i like what the cfo had to say, foster crypto innovation, $100,000 on bitcoin by january, and bloomberg's line, crypto's political muscles are strong. jonathan: appreciate it. let's turn to bonds. bonds are sliding. that understates the move. yields are higher by 17 basis points. the 10-year, 4.4452. the trump trade ripping worlds worldwide. apollo expecting a 25 basis point rate cut, adding that we don't expect to cut rates in december. torsten slok joins us for more. let's start with the election, i would like to understand whether

this has changed anything for you or cemented what you already thought? torsten: what always comes with elections is now we need to figure out which policies will be implemented. it is clear that before 9:00 p.m., we found out with the trump trade really was, maybe rates are going higher, the dollar was going up and stocks are going up. if this continues, it does on one hand mean easier financial conditions, but it also means tighter financial conditions because long rates are going up. the challenge for markets is to figure out why long rates are going up, because of the economy is expected to do better or are long rates going up because of worries of fiscal sustainability? this becomes a serious debate, and what will happen to the long rates with have nothing to do with that expectation? the conclusion is we still need to wait to see what policies will come. jonathan: which one do you think it is and why? torsten: if i look at my bloomberg screen and the premium, they both say that

premium within the last 6, 7 weeks have been going up more than 50 basis points, and that goes up for reasons that have nothing to do with that expectations. therefore, it is a question about, if rates are going up for reasons that have nothing to do with that expectations, what could the others be? one interpretation has been that markets focus on fiscal sustainability, given that both candidates have been scored by a budget model, we will have deficits under harrison trump. one interpretation is that it has been going up the last month or so because of renewed worries of the fiscal situation. lisa: we are seeing small caps ripping and consumer cyclical stacks ripping and lower rate cut it's doing well, which lies against the idea that it will be tighter financial conditions and instead it suggests something about growth re-accelerating.

are you saying this is an inconsistent response for the market or do you take that as the signal? torsten: the small caps in particular, rates higher for longer is negative. 40% of the russell 2000 have no earning on negative earnings, so that means they are characterized by having no coverage ratios which means early learnings to paper interest payment and that is negative for small caps. what is positive for small caps, first, we may not get growth but from a regulatory perspective, if we know that republicans will take a market that is more business friendly, that would be a reason why small caps should not be benefiting, so there is a tug-of-war between higher interest expenses, and at the same time, what could be characterized for more tailwinds on the business environment. lisa: i would like to understand how the federal grapple with this and how fed chair jay powell will signal about yields going higher on the long end.

extensively, it should tighten financial conditions, but they are not if you look at the employment market. at what point does it become a concern and what are the red flags? torsten: tomorrow is easy for the fed in december is difficult because, get to a difficult situation that we already had ism services going up significantly, including unemployment component. we have been assuming employment is going down, but suddenly we see nonfarm payrolls went up and if we get a payback from the weather and the data for november, and on top of that, we are seeing employment going up and the challenge for the fed is that organically, the economy is still in a good spot, and now you have questions about what type of policy will come? do we have more fiscal policy and support for the economy?

that will be the challenge in terms of december. annmarie: the highly regarded political report said that outcome is more likely a trifecta. kevin mccarthy just texted me saying the republicans will keep the house. this is someone who knows the house well, so there is this trifecta, what policy can actually get done? torsten: now we go back and look at the important budget model, which are implications for gdp and the potential hear of a fed rate sweep and the answer is that we generally will see a boost to the economy and the boost to inflation will complicate the fed's job, and it remains to be seen what trump will be implementing, but if we get a red sweep, certainly, we should be going back and starting to what has quantified models have shown in terms of locations for the economy. annmarie: how does jay powell talk about this tomorrow? torsten: it is a difficult

challenge for him because if we agree that tomorrow is easy with a 25 basis points cut, then how do you talk about including this in your forecast? one way he might begin to talk about this to say we don't know what exactly will happen or which policies will be implemented, we have a list of things trump has about order of magnitude will become an important issue for the fed. jonathan: this anyone start auditioning to take powell's job? torsten: we have already begun to have in the second half of next year i debate on who should be the next fed chair, and this will be an important part of discussion. jonathan: we are going to have it right now, don't we? lisa: 100% because especially what we were talking about thomas onegin, the tools the fed have is not just cutting rates but they are also quantitative easing and there is a question about the long end, and i wonder

how on employees they are talking about that. jonathan: how similar is this to 2016 when we waited for the tax cuts from the trump administration, and the fed speak at the time was at what point do you start to make these projections? they had to wait until it became reality, is it worse, the same? are there parallels? torsten: at the time, we had two policies, and that we had the same tariffs. now we don't have significant tax cuts of the same magnitude, so if they are not going to be bigger than what we had in 2017, then you wonder if you don't have the offsetting effect that tariffs will lead to higher prices, generally speaking, the risk of lower sales, there was an offsetting policy effect by the tax cuts, and we don't have that tax cut potentially. there are suggestions that he talked about lowering corporate tax rates for domestic manufacturers selected offset

