>> this was a resounding win for former president trump. >> the idea of good economics has turned into bad politics for the democrats. >> a lot of what we will do a separate rhetoric from reality. >> this is the emergence of a new power structure in the united states. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. annmarie: live from new york -- jonathan: live rom newrk city, good. cominginto thursday, the s&p 500 all-time highs, the nasdaq

100 all-time highs. the biggest postelection day performance in the history of financial markets stateside. equity futures up .2%. the nasdaq 100 up a quarter of 1%. julian emanuel of evercore. price target 6600 midyear. lisa: this is the melt up a lot of people were talking about. mike wilson was talking about that being 6100. can we get a 7000? people were wondering what a red sweep would due to financial markets and the equity space and yesterday we got a taste of something. if it continues it will change the trajectory of the economy as well as market expectations. jonathan: we have had the concession speech from vice president harris. at 11:00 you will hear from the president of the united states. annmarie: it will be speaking from the rose garden and he also

called former president trump and congratulated him and talked about the fact they want this peaceful transfer of power. this is a final moment for biden to try to bring the country together and i think he will talk about that today. also interesting, he invited trump to the white house. these two men who have been politically married since 2020 will have this meeting and there will be passing of the torch. it feels like back to the future. jonathan: there is a question we have asked. does this have the potential to redefine the outlook? the answer based on the last 24 hours is yes. goldman sachs on europe dropped their forecast. deutsche bank on the ecb drop their target for rates from 225 to 150. we are seeing moves on both sides of the atlantic. lisa: in europe you see people expecting a lower rate. in the united states people are

raising their expectation for how high terminal rates will be. this is a fed that will not be expected to cut rates nearly as quickly as they were perceived to be before this. matt lizette a basically saying if it is truly a red sweep, than the likelihood is the fed funds rate remains above 4% by the end of 25. when you look at fed funds futures you can see an expectation there is only a 70% chance of a cut in december and now markets see the end of the year next year at 3.75% versus 2.9% at the end of september. it is a massive rethink of how far the fed can go. jonathan: the real prospect of divergence between europe and the united states. equity futures up .2%. your next hour looks like this. we catch up with lori calvasina of rbc following the s&p 500 best election day in history.

potential trump tariffs and banks rally on a second trump term. awaiting the fed next move and anticipating the prospect of a red sweep. lori calvasina writing "historically republicans controlling all bands of government has been a strong backdrop for the s&p 500." what changed for you in the last 48 hours? lori: we have gotten uncertainty off the table and the market seems to be pivoting to the idea of republican sweep. a sweep versus a split, when republicans can control everything your average annual return is 13%. if republicans have the white house and you have a split congress, that is only a 5% annual return. if you put that into context of today it will be easier for to trump to get his tax package through if he has control of congress. when i talk to investors that is

one of the things they like about the trump outcome. jonathan: there are tax trades and regulation trades. when i saw the banks up 10% what was that? lori: there are little bit of taxes. i will rewind you back to late september. under these potential outcomes what is the outlook for the industry. they were both free bullish under the trump sweep. they stood out in terms of their intensity of optimism. we dug into the issues it was regulation. i joked with them. i did a lot of work on the campaign. all of the stuff on the websites . i do not think i remember either candidate talking about banks or the financial sector. it was all muscle memory on regulation. lisa: this idea there is a knee-jerk acceptance donald trump will be more prone to reduce regulation.

you are leaning into that. lori: we have been overweight. we did not big and political outcomes the last time we did our update. we liked the fact that the center was midway through an earnings recovery. deep earnings pessimism. we have been bouncing off that. valuations have started to look expensive for the big financials. we still have room on the relative pe and we've been pushing people down to the smaller cap financials because we have a much clearer valuation story that has more room to run. lisa: yesterday small caps rose crazy. small caps where the spot and everyone thought that was the trump trade. you like small caps. what are you watching for that makes you nervous? lori: we said we were neutral on small caps but we needed something else beside the fed to get the trade going and we

thought it might be economic optimism. i did not have the republican sweep on my bingo card. that was the something else in the end. the positioning data is not so great for small caps. small caps have been treated as a clinical trade in the past. 2016 and 20 saw three distinct trades in the small caps. the first was on economic optimism, the third was the early days of the china trade war. in each of those the data when to up to these extreme highs and topped out around the same place. we are within spitting distance of that now and this is based on pre-election data. positioning does not look great. i do not know what valuations look like. my data lags by a day. we were in a 16.7 times cap weighted median pe. if we go back to the 2016 to 2018 time period the highest we

made was 19.7. lisa: doesn't make you nervous that yields are rising at a time small caps are supposed to be the most affected by that? lori: i went back and i looked at this yesterday afternoon and what we saw was around the 2016 and 2020 election we got a lot of shifts in the market and one of the things that happened was 10 year yields were moving up. they started to move up before the election and they continued to move up after the election. this was a trump and biden phenomenon. we saw shifts in the style trade, growth versus value. in 2020 it was more pro value. there seems to be something about political leadership transitions that help usher in leadership style transitions. annmarie: at least for small caps in the russell it is all downhill? lori: we have more room. the valuation does have more

room. if we end up being wrong i will start talking about the positioning chart. i think there is room to run on valuations. we go back to these areas like small-cap financials, they are so cheap. annmarie: trump during the campaign was talking about 15% for a corporate tax rate. you and i were ahead's economic club speech in new york and it is the first time he brought up with conditions. how do you look at these companies, where their inputs are made and think about who will potentially be able to get that 15%? lori: it is a big mystery and i start to see strategists adjusting earnings numbers. i have done this myself. if we get the 50% earnings will go up x percent. i did that math but i caution people i do not think all of these companies will get 15%. i have asked everybody i know who has anything to do with

washington and the only person who managed to give me an answer was the bloomberg law analyst. annmarie: i asked everyone too and no one has been able to give me an answer. lori: we are in the discovery process and if you think about where things might get tripped up, if we have a bunch of optimism on the trump tax cuts and it turns out it is only these companies that got this deduction in the past, that will throw cold water on this at some point if that ends up being the case. jonathan: we have done regulation, we have done taxes, let's focus on tariffs. what is your advice to people who hold consumer facing companies with very skinny margins that face the prospects of high tariffs. lori: when we did the investor survey in september, i went back and forth with the number with analysts trying to understand policy views. trump's tax package is good for his stocks but the tariff packages not. i saw echoes of that. the one front and center for me

is industrials which is trading in astronomical valuations if you look at a median pe the industrial sector. people are overlooking the tariff risk. if you went back to the 2018 playbook, industrials and materials absolutely got smoked. if people want to look at that sector and say tax cuts are good and we can manage through the tariffs, i'm not buying it right now. jonathan: one of the best. a real clinic. lori calvasina of rbc. let's get you an update on stories elsewhere with dani burger. dani: qualcomm shares are up about 8% in the premarket trade. earnings beat analyst estimates and gave a bullish forecast, signaling a rebound for the smartphone market. also moving much higher in the premarket shares of lyft going up 22%. the company reported

third-quarter results that beat estimates. third-quarter expectations top the forecast. lyft announced plans to work with autonomous vehicle companies. the fortunes of the 10 richest people in the world surged by a daily record yesterday after donald trump won a second term as president. according to the bloomberg billionaire index the net worth of billionaires surged $63.5 billion. among the other top gainers, amazon's jeff bezos and berkshires warren buffett. jonathan: thank you. up next, looming trump tariffs. >> one can go wrong is we get inflation coming much earlier than the improvement and where the inflation come from? mainly the imposition of tariffs. jonathan: that conversation is up next. live from new york city, good morning. ♪

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jonathan: what a couple of days in financial markets worldwide. equity futures firm or another 10th of 1% after closing at all-time highs. under surveillance, looming trump tariffs. >> what can go wrong is we get the inflation coming much earlier than the productivity improvement. wherewith the inflation come from? the imposition of tariffs. that is the balance the administration will have to figure out. that is the balance the market will have to navigate. jonathan: donald trump pledging to boost the u.s. economy when he returns to the presidency and

deliver sweeping new tariff policies. heidi of the council of promises -- of foreign relations says his top two promises on tariffs and deportations he can move on unilaterally. believe what he says. heidi joins us for more. in 2016 when he came into power the focus was on taxes. it took a couple of years to start to shift towards tariffs. how quickly do you think you will start with tariffs and why? heidi: it will all be about tariffs and more tariffs. he can move quickly. day one, week one quickly. the taxes will be negotiation with congress. he does not have the unilateral authority to move on taxes. be prepared for big-time tariffs he promised. 10% to 20% across the board and 60% on china. those are big numbers.

other countries are preparing to retaliate and that will hit our exports. you will have supply chain disruptions. one of the debates is how much of a shock we are looking at. it is a one-time shock on the three plus trillion we have that we import and how do we calculate and factor in retaliation right now? trump is not going to have his agencies staffed to look at how you remedy or negotiate out of the unilateral across the board. we trade with about 200 countries and territories. this will be long and messy and it will be inflationary. it will be targeted at china but mexico will take the brunt of it. e.u., big trading partners. that is where you saw a lot of fx movement in japan yesterday and in the yuan and the peso.

you will have a lot that will hit that first week he is in office because he knows what he wants to do. annmarie: you think we are seeing the fallout of trump's promises in the sense we will have the collapse of the german government? heidi: i think -- germany has its own dynamics. it is a very good question. what i would focus on more is what the direct impact will be on the u.s. economy. you have a lot of reshuffling in various countries trying to figure out how they will manage this transition to a trump presidency in terms of -- you talk about the changes happening in germany. the whole dynamic with europe is about to change in a very big way. you will have a very different

policy towards russia and ukraine and dealing with nato. you will have a lot of deep conversations about what european security will look like moving forward. annmarie: you think trump is going to put his promises directly in focus. you have individuals close to the former president that say this is a negotiating tool. if he was to put 60% tariffs on chinese imports we could see a meltdown in financial markets. what we learn from trump 1.0 is he deep -- he keeps that i stocks are doing. is that going to be a regulating force on trump? heidi: he does focus very much on the stock market. at some point he will have to focus on what is happening in rates as well because it will significantly complicate the fomc later today and it

complicates the fed job next year because you will have this combination of inflation and growth and tax cuts on the table. you will have a slower pace of easing. i can see very difficult public conversations between jay powell and trump. there is a lack of them last time but i think trump has also made it clear he wants a lot more influence on the fed. there are a lot of spillovers. if you talk about less easing or a potential of rate hikes, which i think is plausible, the spillovers are to higher mortgage costs and corporate borrowing and huge spillovers -- i'm not sure trump would care about emerging markets, but from a market perspective emerging markets will take the hit as well. you have a whole new risk -- set of risks on the table for next year. lisa: you went through a lot and

i want to pick out one aspect of it, the stock market performance in financials. there was an expectation there will be a mass wave of deregulation that will help the banking stops. you orchestrated bank legislation heading into 2011. i am wondering how difficult will it be for donald trump to unilaterally deregulate the banking sector? heidi: i think anything that involves any other parties and negotiated with any other parties is challenging. deregulation on a whole host of issues, banking or anything having to do with wanting to cut red tape and all of the permitting he is looking to do, it is more complicated than anybody knows when they are going into government. i do think it is going to

continue to be -- deregulation will be positive for certain industries. that is going to continue to be a longer-term play in terms of what to watch for. i will code back to where i started. -- i will go back to where i started. the real risk i seen near term is the impact his tariff policy will have. lisa: in terms of sequencing, tariffs first and deregulation will take longer. you said something else i thought was interesting. you do not see some of these offices that will be negotiated with different countries and different agencies fully staffed. why do you think so? heidi: it takes a lot of time to get the right people in place and up to speed on the agenda, no matter how talented your

people are or how prepared your transition is, it still takes a long time to get up to speed and meet your counterparts. i think there are certain countries where i think trump himself will want to have the direct bilateral negotiation, but there are only so many countries he can do that with. that is going to be personality driven with the leaders of those countries. it is also going to mean any decision-making on tariff relief is probably more on a case-by-case for company by company basis. friends of trump are probably going to benefit from anything

that would be relief on any tariffs. jonathan: it was great to get your perspective on tariffs and what it could mean for the global economy. heidi of the council of foreign relations and what it could mean stateside. we have to emphasize that the market was pricing in a positive growth's shock. you can see that in equities and bonds. interesting divergence between united states and the european bond market. we talked about yesterday. the same time bond yields in america arising double digits, german two year yields were chopping more than 12. the y is in the strategists notes. downgrades to the outlook for the european economy. goldman upgrades to the outlook for the u.s. economy. that speaks to the divergence. then germany happened and german politics started to happen. olaf scholz dismissed his finance minister with scathing language. what does he want in germany?

