♪ i'm still convinced that the market is going to eventually have to push back. >> if anything is in referendum it's that americans are in support of tariffs. >> if we have a massive tariff structure it is going to hurt part of the economy. >> there is a type of momentum that could develop and get things really wrong in the future. >> i think there is plenty in the u.s. they keep the strong growth narrative alive, but we can't take it for granted. announcer: this is "bloomberg serveillance" with jonathan

ferro, lisa abramowicz and annmarie hordern. lisa: good morning, this is "bloomberg serveillance." jonathan and lise are off today. today alongside amy and manus cranny. we do have the equity markets, the s&p 500 hitting a 51 record high yesterday, a little bit of pause, everyone is starting to double down on the year-end rally. ton of data on deck, cpi kicking off, fed governor christopher waller today. a little bit lower today but the research says the trump train is going to continue. dani: it's not ridiculous to take profits after 51 record highs, but the south side is all pulled up. stocks could go to 10,000 by the end of the decade because of trump policies. jp morgan 2024 will be better than 2016. mike wilson, stocks can continue their rally postelection. lifting the year-end target to 6200, do you need more?

julian emanuel saying that the bull market is just getting started. maybe the reason to be worried is because everyone is saying the same thing. annmarie: because everyone singing the same tune and personnel, policy, maybe more of an aggressive stance when it comes to china. the bond market pack open for business after a veterans day holiday and we see yield pushing higher. manus: this morning we come in at the. her but spiking a little bit higher. here's the discussion kathy jones a little bit earlier. what is the value at the moment? if you raise your terminal rate to around 4% level, she says value for bonds at the moment is around 5%. we're still 70 basis points away from that. we are pretty much 70 basis points away. she says that is fair value, and then you can layer on top the ta riffs, the tax incentives of

what will go through congress and that is when you begin to really reprice the bonds which then could potential he materially challenge the price for the year-end on equities. annmarie: the bond vigilantes may curb trump policies. market discipline is going to be quite quick. he says trumpcare cares about market discipline and yields go higher and the stock market corrects and the bond vigilantes say you're policies are unsustainable with the right economic advisers, they are going to warn against this. the issue is there's a lot of foreign policy hawks especially when it comes to china. where is marco rubio or michael waltz, we don't know who his economic advisors are going to be. dani: add to that tom cotton, and that is why you see chinese equities off this morning. even though we had more stimulus coming from them. do these suggest that there is a priority on china, that having china hawks in the white house in top executive roles is

important for the trump administration> annmarie: if markets are concerned now, what is going to happen when they see where robert lighthizer is potentially going to be placed, he is the tariff man. markets are pausing this morning after a 51 record high yesterday. as futures. a lot of people saying this has to do with politics but why not take some money off the table as manus routed through, we have bind yields rising almost five basis points. we do have a strong u.s. dollar, we will get in opec report today. we also have home depot hitting the wire right now. what do you see in terms of the health of u.s. homebuilders? dani: it's a decline but it is better than expected for comparable sales. the decline they are expecting is 2.5%. previously they saw 3% to 4%.

you can see their reaction in the shares. the reason that they expect to do better going forward, they are seeing more people shopping for seasonal items and certain other projects which is related to their hurricanes that struck in recent months. so the question here is ok, this is a good result, but is it only for now? mortgages going higher, home demand isn't there. is this just a one off from seasonal impact? manus: the other thing about the stock, she said the one thing to watch as the debt level. the debt level is around 2.5 times. they want to try to get that down. the guidance they are giving in regards to the sales growth expected comparable sales to drop to .5% for the full year vs. the previous guidance of 3% to 4%. it is a little bit improvement

in terms of the guidance that we originally had. so that then pushes into their debt issues. annmarie: many u.s. consumers are just waiting to go out and buy homes because they want to see the direction the fed, like all of us. coming up on the program, christian miller glezman of goldman sachs takes a breather. ed mills of raymond james on trump cabinet picks and tom steyer on the energy transition with trump in the white house. we begin the hour with stocks on pause after five days of gains. treasury yields rising as investors weigh inflation risks under a second trump administration. continued increases in bond yields might result in some inflation frustration for equities, in particular if too rapid. tanks for joining us. how counterintuitive is that? for the past few days or weeks

we've seen a river lower in the small caps. the same time bond yields remain elevated. >> you have a few things that are currently looking weird. to some extent there is a lot of growth optimism. you are still somewhat late cycle and there is no worry about inflation, there is no worry about rates potentially pushing up too much. we are a bit similar to 2021 in that regard. initially when the fed was saying that inflation might be transitory, the market really saw this as a super positive backdrop where rates are anchored, real yields are anchors and possibly going lower. that is very good for bitcoin, very good for these type of assets, and the risk is twofold. first of all, at some point the market needs to reprice bond yields, and that can be either the speed, that the repricing is too fast, or that the drivers.

as you shift from breakeven inflation to real yields, and that's all are watching in particular. our real yields becoming -- starting to go up? that could become a bit of a haslinda. dani: in the small-cap index, in the russell 2000, a quarter of firms don't earn enough to cover their interest rates. surely if we have higher yields or at least somewhat higher than we are used to and they don't come down as much, this is not something you can buy. so what wins out, is at the rate risk or deregulation and everything is sunny for small caps? >> i think you answered it already to some extent. market is betting on deregulation, on lower taxes. we have to consider that some of the financing from these type of small to mid-caps might be locked-in. they might not directly suffer from rising longer data and rates and importantly, currently the expectation is a mention for the market is that yes, this

reflationary shift might make the fed cut rates a bit less fast, but there's no expectation that rates will actually be increased. this is the big risk for next year. if you do actually see the markets the inflationary pressures pick up, you need to reconsider the risk of rate hikes. that seems to be a very high hurdle right now and i think it is fair that the market is looking at this as a very high hurdle, but if you do actually get a shift back to rate hikes, could really go against that bullish sentiment right now. dani: all we really have to go off this moment is what trump said on the campaign trail and what his appointments are so far. as you are assembling across asset portfolio, how much does it make sense to look at appointments? energy, national security michael waltz, that is what the reports say and in that you have israel and iran hawk who has said that israel should indeed target oil infrastructure in iran. do you look at an appointment

like that and say maybe it is time to go long oil, maybe it is time to price in geopolitical risk? do you trade off of those types of things at this very moment? >> as an asset allocator, you want to be very careful about peeing pushed around too much by geopolitical risk. the first line of defense in your portfolio should always be diversification before you actually shift things around, before you actually put on hedges. i think a will construct a portfolio that has some real assets in there, that have some inflation protection, maybe you have a bit of energy exposure via equity, the a credit. i think that would be the first port of call, maybe avoiding areas particularly exposed to the oil price, but i would not necessarily saying it is a good idea to act that any city to get details on policies and any more information on the actual appointments getting into the job. it's a bit too early. but i think what i would say is

after such a strong rally, what we are discussing with clients is looking at the year-end hedges. just knocking some of that performance, looking more at optionality to stay invested. manus: let's build on that. you talk about the upside being maybe a little bit contained. what level of containment is it, because you are still a seller of far under the money calls and you want to buy near on the money calls. just give me a perspective in terms of how far out you are selling because that is going to be the real extreme of what you think this market can do. >> i think we are from a kind of strategist point of view, we are getting close to our targets that we had for the year-end. so i think what we can recommending was to sell far out of the money calls into year-end, 10% or so and protect yourself for another 10% rally. but after that it will be much tougher.

i think we have to be clear that there is a real valuation challenge that we are facing for next year. kind of pushing higher and higher, and i think we are already increasing the goldilocks regime, so now we are pushing higher in the reflation regime that we have because on yields in real yields are not moving higher, so next year we really have a few more headwinds for equity returns. i think this is where it is coming from, this idea of maybe overwriting far out of the money upside and buying with that shorter data upside at the money. >> you made it very clear that it is a well constructed portfolio with a few hedges to maybe take profit on what you've seen. gold is something that you like as an allocation that has come back since the election results came in. you see it more as a geopolitical hedge. >> i think gold actually has one of the best track records, one of the best ratios to protect your geopolitical risk.

somewhat better than oil. so as we were saying earlier, there are potentially problems related to oil price volatility and uncertainty. maybe gold will be a better hedge because gold has other optionality's. i mentioned earlier this kind of reflationary were real yields are not going up, or real yields might actually initially go down because there's a very high earned rate for the fed to actually hike. in this type of set up gold could be very well supported. and i think there's also a lot of talk about, as i'm sure you heard, the dollar strength being a target of policies around the trump administration. this plenty of interesting risk scenarios where gold can help you, so we like gold. annmarie: its highest level of the year, some of the policies mean a higher dollar even if the future president has talked

about how he would love a weaker currency. let's get you an update now on stories elsewhere this morning. here's your bloomberg breeze. >> lawmakers in germany have reached an agreement to hold an early election in february. that is according to government officials familiar with the talks is a federal ballot which was originally slated for september 28 is now expected to be held on february 23. the eight finished timeline coming after the country's governing coalition collapsed last week when german chancellor olaf scholz fired his finance minister over a long-running dispute about the german economy. meanwhile home depot's for your forecast for comparable sales beating estimates shares are now higher nearly 2%. sales for the third quarter gaining 6.6% year-over-year. the ceo saying the company got a boost from better weather with demand for seasonal items and outdoor projects. the company also saying there was at a demand after hurricanes struck the south in recent months.

