>> today, another step was taken to reduce the amount of policy restraint by lowering our policy interest rate by quarter percentage point. >> on autopilot to get rates down to 4% by the early part of next year. then we take it from there. >> you have to preserve the economy and some kind of steady state. we are too high right now. >> next year, you have what could be pretty significant policy changes. >> i think jay powell will want to preserve optionality for 2025. a lot could happen. >> this is bloomberg

surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: that's get us all to the weekend. good morning, good morning. bloomberg surveillance starts right now with your equity market down and touch on the s&p, negative by .2%. on the nasdaq 100 down by .4%. yesterday, all-time highs on a three-day winning streak, the best week of the year on the s&p 500 so far. holding steady on equity futures. the russell is down .2%. small caps up almost 8% this week. the bond market, the 2, 10, 30 year. if i asked you where you thought that yields had been, you might say it feels like they are higher. because we were up so late on tuesday night seeing them so much higher. they're down on the week by almost 10 basis points. another three on the 10-year. 4.29. lisa: the only move that stuck was the good one and the bad one faded away pretty quickly.

assessing how quickly donald trump could put into place policies that could potentially be inflationary. bond markets was sell the rumor and after some thought buy the news. equity markets was by the news by the rumor and keep buying because everything will be good for them. jonathan: we need to work out if they get the trifecta, if republicans get the house. narrow margins. we will work through the program. then we have to start forming a cabinet, work out who is going where to what positions. lisa: we need to know the composition of not just full congress waiting on the house votes. it might come down to 218 versus 217 which means that every single representative ends up being a king, but will likely fall in line with the former president so he can enact his tax legislation. one key pick for the cabinet last night was announced by the former and future president donald trump. susie wiles. she is seen as a very competent

individual inside and outside of the trump camp. she is someone who likes to stay in the background. she will be a physical human moat around president donald trump and decide who gets access to him. she will have potentially unorthodox voices stay outside of the west wing. jonathan: let's start with the price action, equity futures down .2% on the s&p 500. we have a lot to talk about on this federal reserve and what happened in the news conference. in the bond market the yields are lower by three basis points. the 10-year, 4.2965 year it will catch up with sebastian page. robert casey has control -- as control of the house hangs in the balance. and dan toban as investors dial back trump trades. records highs following the interest rate reduction. jay powell pointing to u.s. economic strength. sebastian page of t. rowe price writing, i'm fairly optimistic about the u.s. economy.

equity valuations and spread levels agree, hence opportunities to significantly overweight risk assets unlimited. sebastian, good morning. what has changed for you and the team? >> it has been a stressful week for everyone. the country is sleep-deprived. we were long going into the election and we still are. i think the economy is going to define over the next 12 months. jonathan: it's work through risk assets. would you like more within equities, large versus small, geographically, the u.s. versus the rest of the world, how are you thinking about those things? sebastian: we are long value stocks and neutral between small and large caps in the u.s.. neutral means that we are kind of missing the rally right now. long international small caps. they happen to have the return of equities on the u.s. small caps, dragged down together with global small caps.

otherwise, between the u.s. and non-us we are neutral.it is not an environment where we like to take large positions. we have a slight overweight to start, overweight to cash and short bonds. we are navigating through this. lisa: you said a lot of this good news or euphoria that the markets are extrapolating out has been priced in which is why you don't see a lot of opportunities. what actually is the scenario being baked in? the knee-jerk reaction was less regulation, fewer taxes possibly, and some other aspects that would reduce growth and positive for corporations and negative for bonds. the bond markets are actually saying it will be fine for us, too. what is the scenario they are pricing in? sebastian: if you look at the day after the election, it first looked like you take out a lot of uncertainty and that is good for stocks. you have three factors that you mentioned. the regulation, lower taxes,

inflation -- deregulation, lower taxes, inflation. i go back to fundamentals. how is the economy doing? you can still squeeze a bear narrative if you look at manufacturing pmi's the yield curve and the change in unemployment. the bull narrative is so much stronger. citi's surprise index is up, service pmi's are at 56, unemployment is low, the fed is easing, we have fiscal pedal to the metal. lisa: i'm laughing because i remember you talking about the fights of bulls and bears at your investment committees and i imagine that the bulls are pouting and the bears are slinking into the corner. is that the tone or is there a more clearheaded look of what has been baked in? sebastian: look, we don't call it fights. lisa: constructive discussions?

sebastian: robust debates. it is usually the bond managers that look at the pessimistic side and a stock managers that look optimistic. the rest of us on the committee are multi-asset investors trying to figure it out. yes, it is difficult to make a really convincing bear case. the ones that i still here nowadays, they always are these days, our around the increase in unemployment. 70 basis point increase in unemployment. unemployment is at 4.1%, low by historical standards. the 30-year averages 5.6%. it is robust employment. lisa: this is why some people are saying that the only bear case could be valuations. you are seeing in flows, even though the united states has inflation potential reemergence in the zeitgeist, you saw a

pretty huge weekly inflow into u.s. bonds and not into european bonds even though the european economy seems to be much more bearish in nature and a lot of people are expecting the ecb to cut more significantly. at what point you like overseas because of the pessimism baked in? sebastian: we have a small overweight to emergency markets. we scaled back after china rallied so much on the first round of stimulus. overall, we remain neutral. the u.s. economy is doing better than the rest of the world. i agree that valuations look higher up your the s&p 500 at 21 price-earnings ratio. the credit spreads have tightened. we are baking and a lot of optimism. the 21 price earnings ratio adjusted for fundamentals, we are doing research looking at the return on equity and going back in time and adjusting

valuation for the quality of the fundamentals. that takes us from a 95%, 95th percentile valuation, to like 65th percentile adjusting for return on equity, margins, fundamentals.it takes us back to 2015, 2016. it is expensive but we end up neutral between the u.s. and non-us. i don't like being in the media saying that we are neutral, because it is not exciting. this is a time in markets where we bring things closer to the middle. annmarie: conventional thinking ahead of the election was that a red sweep would mean bad things like tariffs but good things like tax cuts. tax cuts will be difficult if the margin is so slim in the house of representatives. potentially it will be 218217. sebastian: no taxes on overtime,

no corporate taxes, you take away the inheritance taxes and capital gains taxes. i don't think that all of that is happening. we don't know until we know what happens with the house. maybe you make a good point that this initial pop of enthusiasm bakes in a lot of fiscal stimulus. we are still at 6%, 7% of gdp in terms of deficit. maybe there is a little bit of the short-term overreaction. since the day after the election, markets are stabilizing. annmarie: a lot of markets are pricing in de-regulation. and what sectors do you think that will play out the most? sebastian: that will start the day after the election. small-cap stocks 8% for the week. you saw financials. i think that that is real and loosens up the m&a activity and

is meaningful. what is the market missing? with a 10-year doing around trip, i think that the market is missing some upward risk in inflation. the 10-year could pressure equity markets. the tension between the 10-year and equity markets remains unresolved. jonathan: what is the danger zone on the 10-year. i've heard 4.50 and we fell just short of 4.50 this week. sebastian: the head of fixed income at t. rowe price things that we can go to 5% in the next six months and that could shakeup markets. it would probably come with some concerns about an inflation shock that could probably come from a commodity shock. i'm using a lot of probablys. it would probably come from a geopolitical shock. if you look at the day after the

election and the 10-year went up 17 basis points right away, the 10-year inflation swaths went up 11. you can infer that a fair amount of the move was inflation. jonathan: you provided more analysis over the last 60 seconds then chairman powell did in 45 minutes. do think that he open the door to reports in december? sebastian: his messages were, the economy is fine, we are doing fine on inflation, we are not ruling in or out the december cut, and i will take him at his word. we are all sleep-deprived so we are giving short answers. jonathan: not permitted under the law. we will weigh in on that. you think that they can weather the storm when the political threat comes down on them in the next couple of years? sebastian: i think so. jonathan: short and sweet. i appreciate it.

it is very difficult to get your head around the kinds of policies that will be executed in washington, d.c., particularly the margins in the house. you brought up the bond market move. there is a difference between pricing and existing tax policy, the extension of the tcga, and pricing a new tax policy. $4 trillion in tax cuts are on the table. what we found out, potentially, is that they will get extended. annmarie: and how much more can you add? donald trump has given a plethora of more tax cuts that he wants to enact. these are not part of the ones that he wants to extend. he wants to bring down the corporate tax rate even lower. how much can this get done when you have slim majorities in congress? jonathan: equity futures on the s&p 500 are softer. down .2%. with your bloomberg brief, dani burger. dani: nippon steel expects the

acquisition of u.s. steel to be completed by the year ends. the vice chair says that conversations can be constructive now that the election is over. he hopes to meet with union leaders this month. the $14.1 billion deal faced opposition from unions and president-elect donald trump also saying he would block it. the boeing ceo says that workers will be paid for lost time. in a memo to staff, as we navigate through the work stoppage, we asked many of you to take a furlough to support our cash conservation efforts. we want to acknowledge your support by returning your lost pay. the temporary cuts were made as cash concerns mounted in the first weeks of his tenure, month before the strike. president-elect donald trump has picked his chief of staff. susie wiles, one of the top architects of his presidential campaign, will take the key role in the second administration. he says that she helped him achieve one of the biggest victories in american political history.

she will be the first female white house chief of staff. jonathan: more on that story later. next, on the edge of a sweep. >> i feel confident that we will have a house majority in control of republicans and that mike johnson can be reelected a speaker of the house. somewhere in the low 220's is where we will end up. jonathan: how big will those margins be? live from new york, good morning. ♪ ere 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

jonathan: we are almost there. equity futures on the s&p 500 are little softer, bond yields are lower by two basis points, holding on to 4.30 on the

10-year. on the edge of a sweep. >> i confident that we will have a house majority in control of republicans and that mike johnson can be reelected a speaker of the house. we have a 220 seat majority now. two more than the 218 required for control. i think somewhere in the low 220's is where we will end up. jonathan: control of the house is up for grabs with 25 races yet to be called the current count has democrats with 199 and republicans with 211. rod casey writing, broadly speaking, we see trump beginning a second term unrestrained. republican trifecta, supreme court majority, popular mandate. this might be a once in a generation shot for republicans to enact sweeping change. let's start with the trifecta. what margins are you looking for? >> really tight margins. as tight if not tighter than what we are seeing currently.