he wants wiggle room. all of a sudden on the ballot in germany is higher spending. why do they need higher spending? because they are not in a position to lead europe at a time the united states is not on the same side as them at several key issues. lisa: theyt higher spending because the economy has been on its back and everyone is wondering is when germany will finally expand the budget. another issue for olaf scholz is he is losing popularity. some wet wonder -- some wonder whether he is firing his minister that highlights the ripple effects of the u.s. presidential decision on the rest of the world and how that divergence can widen as some people expected to in the currency markets and the rates market. annmarie: it feels like trump was the final catalyst to break up the coalition. the coalition only existed because of russia's invasion of ukraine. how to fend off the fact they will no longer have chief russian energy.

christian lightner is the one who cared about the debt and sustainability and olaf scholz is looking at what they are dealing with in germany and saying we will have to spend more. jonathan: that is why german bond yields are moving in the other direction. the language from schulz, compromise were drowned out by public disputes and demands. such egotism is incomprehensible. that is brutal language from the german chancellor. u.s. banks rally big time following trump's big victory. that conversation is up next. from new york, this is bloomberg. ♪

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jonathan: record highs on the s&p 500. on the nasdaq into thursday. equity futures adding some way to the rally. the best day for small caps yesterday in two years. on the russell we are up half of 1%. in the bond market the two-year at 30 years. yields lower. 4.25. the federal reserve hardly mentioned the thing. they have a decision later. lisa: this will be a boring one, that is what everyone says. but this is the reason everyone

will be glued in when jay powell takes the stage at 2:30. we will be here. how will he talk about the outlook and how much they are watching the potential for what the markets are sniffing out to be reality which is accelerated growth, inflation picking up and bond yields being significantly higher? jonathan: their commentary until we see the policy from a trump presidency will look so stale. they have to put together forecast in december and i am not sure how redundant the forecasts will be. they are very redundant based on what we can see taking place in 2025. lisa: they will start -- they will try to say let's just look at the data. the fact that yields are climbing on the long end to such a degree we have seen 100 basis points of in reese in a month or two raises a question. was it a mistake to cut by 50 basis points and does that tighten financial conditions in a way that weakens the economy

and if it does not what does it say about the neutral rate? jonathan: the 10-year the morning they cut rates by 50 basis points in the three 60's. one meeting later 4.40. in the fx market -- the worst day for the euro since 2020. moves yesterday cross asset had a couple of times every decade. the kind of moves we've not seen since 2016 and 2020. that is brexit, the trump presidency. those kind of moves were taking place yesterday. lisa: it was a game changer and that is what the market was saying. as we heard from a host of different analysts downgrade the outlook for europe, expecting the ecb to cut rates more significantly and hampering the fed's ability to cut rates next year. that differential expressed in of the sudden seismic move in the euro. it does not seem like people are

moving away from this. it does not seem like people are ready to say this is a dislocation. jonathan: a small bounce on the euro. a tiny bounce in the brain scheme of things. under surveillance, the gop taking control of the white house and senate. the house still hanging in the balance. how close are we? annmarie: we are very close for the republicans to have a trifecta sweep but we are still waiting on a little more than a dozen key races. i spoke to kevin mccarthy yesterday who was like -- he knows these california districts well. he was like it looks like it is going to be a red hold. speaker johnson putting out a letter saying he wants to run for speaker again. he has been joined at the hip with the former president. it looks like he will be able to maintain his gavel if they hold their majority as well as steve scalise putting out a letter he wants to have his number two.

jonathan: french hill, the republican from arkansas joining us. in europe olaf scholz calling for a snap election. the breakup of his three party coalition. the crisis after he dismissed the finance minister. lisa: and called for a snap election. the idea that he will have a confidence vote as soon as the next few months and after that an early election. how much was this catalyzed by president getting elected and reelected and second how much is there more? that is what people are talking about out of time, especially germany not spending when rates were negative levels and suddenly rethinking that as they are facing off against a new wave in the united states. annmarie: this coalition did not make sense in terms of how they felt about the finances of germany. it only made sense when they're

doing with the crisis and the crisis of russia's invasion of ukraine. they are recalibrating for the fact that they have a slow manufacturing sector, the auto industry is on its back, they will be dealing with the trump administration that is what they would call hostile to them. you brought up a great quote. olaf scholz basically saying christian liner is an egomaniac as he dismissed him. very embarrassing. jonathan: i think there is a strong suggestion it has been brewing for a while. the election in the united states justified the urgency they have to get something done akleh. lisa: it also feels like this is a seismic shift globally and we have seen a lot of upheaval as to leadership and i wonder if that is because of the populist way for the economic situation and what happens with the pandemic. i wonder if it is because the trade structures are breaking down from the traditional way and you put this together. it is the reason you're seeing big moves in markets because

people are trying to understand what the new regime looks like at a time of great adia -- a great degree of uncertainty. jonathan: china is about to get a stimulus boost for two months. the export growth searching to a two your high. anticipation of worsening trade tensions. what you think will happen? if i need something from china i want it yesterday. lisa: which is basically what you are seeing. some people speculate this has a rebound effect from the typhoon last month. that is the main point, front loading all of the orders as companies try to get ahead of this which raises the question of how companies will try to get around this. that is the reason why the focus is on mexico and vietnam, connector countries that are the intermediaries to make things look like they are not coming from china or the united states. jonathan: let's get to the latest on the financials. bank seeing their biggest one-day gain since 2020 ahead of

trunks -- ahead of trump second term. erika najarian writing "we think banks will have more access capital especially as the president-elect reshuffles the decks on agency leadership." i will start with a note from one of your peers. it is very rare to see a sell on jp morgan. david jordan downgrading the stock to underperform saying it is time to take profits. we agree jp morgan is best in class but investors are paying peak multiples on peak earnings in our opinion. what would you say back to calls to say we have just had a years worth of moves, i am out? erika: we are not at peak earnings. if you think about the new set up for next year, fewer rate cuts, higher rates, a burst of activity in the capital markets, and a redefinition of excess capital. who is highly levered to all of that? jp morgan. by the way jp morgan has the

highest dollar amount of excess capital in a relevant amount of excess capital in the current regime anyway and that is like jamie says, earnings in-store. if the consumers also reset and you have animal spirits in the consumer, and we are going back to europe apparently next summer. jp morgan and that card growth, they will be a big beneficiary. the pe looks lofty but the e is going to continue. jonathan: you believe this is a redefining moment for the outlook? erika: i do think so. jonathan: can we talk about m&a? when we caught up with brian moynihan he gave a strong suggestion that there were companies that cannot do a deal or have a conversation about doing a deal because we do not know if airline deals can happen. you think we will get clarity on that front? there are some suspicion the likes of jd vance are in line with the approach of what we have seen from the biden white house. you think there could be a

change? erika: a megadeal is different from the consolidation of regional banks. it is not going to be necessarily immediate. everybody wants to understand who is the captain of the boat in terms of agencies. the conversations are restarting . if you think about the environment for next year we are going to have a flatter curve then we thought we were going to have an all of the regional banks need the steeper curve coming downturn more money. this whole notion that we will have great growth in corporate activity, that might not be one-on-one translatable to low growth because the capital markets are wide open and private credit is still chomping at the bit. if you have a fairly decent year and decent multiples but not quite the slope in net interest income we thought we were going to have two days ago, it is right to say now it is time to

monetize my franchise and partner with someone larger. lisa: how much does that depend on how well things are doing and whether you like small-cap banks or large ones? erika: we are approaching it in a barbell fashion because the middle is where all of the consolidation will happen in terms of who are the new trillionaire's, who are the new category two banks? if you think about the smaller banks, they peak get a 15 forward multiple in the last trump trade. they are at 11 right now. the money center banks are 13 times, they peaked at 13 times in 2016. you need belief the e will go up. with the smaller banks the e will go up and reset but the pe continues to be depressed. lisa: at what point are you looking at just consolidation and the idea of victim to

capitalize on the yield curve and at what point are you looking at banks being at the precipice of a new wave of m&a not just in banks but across the board if the hood is lifted and some of these deals are able to get done? erika: this is why it may look expensive but we are not getting off the jp morgan train. it is so interesting but it all points back to the money centers. who can take advantage of fewer cuts, greater activity, greater m&a across different sectors, it is the money center banks. they will do better and the eu will do better. annmarie: you mentioned animal spirits economy. does that trickle down to the consumer when you have the former president talking about a 60% tariff on chinese imports? erika: your shien goods -- i don't even know how to pronounce it. [laughter] jonathan: i take it you do not shop there. jonathan: may be fewer -- erika:

may be fewer un-boxing videos. [laughter] i think it will be a close call. if folks are employed in folks are feeling good, may be spending will be flat as opposed to what we were thinking about the last time we were here that there is no way this been trend will continue. all of us spend the trends we are seeing have been based off of the issuance of new card, notches because each customer is spending more. annmarie: the last time you talked about how may be the market was complacent about a soft landing. when you see the trades come is everyone back to a no landing scenario? erika: yes. we were so lucky. we had a meeting with jamie dimon and he said all of the conversations we've had so far with corporate are uniformly happening. if corporate's are investing more and job growth continues to be reinvigorated, folks are feeling good about the economy.