some of it, but given on the tariff side, it is bigger than what we had in the what we had in 2016 and that means the risks are more tilted towards tariffs playing a bigger role. jonathan: this is the beginning of a longer conversation. 2025 rate hikes, are you ready to go there? torsten: if you get a tailwind from better business environment, and if we have higher inflation because of tariffs, if we do report illegal immigrants, that would all be arguing for the fed not cutting as much as we are told at the moment. jonathan: torsten slok of apollo, one of the very best. thank you. if you are just joining us, welcome to the program. this market will open up at small caps and it will be rocked. equity futures on the rustle up by more than 6% on the s&p 500, by more than two, the nasdaq 100 up by 1.8%, and in the bond

market, check this out. yields higher by 18 basis points on the 10 year, the 30 year up i-20. 4.36 on 30's. lisa: just ahead of $25 billion option, 30 year notes, real question j.p. morgan says is these are risk clearing events, and we can find out that price, do the buyers come in? if they don't, does that change the tenor or fields going higher simply because there is the expectation of something of a growth chart? jonathan: td securities joining us, gennadiy goldberg. >> it is a market clearing events, and we have to wait until this plays out, until the market settles down into equilibrium and that we can think of jumping in.

at this point, we have to look at policies, and that may take time, as well because we don't know exactly who won the house. lisa: how fortunate is the timing that they are selling bonds -- how unfortunate is the timing that? they areselling bonds gennadiy: the treasury will not make that mistake again. i'm sure they will take a note. i think they will still somewhat we bought. i'm not expecting a massive option, but it is tricky and it is hard to concentrate this series, and every four years, you are forced to do it. lisa: there is a question as the death settle -- dust settles on which knee-jerk reactions will stick? the difference between the divergence of the european and u.s. markets are surprising.

on deals decline across europe, bond yields surge in the u.s.. at one point do you buy into that and is this a moment or something else is going on and you do not want to get involved? gennadiy: you would always like to wait a couple of days for things to shake out. and historically, they will adjust until the right level. the issue is we don't know the extent of potential tax cuts or fiscal policy. two, we still don't know what the impact is going to be on tariffs, immigration. and the question for investors now is tariffs are easy, tariffs are up to the president. immigration part has to take a lot more work and that might involve congress to some extent, so if he doesn't when congress, that could make it more

difficult, and that is what is dangling in the market, so we still have to wait for these things shake out before we can see the real damage. jonathan: but we know what he would like to -- annmarie: but we know what he would like to do on tariffs. he moved in quickly. is that enough to make moves on? gennadiy: i think the tariff side is likely, so if you are looking at the policies, tariffs quite likely, the big farce is immigration because that could be more damaging the next several years, not just for next year, we are talking about a 10% tariff across the board and we are not sure if it includes the usda. that might just be a threat. and if we talk about mass deportations, that could be huge for the labor market, which is an outcome to better balance and could be inflationary for wages, so it could put long-term price pressures on the economy. jonathan: nobody knows what is

going to happen and we are just doing here scenario analysis, but does the fed need to do the same publicly? gennadiy: i think it is a little too soon publicly. tomorrow will be an exercise in say nothing for about 45 minutes at a press conference and really reading the notes and trying to repeat themselves. to be fair, they also do not know and they have to wait for this to shake out. in november cut is effectively a done deal. december is up in the air. once we get into next year, past the inauguration enter the earlier point, trump 2.0 will have to work faster than trump 1.0. you have to see what is coming. there is a risk, certainly, and it coincides with stronger data we have seen. they may want to take their foot off the brakes a little bit. jonathan: have we just disrupted that? gennadiy: i think we have softened it. i think the fed is still moving in the direction of easing but we have thrown a major wrench

into that. a major source of uncertainty and they will have to see how it plays out. i think they still keep taking rates lower but with the way the data has been, it is not as fast as before. jonathan: i will finish with the same question, rate hikes, 2025, are you ready to go there? gennadiy: i don't think so. a more likely scenario is the fed is on hold for a lot longer than anyone anticipated, so let's say the first six or eight months of next year, maybe even all of next year, if the economy is still doing well we are getting inflationary pressures, i still think rate hikes are a long ways off. that would be quite different but not impossible. i think the market would price it, but i think cuts are overhyped. jonathan: good to see you, thank you. on fixed income and the federal reserve. with an update on stories elsewhere, here is dani burger. dani: hurricane rafael is

gathering strength in the atlantic ocean. according to the west national hurricane center, they have sustained winds of 90 miles an hour, making it a category one hurricane and expected to make landfall in cuba later today. the florida keys could see localized flooding according to the national weather service. bitcoin hit a record highest markets watched votes coming for donald trump. the largest cryptocurrency, thompson 5000, widely viewed as a trump trade because he embraced digital assets during his campaign. crypto related stocks are also rising in the premarket trade. democrats are holding up hope that they can avoid a red sweep and take control of the u.s. house. democrats need a net gain of four seats to wrestle the majority from republicans. with several key races to call, particularly in california, it could be days before it is cleared on which party has the majority. that is your brief. jonathan: thank you. we appreciate it. thank you. next on the program, we set you

up for the day ahead. from new york city, you are watching bloomberg surveillance. ♪