of the 25 seats yet to be called, i think republicans comfortably won nine of them getting them to to 19. there are seats that democrats will win. five or six are concepts. the best republicans can hope for is to 20 or tooth won, but it looks a lot like it does today. annmarie: i don't care, as long as we have the majority we will be successful. if you have 218 everyone becomes a king, no? rob: everyone becomes a king. frankly, donald trump as president-elect means that in the house donald trump is king. they will take their shots not from mike johnson or anyone else. they will take them from trump. annmarie: despite elise stefanik who will go to the u.n, what does leadership look like? rob: i think speaker johnson

will retain the seat. he did what he had to do. other than that, i don't think that it matters much. this will be a session in which legislation is done top down. it will come from the white house. the senate is likely to fall in line. the house, even more so. annmarie: the border or taxes? rob: the border, oil and gas through executive action. i think taxes will take longer. it is not a budget negotiation between republicans and democrats, it will be between the center and the right of republicans. we will see that done through budget reconciliation through a number of months. lisa: will it be mass deportations? rob: i think that we will hear about mass deportations. it's unlikely to see that in the short term because it requires so many billions of dollars to do that there is not an obvious path forward for mass deportations. likely what we see is targeted deportations of illegal

immigrants who have committed crimes on u.s. soil. we will get pictures and videos of emigrants being taken across the border in buses and we are likely to see remain in mexico reinstated. deporting tens of millions of illegal immigrants is hard to do without additional funding from congress, which would take longer. lisa: one of the most interesting conversations was yesterday talking about the budget deficit and his concern as a republican, a house member, a supporter of trump. he poured cold water on some of the proposals from elon musk and the feasibility of cutting $2 trillion of the budget easily. how much pushback will there be within even the republican party as far as expanding the deficit to the degree that some protect the plans would do? rob: i think there will be some pushback but almost necessarily we will see an extension of the trump tax cuts, all of them. there isn't any obvious spending to cut commensurate with that level of tax cuts. otherwise put, i think we are

going to see an expansion of the deficit almost necessarily. jonathan: work through the policies on the campaign trail you think would get done. no taxes on tips? rob: probably not. jonathan: why not? rob: over the past six months what we have seen his donald trump run a phenomenal campaign. today, we know that it was a winning campaign. a lot of what he was discussing, does he want to get it done? maybe. are they priorities in the first 100 to 200 days where we will see a bulk of the legislation get done? probably not. jonathan: corporate tax rate to 15% with conditions? rob: probably so. the campaign talks about 20%, 18%. a corporate rate cut doesn't play well among the working-class. i think republicans are going to do all that they can to get it down to 15%. annmarie: susie wiles was announced last night. who else do you expect to join the cabinet? rob: ric grenell.

if not ric grenell it will be from the senate. maybe rubio. we are all asking ourselves who treasury will be. scott besson i think is at the top of the list but howard like nick has become more popular in the transition teams over the past week or month. i would look at howard lubick as well. annmarie: the names for potential cabinet picks, what is it tell you about how the next four years will play out? rob: the trump 2.0 team will be more ready to govern than the trouble in -- govern than the trump one plano t -- 1.0 te am. it was also a trifecta. i think that we will see a different trump administration with more momentum. more efficient with or without elon musk running the efficiency show. i think what we will see is a

technocratic cabinet, but also i cabinet willing to implement trump's policies. lisa: yesterday donald trump came out with the plan to eradicate deep state talking about measures to give him the ability to remove certain people, certain bureaucrats, certain members of the government. how much are those we would expect to hear versus the technocratic aspects you are talking about? rob: at top level cabinet positions, these people are smart with their hands on policy and will be ready to go. under that, some of the more professional but still policy-related jobs, trump wants to make sure they are pursuing his agenda and not their own. the easiest way to do that is to enact section f, which could allow him to fire up to 50,000 policy-level positions sub cabinet. do we think he will fire 50,000 people on january 20th?

no. is that a healthy threat to make sure they are pushing the ball forward? it is helpful, so i think we will hear more about section f. lisa: ready to govern could mean different things. pushing through legislation? looking for provisions that could allow more dramatic revisions to go into effect? rob: first, it will be done by executive action. the two opportunities are on the border. not so much major immigration reform, but border enforcement in particular. i think quickly we will see trump return to the drill, baby, drill talking points opening federal land for oil and gas production. in the short term, i'm skeptical, but it is what it is. on the legislative front i think that it will be tax focused. everything else in the first 100 days probably falls to the wayside.

jonathan: robert casey, one man to watch is the ambassador. where does he land in this administration? annmarie: that is push pull within the campaign whether or not you put someone like him at treasury. that sends an antagonizing message to china. do put him somewhere else? does he go back to ustr? we will have to wait and see. jonathan: china preparing for another trump administration. that conversation is next. equity futures are softer on a record-breaking week. ♪

jonathan: record highs on the s&p 500, the nasdaq 100 pulling back just a touch. softer by .1% on the s&p. a three-day winning streak on the s&p, the longest since september. it's been that long since it had a three-day winning streak on the s&p 500. poised for the biggest weekly gain this year. two-year, 10-year, 30-year. 10-year's down on the week. difficult to get your head around if you are here for election night and the day after.

417.24. we have a lot to talk about with regards to chairman powell. trying to get the optionality the vice chair was talking about. lisa: with a question mark about which policies are going to be limited. that was hanging over the bond market. the reason you saw this massive whipsaw. when do you start pricing and what the president-elect can do as quickly as he can do some of the other things? that is what he saw a round-trip. on wednesday, $20 billion floated in the u.s. equity funds. the most in five months. $14 billion with the was bond funds. for all the handwringing about people fleeing, the flows don't back that up. jonathan: in the fx market, euro-dollar, 107.94. the index on course for six consecutive weeks of gains. up on the week by only .1%.

it feels one way but in many ways we are actually just flat on the week. in the fx market on things like the euro slightly negative. the bond market has seen a rally. yields dropping across the curve. president-elect trump naming susie wells as his white house chief of staff. she will be the first woman to hold the position. you have heard this a few times. this campaign is disciplined. not the candidate, the campaign. when we talk about the campaign being disciplined, this is who we are really talking about. annmarie: she is the backbone of the campaign. she has the trust of president trump -- president-elect donald trump. i have never heard of republican that is either in the maga world or conservative republicans speak ill of her. she will be the first female to ever have this position. this is one of the most powerful positions in the united states government.

i think probably a morning like today, mark cuban is a little embarrassed of his call and remarked that if there is no strong women around the former president. she's very strong. she rarely tweets and she tweeted about that. she was the backbone of this campaign and she will be the backbone of the west wing. lisa: she's both an insider and outsider. in terms of washington outsider she has not necessarily been with the backbone us on the more traditional washington areas but she was in ronald reagan's campaign in 1980. she worked with john delaney. she has this political experience throughout that time. interesting person for him to choose and when i think a lot of people are finding really interesting. jonathan: focused on one thing, watching the cabinet slowly come together. jay powell avoiding speculation over potential policies from donald trump. signaling he is ready to defend the central bank from political pressure. >> some of the president elect's

advisers suggest you should resign. if he asked you to leave, would you go? >> no. >> can you follow-up? do you think legally you are not required to leave? >> no. >> do you believe the president has the power to fire or demote you and has the fed determined the legality him demoting other governors? >> it is not permitted under the law. jonathan: no, no and not permitted under the law. lisa: one thing we observed yesterday, he was prepared for this. this is something the lawyer jay powell had thought significantly about. look at the code and had a very quick and decisive response. it raises the question how much the fed is preparing for this, understanding what a trump two point could look like, and what kind of fight they are putting up to prevent that. at this moment it really seems like almost provocative and actually notable we have not

gotten a response from president-elect trump. maybe there won't be a war. annmarie: trump sat down with our colleagues at businessweek. if reelected, would you allow jay powell to serve another term? yes, i would. there is a lot of false information on that. especially if i thought he was doing the right thing. he's cutting interest rates right now and for donald trump that is the right thing. jonathan: they could cut again in december. more on that later. the biden administration rushing to complete the chips act agreement before trump enters the white house. within 20 companies still in the negotiation process, quitting intel, samsung and micron. annmarie: what i find interesting is that trump 1.0 had talks with tsmc. they wanted them in places like arizona and put some production of semiconductors back in the u.s. speaker johnson was asked recently in new york when he was on the campaign trail for a

representative, would you rollback by an administration chips act? he heard biden and said we would get rid of it, then he said they would not. they did this in a bipartisan fashion. a lot of work went into this from gina raimondo and they went to make sure the companies get that money so they can make chips in the u.s. jonathan: china is repairing for another trump administration, announcing it $1.4 trillion debt swap to help local governments as it tries to support an already slumming economy -- slumping economy. xi jinping sending a congratulatory message to trump. the healthy and sustainable relationship is in the common interest of both countries. peter tchir, welcome to the program. are you focused on the economics of all of this or on the broader foreign policy? as a market participant what matters more to you? peter: they are very entangled.

when we talk about securities, who talk about the four levers of power. as china is our main competitor there will be economic competition. they will be peaks and valleys where it gets more and less tense. there will be things that are just sacrosanct, whether it is chips, technology, ai. there will be little to no grounds for movement with china. there are opportunities in the regular sphere of business to do things with china. i think the tariffs are a threat to bring them to the table and we will see where that goes. yes, we will be at an economic cold war with china. that is not going to change once trump takes office. jonathan: you think the open negotiations before the fire shots, and by that i mean tariffs when they walked back into the white house? peter: people announced tariffs and see how china response. that is his behavior. when they did the first round of tariffs, 2018, it built up over a period of time.

there were talks. markets were reacting before he finally pulled the trigger and put them in. it was almost universal hatred of the tariffs. almost every economist i know cannot and said tariffs are awful, trade wars are bad. maybe they were so bad. i'm hearing a lot of this protectionism fails. you can't do this. china has been running a protectionist economy for 30 years and they went from nowhere to a real powerhouse. we have been in a trade war for a period of time. we will try to figure this out. i think the chips act will be -- some version of it is super crucial. that is something we need to do a better job of, manufacturing domestically. lisa: if the not as extreme as may be feared initially or expressed through the bond market, what comes next? if the tax cuts can basically be extended and that's the assumption in markets, doesn't that tip the scales on the

inflation on the growth side of things? i think equity markets are waking up to. peter: when i look at the tax, it seems incredibly likely. it will increase the deficit but a lot of that is priced in. i'm not sure it doesn't on for growth. i'm not sure anyone to try to figure out their expenditures based on higher taxes. most people assumed on that. i don't think you would get a big economic boost from the tax cuts. maybe something on the corporate side. that is more of the status quo. the bond markets got ahead of themselves worrying about deficits. inflation could come back. i do think we are probably going to see difficulty getting much below 2%, 2.5% consistently as we tried to build on shore refining. as we try to do more of this resupply. trump will do a very good job. one thing that is lacking in a lot of the last four years as we have been trying to move towards sustainable and self dependence is not in my backyard.

not has stopped a lot of projects. that is one area that trump might do a good job, looking at some of these rules and saying those were important, they were put in place when we were not in a global economic competition with china. let's rethink some of these. this time he is surrounding himself with some good advisors who he does seem to listen to. lisa: given the fact people think equity market suggest if not a full throttle growth shock, something that looks a little bit like it on a tempered scale, there's a real question of what the fed's response will be to. i wonder how much you look at long and yields coming down as part of the consequence of jay powell potentially opening the door to not cutting rates again in december. peter: i think powell handled it well and i agree with him. people got ahead of themselves. but will this policy do? what was it look like? it will take months to play out. i don't know if he'll get done in the next year. a lot of it is a negotiating

ploy it is difficult implement. pal said we will look at this. we will judge it as it becomes policy. bond markets got way ahead of themselves. this has been flip-flopping. we probably should have been it 380 on 10s, we were at 440. seeing real signs of inflation. annmarie: can we go back to china? as we read the tea leaves out of mar-a-lago about who will get what key position, robert lighthizer was a robert lighthizer was a. -- robert lighthizer was a key advisor. peter: i think treasury secretary will be important. i'm not sure the market would like that. they have accepted what he does on trade. i'm not sure they would take him in that broader response but that would be an interesting role to fill out.