that might support the continued level of consumer spending. i do not see acceleration, but a continued level of spending. capital one, jp morgan, they want to give you a card and levered yourself. there are ways for you to support that spending next year. jonathan: you can sense the frustration from bank ceos on wall street with the regulator. do you think they will have influence on direction for policy and a trump administration? erika: it is always at the margin. since the global financial crisis what really sticks out to me is how embedded it is to stick it to the banks in terms of prudential regulation, the stress test annually. i am not sure you will necessarily have a sea change but remember we were going to have a rule that would increase capital requirements by 30%. now that will get cut at least

in half. the stress test has been so volatile, perhaps it is not going to be as volatile. the current regime is a stress test. this administration and this new regulatory leadership can put their own stamp on the stress test and make it less volatile. jonathan: it is not about things not get better, it is about things not get worse. it is good to see you. erika najarian of ubs on the financials after the pop on the s&p. let's get it update on stories elsewhere. here is dani burger. dani: ukrainian president volodymyr zelenskyy said he had an excellent call with president-elect donald trump. in a post on x bloomberg linsky said they agreed to maintain -- in a post on x he said they

agreed to maintain -- from promising to end russia's war on ukraine in "24 hours." nissan cutting 9000 jobs globally and production capacity 25%. the company downgraded its annual sales forecast ever quarterly loss. nissan has been reshaping its global strategy. hurricane raphael slammed into the western coast of cuba as a category three storm last night, causing an islandwide blackout. the storm is expected to slow today and meander over the south-central gulf of mexico this weekend. rafael is the 17th named storm of atlantic hurricane season in the fifth major hurricane of the year. jonathan: thank you. up next, embracing the trump trade. >> this is a broad dollar move so we think about it, this is u.s. exceptionalism. the key tenants is emerging market currencies will

underperform. if you go back to latin america and you think about the mexican peso this is the worst case scenario. jonathan: that conversation is up next. from new york, this is bloomberg. ♪

jonathan: live from new york city, welcome to the program. equity futures with a little bit of a bounce, up .2%, building on the big gains of yesterday. embracing the trump trade. >> this is a broad dollar move. this is u.s. exceptionalism. the key tenants of this are emerging market currencies will underperform. if you go back to latin america and think about the mexican peso this is the worst case scenario. with the euro we have uncertainty around the german

government which will collapse in the near term and we're looking at potential elections in germany. there is political uncertainty in europe and room for violence coming through in the u.s.. jonathan: donald's presidential win sending the u.s. dollar to its biggest gain against the euro in four years. barclays writing "our previous work on the first fx moves of the election looks at the impacts of tariffs as these will be imposed through presidential power. a model shows an asymmetric skew in favor of the dollar with a trump win with euro-dollar reaching towards 1.3. skyler, welcome to new york city. this trade is on tariffs exclusively. when you think about taxes and interest rates at the same time? skyler: you think about taxes and interest rates already. this is important to put the trump trade into context. the shift in the dollar it was

-- fitted to strong growth expectations and that was the start of the trade. we saw the gap to close on the euro-dollar that was motivated by growth differentials as well as the trump trade itself. jonathan: is this a parody call? skylar: i don't think it is quite, we need to see if we get the house. we can get to 1.03 on confidence. if you get the fiscal it depends on how big that is, that can certainly add to dollar upside. lisa: you said the strong dollar takes into account interest rate differentials. we see people downgrading their expectations for the your region , people expecting the ecb to lower rates further in the opposite in the united states. have we priced that into the euro? skylar: absolutely not. there is a gap that has opened up between interest rate differentials and the currency.

we have to reevaluate our expectations. we do not know what the growth outlook looks like now because we do not know exactly what trump can do one fiscal, what he can do one taxes. that needs to fitted -- that needs to feed into the outlook for the fed. we are still debating when the fed skips. that is a big change from thinking they will cut 50 basis points again. lisa: do you think based on that differential the euro needs to weekend before tariffs even get implemented? skylar: that should feed into more downside. lisa: one of three but not parity yet? skylar: not yet. lisa: if there is a sweep across the board does that get you there? skylar: one thing that makes me hesitant is last time around we got a big move in the dollar and we are following the path the dollar took in 2016. that implies you get a big wave of dollar upside. the issue is when you get the fiscal?

last time around it took a year to get fiscal. you wanted fiscal before you got tariffs so we did not start thinking about tariffs until 2018. we could have hesitancy in the middle of policy action does not come through quickly. annmarie: they hesitancy might be the debt ceiling fight. will probably not get a tax bill until 2025 or 2026. does that hold the dollar back? skylar: i think because we have a fundamentally strong backdrop for the u.s. there are lots of cases for why u.s. exceptionalism is here in terms of a high return on capital, it is a closed economy. there is not really an alternative in the u.s. and china. because we have that strong growth backdrop that is a fundamental support. in order to get significant upside. annmarie: to get to parity do you just need the collapse of the german government which we pre-much have? skylar: i don't think we quite

need that. germany has been in a poor state for a long time. it can get worse. political noise to make things more dicey but i do not think that is why we've seen the move and yields are the euro. jonathan:'s bond supply on the ballot in germany? yesterday we were talking about the divergence in fixed income. u.s. rates up and german yields are lower. today yields are higher. there is an idea bond supply is on the ballot. how do you think about the german election and what it could mean for the prospect of looser purse strings in germany. skylar: i think that would be very good for the european union. the issue is because you cannot get fiscal pollution. the u.s. does not worry about issuing debt and can stimulate the economy. it gives them an advantage over europe. in europe you do not have fiscal cohesion and you are not stimulating. if germany has more leeway that gives more leeway to your

economy. jonathan: can we venture outside of g10? what was the peso mystery? overnight at 7:30 eastern time the market makes a move and never looks back and we were looking at three things. equities outperforming small caps. yields a big time and in foreign-exchange the peso getting hammered and by the end of trade yesterday the peso was strong. what was that about? skylar: i think i put it down to the market thinking trump was almost fully priced. we went in and all the commentary i was hearing prior to the harris pullback last week was trump was almost fully priced. if people were profit taking are worried about the prospect of getting higher that comes in. i also think the risk move is important to talk about. the risk move depends on whether you get a house. that feeds into cyclical currencies like em more positively. it is in part profit taking

pullback from the trump trade but also in part a more positive risk backdrop if you are stimulating. jonathan: i will run without explanation. thanks for catching up with us. euro-dollar down to 1.03. a re-think if we take the house and we cleaned the republican sweep. lisa: there is a question of how far does this divergence go? i am distracted by the peso. it crystallizes this feeling of how much do we understand how for the trades have to go? how much does the feeling of it make the president of mexico want to negotiate in a more significant way considering they've already raised questions about chinese imports. these are some of the things that are not easily priced aspects. jonathan: up next, stuart kaiser of citi, david peterson, and congressmen french hill of arkansas on the outlook for

republican policy. this is bloomberg. ♪ where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

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>> there is concerned about high inflation and also a revisiting of the conventional wisdom of the fed. >> rates are going up for reasons that have nothing to do with fed expectations. >> problems will get more acute. >> it is clearly policy discontinuity. >> the november cut is effectively a done deal. december is up in the air. >> this is "bloomberg surveillance," with jonathan

ferro, lisa abramowicz and annmarie hordern. jonathan: a little later on this afternoon the fed is likely to cut interest rates by 25 basis points. the bank of england just it. it hardly touches the sides. it is not being discussed. there's a real belief after the u.s. election we have totally redefined the outlook for policy, the economy, for interest rates stateside and maybe even abroad as well. equity futures up by .2% on the s&p. all-time highs. record highs on the nasdaq 100. up by .2%. here come the small caps. up .7%. lisa: building on what you said, there's a feeling central banks are really from the reality -- reeling from the reality. the perception of a growth shock is basically what the market is

saying. here's a question. how much of the central banks going to reflect the increased possibility of inflation because of budgets that have been expanding? this is the first bank of england decision after the budget was released. curious to see what kind of nods we get to that by them and by the federal reserve. annmarie: there's been a recalibration in the markets. donald trump won with a mandate. we are waiting on the house but at the moment you would rather be speaker mike johnson then i came jeffries -- than hakeem jeffries. republicans are set up for a trifecta. jonathan: stuart kaiser of citi. tobin marcus. commerce and friend hill -- congressman french hill. let's head over to the u.k. lizzie, good morning.

the decision to cut interest rates, give us the complete picture. what does it look like this morning? >> this is a hawkish cut for the bank of england. it is what we expected. all 54 economists in the survey expected given the inflation is below 2%. but the focus is on the path ahead. you have about split 8-1. catherine mann the dissenter. they have now factored in rachel reeves's budget. it is too soon to factor in donald trump's victory but they are saying this is going to be inflationary, the budget. traders are pricing and fewer boe cuts because of the fiscal loosening. indeed, the bank of england is saying inflation will be higher because of what she has done. i will note this is based on the pre-budget yield curve. after the guild moves we saw since rachel reeves sat down, we

have seen all of her headroom wiped out and more tax rises on the horizon. look at the forward guidance from the boe. maintained. they can't cut rates too quickly or by too much. the dangling of hence of more aggressive policy from andrew bailey seems a long time ago now. jonathan: appreciate the update. looking forward to your coverage today. what lizzie just said is really important. even if you're not interested in the u.k. policy and the bank of england, if you're based here stateside, which is happened is an appetite for what might happens at the united states federal reserve six-month out, early march. lisa: they are able to look at the fiscal budget, the preliminary one proposed by rachel reeves in the united kingdom. they assess the budget lifts inflation by just under half a point at its peak. here's the question. how much is this something for

castable -- forecastable? it really does show how much the fiscal budget and fiscal changes can completely alter the path for the central banks. jonathan: that news conference we get this afternoon be on another planet compared to the planet the financial markets have been on in the last 24 hours. we have completely redefined the outlook for 2025. chairman powell will be looking at dot plots from september 18. think about how redundant this conversation is going to be today. lisa: how much can he make it redundant and boring as possible? that will be the goal. what does data dependency mean when the data relies on the other side of the equation, the fiscal aspect? jonathan: we kick off equity markets going into all-time highs. the s&p 500 posted its best election day in history. stuart kaiser saying it remains solid u.s. economic growth but

fomc insurance cuts back to neutral. cuts being christ that was good for equity markets. -- stuart: what changed yesterday? not much. they viewed as a positive growth impulse but it's just a relief of getting past the major event risk where clients the wrist going into that event -- de -risked going into that event as well. we will see where positioning and views base themselves in next week we will look at the moving parts. the clearest trade yesterday that stocks that were stocks that benefited from deregulation up double digits. that tells you everything in terms of how the market is approaching the trump trade. jonathan: this is how we cut it up. tariffs, taxes, regulation.

taxes, the prospect of a sweep. tariffs. dollar general got hammered. target struggled a little bit denny stong of market. how do you think about this companies going into 2025? we have to see what happens with the house. we know we will probably get some tariffs. stuart: that is the hardest one to unpack. you don't know where he's going to tier four how much and which companies will be impacted by that. that's a little bit of a thumb in the air. we think it will hit these other areas. it is a little bit of a wild card in terms of identifying those companies specifically. if you listen to his proxies, bay view terrace as negotiating tactics. -- they view tariffs as negotiating tactics. i think is a very hard trade to put on. what a lot of people are doing is saying that will flow through to fed policy.