stock is up nearly 20% year to date. and republicans are inching closer to a full sweep on capitol hill. according to the ap republicans have 214 seats in the house to 205 for democrats. it takes 218 seats to capture a majority. in the senate, a democratic candidate has defeated republican kari lake, bringing the total to 53-47. the gop is expected to vote on a new majority leader this week. that is your bloomberg breeze. annmarie: up next, the trump cabinet takes shape. >> one of the biggest issues for so many americans was the economy and the president was talking about unleashing economic prosperity through the epa. we have the ability to pursue energy dominance. annmarie: what personnel tells us about policy. that is coming up next. you're watching "bloomberg serveillance." ♪

♪ annmarie: good morning. equity futures this morning hitting a little bit of paul -- pause, but the trump trade really continues. you hit 18 record highs. not 2024. this year has been anything but normal. yesterday, 51st record this year. trump's cabinet taking shape. >> one of the biggest issues for so many americans was the economy and the president was talking about unleashing economic prosperity through the epa. we have the ability to pursue energy dominance, to be able to make the united states the artificial intelligence capital of the world, to bring back american jobs to the oil industry, and so much more. annmarie: donald trump announcing a slew of cabinet appointments. the president-elect tapping lee

zeldin to lead the eight -- epa, mike is national security advisor and kristi noem as homeland security secretary. sources also telling bloomberg that marco rubio is expected to be announced as the pic for secretary of state. ed mills of raymond james joins us now for more. great to catch up with you this morning especially getting a number of personnel announcements coming out of mar-a-lago. what did they say to you especially when it comes to the national security world? >> we are seeing the fix coming out in national security, energy and immigration. if you want to know what donald trump's first 100 a agenda will be, look at the team that he's putting together. he has run on this, is going to lead with this. we are seeing a number of pix that are well-known individuals at least in washington, d.c., but also in a number of cases known nationally. so those are the ones that you often lead with. and those are signaling that there are going to be a number

of folks that are coming into his cabinet, into his administration that maybe six months ago people would have said he's never going to get these individuals to join him. he is. annmarie: when i look at these names i definitely think these are hawks when it comes to policy in regards to china. i'm a little bit confused, maybe you can help us out your come about senator rubio because trump 2.0 was supposed to be a little bit more of an isolationist approach. leaning into the jd vances and the maga wing of the party. marco rubio seems to still be a neocon. >> i think when you mention hawks to china, i have a hard time finding anyone in d.c. who is not. it is one of those true bipartisan issues in washington, d.c. marco rubio is absolutely known for his aggression toward china, someone who has pushed aggressively to have the tech controls that we talked to some of the clients at raymond james over the last 6, 7 years.

when we look at his record, the record of elise stefanik, michael waltz, the congressman from florida, all of these individuals are individuals who voted for ukraine aid. this is not that isolationist you talked about. this is a very traditional, more traditional role that republicans have played. in a signal that yes, there's going to be america first, yes there's going to be a very different policy geopolitically that donald trump pursues, but the personnel is not as big of a break from some of the rhetoric that we have seen on the campaign trail. not only for trump, but for a lot of his surrogates. annmarie: so that means you are left with china hawks which perhaps all of d.c. is you have someone who is very prostyle of tariffs, and then you have immigration hardliners. and as you say, it shows you what the first 100 days will

look like. does that mean the street has it wrong and having high expectations, that the focus will be tax cuts and deregulation? >> one of the things that we even talking about is what is new, what is deja vu. we are looking at this and we absolutely will have trade fights next year. one of the questions i've asked is there is a brewing trade fights that is going to occur with mexico, not only on immigration but the mexico back door that allows china to bring a lot of things into the united states tariff-free. at the minimum we are going to have volatility. back in 2016 we saw a major market run after the election. we saw financials really soaring. now there's a lot of tailwinds right now for financials, a lot of clients are asking me about m&a. that probably continues, but you look over for years and most of that move from financial occurred earlier.

those are the debates we are going to be having over the next couple of months. what can get continued? and when i look at the majorities in congress, republicans have likely completed their sleep in the house of representatives when we look at things like taxes. back in 2017 when donald trump took over in his first term, there was a 47 seat majority for republicans. when he takes the oath of office on january 20, that majority might be down to a single hand. that's going to be very difficult to govern. you might have a majority but can you govern is going to be the question and house of representatives. annmarie: if you might have 218 kings walking around back and shift policy very quickly. is this a republican party more or less beholden to trump in the second term? >> i think it is more because when he came into office in 2016 there weren't a lot of natural allies in congress. in the last eight years there's been a massive change over for

the house of representatives and the makeup of the united states senate. there's a lot more natural allies, and to the extent that you look at maybe 218 kings, you also don't want to be the one or two members who stick their head out and get the full wrath of donald trump in his potential support of a primary opponent for those republicans. it's going to be very difficult to keep that 218 together, that fragile flower consensus. but trump being the head of his party is going to be a huge push toward unity in the house, which is not what we seen over the last couple of years when republicans have had a small majority, but no leader to coalesce them at the national level. manus: good morning to you. it is of course, 29 ongoing at the moment. lee zeldin to lead the epa. energy and drill, baby, drill

along with rolling back some of the commitments that joe biden made are going to be front and center here, aren't they? >> the trump administration does not going to be a strong participant. the trump administration is going to pull out of the paris accords much quicker than they withdrew from previous global climate change accords. that is what he has promised. we look at changes from the supreme court on regulation. when we are going to look for years from now, there's going to be a significant walking back of a lot of things in the clean air act and the clean utter act because of legislative and judicial change. then we look to congress, and one of the things that is a low hanging fruit item is energy reform. a lot of energy projects in the united states take too long to build. the united states congress is going to speed that out with this republican majority, but they would have sped it up even

if it were a democratic suite -- sweep because of the ai energy demands that are out there pushing folks to say let's get these projects built. and we have the inflation reduction act that provides huge tax credits, so that is actually going to surge over the next four years because of the election, and also regardless of the election. annmarie: we do have a biden administration in its final days really trying to shore up some of those environmental plans before trump 2.0 takes hold. and mills of raymond james, thank you so much for drawing out this morning. tom steyer of galvanized climate solutions on the clean energy transition under trump. that is coming up next. you are watching "bloomberg serveillance." ♪

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♪ annmarie: a slew of data on deck this week starting off with cpi tomorrow. we do have equity futures this morning pulling back ever so slightly. this has been a rally for the history books. this factoid got me. this is the s&p 500 best start to an election year since 1936. everyone is a little bit concerned about what these policies might mean, but you said a great, the trump trade continues. you see with wall street analysts are doing, what economists are saying. we are hovering around that 6000 mark, they are saying actually it is going to go higher.

maybe it is taking a little bit of money off the table. we do have the bond market back open for business after veterans day hitting a pause. yields going higher once again. dani: yields went higher immediately after the election but they ended the week lower. there is this real concern, we don't know how to model seven and three quarters of deficit being added under donald trump as if the estimate from the budget responsibility office. if you have that scenario you have more bond issuance. will investors be as willing to absorb it? do you need higher rates on the long end, and what does that mean to have rates moving higher at the fed is cutting? it's like the opposite of degrees been conundrum. annmarie: and and currency markets, our guest just moments ago was talking about the fact that his policies are dictating the complete opposite of the weaker currency. the dollar has been strengthening across the board when it comes to g10. manus: it has indeed.