there will be a lot of that is interesting, that is scary. that is something we will have to digest. one thing i would do my we can note on is if only ai had a good way to translate what trump says into what he would likely means and even more importantly what is policy. >> what robert lighthizer be a not so good. peter: markets will handle it until they see real policy come out and how people respond. we are all just digesting and we have seen this circle of people that are surrounded -- have surrounded him through the election. ok, this circle seems more involved. seems better organized. now we have to figure out what the broader circle will look like. i don't think they will be panic. maybe push back a little bit but i don't get necessarily seeing a growth spurt.

we are seeing people say economic slowdown is likely off the table. trump will work aggressively but the house and senate on his side to ensure we do not get a bumpy landing. that really is what has been taken off the table this week. more so than outright growth opportunity. lisa: deal agree with mohamed el-erian as seeing the economy is bigger but not necessarily hotter? peter: i think it will be more broad. that is one reason we have seen the russell 2000 stocks to well. you will get reversals on these trades. there is an opportunity for more domestic growth, for jobs to be created, for industries that maybe have not been the be all and all to do better -- end all do better. i do like this. i'm looking closely at commercial real estate. teetering about wanted to recommend that. you will see more work from office mandates coming from companies.

the government is very much work from home. if are talking about efficiencies, having people not using office space is one of the most inefficient things. that seems like an easy thing to solve. mandating three or four days back in the office. you are seeing d.c.'s commercial real estate doing better. let's not forget that is one thing donald trump says he understands, commercial real estate. he loves it. i see no reason for him not to push policies for that would help that. jonathan: that's a great call. anyone in washington, d.c. i shout out to peter. tuesday night, the bond market starts selling off. i think you should buy bonds here, that was a brave call at the time. d.c. is a ghost town. if someone set with get back to work, get back to the office, that would be a big show. annmarie: the businesses and restaurants would be very happy. when i first moved there it was the end of the pandemic. it felt dead. it has gotten a little better but still a lot of the federal

workers work from home. that is not going to fly under trump 2.0. lisa: i got notes about commercial real estate yesterday. if there's anyone that will help commercial real estate, it is probably someone who has made his money completely in commercial real estate. you have to imagine some of the policies. annmarie: make washington great again. i think that is what the goal is. jonathan: let's update you on stories elsewhere. dani: dutch police arrested 62 people after 30 said writers attacked israeli supporters following a soccer match. the violence was condemned by both the netherlands and israel as anti-semitic. the national airline said it will offer free rescue flights from amsterdam to tel aviv over the weekend. argentinian president will meet with u.s. president-elect donald trump and elon musk next week at mar-a-lago. he voiced support for trump after his win on social media and tried to forge closer ties with the u.s. the conservative political

action conference is kicking up next week at trump's club. astrazeneca's market valuation fell $27 billion this week with ongoing investigations into china over alleged illegal imports of cancer drugs and privacy breaches. there was talk of another investigation over medical insurance fraud. the stock is left about a quarter of its value since reaching a record high in early september. oil giant shell has retaken the spot for the u.k.'s largest company. that is your brief. jonathan: more from dani in 30 minutes. emerging markets pricing for tariffs. >> this will be long and messy. people be inflationary. it will be targeted at china but mexico will take the brunt of it. jonathan: that conversation is up next. ♪ ♪

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jonathan: equity futures up the 10th of 1% on the s&p 500. bond yields down two basis points. under surveillance, emerging markets pricing for tariffs. >> it will all be about tariffs, tariffs and more tariffs here because he can move very quickly. i'm thinking day one, week one. we prepared for big-time tariffs that he promised. 10% to 20% across the board. it will be long and messy and he will be inflationary. it will be targeted at china but mexico will take the brunt of it. jonathan: mexico and focus as president claudia sheinbaum says she spoke with donald trump about trade relations. it could leave mexico and other emerging markets looking vulnerable. president trump's reelection is

dollar positive. the delicate approach the top of the two-year range on tariff trade war concerns and relative growth. welcome to the program. i want to pick up on that line from that last speaker who said those tariffs are going to be targeted at china but mexico is going to take the brunt of it. do you agree with that? dan: it depends on the timeline. mexico under usmca has some coverage from tariffs. initially we think the more rapid tariffs are the ones i will come under section 301 and 232 which would be targeted towards china. when mexico will be more vulnerable is when the usmca comes up for review in the summer of 2026. we think of this in order to this, it is china first for this year and then mexico for next year. that is probably also in line with how we would think about

the congressional side of things. these broad tariffs probably need congressional approval versus the country-specific targets which could happen faster. it is china then maybe the broad ones and then mexico into next year. lisa: may be dollar strength but not necessarily to the moon. not continuing a trajectory of what we saw in the knee-jerk aftermath of the election. is that right? at -- have we seen the bulk of the moves are ready? dan: about half we would say. 2016, it was a surprise to the markets. you look at 2020, the market thought trump had a good chance of winning. the dollar fell about percent to 5%. -- 4% to 5%. how much of the rally over the last month changed is a function of the election versus the relevant change in expectations for the fed versus the ecb? we would say it's probably half-and-half.

only 2% of the rally of the 4% rally is trump which means we have another 2% to 3% ago to fully price in all the potential policy impacts on the dollar. lisa: you talked about how tariffs will be focused on china and that mexico later on during the usmca could get hit. is that why we saw some of the mexican peso strength in the immediate aftermath of the election complete the defined what everybody was saying as a proxy to the potential trump win was selling the pace of? -- paso? dan: we have seen a steady weakening of the peso. the way the elections work is they are big known events. what you have historically seen is a lot priced into the market. dollar-mex volatility was through the roof. record level highs.

what happens when you get the event and you don't realize the moves? the volatility comes off sharply. that helped support the risk as it the volatility is placed on and that allows some positioning readjustment. will discontinue or not? that is tough to say. we have more concerns. em strategists are more concerned on the mex side because it's an issue in the coming years. they carry is also attractive so you probably see opportunistic buying. annmarie: in terms of the path the tariffs, why do you think trump will go to congress we can he section 232? -- when he can use section 232? dan: it's a lot easier to do it through congress. the sections have limits for how easy and broad you can apply

them. that is usually the way these things work when you talk about the much bigger trade deals. jonathan: i would like your view on what might be the harder trade, the euro. the germans introduced to risk in the last couple of days. it introduces physical loosening. maybe debt issuance out of germany. maybe i'm getting too excited here. framing for us. is this a two-way risk for us in the euro? dan: maybe a little too excited. i think it's more of an option. it will either be the same exact outcome where there is not really that much more room for fiscal or some potential smaller loosening relative to the size of the structural headwinds germany is facing. probably not enough for school to move the needle that much. -- fiscal to move the needle that much. certainly it would be a good sign. what it can mean for europe.

do we see broader loosening? that could support the euro. for now we have to wait and see the structural weakness story remaining more impactful. when we think about tariffs, you know, europe's bilateral trade surplus with the u.s. is one of the biggest in the world. europe could actually be hurt the most. in g10, euro is the easier tariff trade in the developed market space. you saw that on election night. jonathan: good to see you, sir. i always get too excited. dan tobon of citi. usually not about europe and germany. lisa: calm down. jonathan: i can still go on vacation next year. coming up next, mohamed el-erian , adam posen, steven cook, and former kansas city fed president esther george. the second hour of "bloomberg surveillance" is up next.

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>> in the near term, the election will have no effects on our policy decisions. >> the markets will be a great barometer or what policy needs to adjust to. >> clarity on a number of things. trade-in tariffs are really important. >> the devil will be a details on trade policy and fiscal policy. >> they don't know the policy will be, when policy will change, how it will affect the economy. that will matter. >> this is "bloomberg surveillance," with jonathan

ferro, lisa abramowicz and and reordering. jonathan: three the outlook for 2025. equity futures pulling back by .1%. that is the s&p. on the nasdaq 100, little softer. through thursday, all-time highs on the s&p. record highs for the weekend heading towards the biggest weekly performance of the year so far. that is the equity picture in the bond market. two-year, 10-year, 30-year. 417.44. listen to the language slowly starting to creep in for the discourse on wall street. pimco's tiffany wilding opening the door to a potential positive some are. the word skip could enter our vocabulary into what he 25. chairman powell t that it for december. -- teed that up for december. lisa: kit maybe 70%.

the market is saying you have opened up the door. what we heard from jay powell was we will have enough data and we will see the market's reaction long enough to understand with the movies and whether or not we have to respond to it. jonathan: fast forward a few months. at the march meeting they should have clarity on whether republicans have a trifecta. maybe even some policy to work with. they can start thinking about their models. try to model what the future looks like. we are trying to put that together. annmarie: we don't know the exact margin republicans will have if they sweep. it could be as close as 218-217. bob casey think you will be more lik 219-216. it looks like they are ready did come in with almost a mandate of what he promised on the campaign trail. the tax policy will come of the

focus at the end of next year. that is when t cja expires. jonathan: we need to work at having the margins will be. what kind of guardrails we will see and whether they will come from washington, d.c. or whether it will come from the bond market itself. lisa: that is why people are focused on bond vigilantes. one notable thing about yesterday. jay powell talked about how inflation was stickier. mohamed el-erian came out and said this seems like a single mandate fed focused on the labor market. yesterday i would argue this became a dual mandate fed once again. really putting emphasis on the cpi report we get out next week. jonathan: mohamed joins us in a moment. we will catch up with mohamed el-erian as wall street posts its best fed day of the year. adam posen of the peterson institute on why rate hikes are coming sooner. former kansas city fed president esther george on defending fed independence.

stocks sitting your all-time highs. s&p 500 approaching 6000, notching its 49th record this year. equities having their best week of 2024 as trump takes back the white house and chairman powell continues cutting interest rates. joining us now, mohamed el-erian . welcome to the program. i know you watched the news conference. what was your take away? mohamed: three takeaways. as expected in terms of the characterization of policy, i desire to maintain optionality, and where i really felt for him was not in his response to the questions vis-a-vis the president-elect where powell the lawyer cannot strongly. it is this muddled view of what is going on and inability to pivot forward. think of his responses to the question of decomposition of the bond yield. think of his characterization of

real wages. does he want them higher or lower? think of the characterization of the labor market. the key question by mike mckee when he said you have looked backwards, what about forward? powell ended up talking backwards. you get a couple of feelings. one, he's become hostage to data. two, he is in this world of the 1970's and 1980's where once you are away from the extremes of really high inflation or the threat of deflation, somehow he believes monetary policy confined to outcomes. -- can fine-tune outcomes. if you rely on the market to fine-tune, you have all sorts of collateral damage. i felt her him but not for the political reasons most of the media is covering. jonathan: the lack of a strategic underpinning. can you provide clarity on what

you think the underpinning should be given the lack of clarity about the so-called trifecta in washington, d.c.? what policy might look like to clarity and sit there in december, the much harder meeting, to make a decision an interest rates and provide forecasts? mohamed: it should have been a harder meeting because there was great clarity back in july. you and i talked about this. it was time to start reducing rates. he could have done it 25, 25, 25. we were a distance from most estimates of the neutral rate, which is somewhere in the upper three's. there is a distance to go. instead, we got no change in july. 50 in september. then a sense that 50 was a mistake.