that will flow through to the inflation outlook. i will trade on that impulse instead of trying to determine each stock that'll be impacted by. lisa: you had a number of wonderful notes in the lead up to the election. the biggest risks to the rally we are seeing, number one, a weaker growth outlook. number two, the benchmark yields that get to be punitive with respect to valuations. which of the two are you most worried about a now? stuart: tactically it is the rates part. if you look at the real yield curve, nominal yields are getting to levels that are getting people's attention. the market was willing to digest that weak labor report. tactically speaking, the biggest risks in the rally if you get a dislocation at the long end of the yield curve. lisa: is there something that's the tipping point where it becomes more noticeable other than i guess i should pay attention to that at a certain point but i will keep buying small caps?

stuart: it is tough to put a number. the bottom line is it is bond volatility. it will be the initial thing. if you put the 10-year yield at 475 on monday, the equity market will be responding to that. in particular, how volatile are the yield. yesterday, the 10-year got up to 445 and then moved sideways for a bit and i think it helped equity markets that you did not get the inflection higher. annmarie: at some point doesn't that break because you have higher yields? how much higher can they go? stuart: they benefit from low liquidity overnight. what was interesting is the small-cap outperform significant. not only were people blindly buying, they were in the space and trying to buy the best and brightest of the small-cap. for now it is benefiting from

the growth impulse and the deregulatory art of it. -- part of it. that is the part of the market that is on the firing line if we get dislocation. the market is pricing -- annmarie: the market is pricing in a good thing from the trifecta. if you take trump at his word, 60% on chinese imports, 10% from everywhere else, what is that actually mean to some of these consumer facing companies? stuart: if he went through with all of that, that is squarely negative for consumer facing companies. the money needs to come from somewhere. taking it at face value, which is what a lot of people are trying to do would read negative for markets, at least initially. we need to see how that flows through. if you mess into that type of tariff upfront and you follow through with it, that is negative for that part of the economy. the market is telling you positioning is light.

second, that's an opening bid meant to extract concessions. annmarie: depends on who you ask. stuart: i agree 100%. trump is sensitive to financial markets and sensitive to economic growth. will he dial back the rhetoric if you start to see the markets moving the other direction? jonathan: i hope we can move on in trump 2.0. i will lobby this administration to do so. are you going to watch the news conference with chairman powell later? stuart: definitely. you have to watch. on your point about march and six month window, they are signaling on how they will -- jonathan: do you think he has to start signaling? stuart: he's going to get asked the questions. those questions are relevant. you have less than three cuts priced in calendar year 2025. he will get asked those questions. how does he respond to that? what is the body lang which? i agree -- language?

in an election week they want to be as quiet and milquetoast as possible but he will get asked the questions. the proof will be in high interest rates. jonathan: we have seen this with the van giving went. they basically -- the bank of england. they have to look at a more inflationary u.k. what we could see in the u.s. might be that on steroids. they have to cut interest rates today and signal they want to do the same thing in december. is this bizarre? we have these different planets. we are talking about trump policy and scenarios but the federal reserve is presented election never happened and basing projections on what they said in september at that meeting. stuart: nay think it's a go to the big white table any told me they are political and they are not going to prescribe policy ahead of time based on what might happen from a political decision. you will not see them stepping in the bucket if they can avoid it. tom keene likes to --

jonathan: it's an ongoing fight, continue -- that will continue. we will have the conversation. good to see you. stuart kaiser of citi. let's get an update on stories with dani burger. dani: a recap of the boe decision that cut rates for the second time this year. lowering the benchmark interest rate by a quarter point to 4.75%. they were the u.k. budget would drive up inflation by half a percentage point. eight members voted to lower rates. catherine mann was the lone dissenter. airbus needs to double its monthly deliveries in the last eight weeks of the year to meet its annual guidance. it delivered 559 planes as of october. airbus has been struggling to build aircraft fast enough. suppliers have been struggling to ramp up production since the pandemic. spirits are high in cleveland with the cavs up to their best

start in franchise history. they beat the pelicans last to improve the record to 9-0, boosted by a 9.9 from donovan mitchell. the golden state warriors beat the defending champion boston celtics behind advantage performance from steph curry. he nearly notched the triple-double. that is your brief. jonathan: more from dani in 30 minutes. the election postmortem. >> i spoke with president-elect trump and congratulated him on his victory. i also told him that we will help him and his team with their transition. and that we will engage in a peaceful transfer of power. jonathan: that conversation up next. live from new york, good morning. ♪

jonathan: equity futures on the s&p 500 a little bit of a lift. all the drama was yesterday. some of the trends continue. yields creeping a little higher. looking at crude, down 1%. $71 on w ti. the election postmortem. >> the outcome of this election is not what we wanted. not what we fought for. not what we voted for. while i concede this election, i do not concede the fight that fueled this campaign. i spoke with president-elect trump and congratulated him on his victory. i also told him that we will help him and his team with their transition. and that we will engage in a peaceful transfer of power. jonathan: here's the latest.

the democratic party searching for answers after donald trump's victory. democrats losing the majority in the senate with the house race still in the balance. dems find themselves in the wilderness with a big debate ahead about how to rebuild and the gop side, presumptive vp elect vance becomes the front runner for the 2020 nomination. it will be an interesting few years in washington. it will be interesting few years worldwide. thank you for your coverage on election night. i want to start with the democrats in this line from vice president harris. "i do not concede the fight that fueled this campaign. " i can think of few demographics that would like her to continue the fight seeing the shift we saw towards donald trump. do you think democrats will learn the right lesson from this beating? tobin: this is going to be a vigorously fought question about

which way the party should go. the next primary campaign will be the forum for that fight. the comparison is 1992. you were coming off of 12 years of republican governance. reagan had engineered a broad realignment of the electorate. what happened was you had clinton coming in, not just running against washington but against the democratic party and tried to brand him self as a new kind of democrat. that is a move for a governor or somebody to articulate a critique of the party and have that become the new banner for the party. what that is and who that is remains to be determined. i think it is the clear template for how the party should move forward. annmarie: for me it was the quote from senator bernie sanders. "it should come as no surprise a democratic party that abandoned working-class people would find the working-class abandon them. it was the white working-class. now it is latino and black

workers as well. on the democratic leadership defends the status quo, the american people are angry and want change and they are right." d.c. the party becoming more right -- do you see the party becoming more right or more progressive? tobin: i think that is going to be litigated. the progressive wing, although not clear who the standardbearer will be, will make the case the way for the party to move forward is to move against neoliberalism and take a progressive lefty stance. i do think that's going to be the consensus across the party. i don't think the broad wave we saw on tuesday was economic in nature in that way. there was a huge medic dissatisfaction about the economy. around the world we have seen

incumbent parties destroyed in the wake of the inflationary outburst in the last few years. it's hard to look at that as people crying out for a progressive vision. there's a broad sense the party's values are out of touch with normal people. lisa: you mentioned -- annmarie: even in this moment kamala harris give a speech and did not really thank president biden the way most people would expect. at the same time, president biden is calling president trump and organizing a meeting with him. it is very difficult to understand what has been going on in the white house. where the relationship is right now. do you have any understanding? tobin: there's huge mess of continuity between the biden and harris camps. harris has her own people. it makes sense we are seeing different messages from them. they harris campaign apparatus is not particularly relevant. the biden white house needs to do the transition.

there are concrete things that need to happen to hand power over to trump. it will happen in a basically normal way. in terms of the political future the party, the different people who have their eye on 2028 will start setting up their own apparatus and carving out their own power centers rather than -- we had a lot of party elites try to guide the party through something from 2020 onwards. the coalescence around biden during the 2020 primary was an unusual degree of centralized steering relative to what we normally see. a charismatic outsider coming into try to shake things up and taking over the party for themselves. lisa: there was a statistic from deutsche bank that crystallized how unique the moment is. it is the first time since the late 1800s the incumbent party of the white house has lost three consecutive presidential elections. yes, this is a democrat versus republican issue.

this is the question of the identity but there is something else of foot. can you give us color onto why we are seeing this trend? tobin: i think the x nation is that we are at a multi-decade secular decline in the share of people who say the country is going in the right direction rather than on the wrong track. them where there is a persistent feeling america is going in the wrong direction that transcends who is in control. the more incumbency becomes the burden and you expect faster moves with a metronome between parties. that is not to guarantee that we will have another one term of partisan control. we are going into another very unusual period for the president who just got elected was a lame-duck. i expect vance will be the most likely -- not guaranteed but most likely nominee for

republicans in 2028. we will see who was running against him on the democratic side. that will be another opportunity for both parties to try to tap into the discontent of american voters and argue the other ones to lead us in a new direction. lisa: as the exit polls come together what is your sense of what the main issues really were that fed into that discontent, the secular decline that people feel across the united states? tobin: you have to look at inflation. you look around the world and parties of every ideological orientation having it handed to them by voters around the world. in many cases the incumbents happen the beat to the center and centerleft workplaces we did see more right-wing parties in power, whether it is a u.k. or poland. we saw backlash against them also. it seems to me that whoever is presiding over this period of

high inflation, the discontent about immigration that has spanned national lines, those are the most salient elements voters are rebelling against what jonathan: good to catch up. tobin marcus, appreciate your time. i don't think is everyone single reason why you lose an election. we have been talking about the challenge to the income it in the post-pandemic world. one co. speak to a more important story for the democrats. the democrats are finding themselves offside with the center of gravity in the country. the liberal progressive way of thinking, the ideology is offsides with the center of gravity in the country. pick out one county. stark county and texas on the border with mexico. 97% hispanic. has not voted republican and more than a century. back in 2016, donald trump's vote share with 19%. it was closer to 60% on election

night. that is the problem for democrats. this is not just white americans. i further select internationally, this is somehow racism. there will always be some racism in society but it goes beyond that. almost everything of demographic, latino, black, asian, that vote increased for donald trump was pronounced. annmarie: every demographic to moved to the right except for the electorate that is 65 and older and white women with college degrees. everyone else massive shift to the right. jonathan: it's a big challenge to the democratic party. coming up, dana peterson looking ahead to today's fed rate decision later this afternoon. ♪

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 kevin'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.

jonathan: let's get back to the market. futures up by a quarter of 1% on the s&p 500 after a really strong rally in yesterday's session. health .4% on the nasdaq. some outperformance on the russell. small caps up by three quarters of 1%. lisa asking the right questions. in the bond market at one point to high yield -- lisa: it's the uncertainty of how high-yield can go. if the 10-year goes to overnight -- 475 overnight.

a pretty successful 30-year auction at higher yields gay people the confidence it is not up, up and away. it is just a reset. jonathan: futures higher this morning with two hours to the opening bell. manus: day two of weaponized fomo. lyft up nearly 25%. they will get autonomous vehicles next year. a record number of trips, a record number of riders, can commuters make 50% of the customer base. why put in a price lock? it is a snapper at the heels of uber. it is certainly want to reflect on. qualcomm up 20% so far this year. we added nearly 6%. nice bullish guidance for the year. it's how you see the progression of the smartphone from apple. apple 16 pro. you look was happening with

android in china. the language around this is good. the android market is building and has solidity. a nice future. it's also about diversification. auto, tech and internet of things doing well in the readout from qualcomm. let's finish off with your covid vaccine. it has not gone away. up 9%. they got an early agreement on the new covid vaccine pushing their sales through an up on the higher level. the cfo says the market is durable. a sizable market. they will make 3.5 billion dollars in sales this year and they have a pipeline of 10 new products in the five point. jonathan: make you -- new products in the pipeline. jonathan: thank you. five president here is conceding to president-elect donald trump in a speech from howard university. a peaceful transfer of power.