he's of the opinion that we are really much -- pretty much at peak dollar. probably by christmas time at the end of the year. why do you think we are going to peak? he said take your mind back to 1985 for the plaza corp. assigned. he said trump is not going to die on that road. he will make a lot of noise about the dollar, he will make a lot of noise about the world trade but at this stage, he was very reluctant to say that he thought it was a 1985 redux where we go for something as grandiose of that. it is not there. if china is going to devalue their currency, do it soon, do it quick, do it large. but he doesn't say that is the base case for china. annmarie: or we get a mar-a-lago accord and everyone will be descending on palm beach. the associated press finding the gop leading to her 14-205 with 218 states still needed for a majority. the fact that we are still counting ballots blows my mind

that that is where we are. republicans are set to hold a leadership vote tomorrow. when it comes to the house, but i find interesting is that republicans are almost at the brink, but even before they get there, they are going to have to run special elections now because of donald trump policy tics. you have at least a phonic being clipped from their yorks seat going over to the u.n., and then you have mr. michael waltz of florida. this was ron desantis' old seat. he potentially is going to go to the industry should. so the majority is getting slimmer every single day and they haven't even actually got that. dani: in history has shown of the very slim majorities have led to a lot of infighting and a lot of struggle to get different legislation passed the wall street journal had this fascinating story yesterday basically saying that there is a nudist rising among the republican party and that is agreeing on what they call the number, the maximum budget deficit that they are willing to pass on. you are going to have this revealed interesting fight play

out between the deficit hawks and the tax cutters, between the populace and the conservatives who want to make sure that the deficit is in control. what does that mean, is it trump acting as referee or a real divide between the republicans? annmarie: or as larry summers said, the market is going to have to start dictating and educating to lawmakers what potentially it means when you start reaching your fiscal cliff and too high of deficits that may be the country cannot afford. the darling of the trump trade has been bitcoin nearing $90,000 as traders bet on a boom under president-elect trump. the overall value of the crypto market rising above its pandemic era peak, bitcoin jumping about 32% since the u.s. election. manus: the whole value of the crypto world has risen to over $3 trillion. my favorite tweet of all with the wiggle boss twins, -- winklevoss twins, bitcoin has

become unburdened by what it has been. of course he was a contributor to the donald trump campaign, gave him $1 million in bitcoin donations. but you see this unleashing. if you want to understand the unleashing, it is in the bitcoin area. we are trying to make it to $90,000 this morning, didn't quite get there. they were looking at a value of nearly 30% since the election. annmarie: this is the hope that there will be deregulation but i don't see that you leave that that is agenda item for 1, 2 or three for this congress. dani: can we also talk about the irony of this? bitcoin is supposed to be the anti-fiat currency and it is rallying to near 90,000 on a decidedly governmental process. maybe the thing we take away from this is maybe crypto is becoming more fiat, maybe we are going to have a national reserve and the dream of bitcoin being something separate from the government isn't as real as we thought. manus: this could well be one of those under donald trump as to

whether there is additional credibility. there are a number of things that can drive the crypto world to new levels as well. annmarie: almost for certain whether trump or harris was winning, gary gensler was on his way out. outside the u.s., china planning to cut taxes for home purchases in its latest status push. source: bloomberg regulars are working on a proposal that would allow megacities to cut the deed tax to buyers for as low as 1% from a current level of as much as 3%. this is something potentially to try to revive the doom and gloom of the chinese property market. dani: even so you look at the chinese property markets are doing and they are not impressed. markets have been impatient waiting for deals and stimulus. we also had a package announced friday. all of this suggests that china has been waiting to see the outcome of the american election to really start unleashing more stimulus. but perhaps that they are holding back firepower to see with the american policies actually look like. maybe that is what this market

is reacting to. there could be more to come, but we need to wait and see what actual tariffs and actual china policy tics form. manus: i was itching to know what kind of policy they have for chinese bonds and basically it is down to under $50 billion over the past three years, but that has been a slow and incremental burn in reduction on the reliance on u.s. treasuries and indeed private investors ahead of the election. this is what we are going to talk about now. once the chinese see the size and the sale of these tariffs, what is the risk that you would hear his verbiage about the weaponization of china's holding of treasuries? it is like a drum roll, i've been banging it for 20 or 30 years. that is over the past three years in terms of holding. >> donald trump's next cabinet getting the tape shake -- take shape, taking lee zeldin to lead the epa. trump saying he will ensure fair

and swift deregulatory decisions that will be enacted in a way to unleash the power of american businesses. joining us now is tom steyer, former democratic presidential candidate and the cofounder of galvanize climate solutions. thank you for joining us around the table. we are going to get trump 2.0. potentially they are going to roll back a lot of the work that biden administration did when it comes to the energy transition. how much does it matter pick up the races. >> let's talk first second about what is really driving energy transition which is economic prices and markets. over the last four years, solar prices have gone down by 60%. solar sails have gone up four dollars. if you look at what is happened to batteries, last year just in year they halved in china., if you look at what is going on in terms of ev sales, we look at it in the united states still going up, but not going up that fast.

if you look at china, they went up 11% month over month. they went up 50% year-over-year. when you look around the world, what is going on is abundant renewable energy. that is actually the story. what we are seeing in the world is a huge move to renewable energy and the energy transition happening much faster than people in the united states understand. what we are talking about, oil and gas, which is basically a stagnant market. annmarie: so what does that mean to have a drill baby drill policy at a time when you already have peak oil domestic production in the u.s. and you have this transformation you're talking about? >> let's put some numbers on it so we can really understand. the u.s. is the biggest oil and gas producer in the world. we do about 13.5 million barrels a day. if we do drill baby drill, we could take 13.5 and move it to 14. in the context of the world oil market we are talking about 102

million barrels a day. this is a stagnant market. even opec thinks that the total amount of oil sales will go up by 8% in the next 25 years. solar sales went up four times in the last four years. so what we are really seeing is an exploded in clean energy market. we are not running out of oil and gas, but what we are seeing is an abundance of renewable energy, an abundance of new technologies that are competing on price. i wrote a book. cheaper, faster, better. how we win the climate war. and really that is all we are seeing our market forces. business. how do you win? cheaper, it is cheaper. faster, it is faster. and better, it is better. governments can't repeal markets. china can't repeal markets and neither can donald trump. what we are seeing is people

around the world acting based on prices, what is in their best interest. dani: there is another large source of energy demand ramping up quickly besides the renewables or echoes in tandem with the renewables and that of the energy needed to power ai the amount equivalent to large cities needed to power even just the meta-ai demand. when you look at that and the trump white house push for the coming white house for deregulation, if the red tape that needs to be cut anyway to allow for this huge source of energy that is going to be needed to power the future? >> of course there is. you look at the united states, we are very slow in terms of permitting. we are very slow in terms of adding new clean energy products. more oil and gas projects to the grid. so yes, we have a very slow moving process because so many people are allowed to weigh in. and of course, we should be moving much faster. but when we really look globally at -- we're talking ai can move u.s. energy consumption by 20%

in the next decade. that is a huge move for us. but if you look around the world, if you see what is happening in asia, south east asia and south asia like in india, it is growing exponentially. they are going to be five times as much electricity by 2050. five times as much. so when we really think about what is going on in terms of what is driving prices, what is driving volumes around the world, where the real business is, what we are seeing is it is really in energy. manus: just as we touch on the oil subject opec has released their report. oil consumption is down 18% since july. this is the fourth consecutive cut that they have in terms of demand. i want to focus on one of the things that irks donald trump is other people eating america's lunch. and any move that he makes to step back on ira, which is all very well in the red states either way. >> overwhelmingly in the red states.

manus: so just how aggressive is it going to be. there's a lot of ceos sitting out there: i'm ready to eat your lunch. if you don't want to build it, we are ready to do it. >> that is the point i'm trying make. america has to compete. this transition is happening. america should be leading it. this is an absolute necessity for us to be the leading economic country in the world and leading political country in the world and i think it is going to be clear no matter how mr. trump feels about what should happen, what is happening is this transition. and american companies can absolutely dominate here. but we have to choose to do it. we have to put the money into it. i look at this is a great chance for business. and it is just business. this is just about what is cheaper, faster and better and that is traditionally what americans have done really well. manus: what level of stimulus could receive from him, what

level of incentive could receive are these areas? he's been very heavy on the rhetoric against a lot of the incentives that were in the ira. so how does he balance this? >> i really think what is going to drive this is american business. of course the incentives of the ira were important in terms of deployment of solar, wind, and the sale of ev's. but the truth is all of those things are going to keep happening globally. if you think about the idea of solar prices going down by 60%. that would be oil going to $32. from $80 to $32. that didn't happen. it's not stopping. we will go down another 60% at the equivalent of $15. that is dominance. >> if the private sector is doing this already and they were concerned that spending too much at one point during the biden presidency had more than 9%, then what was the point of

something like the inflation reduction act? the future president continues to talk about that he is happy with clean energy with someone like elon musk surrounding them, he thinks it should be driven by the private sector. >> it is driven by the private sector. when i think about the inflation reduction act, i think about an attempt to try to to subsidize companies that are clean the try to put them on a level playing field that are polluting. that's really how i think about it. but over time when these prices come down, the subsidies, the need for subsidies goes away. let me give you one example. over the last three years, texas has tripled the amount of solar it uses. texas. they are by far the biggest wind producer in the united states. the four biggest are all deep red states. they are not doing it because they love the concept of renewables, they are doing it because it is cheaper, it is good business. that is what we are seeing.

cheaper, faster, better markets. that is what is driving this world. people are talking, people are saying things. what what is going on behind the scenes is just -- you guys were talking about the dollar. what is driving the dollar, but is driving interest rates. prices and markets. it can't revoke them. we are in a world where we are going in a very straightforward way and we can talk about it and the sentiment can move back and forth, but if you look at the first trump administration, clean energy did really well. there was a lot of rhetoric, a lot of anger, a lot of emotion, but the fact of the matter is the world cap powering right through it. annmarie: thank you for your time this morning. give you an update on stories elsewhere this morning. here's your bloomberg brace. yahaira: an app developed in china is taking apple to court over app store practices. the chinese court agreed to hear a lawsuit which is seeking over