then 25. now it's changing vis-a-vis december. this is not what policy should be doing. this is what policy ends up doing when you are excessively data dependent. you have up path towards closure to neutral. you have reasons why you should pursue this. if the election promises to end up to be reality, you can change a strategic view. as you rightly said, we don't know how much of this will end up being actual implementation. lisa: the strategic view seems to be let's cut by 25 and then maybe 25 again in december. then the question really becomes a blank slate. he said they will have more data to make that assessment, putting the focus more on cpi. do you think it was a mistake for him to reintroduce the emphasis on the fed's mandate of inflation after kicking it to the curb and focusing simply on the employment picture?

mohamed: it was such a confused discussion. he was pushed on core inflation 12 months because he had only focus on headline inflation. 2.1 versus 2.7. what about the 2.7? then we got into this discussion of is it 12 months, is it three months, six months? he himself previously has said look at the 12 month number. now we look at three months. we went through so many definitions of core and super court and every thing else -- super core and every thing else. he added confusion when there's no need to add confusion on the issue. lisa: what do you think the fed should be doing? if they going to have a framework, what should they follow? right now to cut rates again might be worst and transitory. -- than transitory. mohamed: i don't agree with that. we are a distance away from what

the neutral rate is. i think that inflationary expectations are relatively anchored. not at 2% but you know my view that 2% is too low and certainly now it is too low and inflation target for this economy unless you want to structurally weaken it in a significant manner. they should be on a path of until we get significant new information on what is ahead -- i stress what is ahead -- we will be on the path, for now, of maintaining a 25 basis point cut. the other think i have stressed, it is time to get out of this framework they have, this mindset that they are the only game in town. they are not the only game in town. they should leave centerstage now and become more of an observer and wait to see what plays out. once you are on centerstage, you have been the only game for so

long, it is difficult exit stage left. jonathan: that is your advice to the policymaker? is it different to a market participant? markets are anticipatory. the fed is overreactionary. what would you say to a market participant if they should be pricing in a big positive growth stock could come with some additional inflation? mohamed: in the direction of travel -- the direction of travel is clear. more growth. slightly higher inflation. a higher public sector bond requirement and a huge sucking sound where a lot of foreign capital would end up in the u.s. that is the direction of travel. what you have got to figure out, and it's hard and that is why we have a market is the magnitudes of these things. i think the direction of travel is clear. the magnitudes will become cleare as we getr firm

indications not only with the policy proposals are but who will implement these policies. the appointments will be very important going forward. jonathan: could not agree more. could this be a bigger problem for the rest of the world and it will be for the united states? mohamed: absolutely. this is a period when u.s. dominance of the global system is going to increase, both are positive reasons and for negative reasons. in the short term, the rest of the world simply cannot build enough pipes around the u.s. they are trying and they have even given these pipes are very small compared to the size of the u.s.. over the longer term, you will see more pipes being built around the u.s. at the core of the system. annmarie: the journalist yesterday get an a for effort about trying to get him to talk about politics. do you have concerns about the independence of the fed? mohamed: he gave the legal response.

this was jay powell the lawyer coming up in a strong way. if i had been him i would have simply said i'm not going to discuss this issue. i would not have said no. i said i would not have discussed the issue. saying no opens up a whole new host of things. annmarie: do you think it was hostile to the former president? mohamed: i think it would not surprise me if it is viewed as hostile. what chair powell was trained to do was give the legal answer. however, it can be easily viewed as hostile, yes. lisa: based on your view of the u.s. gaining that sucking sound of capital away from the rest of the world, will that also go to finance the deficit in a way that really caps off yields? it doesn't allow them to rise as high as some people are threatening such as 5%. mohamed: yes. that is two interpretations of why yields came down. one is the market has revisited.

the other, which i favor more, is that u.s. bond relative to the rest of the world became really cheap. people reallocated. if you look at what happened, u.s. bonds and relative space -- most of the time this market solves and relative space in the advanced world. it solves more in absolute space in emerging markets. in the advanced world they tend to solve and relative space. relative to other advanced economies the u.s. yields were looking very attractive. jonathan: mohamed, wonderful to catch up with you. next time i'm going to ask about a vacancy in the federal reserve in a couple of years time. we can talk about that another time. mohamed el-erian of queens college cambridge. lisa: i think he was really glad you did not ask me about that this time around. jonathan: maybe a space of the federal reserve? lisa: 2026. you think this is -- i wonder

with the mandate is for the person. annmarie: jay powell will survive his term but he is not going to get -- jonathan: not based on the last 24 hours. an update on stories elsewhere with dani burger. dani: he rapidly going brush fire in the los angeles area is burning out of control. the mountain fire has destroyed homes and triggered evacuations northwest of malibu. governor newsom declared a state of emergency in the ventura county. the mountain fire is one of a handful of blazes that sparked in california this week after the uptake of seasonal santa ana winds. shares of x media are rising nearly 4% in the premarket. better than his 50 growth bookings in the third quarter. customers book the total of 97 million nights on expedia's travel websites. it raises guid -- guidance. the chief financial officer will step down after his successor is

appointed here. tesla is now offering a lease-option on its cyber truck. prices will start at $999 per month for three years for customers who put down $7,500 down. the eating maker introduced the lease-option after working through the truck's backorders. tesla told investors the cyber truck was the third best-selling model in the u.s. in his last quarter. that is your bloomberg brief. jonathan: unreal. we will catch up with dani in about 30 minutes. a trump win clouding the outlook. >> we don't know what the policies are. we won't have a sense of when it will be of limited and all those sorts of things. in the near time, the election will have no effects on policy decisions. jonathan: not going to talk about it and then kind of talked a little bit. that conversation is not. ♪ -- is up next. ♪

♪♪ ♪♪ the black friday sale is now on. visit sandals.com or call 1-800-sandals

jonathan: equity futures on the s&p 500 down .1%. bond yields a little lower, down by a basis point. under surveillance, a trump win clouding the outlook. >> its possible policies put in place by congress good at economic effects i could matter for the pursuit of the dual mandate goals. we don't know the policies are. we won't have a sense of when they will be of limited and those sorts of things that implemented and those sorts of things. the election will have no effect on our policy decisions. jonathan: jay powell sidestepping questions on how it could impact the fed's dual mandate. adam posen morning, "industrial inputs, consumer goods and federal tax revenues.

this is the exact opposite of the policies and at macroeconomic stability that have a proven track record worldwide are bringing sustained growth and low inflation." adam posen joins us for more. i want to say upfront i want to congratulate you for having the confidence and conviction to come out ahead of time to talk about these things in a way that i think central banks are unwilling to right now. you said months ago back in the summer going into the jackson hole speech what you wanted to hear from the fed chair. afterwards he followed up again. he wanted him to engage in a scenario analysis. the what if. what if trump won and prepare a market and people for two-way risk. would you think of what you heard in yesterday's conference? adam: thank you for that and i appreciate you having me back. look, given where we are now, powell did basically the right thing. the point was to say it ahead of time before the election since

harris was going to do tariffs on china and mexico. not as many as trump but tariffs. since harris was going to create deficits, not as many as trump but deficits, that would have been the time to say we at the fed have to look at deficit spending as generally inflationary. we at the fed have to look at tariffs as potentially inflationary depending on how much you get passed on. he could have said that in general terms first. instead, now that he is here he cannot say anything different than what he said. the big line for me beyond what you mentioned with mohamed was the saying that we don't have a plan, don't have a commitment from here. look for more of that. look for more of them trying to undermine the market's bets of how much cuts there going to be but in a nonpolitical way. lisa: did you think yesterday was the beginning of that? the opening of the door to some

sort of pause next month that could be the beginning of exactly delayed expectations? just pushing it up and pausing for longer as they wait to see what exactly will get put into place? adam: i think that is where we are at. i don't think they will be a pause next month. they will cut 25 and i don't think they will announce a pause. they will try to slow it so they can maybe skip january and cut again in february. by february, you will know what executive orders the trump administration is giving. you will know with the budget proposal looks like. in which case by february they could be warning that is it for now. lisa: it seems like there is a narrative shift happening where it used to be maybe the fed would frontload cuts in the beginning of 2025. now you are seeing increasing number of forecasts sang the fed will probably cut 25 basis points in december and next year probably pause for the first half. they will need to raise rates but not necessarily able to cut them much beyond 4.25%.

why do you push back? quite easy potential for rate hikes next year? adam: as jonathan indicated, we have been talking about this for almost six months now. it is in the end it doesn't matter who is president. what matters is the policies. if you do large unfunded tax cuts you tend to get inflation. if you do tariffs on a large scale and brought, you tend to get inflation. if you do things to indicate that maybe the current fed chair is not going to resign -- i'm sure he won't. the next fed chair is going to be better terms with the president. that tends to raise inflation expectations. the other thing is nothing to policy. it is economics. the fed, i think, has overestimated how tight they are already and underestimated the

strength of the u.s. economy. part of the market repricing prior to the election was based on the economics becoming clear. annmarie: when it comes to tariffs there's a debate on how much donald trump can do unilaterally versus what he needs congressional approval for. what you make of that? i believe if you look at the law of section 232, what commerce can indicate to the executive branch, donald trump has a lot of leverage when it comes to tariffs on his own. adam: i can fully agree with you, annmarie:. senator rand paul has put out a proposal to reassert congressional authority and i think has a legitimate case to make that and say this is a tax. taxes should be voted on by congress. on the current law, they are all kinds of ways. you mentioned section 232. there are various antidumping measures, national security measures.

all of which biden either kept in place or used in self. all of which the congress did not challenge under trump or biden. unless rand paul's bill passes, which i doubt, there is no reason trump can't just immediately put on tariffs the first day. i'm sure he may not do it literally the first day but i'm sure he's got the executive orders drafted. legally, politically, precedent, yes, he can do it. annmarie: do you think he will use them as a negotiating tactic or he's going to come out with full blanket city percent on china and 10% on the rest of the world? adam: i think he's more likely to come out with that than to -- use it as a negotiating tool. if you're an honest macro forecaster, which i try to be, sometimes you want to be wrong. you want to be wrong either that somebody will do it certain policy and they don't do it or that the policy has different

better effects than you think. it is possible that trump just threatens and waits to see what he gets and doesn't put up the tariffs. i don't think that's going to work because i think he has to be credible both to his domestic politics but more importantly to his negotiating partners. maybe he won't. maybe he will get it all without threats. more interesting is the question that some of the people speaking for the trump campaign will presumably be in the administration have said, look, but tariffs can be removed or they can be escalated. the countries will cave and we will get benefits. that is where i hope i'm wrong. i don't think that's going to work. not so much because the countries will cave but once tariffs are in you will not get the results you want and you will not remove them. i hope i'm wrong. jonathan: as we have seen with the current administration it did not remove her the any of them. it is good to see you.