president biden addressing the nation at 11:00 a.m. this morning. how different will that address be? annmarie: you will clearly try to unite the country. he will say they want a peaceful transfer of power. we have not had a real concession speech because donald trump did not give them this grace when he left office when biden came in. that 2016 concession speech from hillary clinton sound at all like harris's speech yesterday. what is interesting -- i spoke to people around the former president yesterday. there seems to be a meeting that's going to happen before trump takes office. he's going to go in and sit down with joe biden. i think that's going to be very interesting. the wall street journal editorial board says trump has the second chance. how he uses it is going to be incredibly interesting. does he try to unite the country himself or go after grievances? jonathan: i gave a teaser. how much influence do you think rfk will have over a vaccine policy in america? annmarie: it depends who you

ask. he think she's getting control over a ton of agencies and people, other people are not sure. it depends how the senate shakes out who donald trump can get through her cabinet positions. -- for cabinet positions. lisa: there's a larger question of the people he puts in place determine whether it is an issue of transactional types of policy or something more comprehensive. there are some people who are advising him who are longtime people in business and have experience coming up with much more disciplined strategies. other people who are less so. jonathan: tech executives climbing up to congratulate donald trump in the last 24 hours. jeff bezos, mark zuckerberg and tim cook all offering messages of support. the industry preparing for the new administration and potential changes to regulation. annmarie: jeff bezos tweeted twice this entire year.

both tweets were about the former president. july 13, after the former president survived the assassination attempt and butler, pennsylvania, and yesterday. big congratulations to our 45th and now 47th president. we had seen this from tech executives leading up to november 5. they were all having these check-in calls, making sure they were on-site for potential trump winning the white house. no surprise there. the only time i have seen jeff bezos make these public tweets was when it had to do with donald trump. jonathan: what kind of changes are they expecting? what favor are they looking for? probably hoping things will get worse or are they worried the former president is going to actively come after their business? i'm thinking more about mark zuckerberg that i am the others. lisa: there's a question about the antitrust aspects and what kind of actions they could have. there's also the china issue. carveouts for specific areas, especially if tariffs are pushed

up significantly on chinese goods. annmarie: first on their mind is the ftc. they want to see lina khan out. they want to see her basically leave and they want someone, even if jd vance said in the past that he thinks lina khan is a decent job. everyone i talked to says that is nice of jd vance to offer his opinion but it's up to the former president. we know how trump feels about the regulation. -- deregulation. you only get the 15% corporate tax rate with conditions. how much of your products will be made in america and are they going to be things like carveouts? jonathan: let's talk about automakers. stellantis laying off 1100 workers at a factory in ohio. they point to bloated inventory and declining sales. u.s. deliveries falling to their lowest level since 2021. once again, the future of white house policy will be at the epicenter of this industry. lisa: in a big way. from ev's and regulation and

what the new protocols will be also with respect to tariffs and how much the u.s. market is insulated from others. stellantis, it's been a long-standing issue and they have been trying to deal with it independent of trump. there's a question of what kind of pressure there will be to come to the u.s. and build the cars here. what kind of penalty there will be from the likes of a trump administration for a manufacturer that closes a plant or has big reductions. interesting tug-of-war about which is better or worse for companies going forward. jonathan: executives on the brink of making big decisions about where factories will be, how much staff they want have got an extra thing to worry about when they sleep at night. waking up in the night with the phone buzzing because the president of the united states has put out a message going out to your company. that is going to keep them on edge. hi donna how much it will influence the decision they have to make but it will be a factor. annmarie: elon musk had said on earnings calls, even though we

know he's rbc a friend of former president, he's been at mar-a-lago hanging out, future president, he has said he's on hold of what he will do with his mexico plant until after the election. we already heard from donald trump about what he thought about deere and if they make more tractors in mexico. i think that stellantis news about job cuts in michigan made sense in terms of when you look at the map in michigan and wyatt moved to the right and voted and flipped it back to read from 2016 -- red from 2016 donald trump to 24 donald trump. jonathan: we hardly talked about the fed. dana peterson writing, "the results of the election likely will not affect the november decision but it may alter the pacing of future rate cuts. the set up for the backdrop for

a 25 basis point cut in november and likely also at 25 basis point cut in december." welcome back to the program. thank you for joining us late in the night on election night. we appreciated your time. you measure confident so well over the conference board. how do elections like these, seismic events people believe redefined the outlook for the economy, how do they influence confidence in the near-term? dana: it's about how it impacts employment and when we look at our consumer confidence measure, consumers, even though they notice inflation has slowed they are complaining about prices. prices being elevated. if they get the sense that they will continue to work but prices will fall, they may stay optimistic like we saw in october. it depends on what the outlook looks like and also looking to next year in terms of the tax cliff. will they see their tax rates rise? jonathan: can be look back into

the past. what did we learn from 2017 tax cuts? 2018 trade war? added that she consumer and business confidence back then? do you think you will see similar things this time around? dana: starting up of businesses, the tax cuts -- many businesses were happy about that. some did issue thousand dollars checks to employees and raised wages a bit. some did say we will invest more but for the most part we saw businesses were giving back money to shareholders. when it comes to workers, they were happy to see their tax rates fall. fast forwarding to next year, any changes and that dynamic is going to be material for businesses and especially for consumers. if consumers see they have to pay higher taxes, they will pull back consumption and that will impact businesses. lisa: can you give us a sense of how much the boom we are seeing

and equity performance right now and this feeling that there's going to be a new wave of growth again, not necessarily a forecast but the implication from the markets, how much does that give a boost to consumer confidence and consumer spending? dana: consumers do equate the health or strength of the equity markets reflecting back on them, even though most people don't own stocks. they see the business conditions are favorable. will they change their minds? will markets change their minds if we start seeing i renewed trade war? the tariffs put in place or with us but will we see more? that means higher prices for consumers because the price of those imports will be higher. businesses will pass that on, certainly for inputs. consumers will feel it immediately through finished goods. let's see what markets think if we do have another round of trade wars or even shocks to

geopolitics that cause commodity prices like food or energy or inputs like metals and critical thinking chips affecting the economy and consequently inflation for consumers. lisa: this brings us to the fed and how the fed considers markets. in the past, the fed considers it. when he goes up, they shrug it off. that has been the theme we have seen consistently. it will be an awkward meeting today for fed chair jay powell to not talk about the elephant in the room. does he have to address with the market is saying about the potential path of inflation as well as just this feeling maybe there is going to be stickier growth that will be re-accelerating? dana: chair powell will have to do two things. he will have to talk about what has transpired since september. we did have the odd october employment report. that was affected by strikes and

hurricanes. for the most part the u.s. economy has been doing great. a little stickiness and core inflation. that would justify a 25 basis point cut today. potentially also in december. we are not going to see many big policy changes until next year. the second piece of the discussion has to be about the outlook. there is potential that the fed may acknowledge there is going to be potentially more uncertainty, more volatility in markets but also for the economy since we don't know what the policies -- what policies may be unlimited. there's also the debt ceiling. there must be congressional action around that. the debt ceiling, the whole path to a point where they could be default impacts the fed's quantitative tightening. all these things will weigh on the fed and we will see how much chair powell is come to bull talking about the future before we get there. annmarie: the debt ceiling is interesting.

january 1, that's a problem. do you think because we are on track for this trifecta in washington that it's going to be dealt with swiftly? dana: it's interesting. even though we could have a mandate, it is not the case that all members of the gop are all on the same page when it comes to the debt ceiling. some say let's just raise it. others will say if we do that, we need concessions and spending cuts. there are some who may say let's kinda go where -- go over the edge. most people would understand that would result in a bad outcome from the u.s. you could have wrangling over the debt ceiling for months. that impacts how markets view the u.s. and whether or not we will stick to our commitments. it affects qt in the sense that the treasury does have a wallet at the fed. they usually try to give the wallet fat.

$750 billion state hundred billion dollars a day. when the treasury engages in extra ordinary measures -- extra ordinary measures to push off the debt ceiling, what does the fed do with assets? do they slow qt? i'm not sure what happens with all in all this could have major implications for financial markets, how the fed conducts policy and the economy. jonathan: it will be a very busy four years for all of this. we appreciate your time this morning. dana peterson of the conference board. here is dani burger. dani: vice president harris gave a concession speech at howard university yesterday afternoon. she said she's proud of her campaign and stressed when we lose an election we accept the results. the vice president also pledged to help with a peaceful transition of power. president joe biden will address the nation at 11 eight lik -- 11 a.m. this morning from the rose garden.

olaf scholz has called for a snap election by the end of march, dismissing his finance minister. the decision cost germany's ruling alliance is majority. he accused linder of misusing his trust. the conservative opposition alliance currently leads in the opinion polls. shares of arm are falling more than 6%. the gif designer issued a disappointing forecast for the third quarter revenue. investors placed big bets it would be a major beneficiary from the massive spending on ai, for the company's underlying tech is used more heavily in other parts of electronics industries, particularly smartphones that leaves it vulnerable to demand swings. that is your brief. 1 of next -- jonathan: up next, policy priorities. >> we are a center-right country. for democrats to be able to compete in these centrist purple states they will have to field candidates that appeal to them.

jonathan: that conversation is up next. ♪ ♪

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jonathan: stocks are up once again, up by .2% on the s&p 500. bonds little changed. 442 on tens. >> the country has spoken. we are a center-right country. the democrats to be able to compete in these centrist purple-ish states, they have to field candidates that will appeal to them. you are seeing a shift across the country and maybe picking schapiro would have helped marginally. the big issue is gas and groceries. jonathan: here's the latest. republicans looking to complete the sweep and control the house,

giving the party unilateral control of washington, d.c. speaker mike johnson sang the gop is focused on kitchen table issues. i did event in so many cities and i saw the same concerns everywhere i went. the economy and the border. weakness on the world stage and the rising crime rates, i think that is what motivated the voters. joining us now is congress and french help of arkansas -- congressman french hill of arkansas. a simple question. how much confidence do you have you can complete the sweep? rep. hill: it is good to be with you. i'm confident we will have a house majority and control of the republicans. mike johnson can be reelected as speaker of the house. we have a 220 c majority now. just two more than the 280 required for control. i think -- 218 required for control. i think we will end up in the low 220s. annmarie: you may go from a

congressman to a chair of financial services. what is it look like right now? rep. hill: the steering committee will meet after we elect our leadership and determine who should be the best candidate to serve in our committee structure. after four decades in finance and 10 years in congress, i'm a candidate to serve as the chairman of house financial services committee. i will try to make that case to each of the members of leadership in the steering committee over the coming days. annmarie: let's talk about of the sweep does happen. the promises that could become policy. former president now future president said promises made, promises kept. he said he was to bring the corporate tax rate to 15% from 21%. he wants no tax on tips, social security exemptions of $5,000 child tax credit and considering the limited federal income tax on first responders, numbers of the military, fire fighters, etc. ken all that get done? -- can all that get done? rep. hill: the congress faces a severe test this year.