$400,000 in damages after apple pulled the app from their store in 2020. closed-door hearings in the case may ramp up as soon as this week according to a person familiar. it marks the first time apple is fighting allegations from a chinese developer about its platform practices. meanwhile, a spirit airlines plane was struck with bullets as it was landing in haiti's capital yesterday, prompting the closure of the company's main airport. one flight attendant was injured before the flight from florida diverted to the dominican republic. the company will stop service to two of the country's airports while american airlines and jetblue also suspended operations to haiti. the country is engulfed in political turmoil and struggling to respond to gang violence. meanwhile, the jennings creek fire it new york and new jersey raises on -- rages on. according to the new jersey forest fire service as of yesterday the fire was 20% contained, spanning 3500 acres,

but it is not the only one in the area. several fires burned throughout the week and along the new york- new jersey border q2 historically dry conditions across the region. no evacuations has been ordered as of yet, but new york governor kathy hochul announced that since the start of the fires, roughly 5000 acres have been burned. that is your bloomberg brace. annmarie: up next, a housing crisis in america. >> housing affordability is still a problem. existing home sales are low. you are not getting enough homebuilding. annmarie: that conversation coming up next. you are watching "bloomberg serveillance" right here on bloomberg tv. ♪

♪ annmarie: good morning from new

york. under surveillance with morning, a housing crisis in america. >> i think shelter is a really big deal. housing affordability, still a problem. building permits are low, existing home sales are low. you have a problem. were not doing enough homebuilding. look at all the homebuilder earnings. pretty rough because they are subsidizing mortgages, they are subsidizing houses. listen, i think you've got to get the rate down, you've got to get housing moving. you've got to bring shelter inflation down. annmarie: u.s. mortgage rates hovering at the highest level since july, following a six-week surge. lingering shelter inflation driven by low supply, high construction cost having a major impact on housing. drew reding joins us now. we also just got a read on the housing market when it comes to the home depot earnings report. what are you looking at? >> it looks like they got a little bit of help from the weather and saw some improvement

in seasonal categories as well as a boost from some of the recent hurricane activities. that being said, we still think that the company is likely to communicate during the earnings call that the backdrop for repair and remodeling remains choppy. you still have cautious consumers, housing activity, and seeing an ongoing pullback in big-ticket discretionary spending. annmarie: that there any degree were some of this was just put aside because of political uncertainty and consumers wanted to know how things shape up? animal spirits are reawakened. is that likely to have any sort of readthrough on consumer appetite for big purchase items? >> we have heard from some of the home builders have told us that in their conversations, home shoppers are putting off purchasing decisions because of the election. we are a little bit skeptical that the election is causing such a pullback in sales. we think it is really broader

economic uncertainty that remains out there that is leading consumers to pull back. we think may be to some extent we are seeing that, but i don't think that really exploit -- explains the broad weakness we've seen in housing. annmarie: maybe the thing that explains it is you have a fed that cut but mortgage rates that move higher. above 7% at this moment. what does that do to psychology, to consumer psychology that we got the cutting in rates that we wanted, yet long-term rates, mortgage rates are moving the opposite direction? >> the fact that we just can't really get any stability in rates is really impacting consumers. we saw a rates come down as low as 6% in september and a corresponding rebound in housing activity, but in just a couple of weeks, rates were back up basis points. that puts housing out of reach. homeownership out of reach for many people. mortgage rates certainly get a lot of attention, and what

happens with them will be key in dictating housing demand but at the same time, you have to remember that home prices are equally as important to that affordability equation. that we've got home prices up 50% from pre-pandemic levels. just to kind of highlight how out of whack home prices seem to be, we did and analysis that shows that in order for monthly payments relative to income to return to historic levels, you would have to see property values fall about 30%. >> is this also why we have this lack of supply right now in the market as well, on top of the fact that it is difficult for people to get in on the housing market? >> part of it is a supply situation which has certainly been one of the key things in housing. part of it has to do with the fact that a lot of current homeowners have mortgage rates that are well below the current market rate. a majority of rates out there are actually below 4%, so there is a disincentive to move. but from an inventory perspective what we are actually starting to see is in some markets in the south, namely

florida, texas also comes to mind, we are starting to see the inventory reverse. we do think that could help transaction activity but it could also put a little bit of pressure on pricing. >> thank you so much for your time this morning. for a look at what is going on with those home depot results and the housing market. coming up next, jim of morgan stanley, terry haynes of pangea policies look at some of the personnel announcements coming out of mar-a-lago. bob diamond, former ceo of barclays merging capital and david tinsley of bank of america. your real sense of the health of the consumer. who are watching surveillance this morning alongside dani burger and manus cranny. i'm annmarie hordern.

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♪ >> the fed reserve, they have an easing bias. >> we might not get rate cuts as aggressive as the fed suggested a couple weeks ago. >> they're really quite restrictive. they don't want to get ahead of themselves. >> i think everyone needs to have a little bit of humility and fully focus on the economy and the data. >> we have strong growth, high inflation. announcer: this is "bloomberg

serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. >> this is bloomberg surveillance alongside dani burger and manus cranny. john and lise are off, i'm annmarie hordern. we do have a rally that they are calling for the history books, the s&p 500 best start to an election year since 1936. equity futures this morning are taking a pause but the trump trade continues. yesterday s&p 500 ending the day hovering near the 6000 mark. they are nearly close to the year-end rally target, which he had to lift because yesterday was the 51st record this year. >> he thinks that equities by the end of the decade because specifically of trump policies can go to 10,000. john stoltzfus also at a new streak high with 62,000. one of the more interesting because was from j.p. morgan saying that this is different than 2016 and it will be stronger and a bigger rally because of 2024.

discussed the u.s. there is nowhere else to go especially if there's tariffs. this will be the strength of the american market. the head scratcher though, yes that will do better with the regulation. a quarter of the russell 2000 doesn't earn enough money to cover their debt. that is a problem in the market is overlooking it. i manus: like what jp morgan said, it's going to be team usa until the end, a 2017 redux. the russell falling 14% between election day. we've done a lot of the legwork. oil is in focus as well. we've got opec cutting oil demand. again, this is fast and furious, this is the fourth month of cuts they've gotten. 2024 consumption is down 80% since july and again, they are referring to the slow down. annmarie: and the price has already been taking a hit but a

lot of that has to do with trump trade and the fact that we are seeing absolute strength in the u.s. dollar index hitting a year high today. on deck this week we have cpi coming in tomorrow as well as we are going to be hearing from governor chris waller today. that is where we are when it comes to the state of play for equity markets and across asset. coming up jim karen of morgan stanley at the equity rally pauses. terry haynes of pangea policy as trump solidifies his border and security picks and bob diamond of atlas merchant capital on the outlook for financials during a second trump term. we begin this hour with stocks on hold as investors are weighing the impact of potential trump policy. jim karen of morgan stanley saying there are many concerns that trump 2.0 might lead to higher deficit, which is ultimately inflationary and could lead to higher yields. this is a risk consideration in markets and is the reason bond yields rose after trump won. from an equity market

perspective we should think about where he may be spending as where he may be cutting. jim joins us now. where is he spending and where do you think is going to cut? >> thank you for having me. it is pretty clear that trump wants to build a better infrastructure, better energy. i think a lot of those segments of the market can actually do relatively well. and where he may start to cut, it is really no specific place but it is really more of that broad-based department of government efficiency type of strategy. trying to see where the wasteful spending actually is. so i don't think he necessarily hits a specific area but i would probably callout maybe health care. health care might be an area where he could have some reductions because there are a lot of government overlays that go into that space, that go to fund some of the pharmaceutical companies and what have you that are based on government financing. so a lot of this is going to be based on the efficiencies and

all of these various sectors, and really keeping an eye on the outlay and the spending and how that money is being spent as opposed to just setting forth policy, putting a dollar number next to it and allowing that to get spent without the monitored. dani: the fear of that public debt and the growth of post-the fed cut by 50 basis points, and you add in the strength of the american economy. that does mean we moved something like 60 basis point higher on the 10 year yield since that decision. in greenspan, the greenspan conundrum with them hiking rates in the long and rate not going up enough. here we have the opposite of that. of rate cuts and for some reason the long edges moving higher. could we be in a situation where the cost of capital isn't coming down alongside cuts as we go forward, and what does that mean for this economy? >> that's exactly right. when the fed cuts rates, to interest rates fall? it is a mechanical thing that we think about, but we kind of take

it for granted. the reality is that there has been a lot of money supply created over the years. when the fed starts to cut interest rates, that money supply is still in the market. also, if we believe that there is an inflation impulse to higher deficits, bigger balance sheets and things of that nature, then the fed may not cut as much. remember where we were after the september meeting. the markets priced in that the rate was going to 3%. today the market is pricing in maybe 3.5, a little over 3.5%. there's been a 50 basis point adjustment, and that adjustment in rate expectations from the fed has translated into the fronted curves and has quite naturally flatten the curve. so ultimately, what we need to see is where that terminal policy rate is. i'm of the opinion that the terminal policy rate is going to likely be somewhere between 3.5% and 4%. maybe with the fed is saying,