we appreciate your time. adam posen of the peterson institute with a range of things to think about. the guiding light is just away way for the cabinet positions. if you see the likes of a scott besson, i think it would give more weight to the argument in the near-term. annmarie: 2.5% for 24 months. personnel is policy. that is why reading the tea leaves out of mar-a-lago is important to the financial market. jonathan: coming up, we will catch up with steven cook as world leaders react to donald trump's win. ♪

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jonathan: three-day winning streak on the s&p, the longest streak back to september. just pulling back a little bit, down by a 10th. the 10 year yield down on the week, down another basis point. 4.31. on the two year 4.1870. plenty of healthy debate around the table about the future of fed policy and whether we could get a pause in december. lisa: they clearly put inflation back on the bingo card and cpi will be interesting. when we look at the moves in the

market what stands out is what mohamed el-erian was talking about, the sound of foreign capital into the united states. it will also go into bonds with the differential as wide as it is with rest of the world and that is what we saw with flows as well as yields. jonathan: the follow-up we need to get into is where the money is coming from, where is it being sucked away from at a time the u.k. will issue more debt, when germany will put bond supply on the ballot effectively. where does the money come from? do they have the physical space if we want to counter some of the policies that take place in the united states? lisa: where there was the dismissal of the finance minister and maybe this open the door to loosening the fiscal pursestrings, a question mark about financing, yields rose. you did not see the knee-jerk response in the united states which raises the question to they have less room to do so because there's so much money flowing to the united states. jonathan: there is a belief a

trump presidency is bullish for stocks, bears for bonds, and bullish on the u.s. dollars. we are looking at six weeks of gains on the u.s. dollar, the longest winning streak back to september 2023. euro-dollar 1.0 769. full control of congress hanging in the balance. republicans during a majority in the house with 211 to 199. 25 races have yet to be called. the gop controlling the senate 53-45. the race for the house is the big one. annmarie: this will determine whether they have the trifecta. jake sherman points out the fact that that means zero room for error. absences come illnesses, do you want to take representative of elise stefanik from a new york

district and put her at the united nations. how difficult will that be if you have no wiggle room and you do not want special elections and you want to hit the ground running when it comes to immigration and tax policy. jonathan: you said is everybody going to be a king? he said they will just follow the leader. annmarie: i think it is somewhere in the middle. i do not know if you will have 218 joe manchins walking around the lower chamber, but donald trump will feel like -- rightly so we look at the direction of travel for the united states -- he will feel like he has a mandate and he will think that has to trickle down to individuals. we know how he feels about people having personal loyalty to the head of the party. i understand where bob casey is coming from. at the same time they're going to be certain districts, maybe there are a republican rep in a district kamala harris won and they will need to push back a little bit. lisa: french hills comments on

the deficit were interesting to me. there is a question of what mandate especially if certain people try to impose fiscal discipline. jonathan: guardrails. two they come from the market for the lower chamber? china looking to boost its authority -- to boost its economy ahead of the term of donald trump. the plan allowing local governments to issue more bonds and save on interest in the coming years. this is smaller than some people had hoped for. lisa: i think that is fair to say. there are people saying will they provide direct stimulus to individuals. are they going to build another bridge to nowhere? are they going to support housing prices that could refinance debt and save 600 trillion yuan on what we see with respect to interest payments. it underwhelmed expectations. it raises the question of is this what they were hoping for and do they have the capacity to

stimulate unlevel some people were hoping for given they were waiting to see if trump got back in office. they saw what happened in this is what they came up with. annmarie: is the policy going to be blanket tariffs or negotiating tactic? maybe that is why underwhelmed. the actual to see what trump does. jonathan: everyone is thinking the same thing. what about nippon steel? saying it expects a takeover of u.s. steel by year-end. the deal continues to face opposition by the outgoing biden administration. president-elect donald trump budging to block the deal on the campaign trail. annmarie: i spoke to a source about nippon steel last night. it has been hiding out in political purgatory and sify us. sify us has been used for blanket political regions -- political reasons because of

pennsylvania and their 19 electoral votes. biden is a lame-duck president. it looks like it will be a republican trifecta. my advice to japanese leaders is to make a trip to palm beach and get the incoming president's approval. those conversations are going to start as of last night. lisa: if this was political purgatory, now that the political purgatory is over joe biden may not be as previously thought. maybe sifius is realizing it is not a public security concern. jonathan: did you notice the energy president biden had yesterday? lisa: i saw all the memes. jonathan: the media has to call as they have seen it. it is a mistake they made with this presidency. lisa: he seemed cogent and energetic. annmarie: i think president biden might think that maybe he

performed better, especially in places donald trump won. at this point he is the only visual who is able to be donald trump. jonathan: what happened this summer, that weekend, someone has to write the book. what happened that weekend at the beach house in delaware? who pushed him to step down, who wrote that letter? annmarie: let's think about who president biden has yet to speak to since he dropped out. i do not believe him and former speaker nancy pelosi have yet to have a conversation. jonathan: it is a book to buy this christmas potentially. maybe next christmas. world leaders prepared for donald trump second term. benjamin netanyahu reacting enthusiastically to trump's reelection. vladimir putin and volodymyr zelenskyy graduating trump. putin giving no indication he is looking to negotiate.

let's start in the middle east. what changes with the election of donald trump? >> the middle east is the one region of the world right now are most world leaders are very happy. i think with the exception of the iranians all of the leaders were quick to call donald trump and issue him the warmest congratulations for his overwhelming victory. what changes is the head of the state department transition said yesterday, that almost assuredly the trump administration would tighten sanctions on iranians. maximum pressure will be back. the biden administration has allowed the iranians to sell a lot of oil to keep gas prices low for americans. donald trump and his team are looking to put that pressure back on the iranians. when it comes to the war in gaza

the president-elect has been vocal in telling the israeli prime minister he should wrap things up by inauguration day. i am not convinced that will happen. the difference is the trump administration will allow the israelis even more leeway to pursue military operations as they see fit to bring this terrible conflict to an end sooner rather than later and that may include releasing weapons that the biden administration has held back from the israelis. annmarie: regardless of what happens with israel, do you think a trump 2.0 will push almost immediately for an expansion of the abraham accords? steven: since the abraham accords were president trump signature foreign policy achievement during his first term i think it is likely that trump will go back to the sally's and say let's talk about normalization. the saudis remain interested. they see it as a strategic choice to normalize with israel

and integrate the region. the obstacles to this are if the saudis continue to say a two state solution is a requirement, something they were not saying prior to october 7. nevertheless this is something the saudis in the united states will be involved in. since president trump has a unique relationship with the saudi leadership he may get somewhere. annmarie: your understanding right now, the war in gaza would need to be settled, and then he can move for potentially opening up that kind of deal between israel and saudi arabia. steven: there are lots of things they can do short of normalization and short of this saudi requirement which was encouraged by the biden administration. i think they will negotiate this, they will push this, they may make progress.

i am not confident we will see a normalization agreement soon. annmarie: outside the middle east, how quickly do you think donald trump will get on the phone with vladimir putin? steven: i think this is something that will happen relatively quickly. i think the president ran in part on being able to settle these conflicts around the world. his base does not like -- the republican party does not like support for ukraine. i think the president, who sees himself as a master dealmaker is likely to get involved in this negotiation quickly. this is obviously making europeans very nervous. nevertheless this will be the policy of the united states is to pull back for support for ukraine and you can tell this is going to be the policy because the biden administration is scrambling to lock in a variety of ways of supporting ukraine between now and inauguration

day. lisa: we have a sense of what that deal looks like between russia and ukraine donald trump would like to orchestrate? steven: it is very unclear. we have seen some people in trump world talk about a stand in place, acknowledge the fact that the russians control parts of ukraine and negotiate from there. i think there is a view that the ukrainians are never going to regain that territory so therefore let's negotiate new lines. it remains to be seen whether vladimir putin is emboldened by donald trump's election. it is possible he will not agree to that. lisa: you said this is making europeans very nervous that donald trump is supposed to providing the same level of support from the united states to ukraine. you've seen european pushback among the public that officials

have put into place. is there a movement taking place on the ground that is also pushing these countries together? steven: it strikes me that the effort in ukraine is something that is important for nato and nato cohesion. donald trump is skeptical of it. the american public is skeptical of it. the european public is skeptical of ukraine. the europeans have more to lose than americans. there is going to be tremendous pressure on european governments to do something about vladimir putin. the eastern flank of nato is exposed if the united states ratchets back or and it support for ukraine. donald trump has said he would pull the united states out of nato. that is something you might say

during an election campaign or not. it may or may not be policy. there are likely to be changes happening in europe and those will have political reverberations as well. jonathan: it is worth noting the secretary-general of nato, the dutch prime minister has said live on tv that the former president was right about what he said about nato. you have any fears about a relationship being soured? at the moment on the surface it looks like there could be a decent one. steven: president trump takes a tremendous about of criticism for his relationship with europe during his first term but it did spur nato allies to spend more on their defense. nato has ramped up its spending and defense production. the question is what president trump is likely to do early in his term.

is he going to follow through on the promises he would take the united states out of nato on day one? what is the policy? we don't know. in your previous segment you talk about who is showing up at mar-a-lago? who is doing what is a telltale sign of this. one heartening thing on this issue is the person who is running the state department transition is not someone likely to recommend the leave nato. the only policymaker is president trump. jonathan: stephen cook, appreciate your time. steven cook on the council on foreign relations. with an update on news elsewhere here is dani burger. dani: rivian shows a relatively unchanged. the eb maker is counting on a surge of regulatory credit sales after production disruptions added to losses. rivian's third-quarter earnings

missed wall street expectations. paramount global reported big gains in streaming subscribers in the third quarter. overall sales at the parent of cbs mtb and its namesake were weaker than expected due to declines in tv and film revenue. paramount is working to close its merger with guardians media in the first half of 2025. the deal would see producer david ellison take over the company. richemont shares are plunging 4.1% in the european trade. the owner reported a profit slump in the first half of the year. the watchmaking division faced falling demand in china. sales were stable but operating profit had a 12% drops. others have felt pressure from we consumer demand in china. that is your brief. annmarie: up next on the program, fed independence. >> some of the president-elect advisers have suggested you to resign.

if he asked you to leave would you go? jonathan: no. that conversation up next. not that one because that is not very long. a much longer one. ♪

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jonathan: live from new york city, welcome to the program. under surveillance, fed independence. >> some of the president-elect advisors have suggested you resign. if he asked you to leave would you go? >> no. >> you think legally you are required to leave? >> no. >> you believe the president has the power to fire or demote you and has the fed determined the legality of the president demoting at will other governors? >> not permitted under law.