i'm glad president trump was elected. i'm glad we have a senate and house majority in place for the 119th congress. i believe congress will face a severe test in 20 when he five. we cannot have a sustained six or 7 -- 6% or 7% of gdp budget deficit year after year. that is what cbo is forecasting following the avalanche of spending from the biden administration. we have expiring tax cuts for the 2017 tax cuts and jobs act for president trump. congress has the responsibility of trying to reign in spending and increase the supply side by making sure we don't disincentivize investment growth, career and job opportunities by penalizing changes in the tax cut. to go lower or to get more tax benefits will all be in the mix congress will debate and try to build the best menu that produces economic growth from the supply side combined with

opening up supply-side policies like energy, advancement, the energy strategy and permitting across the country. training and regulatory policies that constrain economic growth -- raining in --reigning in in regulatory policies that concern economic growth. lisa: what is the easiest path you see congress coalescing around to offset some of the tax cuts and other measures that donald trump is that he's going to implement? rep. hill: president trump during the last days of the campaign said this was going to be a priority. i was pleased to hear that. he talked to howard l utnick, elon musk, is government efficiency point person potentially for the new executive branch leadership. they need to identify that. they will find this is hard to

do when you have two thirds of spending locked into these mandatory spending programs of the health care, social security and benefit programs that are on demographic trajectory. i think it takes bipartisan leadership both to reduce nondefense spending in certain categories which will be a target of the administration, but you're not going to dramatically reduce that budget deficit until you get health care spending under control and engage in a long-term reforms. my point of view is let's just show that trajectory lowering. that we are not for debt projecting 6% or 7% annual budget deficits for the foreseeable future. that will send good market signals. that will get us back on the right track. lisa: are you basically saying the idea of cutting $2 trillion from the budget is implausible? rep. hill: i don't think it's implausible because of the $6

trillion in broad demographic -- democratic priorities joe biden imposed. he increased spending $6 trillion over his four years in office in new spending programs. many are ripe for being paired back. you have to compare that with long term mandatory spending reforms as well. jonathan: congressman, this is the start of a much longer conversation and we appreciate your time. congratulations on the big win. congressman french hill on policy priority. annmarie: i'm struck by the idea that basically republicans think you can deregulate yourself to growth. two, it is not just joe biden who added to the deficit. trump added to the deficit. i'm reminded of what larry summers told david westin. the bond market may need to educate lawmakers about -- lawmakers about what is going on. jonathan: coming up, bankim chadha, tom narayan, andrew

hollenhorst and bob elliott. all that in the third hour of "bloomberg surveillance." ♪

♪ >> this was a resounding win for former president trump.

>> the idea of good economics has turned into bad politics for the democrats. >> a lot of what we are going to do is separate rhetoric from reality. we knew have a new investment regime. >> this is a new power structure in the united states. announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: massive gains in the equity market, we add to them. the russell yesterday up almost 6% up by another 0.5 all-time high this morning, higher by 0.2. the nasdaq 100, we are up by 0.3. a federal reserve decision a little bit later on this afternoon. apparently they are going to cu interest rates by 25 basis point. who cares? apparently they might do the thing -- same thing in december, who cares. because in 2025 the outlook is going to be very different to the one chairman tal speaks to. lisa: i'm sorry i was sleeping as were talking about this

group. everyone is basically looking beyond the fed because they are looking at this idea that right now they are going to say as little as fossil and are not going to telegraph how they respond to any potential policy. that said, there are still some questions they have to respond to. they have to respond to what the market is looking at, inflation expectations and forward-looking market are creeping higher. why are they going to ignore them? jonathan: we've still got to find out if we actually get the red sweep and secure the white house, the senate and the house. when we get there we can talk about policy with just a little bit more clarity. then we can talk about priorities and guardrails. what is the order of things this time around? guardrails. who's the new kristin cinema in republican senator the republicans? who is the new joe manchin in the republican senate, or is it the market that constrains the hopes and dreams that we saw in the campaign trail?

is it the market that constrains those hopes and dreams? annmarie: that is what larry summer things -- seems to think so. the trajectory of policy, the tax cuts don't expire until the end of 2025 so it does look like an administration that can come in and based off conversations i've been having, they are already starting to step up from recalibration of free-trade that they want to enact, that trump has been basically on the campaign trail for. that is why it makes this fed meeting so irrelevant that jay powell basically milquetoast today in terms of what he's going to have to say in terms of all of these questions about 2025 and beyond. jonathan: my first signal would be cabinet picks. whoever he picks for treasure, is ambassador lighthizer or somebody who might be quite market friendly? >> we don't know yet.

that is going to be the telltale sign to this market about how aggressive trump wants to be and basically how antagonistic he wants to be toward china. if it is ambassador lighthizer, you can see the walls going up ly a higher. we already know but scott besson thinks about tariffs, they are in negotiating tool. jeezy and paying it, call us when it starts to bite. jonathan: the s&p 500 notches its 48th all-time high of the year. on elon musk tesla under a trump presidency, and andrew hallman horse of city looking for five basis point rate cuts. we begin this hour with investors embracing the trump trade. record highs on both the s&p 500 and nasdaq: the biggest postelection day gain in market history. deutsche bank says the rally fits with the historical script of a rally after close elections when the result is clear. looking a little further out the market will have to grapple with the policy impacts on the positive side, tax relief,

deregulation, and the negative side, tariffs. >> good morning. jonathan: are you saying yesterday's price action was more of a cleric event than pricing? >> is what we've been talking about for a while as you go into a very uncertain events. you saw basically in a very big way across all asset classes a massive blowout basically in what i'd call the volatility premiums. applying volatility going a lot higher than realized volatility. and the event happened. it happened, the quicker than the market was position four. and so what you see is basically this premiums collapse. the uncertainty is cleared up, and if you look at yesterday's price action and you overlay it with what happened in 2016 it is a pretty good fit. if you overlay it with the last elections, it is right there.

you can get into the decimals of small caps doing a little bit better, but otherwise it is really the same. jonathan: how are you in the team thinking about a sequencing of policy, good stuff and bad stuff? >> first comes the business cycle of the economy which i would argue is very solid. it's been running at 3% growth year-over-year, basically for quite a while now, so it's pretty steady, so i would say it's pretty good. and so then you start thinking about overlaying policy on what is a baseline view of policies that are going to change, and you can make the case that deregulation adds may be another half of 1% that. obviously you notice a big difference basically in various segments, and then you think about the tariffs and there is great uncertainty about the

magnitude and timing. and that would take off perhaps. economist calculations are steady calculations, this is not about the steady state, it is about the transition, but it is a benchmark way of thinking about it. most calculations would tell you it takes off half a point. so if you start with a baseline of 2.25, i am back to 2.25, so there's positives and negatives. as you say, it will basically all depend on sequencing. i would say the difference now and then is the economy looks a lot stronger, so you could in principle as a policymaker take the risk both during the negative and before the positive, or you could join them together, but i would say the pressing issue is really the positive one, and so my bias would be and my hope would be that they do those first and

also basically on the trade side, it allows a leadtime basically for a better transaction to take place. lisa: a lot to unpack here and they want to get a sense of as you parse through some of these uncertainties how much of what we are seeing already, you said a lot of it is just the relief rally. we heard the same thing from stuart kaiser. people waiting for some serve outcome and now they are piling in because it has ended. just to get a sense of whether this is something to buy into or whether to look for opportunities to sell. how much of this was simply that relief rally and not having anything to do with policies? >> i think about it more like a bump in the road. not really a relief rally, you are sort of heading for a risk. the event passes and that basically gives you the upside, for the reversal of that hedging action.

unconstructive, and i think the rally basically goes further. i would say the most important thing there is really the state of the economy, the business cycle, is that going to really change? we've been very constructive with the cycle and basically remain very constructive on the cycle. and that is simply because if you think about it, there's various aspects that happen in a cycle that just haven't kicked in yet. we are still talking about the stocking and when we are restocking, there is the funk in manufacturing. they long list of things haven't happened yet. lisa: but then you overlay the idea of tax cuts, less regulation, mergers and acquisitions, and if the reason why we saw from julian emanuel the increase in his expectation for june of next year. 6600. are you looking at the same kind of upgrades to the forecast simply because there is this sense that we are turbocharging

some of that growth and stability. >> i would disagree with that number, i think it's exley very reasonable. if you think about it, we just put in two years of 20% plus upside on the s&p, so yes we are still constructive but the pace of a move up will slow. but i'd say 15% is a very reasonable slowing from 2022 two years in a row. we talked about this before. equities from a supply and demand point of view, as of last friday, the 51st percentile. that is as close to neutral as you can get. we didn't see the fear and the big pullback in positioning and move to underweight, but positioning is that neutral. the 51st percentile to the 100 and 99th percentile, which is

where we were july 16, by the way, that's worth some percentage on the s&p. that's not a small number. and in the meantime if you look at other aspects of our supply demand framework, one of the most surprising things is one of the robust inflows we have seen into equity. so while we were all voting and trying to watch tv, we had $5 billion in inflow equity on the day. and i think that's been a very important driving force. coming back to your question, it has been continuing for a long time. it will continue, i would argue, and if you think about it from a fundamental point of view, unemployment is pretty close to 4%. gdp growth is only a 3%. anne-marie: to go back to the start, you said potentially you hope president trump does the bad things first.

>> the good things first. anne-marie: whether sequencing may be tariffs first and if that is correct that he goes for tariffs first, having lived through trump 1.0, do you take them seriously or literally when it comes to what he is pitching on tariffs. >> i taken both seriously and literally. annmarie: so you can start modeling 10% tariffs, 60% on china. >> yes, but that's not very easy to do. that assumption i could debate as to whether that is exactly the number you should use. jonathan: we've got global in the title. what are you doing with european stocks? >> it's a static calculation. which is the steady state, there is no such thing. jonathan: it's about feelings. so what do you do with european equities for 2025, to those get better from here or worse? >> is a pretty fluid situation. i would say there is more risk

of upside than downside. jonathan: why do you think so? >> europe hasn't really recovered because the pandemic was followed pretty closely by the russia ukraine oil and gas issue. and so if you look at any measure of activity in europe, you will see you had a big balance coming out, basically. but we sort of gone sideways for a couple of years now. when you go sideways that suggests some resilience, not a whole lot of positive things that happened with the economy in there. so you know, we had this conversation before about global manufacturing, it is in a funk and germany has greater exposure to manufacturing, so it kind of makes sense. and so i say if you look at manufacturing in the u.s., in german manufacturing pmi, all

pmi and ism have their own quirks. you look at them relative to euro history, they are in the same place. it's not really that much worse. u.s. equities has been working out for two years. we are in exactly the same place, and so i would argue there is more upside than downside risk. maybe just a touch low, we will watch the political irrelevance. jonathan: thank you, thank you. the political relevance in germany. shooting in email this morning, saying that maybe this is an inflection point for things to actually get that are in europe and not worse, which is kind of the point. relative to what is the price right now. let's get you the bloomberg brief. dani: moderna shares are rising 10.6% premarket. the company reported third-quarter revenue that beat estimates thanks in part to an early start to the sales of this seasons covid booster shots.