that could suggest that yields could come down, but they are not going to come down materially from here. the next question is will they go up? unless the fed switches policy in terms of reverse years or we have a big inflation impulse, i also don't think that yields are going to go up quite a bit soy think it is going to be hard for tenure year treasuries to materially rise above 4.5% or 4.6% for any time unless the fed reduces rates. sorry, reduce their policies. and essentially what i'm saying is we are going to have a more broad-based range of interest rates. dani: that in itself highlight how the broad distribution, how the tales under a trump presidency and the kind of policy we could get are just kind of fat and wide, those tales. we don't have any good economic models for adding $7.75 trillion

of debt to the economy could do. what does that mean for the place of bonds in your portfolio in 2025, that possibility of higher volatility? >> so again, a fantastic point here. the way that we look at this is that we are perpetually underweight duration. typically when people say that they are getting to work neutral, they typically get to index level duration in the bond market which is about six. for us, the new neutral is to own less duration, to unless bonds. effectively, our neutral level for duration is closer to 4.5 years or five years. we are a full year and they have children than index like say. ultimately what we are saying is our ability or willingness to buy long-term bonds is less. you're happy to own high-quality short-term fixed income, and that is where we are going to set it up. the other thing that happens here is that when you get this higher inflation, and when we are talking about this duration

risk in the markets, you tend to get bond returns correlating very highly with equity returns which means that bonds don't necessarily hedge equities in the way that they used to do. so therefore, the portfolio becomes riskier because you don't have bonds at that natural offset and that natural hedge. so we have to be very careful and selective and be very actively managed in the bond space as opposed to passive. it is a change in style and also a change in structure of the overall duration. less duration, more active management of the way we are dealing with this right now. manus: that carryover into the growth scenario with the equity space, particularly in the mag seven? you talk about a mispricing and some of the earnings. and i guess from wells fargo said they expect a crash in mega tech, you've got to reach further and wider into better value into russell, small caps, etc. >> effectively what we're looking at more of a broadening out of the markets.

so the mag seven has done very well. that is really largely representing the beta of the marketplace. think of it as a multiple expansion. it is a beta type of a move, and that is the mag seven, a large camp and that his tent and that is growth. but if it becomes more about earnings, earnings are not evenly distributed throughout the s&p 500. you can do earnings and mid-cap, earnings and small-cap and also enlarged cap. so what i'm saying is that going forward, the lines are going to be blurred. it's really about moving more toward that active management on the equity side, thinking about where the earnings growth rates are, all the factors of cash flow, free cash flow yields. margins, pricing power. all of these quality factors that can come from different parts of the market. there is one risk here.

the trade that worked really, really well is that growth in tech space. so yes, it is the mag seven that has good earnings upgrades and a lot of momentum. so we do have to be a bit careful when we step away, stepped off a train that has been working really, really well for a long time and we have to slowly start to think about reallocating into the broader markets. but i think that is were some of the trump deregulation policies can actually help, because i think it would have a better impact on the broader markets more so than just the mag seven. manus: when it comes to that deregulation trade, the idea is that it's going to be good in energy. that is the classic kind of thing that has come into our inbox. to a certain extent, part of that has already been delivered by those sectors. we really need to lower a lot more detail on what deregulation really means for equities. >> and the way that i think about this is what they say in the government is that people

are a policy. yes, the immediate impact is in places like financials, and we are going to see that very rapidly. but we are also going to see it in the energy sector with permitting. we're going to see across the fda, we are going to see it across various other construction industrial materials such as transportation. i highlighted energy, natural gas. all of these other places, we're just going to have different people doing the regulation. it is not so much about undoing the regulation, but having different people enforce those regulations. and the interpretation of those regulations might become more business friendly as well. this is really what we are thinking about that is much more broad-based. the market is figuring this out. the market is saying it is not just about those specific sectors because it has been a more broader rally since trump had pulled ahead in the polls and ultimately won the presidency. annmarie: we've definitely been

talking about progrowth policies became we have robust growth that is not inflationary? >> that is the key. that is productivity. high productivity means that you have good growth with low inflation and we can go from there. ultimately, that is the solution of what we want. the typical way of looking at this is that if you have higher growth, you have higher inflation. but we are also not accounting for the fact that there could be more business investment. regulation costs a lot. that is a drag on production, a drag on profits and also returns. if you have a combination of smart deregulation and you also have a reasonable economic environment, reasonable economic climate, with all the fiscal stimulus that is still in the marketplace right now if you start to deregulate, that money gets to be put toward more productive use. so in theory yes, you can have

more growth with less inflation. as ackley what happened in a 1.0, when he got elected in 2016. you got a rise in productivity, rise in business investment because a lot of cash was freed up due to deregulation and a lot of time and energy got spent on regulation to go into business investment, and you could potentially have it. this i think is underappreciated by the market because it just is a very hard thing to quantify any specific number. annmarie: thank you for your time this morning. let's get you an update on stories elsewhere this morning. here is your bloomberg brief. yahaira: democrat ruben gallego defeating republican kari lake in the arizona senate race according to the associated press. it is a bright spot for democrats after republicans regain its role of the chamber. he will succeed retiring senator kyrsten sinema who is elected as a democrat before changing her party affiliation to independent.

he pulled well ahead of kari lake in the entire campaign but in the end the results were much closer than predicted, another sign of republican strength throughout the country. meanwhile southwest airlines offered volunteering departure packages or extended leave the airport workers and 18 cities in an attempt to curb over staffing. those of except the packages will permanently leave the company at the end of the year. this comes as aircraft delivery delays forced southwest to cut flying plans and those delays were due to troubles over at boeing. and opec cut its forecast for oil demand growth for the fourth consecutive month and lowered its projections for next year. the move recognizes a slowdown in demand by top oil consumer china. opec has scaled back this year's growth projections by almost 1/5 since july, led by saudi arabia, opec and its allies have twice delayed reserve production, and modest monthly increases are due to start early next year but

will first need to be reviewed at a meeting in december. that is your bloomberg brief. annmarie: bracing for trump's immigration policy. >> unemployment rate close to 4%, and all the work is basically not really returning. it's not clear at all who is going to be producing increased output. annmarie: if personnel means policy. that conversation coming up next. the bootstrapper. the bootmaker. yeehaw [narrator] but many do have something in common. we all trust schwab with our wealth. [narrator] thanks to our award-winning service, low costs and transparent advice. every day, over a million multi-millionares trust schwab with more than two trillion dollars of their wealth.

♪♪ the black friday sale is now on. visit sandals.com or call 1-800-sandals ♪ >> good morning. equity markets this morning and little bit softer but still, the trump trade continues. a number of members on wall street saying look, we are actually going to be higher. we are not ending the year on 6000. even though it is a little bit softer today. bond market back open, and

yields up nearly six basis points. manus: we just had a conversation with goldman sachs. a weird market but they are ready to go. on this market, and as it were, potentially another 10% up in this market. and julian emanuel says this is a bond market in its infancy. then bank of america said the positioning is at an 11 year high. so yes, you can make the argument that exposure is a little bit stretched, but if you believe, and dental that you should, tax cuts, everybody get a tax cut. a tariff war, and that is impatient for the fed, so maybe some temperance and the rate cuts. growth in earnings. and if that is the situation, then an 11 year high in positioning is not necessarily stretched. annmarie: personnel is going to mean policy and that is what we are going to discuss right now. bracing for a trump immigration policy. >> if you put tariffs at the

same time as immigration flow, it depends on what workers are coming from. unemployment rate falls to 4%, and the population that is aging and all the workers basically not really returning to the labor market, it's not clear at all who is going to be producing increased output. annmarie: president-elect trump tapping stephen miller to serve as deputy, reporting he is also picked kristi noem to lead the homeland security department. gary haynes a pangea policy writing deployment of stephen miller as white debited chief of staff is at first blush a small markets negative. it raises the potential that staff fights create a situation where his white house loses focus on implementing and executing on market positive policies. terry joins us now. terry, you say personnel is policy, based off everything we are hearing out of mar-a-lago, what do you think the makeup of trump 2.0 is going to be? >> the short answer is we are

not sure yet but what i would say is this. we're looking at a second term with a presidential victory with a tiny, tiny house majority and a small senate majority, broadly speaking, the same as biden's first two years. in context, what you have to look at is maximize your focus on things that are your top priorities that could with what is popular first. secondly, you need to make sure to relentlessly focus on the time left in the administration, so that you are pushing the policy forward to success. and thirdly, don't bother with rearranging the deck chairs on the titanic and worry about the technicalities of stuff. just push forward with your most popular things that are your top priorities, and then move forward. annmarie: does this not say to you that this is a hawkish

immigration stance and a hawkish stance on china? >> sure, neither of which are surprises in both of which are meant to be corrective to a much lawfully or buying policy. -- waffle-ier buying policy. manus: annmarie and i were just chatting along with dani at the break in the question becomes at the construct of this congress changes, who is going to be the equivalent of joe manchin? >> there are a lot of those people. the first two that come to mind are susan collins, lisa murkowski. but there are others. i've long said it is a mistake to think of the u.s. senate as some unitary body. you are looking at 100 ceos who are making their own decisions in their own interests, and you need to coalesce in order to get political decisions. it is a consensus body. consensus is difficult to find.