jonathan: jay powell dismissing the idea of stepping down at donald trump asks. the president-elect has a history of publicly criticizing the fed chair and recently called it the easiest job in washington. >> i think it is the greatest job in government. you show up to the office once a month and say let's see, flip according, everybody talks about you like you are a god. jonathan: let's talk to one of those gods, former fed president esther george. how difficult his life about to get at the federal reserve? esther: it is never an easy path when you get to a time like this. remember, this institution was by design anticipating there would be political influences on it and so a lot of safeguards were put around it to allow the individuals that sit around that table to maintain their focus on the american public and of the

mandate given to it by congress. lisa: there is confusion given the fact that a lot of potential proposals would have a fundamental effect on the trajectory of the economy and that is what the market seems to be responding to. if you were on the fed do you think you would be rethinking how much further the fed can cut? esther: there is no question that you have to take into account fiscal policies and the impact they can have on the economy. when you are making a forecast, you have to be thinking about what are the risks around that forecast? whatever baseline you set, you have to be thinking about what lies ahead in terms of setting a path? i thought yesterday the chairman was clear he was not going to offer any forward guidance about what comes next and i think that is the right way to handle it at this stage. lisa: at this stage.

december will not be so easy so they have to issue a new set of economic projections. how do they signal analysis around something the market is actively responding to? esther: i think where we will see that, certainly you can see it play out in the median assessment of those 19 forecasts. you will also see it in the statement where this committee will talk about the balance of risk and they will talk about their own assessment of what the path ahead might look like. today they are relying on what they know, which is we have the economy that is handed to us. we are saying the risks are in balance. we heard the chairman say several times what the trade-offs are between going too fast and too slow. it will be a while before they get any clarity on what steps

will be taken in congress, in the administration that will begin to bend the curve of those forecasts. jonathan: can we rewind and play the tape back. you lived this. you live to the tax cuts in 17 and the trade war in 18. we are asking the same questions we were acting -- we're asking at the back end of 16 when trump was elected to his first term. can you share your experience of how long things took to consider what was happening on the other of washington? esther: there is the real challenge for the committee. when you are watching how fiscal policy might play out. you can see today if you thinking about tax cuts as we were in 2017, at what point to those feedthrough the economy, when you feel their full impact, and importantly what else is going on that is going to

counter whatever you might estimate those effects to be? it is a process, as it was when i was at the table of saying what are the various scenarios? where might we see more immediate impact and what tends to play out over a longer timeframe, also taking into account other things going on in this very large and complex economy we are trying to make an assessment of. jonathan: that final point is the more important one. the tariffs and 2018 did not turn out to be as inflationary as some people warned. is there reason to believe given the current context of things that it could be more inflationary this time around? esther: by the fed's own admission their upside risks to inflation right now. inflation has not returned to target even as it has come down. we are looking at a fiscal situation that is likely to bring upside risk. we are looking at global trade

and changes and shifts there. many aspects of what we see playing out today give good reason to be cautious to think about those upside risks, even as you watch any given action taken that could be pro-inflationary. jonathan: esther george, thank you for sharing your experience. the former kansas city fed president there on the introduction of risk in 2025 and a more more material way. lisa: her point that this is a different circumstance. you have to look at the economy you have. one thing adam posen said is the economy had more inflationary momentum heading into this time than they currently have been talking about. jonathan: similar to the view of torsten slok of apollo. i wonder how quickly until we are talking about rate hikes in 2025. we have to see if we get a trifecta first. let's get it through the week. up next, jim bianco.

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>> today the fomc decided to take another step in reducing the degree of policy restraint by lowering our policy interest

rate by a quarter percentage point. >> we are on autopilot to get rates down around 4% and then we take it from there. >> we have to preserve the economy and some sort of steady-state. >> we should get into next year. we have pretty significant policy changes. >> jay powell will want to preserve optionality for 2025. a lot can happen. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: and we fast forward to thanksgiving? skip the next few weeks. lisa: have a day off. jonathan: you know what is happening at my house soon? lisa: the christmas tree. jonathan: getting closer. lisa: it is not even november 10. jonathan: mid-november this weekend. tree is ready to go. decorations ready to go. stocks at record highs, music

will start playing. equity futures down 0.05%. on the nasdaq down .2%. in the bond market, tends at 4.30. way off the highs of this week. very close to 4.50 and then backed away. lisa: a question of how much is some sort of overplaying of expectations and how much is real. there is a sense that even the most exuberant of trump trade investors are taking a step back to think at this point are the beds overdone. the conclusion in equity markets is probably not. and bond markets people are saying hold on. annmarie: let's see exactly what the makeup of the house of representatives is. it might be 218-217. they are poised for a trifecta but they will not have a ton of wiggle room. absentees, this could become challenging. you think what to they want to fight about? is it going to be immigration,

which feels like a lot of individuals voted on that, or will it be tax policy? the former president through every potential tax cut at the wall. which one stick. jonathan: two different scenarios. they might fall short. there is high conviction they will get a very small majority in the house. we are not there yet. lisa: it seems like when you talk to stop investors they are saying even if there is not some big mandate, just the extension of the tax cuts, the lack of event risk hanging over the landscape, and given the incredible earnings we have gotten, earning beats across the board, people are able to bet on that and less on the uncertainty in this has less to do with proposals. jonathan: one risk was taken -- annmarie: one risk was taken off the table last night. that is susie wiles. she will be a human moat around

the future president because she is going to make sure voices that are not in line with the agenda that she was running from behind, the backbone of that campaign, they will not be in the west wing. jonathan: we are all looking for policy signals. the guiding light is live look for the cabinet positions as at start to come together. coming up, we'll catch up with jim bianco of bianco research. ryan peterson of flex port, and march and only of barclays on why a december rate cut is not guaranteed. equities near all-time highs following trump's election win. jim bianco of bianco research saying i am a no lander. the bloomberg surprise index is at its highest level since february and now we have fiscal stimulus and the firm of tax cuts and deregulation. the fit is overstimulated and setting up inflation problems in 2025.

cutting rates now might be worse than transitory. jim joins us now for more. jim bianco, that is punchy stop. are you talking rate hikes in 2025? jim: i don't know yet if we will need rate hikes. it depends have been more rate cuts we will have. the market is pricing in about three more rate cuts. if we get one in december because it has a better than 50% chance, i don't know anybody is ready the by the end of the year of the rate cutting campaign will be done if not completely done. if the fed does want to follow through on the austin go that they have hundreds of basis points to get to neutral, then they might overdo it and have rate hikes in 2025. jonathan: considering we are talking about the potential of a positive growth stock, is that a world in which stocks continue to do well? jim: there is only one thing

which will stop stocks from going up which is the possibility of inflation, overstimulating and creating inflation. if inflation is defeated why did the fed cut rates to zero? what is to stop them from becoming massively stimulative. the idea is that you create inflation. the only thing that stops you want to get inflation is the bond market. yields will go up so much that it will stop the rally. that is what i think will be the big fear in 2025. right now with all of the stimulus we are talking about, both fiscal and monetary stimulus, there is nothing to stop this market unless we get inflation and high interest rates. lisa: yesterday the message from markets seem to be the prospect of the federal reserve not cutting by 25 basis points would be enough to tame inflation sufficient to ignite that rally in the long end of the yield curve. you think bond markets are getting it wrong? jim: i don't think they are

getting it wrong. we are talking on election and fed week. we are talking about a week when the move index it a 13 month high at the beginning of the week. we were coming into the week with all the volatility measures saying an average day is a 15 basis point in the 10 year yield which is enormous. we are over reading a lot of the volatility we have been getting this week with whether or not the trends have been changing. if you step back and you look at the bigger picture, the uptrend in yields that started with the fed cut in mid-september is very much intact. annmarie: what are you looking for to understand the amount of inflation that could be in the system currently as we heard from adam posen, as well as what could get ignited with the extension of tax cuts and other stimulative measures? jim: as far as inflation, let's remember 75% of the average basket is in services. that is why i will come back to

policy. services less housing services. it has been a fairly good measure because what it is trying to measure is wage inflation and it is over 4%. if we continue to see that kind of measure of wage inflation you will start to see inflation move up. you throw in the potential of tariffs, tariffs are another form of inflation. then you have the stage set. you could see the inflation rate, which seems to of been -- which seems to have been a bottoming around 3%. that if it does start going up, you could start looking at this idea we are not in a 2% world, we are in a 3% world. that should be unacceptable for the federal reserve and they should not be cutting in that environment. annmarie: do you think the immediate inflationary impact will come from tariffs or tax

cuts? jim: i think it will come from tax cuts. they are making permanent the corporate tax rate and it will come from moves on deregulation. tariffs is difficult. they are about 50-50. 50% of the people i talked to think tariffs will happen and the other 50% think it is a gambit to get a deal in place, threatening tariffs. whether or not we get them is an open question. i happen to be more on the gambit side that he is threatening tariffs to get a deal and will not see as many. annmarie: you think the market is over their skis given the fact we do not know what the margin will be in the house of representatives? jim: it could very well be. there is an assumption that the stimulus we will get, the fiscal stimulus from the trump campaign is going to not see many roadblocks. one big roadblock when it comes to tax policy could be whether or not we get any kind of red

wave that extends to the house and extends to the house by more than one seat. one seat can throw any kind of legislation into order. maybe it is getting over its skis right now but it is hard to argue with the market. lisa: we have been playing a game throughout the week with every cross asset strategist. how high the bond yields have to go before equity investors care? some people say 4.5%, others say that is a silly question because it depends on the circumstance. do you have a sense of what would make this equity market watch the bond vigilantes much more closely? you have a sense of what it would take at a time it seems like the stock traders are unfazed by everything? jim: you are not going to like my answer because it is 4.25 and we are already above it. wait a minute, the stock market set a new all-time high. that comes back to what you are seeing in this market.

the emotional reaction of the election and the unleashing of potential fiscal stimulus. it does not matter of bond yields were 5.25. once we get past this period, we will start to see that these yields at this level, and if they continue to move higher will be a headwind for the stock market. go back before monday? what was the stock market doing in the three weeks before monday. it was struggling because yields were above 4.25. we are there right now, we are just sidetracked with the euphoria of massive fiscal stimulus. once that wears off, if the yield stay at that level or go higher it will be problematic. lisa: a really interesting point, especially if you look at the areas that have outperformed the equity market. traditionally small caps are more leveraged to yields that are higher. they tend to do worse. are you expecting that trade to

be ahead fake? jim: i think over time it will. what you are seeing in small caps is that is another way of saying value stocks because everyone has been running towards value in the last couple of days with the idea that fiscal stimulus means earnings, it will mean people show up at your store and buy products or services. that is what has everybody rushing towards those kinds of companies. once we get past the euphoria, it might be analogous to what we saw in china last month when they started all of the fiscal stimulus and their stock market rocketed higher, and that was it. it is bb and meandering sideways to lower. we are in the rocketing part for our stockmarket. it might not be done with but that will go into the phase with we priced it in and now we have to sit and wait to see if any of the stimulus materializes. in the meantime of interest rates are staying in these levels are going higher, it will

start away on it. jonathan: always thought-provoking. the super thought-provoking jim bianco. andrew hollenhorst of citi just published rate cuts are still coming, with thick the markets are underestimating the softness in the rate market and the fed reaction function. there is your bloomberg brief with dani burger. dani: president-elect donald trump has picked his chief of staff. susan wiles, one of the top architects of his presidential campaign will take on the key role in his second administration. trump says she helped him achieve one of the greatest victories in presidential history will be the first female white house chief of staff. san francisco is said to elect levi strauss air as the cities like the mayor. -- as the city's next mayor. the incumbent conceding the race. his election is seen as a sign of the residence dissatisfaction with the status quo in san francisco. he spent $8 million of his own

money to fund his campaign and has vowed to tackle issues like homelessness and rupture. the baltimore ravens -- and corruption. the baltimore ravens beat the cincinnati bengals in a thrilling comeback win. the quarterback let a furious comeback with two huge touchdowns, both over 65 yards and he stayed hot in the fourth quarter to put the ravens up by seven. the bengals managed to storm back for a touchdown in the final minute but they decided to go for two instead of playing for overtime and missed the two-point conversion. jonathan: thanks for the update. up next, the morning calls plus ryan peterson on the outlook for trump trade policy. that conversation is right around the corner. ♪ the best ai assistant isn't one that knows the whole world. it's one that knows your world.