investors have been concerned about fading vaccine sales and a slow launch of its rsv shot. shares of moderna are down nearly 50% through wednesday's close. tsmc says taiwan needs to invest more resources into advancing the country chip technology and expanding its lighting expertise. a senior vice president spoke just hours after president-elect trump clinched the presidency for the second time. trump had said taiwan took semiconductor business and jobs from the u.s. any plans on leveraging tariffs to convince company like tsmc to build plants in the u.s.. raygun has hung up her dancing shoes. she is retiring from competitive breakdancing due to the scrutiny of her performance of the paris olympics. the 37-year-old gone viral after she failed to get on the scoreboard in reefer competition rounds and showcased unusual moves like the kangaroo hop. she said while she initially planned to continue competing, her experience at the olympics

was so upsetting that she changed her mind. that is your brief. jonathan: i'm not going to pylon raygunn, one of the highlights of the liv-ex for me. lisa: i will just say a lot of olympics is sort of out of my aspiration. that was wonderful. jonathan: you felt like you could take part. lisa: i actually did take part, we all did it and it was really fun. jonathan: for australia. plus, tom narayan of rbc. i promised i wouldn't pylon. the bar is low, right? -- pile on. this is bloomberg. ♪

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♪

jonathan: equities up by a quarter of 1%. downgrading jp morgan to underperform. david george seeing limited upside encore risk reward. the stock is down six tens of 1% after rallying more than 10 in yesterday's session. 10% higher, 11. did we get close to 12? ridiculous rally. annmarie: after an incredible rally already. jonathan: the analyst noting better than fear guidance despite worries of weak android handset trends and planning apple manufacturing plants. that stock is up by 6.4%. and finally bank of america raising its price target on tesla to 3.50 saying it will likely benefit from any figural -- federated vision of a ton, adding that the relationship between donald trump and elon musk will need to be monitored closely. that's how you avoid talking about it. lisa: how do you put a price

target on a relationship which is essentially what people are having to do? jonathan: sticking with tesla, shares soaring on the back of trump's victory, gm and ford also getting a boost. it remains puzzling especially considering how they reacted terror threats during the first trump administration back in 2018 and 2019. most puzzling to us is the positive reaction to tesla shares. tom, good morning. what puzzled you about tesla, what did make sense? >> we don't have evidence that we are going to get national federal deregulation of ai. tariffs are not a good thing for tesla, and any repeal or attempted repeal of the ira would really be bad for tesla. so other than the fact that the ceo has a relationship with the president-elect, i don't really see why it would benefit shares of tesla. jonathan: do you have any confidence you can stop as bad things are happening to the company? >> i mean, we saw the first go

around in 2018, 2019. i mean, it was more of a threat so it didn't really happen, so that could be a silver lining, is this just a bluff? i don't know. i don't know what is inside the hearts of these individuals. lisa: what about dark maga don't you understand? how do you put some sort of price tag on a relationship that seems incredibly interconnected, there is one person who clearly has an ear into donald trump? >> so here is where i would probably agree. economy is like 70% of tesla valuation. robotaxi. if there is federal deregulation, that would be from vendors for tesla. not just tesla, a lot of companies autonomy. so if that happens, sure. we just don't have evidence of it.

we need a commentary where byrd has been saying the opposite. annmarie: trump 1.0, tim cook was dealing with some issues, call the president leaning on his ego a little bit and then said can i come in and talk to you about it? from had a much better relationship with tim cook. couldn't elon musk maybe have carveouts for tariffs, but also get deregulation on the backend because of his relationship, given how trump likes to run his white house, he is in a prime position. >> the optics of how do you single out one automaker vs. another. annmarie: biden administration did it, they had gm and didn't have tesla. jonathan: that was more optics because of the uaw situation. that wasn't actual policy. i think it would be very difficult to give preferential treatment to one and not the others. we saw cleantech get destroyed. shares got destroyed.

the same beneficiaries as tesla, storage, easy credits, making batteries. how do you benefit one company and not the others? the only way i see it is it a rising tide lifts all boats, if he was able to convince the president-elect to change policy altogether, but i don't see that is what happening. lisa: it was even more confusing to see tesla shares rising as much as they did. there's a larger question about deemphasizing some of the shift position -- in terms of composition, back and really benefit their tess mata especially transition that has been hurt on a little quickly. if you look at the investment, gm is amply the biggest battery maker in the u.s. ford has talked openly about how

if they were to change their situation, what if the next situation is more restrictive and ford makes use leds more? they've already gone down this path. all you have to do is look at what happened in 2018, 2019. threats of tariffs were problematic in the supplier base. very broad based on the exposures and also, i understand the competitive argument. maybe there's less mercedes or bmw, but it's not like i was going to get an e-class but now i'm going to get a silverado. they don't really compete against each other. >> i got a messaging moment ago and this individual said regulation isn't the problem, it is getting it to work. what is the biggest problem,

regulation or getting it to work? >> there's a difference between full self driving in robotaxi. regulation is important i would argue to incentivize people to purchase the product. everyone thinks they are a good driver. but if it is mandated like airbags and seatbelts, that would be important to push it over, absolutely. but that is like a state-by-state issue. i mean, a federal law to mandate a level two plus, i don't know if i see that happening with a new administration. jonathan: we were trading in vibes yesterday, we will start the trade policy pretty soon. i hope whether we find out whether this campaign promises become reality over the next 12 months. lisa: but trading vibes is so fun. the funny thing about trading vibes is how much of the rally is just people having vibes that thank goodness don't have to speculate about. jonathan: i go back to one

consistent theme in financial markets, trading a positive growth stock in america and basically anything exposed to that with the exception of some consumer facing companies with very thin margins dependent on importing things from china and thinking of some retailers in yesterday's session. lisa: which is the reason a lot of the good news is getting priced in. the key question is how do you value that, how do you understand what that looks like and maybe it is getting overused. jonathan: good to catch up, we will see you again soon. this industry, what is it going to look like? up next on the program, jobless claims. we will catch up with andrew hallman horse of citi and bob elliott, looking forward to a fed decision this afternoon.

jonathan: seconds away from some economic data, equity futures on the s&p 500 positive again. all i a quarter of 1%. the nasdaq 100 up by 4/10 of 1%. both coming into thursday all-time highs. the next data point, and we haven't discussed it at all, it's jobless claims. the previous number was 216. the estimate this morning is for 222 with economic data. let's cross over to mike mckee. >> we are waiting for the jobless claims numbers to drop and i can give you productivity

and unit labor costs. productivity up to .2%. a little bit lower than anticipated. 2.5 of the forecast. unit labor costs rise a lot more, about double. 1.9% from 1%. so there's a question for the fed going forward, we see some pressure on the labor cost side in terms of ringing down inflation? now jobless claims, 221 is a number for last week, and at this point it doesn't look like a significant move, we are going to have to wait and look for sure, the prior week revised up to 280,000, continuing claims 1,892,000, up by 39,000 from a week before. at this point we had a little more in the way of jobless claims but probably mostly noise, and somewhat surprisingly lower than anticipated productivity numbers. so we will see how the fed talks about that, if they do this

afternoon. jonathan: thank you, sir. we are down a basis point. i have to stress this kind of meaningless in the green context of the week so far given the fact that yesterday yields were hired by double-digit profit curve. andrew is alongside us for more. good morning to you. let's start with jobless claims and then we can get to all the rest of it. claims are really low and even looking for a much weaker labor market into year-end. why doesn't that back that theory? >> and is a different labor market than something we've ever seen before we have really low hiring rates. we see the jobs data, we see the percentage of people getting hired in some new jobs, and that number is low, so it is hard to get hired into a knob. the good news is we are seeing jobless claims at initial claims chilling effect the layoff rate is still low. so we have a strange labor market for it seems like people are hanging onto the worker that

they have but not necessarily wanting to hire more. jonathan: so you think 25 today and 50 in december and everyone else is thinking about 2025 in rate hikes and not rate cuts. how useful are the price action of the last 24 hours to project out what went 25 might bring? >> not useful at all. they're not supposed to take a macro narrative away from what is going on in interest rate market right now. if you look at what is happening in the macro fundamentals, do have the softening of the labor market, i think that is clear after the last jobs report for even if you adjust better hurricanes and for strikes, and i think that is part of why the market can react to it, we also have the election coming up, but with all that distortion, if you draw a line through it, what you see is the pace of job close -- job growth, the unemployment rate has risen, and if anything, it is still trending higher. that is going to make up fed then there is a downside risk to employment and then you moved to the inflation side where we just

outnumbered for the third quarter. 2.1 6% quarterly annualized core pce inflation. that is essentially target inflation. if you are the fed you are looking at inflation is close to target and unemployment rate that is still low but maybe rising. the path is going to be toward lower rates, so i really don't understand the move in the market or the new narrative that this is a fed that might need to hike. no, this is a fed that is cutting. >> i think a lot of people but agreed that the fed is probably not going to hike all the one person did put out the prospect. a number of people, actually. there is a feeling, though, that they can't cut nearly as much especially when the deficit is probably going to expand and even if it not accelerating, the economy is pretty solid. how do you push back against that? >> i'm not sure that the economy is pretty solid. i know we are seeing gdp growth running close to 3% on the activity numbers, those look fine. the labor market doesn't look as strong, and i think we just had

a referendum in this country in some ways on the state of the economy, and the results were not positive for how people are experiencing this economy. you see that in some of the survey data. i jobs plentiful or hard to get? you see that hard to get number coming up, a jobs number that is elevated right now. if you are the fed, the mandate is employment and inflation. inflation is close to target, the labor market is softening, and back in august chair powell said we would not see for welcome any further softening of the labor market. that means policy rates need to be down toward neutral. lisa: this really highlights how messy the data is because the same time you are saying the election was a referendum of sorts that we see this in sentiment, at the same time we are seeing the u.s. surprise economic index rise to the highest level going back to april. at the same time ism services actually increase more than expected. so how much are you looking at the rising inflation

expectations as stated to pay attention to or not pay attention to for the federal reserve? >> i think it is a fair point and the signal-to-noise ratio is just lower than it used to be. in some ways, we know why that is happening. job roles report, the payrolls report, the response rate is much lower, imagining the data is going to be noisier. we see that in from of the revisions, consistent downward revisions. you get a jobs figure, you look at the surprise index, the market reacts to that. i'm not sure people are paying as much attention one or two months later. sometimes a year later with those for living area benchmark revisions to the payrolls numbers that turned out to be 818,000 lower in terms of the level of job thought it was. those revisions have into the downside and we are actually looking at a weaker labor market than we thought that the narrative has already shifted. what we are trying to do is look at the data as best we can and draw those three lines in terms of where things are headed. i would agree right now we are

running good gdp growth, we have an unemployment rate that is low for percent, that is not a bad thing, either. but the question is where are we going from here? annmarie: i want to come to your point about a referendum. with that jobs, or price pressure and inflation? >> i think it is a combination of the two. that is why you are supposed to be adding the unemployment rate inflation. when you look at the consumer sentiment surveys, people are saying prices are high, that is one of the reasons they are unhappy with where the economy is. the other thing that i think matters, look or interest rates are and it goes back in the discussion you are having with lisa that fiscal concern means that longer-term interest rates have risen again. it means mortgage rates are going to be close to the highest again. we thought they were going lower because the fed was cutting interest rates. those are actually reasons that the fed might end up more dovish. i understand that is a complicated scenario when you have fiscal policy that is raising interest rates.