so you need to find those people, but anybody who thinks that this is going to operate on the u.k. model where people fallen under party lines without regard to their own self interest is i think misunderstanding politicians in the united states. >> there is a direct impact on the illusion of our understanding of tariff, tax, and fiscal policy because it is not one team, one dream with no dissent, as you say. so perhaps there is a form of guardrail around the most extreme fiscal, the most extreme tax, perhaps the most extreme policy. >> fiscal in particular gets decided much more by the congress. most policies get decided, the specifics of them, much more by and in the congress than in the executive. i think that is not understood. what i was writing on sunday, and a lot of people have been picking up citizens -- since,

the shape of the tax cuts and the size of the tax cuts have to do with what the appetite is for increasing deficit and if so, how much. last time around that was 1,000,500,000,000 over 10 years, but when you break it down, that was deemed to be acceptable. and this time out, i don't know. you're going to get a very interesting debate before you ever get to the tax cuts. with a debt ceiling debt limit about what the appetite is, and frankly, what the market reaction to increasing the deficit is. annmarie: that house certainly wants to move a bill within the first 100 days that addresses some of these things. do you understand the makeup of congress as it stands at this moment between supply-side conservatives and populace, and where those party lines will fall in ability to agree to what the deficit should actually look like? what is the number that they can agree on? >> i have no idea what the

numbers. i think that depends on anybody -- anybody that says so is not telling you the truth. but they took until about may of 2017 before there was an agreement among republicans in the senate about what that number would be, and the senate i think drives the train this time. the house's job is fundamentally, and in a washington like this, is to stay together as much as possible, number one. number two, overshoot. what the house does on bond policy is designed to be too much with the idea that the senate brings it back into line into more of a consensus product. and that is what they will do this time. my dice to markets is watch the senate, not the house. annmarie: who is the name you would put money on when it comes to majority leader? >> i'd say either corn and or thune.

that is a last-minute insurgency and they don't think succeeds. this is a secret ballot which will tell you everything you need to know, plus i think scott in his attacks on mcconnell the last time is not blood by his colleagues. annmarie: terry haynes, thank you so much for joining us. terry haynes a pangea policy. coming up next, bob diamond of atlas merchant capital on the outlook for financials during trump 2.0. you are watching "bloomberg serveillance" this morning on bloomberg tv. ♪

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annmarie: good morning. john and lisa are off today. i am joined by dani burger and manus cranny. another record high yesterday. the s&p 500 hovering near the 6000 mark. we are a little bit softer today but as dani keeps reminding us all of the wall street notes are doubling down on the trump trade. the bond market back open for business after being off for veterans day. we are seeing yields go higher. dani: there is a huge hesitancy around duration.

we were talking with jim caron earlier in the hour who said you need to be underweight duration. we have heard this over and over. citi and j.p. morgan think you should be neutral. the concern is whether investors will be willing to fund the fiscal deficits at a time you have foreign central banks less willing to buy bonds. you have the fed doing qt and you now have a situation where there more price-sensitive buyers. does this mean we will see something that looks like a failed auction? it means yields higher, even with the fed that is cutting. annmarie: at the dollar moving higher supported by higher u.s. yields. at some point will we see parity on euro-dollar? manus: he believes the political chaos, the terror of potential, the ecb, the trifecta, it is almost like the horsemen of the apocalypse coming towards the euro. kit was at pains to say he

thinks the dollar exuberance and that high will come fast and furious before christmas and that is when he thinks you will see the dollar peak. he thinks the most extreme version of policy on the dollar is not going to be reflective of 1985, which was the plaza court. there may well be a mar-a-lago accord, but he does not think the extremes of the dollar policies, the trade initiatives from the 1980's will be brought to bear. annmarie: we are getting a lot of tea leaves and reporting about how president trump will govern. under surveillance, trump adding to his list of cabinet picks. he is expected to cap -- he is expected to tap marco rubio for secretary of state after naming former congressman lee zeldin to lead the epa and kristi noem is the pick for homeland security. two things come to mind. hawkish stance on china.

we look at individuals, very hawkish when it comes to immigration. dani: very hard line on immigration. as ed mills brought up, does this suggest were trump's priority is? there is wall street that is ecstatic that the priority of trump and congress will be deregulation and tax cuts. if what we are seeing is concentrated on china hawks and immigration hardliners, is that were the focus is? will the street be disappointed? to understand where this goes and where the priority is we have to hear who the treasury pick is. annmarie: treasury pick and director of national economic council. they will have a lot of sway on how the president views the economy. axios reporting the israeli minister of strategic affairs met with trump on sunday and shared messages from benjamin netanyahu on israel's plants on

gaza, lebanon, and iran. you and i both know there are number of phone calls as well with president elect trump and netanyahu regarding iran and how those two view iran. manus: if you think marco rubio as secretary of state, he is not just a china hawk but also in iran hawk. he has championed maintaining nato alliances. it is not all directly negative. there is a line from politico which says that sound you hear is a tiny sigh of relief. but it is about a recalibration of what is to be done with iran. it was a gathering in saudi arabia about trying to build more of reconciliation because the dial has shifted in qatar in terms of the discussion for a cease-fire. annmarie: we also know congressman michael waltz, a green beret will be his national

security advisor. these men are stalwarts when it comes to protecting israel. they are very hawkish. netanyahu had said he and trump ci chai when it comes to iran -- see eye to eye when it comes to iran. that means sanctions are on the table. home depot lifting its forecast for the year after normalizing whether it led to strong sales for seasonal goods and demand for outdoor projects. the company noting impacts of economic uncertainty in many u.s. consumers postponing homebuying and larger scale projects. everyone was coming on the program saying consumers, big mrs., they are all putting up big purchases until after the election. are we off to the races now because we know the outcome? dani: it is not like an home depot earnings saying all the sudden there's been an uptick in interest because we know who is president. the problem for home depot and those exposed to the housing

market is even though you have a trump presidency, even though you had the fed cutting by 50 basis points and again 25 basis points is that rates of been moving higher. 30 year fixed mortgages have continued to go higher. what does that do to the psychology of consumers. still you do not have the ability to do it. home depot outperformed but at the moment it looks like a lot of that is due to the weather and hurricanes because things needed to be built and replaced. it does not suggest long-term success for the company. manus: i did not help home depot. no home depot for me. asking other people to help me. this is the company with debt. a debt to eva tolle ratio. dani, mortgages are still expensive. do you want to take on a mortgage at 7%? it is about the re-mortgage

market and we did see a flurry of that. that is when we came back down on the rates. as long as we are in the cutting cycle there is every opportunity for the remortgaging market to help people. that is how you remodel your home. annmarie: i ask this question to myself every day, you want to take out a mortgage at 7%. so far i'm unsure. investors price and what the trump trade will look like in 2025. bob diamond writing it is in no one's interest to make the big banks even bigger. we need a vibrant banking sector with regional and specialist institutions that serve small businesses and customers around the country. bob joins us now, former ceo barclays. thank you for joining us around the table. what are you expecting with the new regime in washington? bob: it is pretty clear this

administration will be less aggressive on regulation. i think for the big banks we will continue to see strong performance. as you just read from my quote, i think the banks since 2008, when the theme was too big to fail, this will not happen again , the largest four banks in the u.s. are bigger and more concentrated and have far more systemic risk if something went on. in our view the great investment right now is not just the big banks. i think they will do absolutely fine. it is the four and a half thousand regional and consumer banks we think we will see consolidation. i think we need consolidation. we need the sector. the service the regional and community banks provide for small businesses, middle market businesses, family offices, family businesses is much bigger than the larger banks. i think it is one of the pillars of why the u.s. economy is

healthy and as strong as it is and has such a diverse financial services industry. we think there will be consolidation and we think it is necessary because many smaller community banks are too small to succeed. for us, invest in those strong regional banks, give them the capital to beef up the capital ratio, whether it is the loan portfolio or the interest-rate portfolio, and most importantly give them guidance, give them the capital so they can acquire the community banks that are too small to succeed and get the synergy of technology costs, the online type of cost and all three good tory costs associated with this. dani: it is a little bit different than the conversation over the past few years. the conversation had been when you see some of the risks this regional banks. you said with the big getting bigger they have more systematic risk within them right now.

what is that risk? manus: it is what the regulators faced in 2008 when banks were so large, and it is hard for anyone to imagine today that the banks are so healthy, and they are pretty safe. there becoming more utility like. if in fact there was a crisis, than the systemic risk of the larger banks is significant. i think more importantly is the competition from strong regional banks who are providing the kind of service we talked about in the competition they will provide for the big four banks is really good for the economy and good for customers. dani: one of the arguments that the banks have left systemic risk is a lot of the risk is off their balance sheet and private capital has followed that up. that is where the riskier loans late. if we are in an environment with deregulation to those trends reverse? do banks start taking on more

risk? is private capital sees the astronomical growth it has had? annmarie: it is not debatable -- bob: it is not debatable that the banks are larger and more concentrated and so there becoming more like utilities. safer in many ways but if there were a crisis being larger and more concentrated will create more systemic risk. i think allowing the growth of the regional banks and the community bank's outside of the large banks is good for the economy. manus: you run a major international bank. one of the prospects of the market is a lighter capital touch and a softer endgame with basil three. you have been a ceo. what moves the needle for the ceos on the street in terms of d regulation? bob: it has been very beneficial to the u.s. banks.