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jonathan: equity futures negative 0.07%. yields lower. the 10 year 4.3062. time for morning calls. home depot outperform, expecting fed rate cuts to boost shares. that stock is up .9%. barclays raising its price target on expedia setting better-than-expected third-quarter bookings despite a drag from inclement weather. finally citi upgrading bank of america to buy saying it could benefit from lighter regulation under the new trump administration. that stock is up another 1% come already higher this week by 7%. president-elect donald trump proposing 60% tariffs on products from china and between 10% in 20% on all foreign goods resulting in more questions than answers about how his administration will implement them and how fast. joining us is ryan petersen. welcome to the program.

how busy are you right now? has business increased it on over the last few weeks? ryan: not just necessarily because of the possibility of a trump election but we also have a looming port strike on the east coast. remember they went on strike last month but they got a 90 day hiatus and january 15 that contract ends. all of the east coast ports right before trump gets elected mako back on strike. a lot of people are trying to get goods in before that happens. annmarie: joe biden called union joe. how do you think negotiations will go under president-elect trump? ryan: it is sort of like who he listens to. in october he made statements in favor of the union saying they need the right to negotiate against these foreign companies. at the same time his main advisor elon musk has said the union's demands for no automation are ridiculous and need to be stopped.

it is a big open question. who is trump going to listen to and how does that play out? annmarie: because of that dynamic you think these talks could drag on and how long can we see them dragged into 2025? ryan: the talks are happening five days before the inauguration. what is the current biden administration's role in how committed are they to making that happen. that is with the backdrop of tariffs which are also alluding to. trump want to have that priority. it is hard to govern when there is always something coming at you. lisa: there is this question -- you mentioned things are getting very busy. a lot of people are frontloading orders to get ahead of whatever policies might, as well as the potential strike. can you give us some scope of how much busier it is, how much rates are able to go up for u.s. people try to get ahead of that certainty? ryan: you are seeing volumes

that are little bit higher. it is hard to attribute to anyone thing. it is a complex world. i would not want to say the volumes are up this much because of tariffs or because of lumen changes in policy. i do not have a specific number to tied to it. we have set it every time. whenever there are new tariffs you see a big surge. we sought with the biden administration with a increase to section 31 tariffs on chinese steel. that led to a big put an ocean rates went up about three times earlier this year from long-run historical average it costs about $2000 to ship a container from the asia to the u.s.. that went up to over $6,000 were $7,000 in the spot market this summer and it was driven by people pulling goods in before the port strike and before the tariffs. we have seen this movie before and we are heading back into something similar. lisa: i would like to lead into

the idea we have seen this movie before. with the experience of the 2018 tariffs. there is a real question of how much companies have already rejiggered their supply chains to adjust to new pressures, new focus on near shoring and on shoring. how much have you seen a shift in the patterns of your clients in terms of where they ship from? ryan: it has been massive over the last decade, and not just driven by the tariffs. also driven by labor costs. chinese labor costs have gone up. good for the workers in china. they are no longer the cost source of labor for the world and companies have been relocating. especially vietnam, india, mexico. many other countries do. there are a lot of supply chains where you cannot get it done outside of china. the manufacturing expertise, the

ecosystem of component suppliers , and for that i am talking about electronics. the electronic sector has a hard time moving manufacturing out of china. the other big industry is e-commerce. chinese e-commerce parcels, going direct to consumer all the way from china are close to 50% of the worlds airfreight. that is already being discussed to shut that down or impose tariffs on it. those fly duty-free under the current regulations. even the biden administration has a directive of customs and border protection's to take away those tariff exemptions. that may make those noncompetitive. there are a lot of different factors. these new tariffs are on top of the ones the trump and biden administration put in, it is not just like we are back to trump's

tariffs. biden never took them away and they will be talking about adding on to those. lisa: you mentioned vietnam and mexico. i wonder, especially given some of the threats we have heard from the trump campaign, how much you see from the flows that mexico is a trojan horse for chinese goods. the same with vietnam. ryan: in both cases you've seen exports from china to these countries increased by 20%. that implies we are either moving goods there as raw materials into a manufacturing process or in some cases there is probably fraud where they're just relabeling things and saying made in mexico is actually made in china. i think it is probably more raw materials moving in. the market finds a way. when a country like china is so good at manufacturing, very hard for businesses to avoid using that. they will have a competitive

advantage and the markets rally around it. the other factor is it is expensive. trucking is expensive. moving a container or truckload of cargo from mexico to the united states is not cheaper than shipping a container from vietnam to the united states. ocean freight, the physics are unmatched. it is so much cheaper than land freight. it is not just because mexico is closer in terms of distance. annmarie: there is one salient thing i want to ask you about given that we will have a change in administration. the red sea, do you think we will see more freight go through there? ryan: we have started see a little bit of restoring of services through the red sea in the last month and that is before trump -- anyone had an idea trump would win. some carriers are starting to brave that. there is a real possibility for breakthrough but i do not have any insight into what trump might do with iran or the rebels

there. you should expect a new set of initiatives and policies and potentially military action. very unclear. one interesting story i thought did not get enough attention that this allegations that the rebels in yemen, or the government in yemen has been taking bribes and running a tollroad to the tune of $2 billion a year from ocean carriers and ocean shippers to move cargo through, a payoff to not shoot missiles at them. that is a crazy deployment if true and i would like to see more about it. i did not have any sources other than reading it in the use -- reading it in the news. jonathan: i know a reporter around the table that will chase that story more. let's do this again. this was super sharp. ryan petersen. i want to talk about mexico. the debbie trade minister of mexico came out last month saying 70% of mexico's imports

from asia come from 54 and companies. a large chunk of those companies are american and a large chunk of those american companies, auto parts, automakers. this is a big issue for america and the president-elect wants to get on top of it. lisa: it is unclear where things are made and how much goods from china or goods from the u.s. are getting shuffled through 15 other countries to not necessarily have an obvious origin. jonathan: i cannot believe this stuff is still happening in the red sea. annmarie: it is happening and it is adding to baseline inflation for a lot of the companies. jonathan: up next, look ahead to next week and a ton of economic data. ♪

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jonathan: let's take out the markets. totally unchanged on the s&p 500. you can take a breather this morning. on the nasdaq we are down by .2%. coming into friday at record highs. with 60 minutes until the opening ballot, here is manus cranny. >> 2 billion people have checked into an airbnb in the lifetime of this company's existence. obviously not enough. bookings were up 8%, so the issue is this. how are your margins? you are having to spend so much more on getting through to the final click. that is what is weighing on

this. the investments weighing on the margins. jp morgan says it is about growth sustainability. if you look at the united states, marriott had a problem over the election but the essence is we have a strong consumer. barclays says there was something for the birds that -- the bears and the bulls. how do you synthesize tv advertising and online? connect it up. that is the synthesis. bloomberg have put out there note. they think there is a slowdown at hand, even though revenue grew by 27%. spoiler alert from bloomberg intelligence. 1.4 trillion dollars worth of money has been made available to refinance the local debt. the reason why i picked alibaba is what has been done to shore up the defense of the rome of the consumer in china. we talk about the deflationary pushback into the united states of america. here we are, consumer stocks. you don't know what the

terrorists are going to be, you don't know what the politics are going to be and right now the stimulus doesn't look as if it is on your side as a consumer. jonathan: good morning to you. thanks for bringing up that stock. just a bit softer in early trading. i think it is interesting, the excuse that china is trying to save this ammunition for 2025 because they don't know what the policies going to look like don't you want to get ahead of that? we talk about stuff when it comes to policy. don't you want to do something about your domestic economy and make sure it does have that resiliency to have things thrown at it? lisa: not to be a little cynical, but people have been making excuses for why we have not gotten stimulus earlier, and then they say, you see the effects of what has been put into place. and you have to start asking, do they have the capacity and willingness to put into effect the type of stimulus people are looking for? that is really the key question, and honestly an increasingly number of people are saying maybe they don't have the willow

capability. jonathan: you say excuses. it has been one on repeat. they are waiting. they are waiting to see what the policy is. we are still waiting. we are waiting for 2025 and fed policy and what it look like. this is the view from barclays. we expect fomc to cut rates in december, however in light of upward revisions to our inflation projections we are changing our rate call for 2025. we now think the fomc will cut rates only twice by 25 basis points in march and in june. good morning. let's start with that inflation projection. upward revisions to our inflation projections. on what? marc: what we learned this week was with the results of the election is that we will likely have an increase in tariffs next year and we will likely have restrictions on immigration. in this is regardless of the outcome in the house of representatives. we think that with the tariffs

we are likely to see an increase in prices, in the price level that will increase inflation, we think already in 2025. we estimate that the tariffs could increase inflation by a good half a percent point in next year -- after percentage point to. they could have some effect in 2026. on top of that restriction and immigration are going to contribute to a tighter labor market. with a tighter labor market we are likely going to see a little bit more wage pressures by the end of next year. all of that has contributed to raising our inflation forecast by about .4% next year and a little more in 2025. jonathan: -- marc: take this full on board because we think there is likely going to be some negotiation between the u.s. administration

and other countries. we basically took half of that effect. and so we think there is a lot of uncertainty around the magnitude of these tariffs, but in any case this is what we started with has an operating assumption. with that we think that would contribute to roughly half of the effect that we would expect under the full 10%, 60% on china tariff imposition. with this we expect that will contribute to roughly .5% on the price level, which would increase inflation about .1%, .2 percent in 2026. and then on the immigration part we think that president-elect trump would impose tighter restriction than the blood and administration has already imposed with the executive actions starting in june.