jonathan: you really think that 50 basis point cut contribute to higher longing yields? before talking about a trump presidency or a material way, ever since they cut interest rates, yields bottoms within 24 hours of that. they haven't been up by 60 or $.70. we were at 360 last time around. so let's call it 80. 80 basis point move on the 10-year. don't you think the fed easing has had something to do with that? >> all else equal, a more dovish fed is a steeper yield curve. the level of short-term interest rates is going to be lower relative to the long-term interest rates. you have a more dovish fed, you should be more concerned about medium-term risk to patient, about of cyprus to growth in the longer run. what happened here is we were coming into the fomc meeting, the data looked pretty bad. that jobs report look pretty scary, employment rate accelerating. i think they were thinking maybe

they should have cut 25 basis point of the previous meetings. camus that we had higher in yields, we've had these consistent upside surprises in the data and yields just got that higher. the election also playing into that move higher. but the longer discussion around that is where his monetary policy going to be relative to fiscal policy? we still have large deficits, and that is going to be in the longer-term yields being higher. jonathan: my opinion doesn't matter if i have to respect the price action of the last 24 hours. there are going to be service workers they don't have to pay taxes on tips anymore. we are a few house seats away from this reality corporate tax rates coming down with conditions, these of a changes for the u.s. economy which should stimulate demand. we've all be seen that kind of competence level being baked into bank stocks. that is the markets screaming and later on this afternoon we are going to have a federal reserve talking about the economy and the way that you do.

we're on two complete different planets right now. finance a market is going to be right over here, chairman powell is going to be right over here. when they put out projections for december, how much weight can i put on that? he's going to be doing a news conference today based on a dot plot from september 18. this federal reserve conference today is absolutely ridiculous and i just wonder how different the conversation is behind closed doors. can we at least acknowledge that, that the conversation we hear in the news conference today is going to be radically different for the conversation behind closed doors. these guys have got to consider now a very real different scenario for 2025 than they had to a few months ago. >> i think that is guaranteed and they will be a very interesting discussion going on at this meeting and we will see that any number of years in the transcript. we are going to hear that today in the press conference, as little as possible, because they don't know. and really we don't know in general because we didn't have a very robust aussie discussion going into this election.

we talked a lot about politics, not a lot of policy. jonathan: let you know they are in the risk management business. if i face two very different scenarios which are the polar opposite of each other, your world, recession and higher unemployment, and donald trump's objectives, lower unemployment and a domestic boom, why are you cutting 50 in december? >> i come back to inflation because that is the other mandate that i worry about. is this potential stronger growth outcome for the economy going to drive inflation? everything we are seeing is going in the opposite direction. we have demand running below supply now. we have goods inflation that has come down, housing inflation. here talking about mortgage rates up to where their highs. housing cycle engine traction. that is why the fed is in a very different position. the fed is looking at this and saying inflation looks under control. that is what they are behind closed doors. inflation looks under control, and i have this downside risk to

the employment mandate. if i'm wrong and we get stronger jobs growth and stronger gdp growth, that's great. but i'm not going to be wrong and cutting rates. jonathan: it's going to be a very interesting few months ahead of us. always good to see you. thank you, sir. if you are just joining us, welcome to the program. equity futures higher by about 1/10 of 1% of the market has got a little bit of a lift. you see that on the nasdaq 100 as well, higher by 4/10 of 1%. after a monster rally yesterday of almost 6%, we come back down by about 4/10 of 1%. is this huge move not just in the last 24 hours, but ever since the fed cut interest rates back on september 18. that morning the tenuous trading in the 460. this morning we are trading the 400 40's. this bond market is radically different than the one that they looked at at the last meeting. lisa: which raises the question of how they are going to address this. this actually increases the downside risk for them if

financial conditions are tighter and that put an even greater constraint on mortgage rates and other long-term rates. this point about behind closed doors will be a very good thing discussion about the response mechanism can scenario analysis. can't wait to read that in five years. jonathan: and kate -- can't wait to see the changes that we might get that six months time. good to see you. how much james this week the global economy? >> i think we basically doubled down on the pursuit of monetary fiscal policy in the u.s.. and that is a big deal ahead, particularly because the consequences of the easy fiscal policy are probably not going to leave elton time for the fed to arrest the plan one under basis point cuts. and the fed can't really act on perspective physical policy until it actually happens, and that won't happen until later. >> if it doesn't shake

direction, will chief pace? we had a conversation about maybe going 50 in december. if you are the federal reserve, do you have to slow down that pursuit of neutral? >> the fed's backward-looking. they have to be down for looking because they have been so poor at trying to predict what is likely to transpire. they learned a lesson as a result. they are going to be looking at the actual data combined with the fact that they strongly believe that inflation is over. enter the cuts will, at 50 or 25. it doesn't really matter that much particularly for the equity market or growth. the direction of travel is clear. rates are going down, even if inflation continues to be elevated village of to the mandate, even if growth continues to be pretty good. they are cutting rates because they believe that inflation is dead. lisa: so you buy into that notion, or do you go the opposite direction and say inflation is alive and well, and these are the ways that i want to play? >> if you even look at the

actual data, core pce is 2.7%. that is above the fed mandate. it is unlikely to actually meet goals for december as a function of that. we continue to have relatively tight labor markets, meaning not quite as tight as it was before, but still tight. unit labor costs rise in the day that we saw this morning. all of that points to elevated inflation pressures ahead. if the fed is going to continue -- continue to pursue this monetary policy, you want to buy equities and you want to buy gold. >> at this point this is what we're are trying to parse through. how much is the course of the economy from before what people are currently looking at and basically a sigh of relief, know what happened with the election. regardless of the outcome, we know we have an outcome we can move on versus an actual growth shock from the new policy. how much is that growth shock already being priced in? >> what is priced and if you look at the postelection indications are essentially the

equivalent of upside growth data points. payrolls that is better than expectations. so incrementally expecting to see stronger growth with this, but there's a long way to go in terms of the pricing of a stronger growth environment with easier fiscal and easier monetary policy ahead. annmarie: there's also a lot of inflation potentially can be priced in next year. tariffs coming potentially almost immediately. on top of that, you talked about a tight labor market. it could be even tighter if we have stronger immigration. -- talk about deporting people. how does december mean -- >> most of us don't know. that ambiguity of what they are actually going to do, separating campaign rhetoric from actual implemented policy.

>> isn't that enough? >> it's not particularly clear. if you get a 2.5% tariff raise on china every three months for the next four years, that's going to be a radically different impact on the macroeconomy been if we go to 60% on a one of the trump administration. it's important to recognize we don't fully know what is going on. we don't know campaign rhetoric to policy. >> but isn't that the fed answer, we don't notice we have to sit this one out? >> they don't know, so they are looking at the data that they believe is going on. they believe inflation is dead. chairman powell rewrote the reaction function. the important thing in december was he said not just that inflation is dead, he also said the economy is strong and even with that, i'm comfortable cutting ahead and put a net three point 4% and 2025 in the s&p. he was comfortable with delivering easier monetary policy and a strong growth environment. so when you see that, the real

question of the fed meeting today, does he called into question any of that when he stands there at the press conference? at least even raising the possibility that maybe it is important to be cutting given how strong the economy is and how inflation isn't meeting their targets. my guess is he will reaffirm this for monetary policy -- accommodative monetary policy and this means this broad policy in the u.s. and globally is going to be driving asset markets ahead. lisa: so what is your one question for this afternoon if you're going to actually still watch even though you think you have a sense of of the outcome is going to be? and by the way, we are hosting a special. >> my biggest question is going to be what level of inflation data and what level of growth data could cause you to change her mind about the direction of travel interest rates? and bad, i think, you probably won't answer that question and it probably will be asked

because it will be -- to do so, but if i was in the room, that would be the question i would ask and answer would be very telling, assuming it is honest, about what the direction of travel of the in response to the data we are seeing. >> i'm totally with you. the higher risk that things bring is not sufficient to disrupt the easing cost. bob, good to see you. bob elliott with an update on stories elsewhere this morning, here is your bloomberg brief. >> recapping economic data we got a few moments ago, jobless claims going up in the last week. initial claims increased by 3000 to 221,000, roughly in line with estimates, and it with the first increase after three weeks of declines. shares are surging premarket, nearly 23%. the ride-hailing company reported third-quarter results that the wall street estimates. its fourth-quarter forecast also top expectations. they also announced a find work upon the field of companies.

according to bloomberg calculations, the mystery events trader known as the trump wailed is set to rake in 48 million dollars profit as a result of the election. he bet that trump would win the presidency, or popular vote and the swing states in pennsylvania, michigan and wisconsin and the wall street journal, he was critical of the pre-election polling saying that he viewed them as biased toward the democrats. and that is your brief. jonathan: i suggest you read that, a fantastic piece in the journals morning. it's criticism of the people right going to tell the truth and the more interesting pulling for him was to ask them who do you think your neighbor is voting for? which should reveal or could reveal who that actual persons more inclined to vote for and those in the policy was following. >> this just shows how polling is changed and that we all are a little bit nds that he had the payday that he did and that we mocked him. >> i'm sure he's grateful

because his family didn't know. was in his whole network? >> basically, $30 million of liquid assets. >> up next, setting you up in the day ahead.

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♪ jonathan: getting a sneak peek of the trout -- calendar. a look at what you can look forward to the next week or so. 11:00 a.m. eastern time you hear from president biden and then a federated decision at 2:00 followed by chairman powell news conference 30 minutes later. friday, consumer sentiment. wednesday, cpi. thursday, ppi. more results from disney. looking ahead to this afternoon, mike mckee joins us for more.

ipt will be in the room with chairman now. give us an idea what you will be pushing for from the fed chair. >> everybody on wall street wants to know what they are going to do now the donald trump has been elected because there has been a sea change and economic outlook but as were talking about with andrew and bob in segment, it's probably not going to come, is going to guys the question because he doesn't know yet. there's no point getting involved in any kind of argument with the president-elect at this point. they will just wait and see, which should make the afternoon relative before them. i think what we might look for is an assessment of the economy, and whether that has significantly changed since september when they put out the last s&p dot plot. they are not going to give us a new one this time, but we get the feeling that they might see things a little bit differently. >> when with the last time that there was a fed rate decision that ashley had consequence so soon after an election?

>> we've had that happen a couple of times. i think one of the biggest ones was the lisa alan greenspan and the fed lower rates after the election that bill clinton became president and george w. bush lost. george bush blamed alan greenspan for not lowering rates sooner to get the economy going. that was at a time when they criticized the fed a little bit more than they have now. mike mckee on the federal reserve. that news conference taking place at 2:30 eastern. special coverage for you at 1:30 eastern time. joined by bob michele of jp morgan. the former fed vice chair, and deutsche bank as well. looking forward to all of that this afternoon. coming up tomorrow, we will catch up to the peterson institute, the former kansas in fed president, and --.

from new york city this morning, good morning. thank you for choosing bloomberg tv. this was bloomberg surveillance.

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matt: day two of a trump driven equity rally. sonali: bloomberg open interest starts right now. matt: jerome powell faces a tough test in the new trump era. the fed is said to cut rates later today. as the trump when rumbles, we