the u.k. banks are the opposite extreme. the regulators have been very aggressive on higher capital levels, very aggressive on not allowing risk or development or growth of businesses. where are the u.k. banks now relative to the u.s. banks? nowhere near. very low price-to-book. very little operations outside the u.k.. even my former bank, barclays, who had the benefit of the lehman brothers acquisition has not driven that investment banking business. given the quality of what they have they have not been as aggressive against the u.s. banks and are paling in comparison. i think the u.s. banks are benefiting from a much lighter touch on regulation and we see it in the results. i will say, i think it was five or six months ago when i was on this show, i think my comment on european banks are becoming less

bearish. i cannot quite say bullish. what we are starting to see, whether it is unicredit and what i think is a very thoughtful approach to commerzbank, could we see a real cross-border merger? annmarie: will the germans allow it? bob: i think they will. i think this is a different germany and we have seen since the introduction of the single currency. they are not making all of the decisions for europe around banks. i have a feeling this will go through and be positive. manus: let's bring forward. i can hear sergio monte howling at the tv saying the landscape is getting even more unfair for europeans relative to wall street. let's cast our view forward. in terms of m&a, i hear from the regional bank. what about a global m&a bank deal?

is that something that is not fit for the landscape? whether that is europe to the u.s. or the u.s. into europe? bob: i think for bank ceos one of the lessons learned in 2008 is retail banking is a local regional business and investment banking and asset management and wealth management are global businesses. absolutely you will see continued growth of the international footprint of the u.s. and european banks in investment banking, in wealth management, in asset management. there is no appetite for a global retail banking operation. manus: when it comes to regional banks -- annmarie: when it comes to regional banks and united states are you concerned about some of the failures we have seen? there is little bit of concern of what is underlying the regional banks? bob: i think i said at the time that the failure of svb and the failure of first republic, they

were behind us. the strength of many of these banks -- do they need more capital? for sure. every bank has the treasury portfolio a little upside down when rates go from zero to 5.5%. every bank has some issues with the loan portfolio for the same reason. certainly as an investor one would stay away from the banks that have a higher percentage of commercial real estate in their loan portfolio, but that is something that can be seen during due diligence and i see no crisis brewing. i see a much more positive outlook, which is that this is a sector that is absolutely right for consolidation, positive consolidation. my worry is the noises coming out of the sec prior to this were concerned about do we want this consolidation. i think it is really important for our economy. i think the service they are

providing is good. i think this is a positive case for consolidation. i think we will see more of a positive attitude toward that with this administration. manus: whether it gets changed in terms of the renumeration, do you think this banner headline of d regulation will incorporate some kind of alteration to the banker bonuses? bob: i've not heard the word dodd-frank in so long. volcker rule, is that coming back? manus: is about the restructuring of the renumeration on the street. bob: i don't see much pressure on that in the u.s.. i see that pressure easing significantly in europe and the u.k.. in 2008 the u.s. took a very practical approach with tarp. re-equitize to the banks and force them to clean up their balance sheets and allow them to grow.

in europe it was a bit more justice, it was get the bankers and the banks at the risk of the economy and we sought in ireland for quite a while. i think that has changed. i think the caps on bonuses have come off to a large degree in the u.k.. i think it is moving in a much more healthy direction. annmarie: this was fantastic. thank you so much for your time. bob diamond of atlas merchant capital. let's get you an update on stories elsewhere. here is your bloomberg brief. yahaira: donald trump's return to the white house could see the return of bond vigilantes according to a famed economist in an exclusive conversation with bloomberg at the conference in sydney where he discussed what might happen if treasury yields search under trump. >> he cares about market discipline and bob finch lent his and markets saying your policies -- and of bond

vigilantes saying your policies are not sustainable, they will warn him against policies that have such a market impact that the policies are more moderate. yahaira: he went on to say investors are trying to game plan the scope of trump's second term policies. meanwhile bitcoins record-breaking rally continues. just a few hours ago it got within striking distance of $90,000. now it is trading just under $87,000. the currency is lifting the crypto market above its pandemic peak as traders bet on a boom under donald trump's administration. plus with the republican party tightening its grip on congress, that is boosting optimism the president-elect's crypto friendly policies will be pushed through. in sports the miami dolphins held off the l.a. rams on monday night football to win their first game in over a month. tyree kill cut a shortcut down past -- cut a short touchdown pass to end the longest scoring

drought of his career. the dolphins kept the rams out of the end zone. the cleveland cavaliers historic start to the year is not slowing down. last night's win bank in chicago lifted cleveland to 12-0 to start the season, becoming the first nba season to do so since the 2015 warriors. annmarie:, consumer momentum. >> the consumer is interesting because the consumer does seem stretched. we have had a great expansion, we have had a phenomenal bull market so we have a wealth effect. annmarie: that conversation is up next. you are watching "bloomberg surveillance." ♪

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finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah. annmarie: good. under surveillance, consumer momentum. >> the consumer does seem a

little stretched. obviously we had a great expansion, we had a phenomenal bull market so we have a wealth effect. consumer goods will be one of the places that get targeted. without seeing things -- even if the consumer is strong, retailer might be under margin pressure. it is one of those places you have to watch and wait. annmarie: another batch of consumer data do this week with cpi tomorrow and retail sales running. according to bank of america the consumer shows solid momentum into the holidays. the 2024 bank of america holiday survey suggests people are planning to spend $2100 outside of obligations and necessities, that is up 7% year-over-year. joining us is david tinsley of bank of america institute. i read through your report. are you seeing any signs at all of the consumer that is slowing down? david: i would tend to take

issue with the interview you were just showing saying the consumer looks stretched and is potentially slowing. in our data what we are seeing is our credit and debit card data is up 1% year on year in october and there's a pretty good number for this data series. if you overlay that with the four months in a row rise in consumer sentiment in the michigan survey, and then when you look at our data again and what is going on in terms of wages going into people's bank accounts, the year on year growth is around 2% or so across all income cohorts. it is not obvious to ask that the consumer is slowing. i think we would characterize the situation as continued forward momentum. dani: we have been talking all morning about different companies saying consumers are

putting off big ticket purchases until they know the outcome of the election. did you see the same pattern in the spending that will be there will be some form of financial firepower unleashed with the election behind us? david: that is an interesting question. in last month's checkpoint we did note we saw some consumer durable purchases, big ticket items, some slow down there. it could be there is some pent-up consumer demand in those areas. overall the position is not a bad one in any case. what we do see in our data, and i think this speaks to the differential corporate experience, is the consumer continues to be valuing experiences over goods. in other words it is launching, airfare, those kinds of things are the items of particular

strength, more so than on the good side. that explains some of the differential corporate news flow on this. annmarie: we thank you so much for your time. david tinsley of bank of america institute on the health of the consumer. this holiday season there are five less days than you would normally see for the holiday cycle and i wonder if that means potentially less christmas shopping. dani: that is an interesting point and reminds me i need to do mine. retailers were scared of strikes and the weather and also scared of elections and tariffs. maybe they are more ready than usual for that spit up calendar. annmarie: ubs paula donovan always calls it the hedonism of the u.s. consumer. coming up, richard bernstein. former new york fed president bill dudley and sonja mask in of ubs. you are watching bloomberg surveillance. ♪

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>> i still think if the politics that are moving things. i'm still convinced that the market is going to eventually

have to push back. >> if anything was supported this american cycle, americans are supportive of tariffs. dark trump is going to hurt parts of the deep economy. >> there is a type of momentum that could develop and get things really wrong in the future. >> i think there was plenty in the u.s. to keep the strong growth narrative alive, we can't take it for granted. announcer: "bloomberg serveillance this is with jonathan ferro, lisa abramowicz and annmarie hordern. annmarie: good morning, this is surveillance alongside dani burger and manus cranny. i'm annmarie hordern. we are still off to the races i think when it comes to fitness trump trade, even though we are a little bit softer when it comes to equity market routers. yesterday, another record high this year. bond vigilantes made curb trump policies. he cares about market discipline and if bond yields go higher,

which they are, with the bond market back open after veterans day and the stock market correcting and the bond vigilantes sager policies are unsustainable, with the right people around him he will be regulated by the market. dani: but maybe it's not the bond vigilantes that do it. maybe it is this equity market because we know it is a donald trump that cares about equities more. maybe the tv surrounds himself with will also care about this. he was i were talking about this. there is a wall street journal op-ed from yesterday that that look at what the market is doing. it is endorsing trump policies. a dangerous game to play because it is a fickle market but it seemed already we aren't even on day one yet, he is still assembling a team and they are already benchmarking themselves to this equity market. annmarie: potential catalysts. if you're going to hear from fed governor christopher waller today, tomorrow, the latest inflation data. manus: to cash bond market has come back. up in yield on the very short

end of the curve, and that flattening of the care that we have last week puts the election and the drop in yield over the week. it allows a re-attack on the upside minefield at the start of this week ahead of some of the stead commentary. i had a conversation with kathy june from charles schwab who was saying 5% is actually reasonable because you raise up that terminal rate up to around 4%. >> but if you had 5% on the 10 year yield, can you actually still continue to see some all caps trade in the way they have? let's take a look at where the markets are trading this morning. pulling back slightly but the trump trade still has that momentum in it. we do have s&p 500 futures hovering around that 6000 mark. this quest potentially for parity in the euro-dollar. we have seen a much stronger dollar when it comes to the reemergence of a donald trump presidency six basis points higher on the 10 year yield and new york crude, 68.55. higher yields and a higher dollar.