the assumptions we make here is we were -- we would return to the immigration flows we had seen in 2017 and 2018. lisa: is the big charge from tariffs the cost that gets implement it either on the producer or consumer? or is it that it has to be made somewhere else and that somewhere else has to be the united dates at a time where you have a tight labor market, reduced flow of immigration, and maybe not even the expertise in certain types of production? marc: right, exactly. it is all of the above. there is a direct effect from increasing the price of imports. and then there is a little bit of an upset from the appreciation of the u.s. dollar potentially that could induce some of these. then, to your point, you need to produce the goods domestically. so you need resources to produce these goods domestically. that will raise the price on other goods and services domestically as well. there are a lot of effects going back and forth but the primary

effect is the higher import prices and then maybe some internally that would raise all of them. annmarie: if they are going to be made in america the future president is talking about a corporate tax rate. cannot bleed into potentially offsetting the increase you would see from tariff proposals, they be decreasing the price of goods? marc: i think longer term potentially, but i think in the short run you need to produce the production capacity and construct the plants and all of that in order to have bigger production capacity. and you need workers to produce all of that output that is now required to be produced in the u.s. if you put tariffs at the same time you limit immigration flows it is not clear whether workers are coming from. if we had a 10% unemployment rate at this point i would say there is a lot of slack in the labor market. with an unemployment rate close to 4%, basically with the labor

market and a population that is aging and all of the workers basically not really returning to the labor market it is not clear at all who is going to be producing that increased output. jonathan: this week you changed your forecast. they were asked about their old forecast. get some new forecasts in december. how stale will those be? they are not going to take account for any of this until when? marc: chairman powell was asked a lot of these questions and said, we are in the middle of that cycle here and so it sounds like so far even absent any of the trump policies put in place next year, even absent all of this news we have already seen very resilient labor market in september. we have seen upward revision to the gdp, national income. we have seen expected inflation prints. all of that would suggest the on employment rate is going to end up lower than the fed had expected in september. that activity is going to be

stronger. that inflation is going to be elevated. this is absent any of the new policies that might come in next year. on top of that i think for next year we can anticipate, as i argued in our forecast, higher inflation and more activity, and potentially a tighter labor market. i think that implies that a rate path overall is going to be -- will have to be slightly higher than what the fed had been selling. lisa: i wonder, especially since jay powell was talking about inflation as a new concern they are putting on par with employment, i'm wondering how high the bar is for next week's cpi report to potentially torpedo the chance of a december rate cut? marc: i think basically the fomc meeting yesterday with statement and press conference have basically left all of the options open at the december meeting. our baseline is for the fed to go with a 25 basis point cut because chair powell repeated

yesterday that they see policy as being still restrictive. they think they want to go to a more neutral level of interest rate, and so, we think they really want to cut rates, but i think it is going to be a close call, and in particular if the inflation print next week comes in from of the unexpected we expect something around .3% for corporate -- for core cpi next week. that is going to be higher than what they had anticipated at the september meeting. and then we will have another cpi just before the december meeting. and we will have also an important payroll report in november. that one is going to be particularly important because it is going to tell us something about the underlying pace of job gains. remember that the last month print was particularly noisy due to the hurricanes and all of that. we expect a very big rebound in the payroll print. jonathan: what kind of number?

marc: we think the underlying pace of job gains is $150,000 a month, with a 10,000 job gain in october. we think we could have easily a print of 300 in early december. if indeed this underlying pace they are on, 150. so the picture of the economy when you sit down at the fomc meeting is going to be very different than the one that they have anticipated. jonathan: that doesn't sound like a rate cut in december. it is good to see you. it is good to look through. marc giannoni of barclays. looking ahead, they are looking for .3% encore. the s&p 500 just a little bit softer. the opening bell is about 49 minutes away. we are looking at equity futures declining, but you have to bear in mind we came into friday at record highs on the s&p 500, record highs on the nasdaq him and we are looking at a weekly

gain that is the best of the year so far. we had the best post-election day of gains ever in the history of markets and the best fed day of gains ever as well. is that right? lisa: it is. the flows back that up. i thought it was fascinating. $20 billion flowed into equity funds on wednesday, the day after donald trump was presumed to be resident elect. this highlights just how much people are putting their money into some of these moves that we have seen in markets. jonathan: truly historic. subadra rajappa, it is good to see. barclays just said 25 basis point in march, and in june, and that is it. what is the view of socgen? subadra: that is what the market is pricing in, a december rate cut and maybe two for next year. we still think that perhaps as the economy starts to slow down and will deliver that there is

really a lot of uncertainty around those -- around that call. i think the bias is toward lesser cuts than what the summary of economic projections is showing. jonathan: barclays is making some assumption about the outlook, about immigration, about trade. for someone who has to make a bond call, is it too early or can we make some basic assumptions about what policy might look like? erin: at this point we have more questions -- subadra: at this point we have more questions than answers. i have tried to go through that exercise, coming up with forecasts for treasuries, and my base case would still be that for the remainder of the year 10-year yields are going to be somewhere between 4% and 4.5%. and then going into next year is when we are going to start seeing a lot more volatility on possible outcomes based on whether tariffs get passed,

whether there is more fiscal stimulus from tax cuts and whether immigration, and to what extent the policies they have been discussing during the campaign. jonathan: there is so much still to go. still yet to discover whether they can secure the house. once we work out whether they secure the house we have to work out how workable the margins will be. whether there is any resistance to the policies we saw in the campaign trail. then they have to work out what that means for the bond market. that is the challenge we had all week you can view it as a clearing event or you as an event that redefines the macro outlook. if you ask people at the moment on wall street they will have a mix of one and two or one or the other. lisa: what it seems like his people in equities are saying it was a clearing event and that honestly has been the takeaway i have gotten from all of the people we have spoken to. in bonds it is more of a question mark. we should not be accustomed to

15 basis point swings in treasury yields as being the new normal. jonathan: do you view it? was it a clearing event or does it redefine the macro outlook? subadra: i think it is too soon to say. what the price action was in the bond market this week is that we got through a key risk event, we saw volatility come down quite sharply. the initial knee-jerk reaction was for a selloff and steeping of the yield curve, which is what a majority of the market was anticipating. given the fact that the positioning was relatively clean heading into the elections and the fact that the market was almost fully priced in for a trump scenario i think what you saw after the election was for the market to take a little bit of a breather. jonathan: we also rallied on monday, which did not help. which set us up to get kicked in the other direction. lisa: i think that is a great point, which is, we had been pressing in something, then we

priced it out, then back in. you think we are in a range here and that people are getting over their skis talking about the potential for 5% treasury yields and all of these types of more excessive potential moves. what makes you so confident at a time when some people are saying market participants are waking up to the fact that this economy had plenty of inflation baked in? subadra: going into year-end i think it is going to be range bound. i think investors are going to be cautious. you typically see that, but beyond that you are really going to start seeing the market focus on the impact of tariffs. i think that if tariffs in addition to the fact that inflation is already taking up -- ticking up.

i think inflation is still very much a concern. add to that any fiscal stimulus you could get from the trump administration, there is a concern that inflation is going to be something that is going to be high and persistent next year. in that environment it is going to be challenging for the fed to cut rates camino, aggressively. even if employment is starting to moderate. it is going to be that tug-of-war between what the impact is going to be on inflation and the dynamics around employment and growth. annmarie: the fed may have to be on pause, but how quickly are we going to see the ecb move? are they going to be pedal to the metal? subadra: i think they are in a tough situation. on the one hand you are looking at the impact of tariffs affecting europe a lot more meaningfully then perhaps even china. and so, they are going to need to kind of talents that aspect of the impact of policies from

the trump administration. then you also have to look at changes, elections in germany and other geopolitical risks and the dynamics around politics changing meaningfully next year. they have a very tough balancing act but i think the bias is that the ecb cuts more next year. annmarie: are they the biggest loser in this new regime? subadra: you mean europe? potentially. we will be watching for what the specifics are and how much the trump administration can actually pass and what impact that would have over the medium term. jonathan: just a final question. how do you write an outlook for 2025? typically around now they are already getting published. we waited for the u.s. election but how do you put one together? what do you do? what are you and the team doing? subadra: this is going to be one of the most challenging years to come up with an accurate

forecast for how things are going to pan out next year because on the one hand you have the dynamics of inflation, which could keep the front end pegged or there is also people say maybe they would not even cut rates or hike. there is that dynamic, then on the long end you have to kind of suss out what the impact is going to be on growth. is it going to slow down growth or is that going to be inflationary and you start to see a meaningful rise in inflation expectations across the curve? this is a very confusing environment to really come up with a forecast. so, we will be spending the next couple of weeks trying to suss out the possibilities. jonathan: i'm in the cheap seats. your job is a super hard right now. lisa: i'm just googling where we can buy dark parts and how expensive they actually are. and blindfolds so we can make sure to get our forecasts in shape for surveillance come year-end. jonathan: appreciate your time.

let's get you an update on stories elsewhere with your bloomberg reef. dani: tesla is offering these options for cyber stock. prices started $999 per month for three years for customers who put down $7,500. the ev maker unveiled the lease-option after working through back orders. last month tesla told investors the cyber truck was is third-best selling model. rudy giuliani has one week to surrender his assets. federal judge said the new york city mayor must turn over his mercedes-benz and a collection of luxury watches to 2020 poll workers. it is part of a defamation judgment. giuliani told reporters the case is political persecution. wells fargo bank analyst mike mayo says the election of donald trump nothing short of a seachange for the industry. the wall street veteran telling bloomberg this has been one of

the long, harsh regulatory cycle for banks. now the expectation is for a paradigm shift that prioritizes economics over politics. the s&p 500 financials index has surged 80% since trump was reelected earlier this week. that is your brief. jonathan: thanks for this morning and thanks for this week. we will set you up for the week ahead. looking ahead to inflation data in america. from new york, this is bloomberg. ♪

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♪♪ the black friday sale is now on. visit sandals.com or call 1-800-sandals so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: the opening bell, 36 minutes away. equity futures just a little bit softer. looking ahead to next week.

before we get there you've got this. consumer sentiment. mike is going to take care of that. then tuesday, home earnings -- home depot earnings. and friday, retail sales. mike mckee, let's start with cpi. what are you looking for? are we making cpi reports great again? mike: we are making cpi reports great again but jobs will also play a role. we are getting back down to the dual mandate worries we had. cpi is expected to come in unchanged. a little bit stronger on monthly basis. the headline is expected to go up. that is not a good headline for people's psychology. a lot of it will be costs that went up because of the hurricane. but we get another cpi before the next fed meeting, so the fed has plenty of inflation data to look at. lisa: are you excited for the sentiment survey?

mike: i would be, except this is two days after the election. i don't think they have a lot of time to get data in, but i'm certainly going to ask joanne about that and whether or not it reflects -- if you look at the sentiment by political party it will be interesting to see republicans are all of a sudden sinking -- thinking things are great. we know things are miserable, but we see -- we will see if it is reflected. jonathan: we have already had michigan sentiment. thank you, sir. coming up on monday, don't miss this lineup. nila richardson, a be -- adp. gary cohn, the former nec director. plus, oksana aronoff. from new york city, you are almost there. enjoy your weekend. thank you very much for choosing bloomberg tv all week. this was bloomberg surveillance.

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matt: futures looking down, but it could be the best week in a year for stocks. katie: bloomberg "open interest" starts now. sonali: coming up, big no, he won't go. jay powell says donald trump cannot fire him, even if he tried. matt: the trump rally takes a