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♪♪ the winter escapes sale is now on. visit sandals.com or call 1-800-sandals. jonathan: 40 minutes away from the opening bell. i'm exhausted already and we have a full day ahead of us on a fed decision tomorrow. equity futures on the s&p out by 2%, bond yields higher by 50 basis points, the 10 year, 1.03 -- 4.43. tomorrow, a fed rate decision and another round of jobless claims and the bank of england rate decision. friday, on tuesday, earnings from home depot, wednesday, uscp i, thursday, ppi and earnings of disney. dropping by the studio, michael mckee. good morning.

can you give me an impression of chairman powell tomorrow in the news conference? what will he look and sound like for 60 minutes? michael: they only go about 45 now which is a benefit. they don't know. i think they do the 25 for this month, and they were never really going to commit to another between five and a center because they are looking at a lot of mixed data lately and they could say we will wait and see with the datasets. now it'll have to wait and see what policy is going to be. there are definitely some trump proposals that would throw, to use this expression, a scanner into the economy, so there will be a lot of dunking and dodging. lisa: i can do an impression. i thought about this this morning, we look at the data we have, we respond to it, there

was a moderation in the labor force, we have seen inflation has moderated and seems on a downward trajectory to our 2% goal, so we are on path to cut rates incrementally we will evaluate data as it comes in. how do you interpret the long end of the yield curve rising so significantly? how concerned are you about what that signals if it does tighten financial conditions at a time we the economy is fragile, and does it were the neutral radius? gennadiy: that is an interestinggennadiy: question the fed has to look at, and you will want to read the minutes because it will have a deeper discussion on that. and they will lay out all of their thoughts, and as they go forward into january and march, they will be talking about this more and more and trying to divine what it means, but with the long and going up, if you look at breakevens, that is what

is driving it, inflation concerns. that is one of the key things for the fed, inflation expectations. so we get michigan sentiment on friday. annmarie: i think we got michigan. gennadiy: it is not quick to tell us much about inflation because of the limited amount of time in that survey, but that is something to watch. jonathan: annmarie, that was good. annmarie: we did. we are waiting on the house but i'm hearing many people potentially think it will be a trifecta, reading the tea leaves, trump told bloomberg news that powell could serve at the end of his term until may 2026, "especially if i thought he was doing the right thing." the right thing for the former president was low interest rates but his policies may dictate something else. how does powell deal with this? gennadiy: he ignores it as much as possible because that is the only thing he can do. he cannot respond to the president or he risks creating market reaction that will lead to a lot of problems for him.

he will get questions, no doubt about it, and he will say our job is to focus on the economy, and i'm not going to comment on anything else. but here's the question because i do not want say -- to say he cannot believe anything trump says, but you cannot. if he says he will serve out his term, he may change his mind and decide to fire the guy and then who knows what would happen? we may end up in court. jonathan: i don't believe anything anybody says on the campaign trail and that is the problem you have if you are trying to set policy. lisa: although there is a market response in some sort of readthrough that you have in a knee-jerk way. on one hand, you can say, we look at the economy, but on the other hand, there is a dumpster fire behind someone and they are like, there is nothing to see, the data will come out. at what point do they feel forced to have some sort of comment? annmarie: this was a fast and furious trump suite, 2016.

you have to think jay powell, and this morning, they were saying, i wish it was 2020. i wish they could say, we cannot comment, we do not know but they do know. they can look at trump 1.0 and know how trump 2.0 will be. jonathan: appreciate it. we will get a new one of those in december. special coverage of the fed decision and the chairman powell conference tomorrow at 1:30 on bloomberg tv. tomorrow morning, we will catch up with stuart keizer of citi, and deutsche bank. come back here, 78 years old from queens, new york city, the 44th president of the united states, poised to be number four to seven, president-elect donald trump. from new york city this morning, good morning. this was bloomberg surveillance. ♪

it's our son, he is always up in our business.

it's the verizon 5g home internet i got us. oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people.

>> we are going back. risk on, 30 minutes until the start of trading. i'm matt miller. sonali: i'm sonali basak. katie: i'm katie greifeld. our special coverage of election 2024 starts right now. sonali cooley coming up, donald trump stages one of the most dramatic political comebacks in american history. matt: from the dollar to stocks and everything in between, the trump trade erupts across financial markets. katie: republicans win control of t