that means lower oil. also this that lack of demand coming out of china. also when it comes to the equity market picture, jp morgan talking about it expects 2024 returns to be larger than 2016. the trump trade continued, even if we are seeing it pulling back just slightly. coming up this hour, richard bernstein. investors worried the rally looks overdone. former new york fed president bill dudley on the push and pull between trump and fed chair jay powell. we'll hear from on thursday, and looking ahead for cpi and ppi. we begin this hour but stocks on hold as market to re-examine the potential impacts of trump policy. richard bernstein saying it seems highly unlikely that a new administration to exhibit fiscal prudence anytime soon. tariffs might be an effective trade told them there is domestic production to protect. however, the u.s. doesn't have nearly enough production to meet demand, so tariffs should be viewed as inflationary tax

because there aren't domestic goods to substitute for the tariff-imported goods. richard, thank you so much for your time. when you look at a potential trump 2.0, what are you expecting from his administration? >> i think right now it is pretty easy to figure out. we have a very accommodative fed. he has a trump administration that so far seem to be focusing on fiscal prudence, so if you we have fiscal policy, stimulative monetary policy, we should expect nominal gdp to be stronger than people think and therefore the stock market will respond accordingly. i think that is what is going on. my general theme regardless of whether president trump is there or whether it was a president harris, i've general theme is that people should expect more inflation rather than less. >> if i could jump in there,

putting all that together, it's the fed then making a mistake by maintaining easing bias? if that is the trajectory. >> the fed is not calling me up and asking me my opinion. so whether i think they are making a mistake or not is totally irrelevant. but what i will say is this is highly unusual for the fed is cutting rates into accelerating profit. profits tend to spurt employment. so normally you would find that the fed's hiking rates into accelerating profit cycle of like now they are cutting rates into accelerating profit michael. that is putting fuel on the fire which i think support the notion that people should be expecting more in asian rather than less. dani: i don't know what the fed things or who they want to seek advice from, but we want to know your opinion, so i'm glad you gave it to us. shorter duration than the benchmark. how concerned are you about a rise in higher-end yields, pain in duration because fiscal

concerns coming online? >> that has been one of our central themes, is to be shorter duration than the benchmark because of one phenomenal growth. on top of that, i don't think the investors really even paid enough attention to, and be written about us extensively, is the united states has been penalized for 11, 12, 13 years now since u.s. debt was downgraded. u.s. treasuries have consistently sold at a higher yield parameter versus aaa rated sovereigns from other countries. the u.s. isn't aaa anymore. we saw a downgrade and we would expect there to be a risk premium attached to it. that has occurred and has been going on in the u.s. so there's not going to be a day of reckoning like people like to talk about. it is more like a slow bleed, and that slow bleed has been going on for 13, 14 years, sucking capital away from

productive use. manus: so good morning, for that long, slow drain under trump 2.0, one of his ambitions is to regain market share of manufacturing. you think that slow drain of capital inverts and comes back, and what is the impact on matt, that presumably is a dollar positive. >> right. so it is a question of fiscal prudence. we want to raise revenue, we want to cut spending? those are going to be the big things. do we want to reorient capital in the economy to productive use? look at what is going on right now with cryptocurrency. it's very hard to argue that it is an allocation to productive capital. like, what does it do for the economy? as opposed to putting it into manufacturing and things like that, i think we have to be very careful about the notion that everything is going out and we

really wanted to be oriented toward productive use of the economy. manus: so everything is rising at the moment, a certain amount of unbridled euphoria in these equity markets. when we look at the growth trajectory into next year, i looked at the profit for the third quarter, it was 8.4%. it was double the estimate. and the trajectory is for product arise going into next year contingent on growth. and that is the one thing that the trump administration does not want to see suffer. so with that growth trajectory in mind, we've been talking about this to the morning in terms of small to mid-cap stocks, is that the ground zero for you to get a better return relative to large-cap? >> i think that is right. whenever you have large -- rising interest rates, it becomes a tug-of-war. what happens is when interest rates go up, you get a tug-of-war between the financial leverage and the operating

leverage. why are interest rates going up? because the economy is stronger than people thought. and smaller companies benefit disproportionately from that increasing operating letter. so normally, operating leverage wins over financial leverage. the same reason why junk-bonds outperform when interest rates are going up. same effect. so yeah, i think you want to look at small to mid-caps. p.r. are quite overweight small caps and mid-caps. dani: this is making nervous that everyone is doing that same trade on equities, everyone is raising their guidance for the year? is that in itself a reason maybe to be a little hesitant? >> i think there are any number of different reasons to be cautious. the stat that i like all the time is the private client equity data is now up to 1.45. that is a whopping data in

private client equity portfolios. monstrous data. the beginning of the bull market was 0.75. it has basically almost doubled during the bull market peaked -- bull market. the magnificent seven, i don't think the risk is equal, i think the risk is disproportionate in those seven companies. think of it as a seesaw, if you will. this plenty of opportunity on the other site even with the asset class equities may not be great. manus: some of the measures of positioning, where you go for defense? we were talking to goldman sachs a little bit earlier on. they are still bullish in terms of the calls for the upside, but where is the defensive play in this, because the trajectory never remains on a one-way street forever. where do you look for defense in

this equity market? >> if you are worried the equity market is going to go down, it depends on your view of what is the catalyst that is going to cause the equity market to go down. if you think it is going to be more inflation than people think, a fed that maybe has to reverse course going back to the question before, a fed that has to reverse course, that i think you want more cyclical. cyclical does well in a higher nominal growth environment. if you think it is a falloff in growth and that we end up heading toward recession, then it would be the traditional defenses. you want consumer staples and health care and utilities and things like that. right now we are positioned for the former rather than the latter. more nominal growth than people think that because the fed to hick up here a little bit. annmarie: we have a ton of fed speak this week starting with waller today. richard bernstein of richard bernstein advisors. thank you for your time. your bloomberg brief. yahaira: president-elect donald

trump continues to fill out his next ministry should. he tapped former new york congressman lee zeldin for epa administrator while cnn is reporting he will choose south dakota governor kristi noem for secretary of homeland security. meanwhile we are reporting trump picked florida senator marco rubio for secretary of state while michael waltz has been tapped for the role of national security advisor. and the european union has notified apple that it's geo-clocking practices are potentially in breach of consumer protection rules. the e.u. saying the iphone maker app store, itunes store and other media services unlawfully discriminate against european customers based on their place of residence. apple has one month to respond to the findings and proposed solutions. employees across wall street can expect to receive a higher bonus this year. a report from compensation consultant jhnson

finding that year-end bonuses across almost all sectors in the industry are set to climb for the first time since 2021. investment bankers, traders and asset and wealth management professionals are all set to see increases reaching into the double digits. that is your bloomberg brief. >> we will get an update in 30 minutes time. up next, the morning calls plus bill dudley on the tension between fed chair jay powell and president-elect donald trump. wall street journal saying they visited this six years ago and there is a legal path to make sure he keeps his job. as coming up next. this is bloomberg surveillance. ♪

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are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar. i've got another one. ♪ >> good morning, i'm annmarie hordern alongside dani burger and manus cranny.

equity markets this morning taking a little bit of a step back. citigroup is saying s&p 500 positioning suggests profit-taking possible. of course, we had a five-day rally in yesterday we have another high. we are seeing the trump trade continue. on the market backup for a 10 year yield, up six basis points, and the two-year also hitting fresh highs. we hadn't seen these numbers since july. time for some morning calls. raising the price target on disney to $128. everything improving direct to consumer profits. next up, morgan stanley raising its price target on walmart to 89 dollars, expecting a modest upside for earnings next week. and finally, citi sending increased uncertainty tied to upcoming management transition. turning now to the fed. former new york fed president bill dudley writing in his latest bloomberg opinion piece the u.s. federal reserve and its chair jerome powell are rightly

choosing not to act on any assumptions about what donald trump might do as president. that said, if he follows through on his more extreme campaign promises, they will struggle to contain the economic consequences, a problem that equity investors ignore at their peril. bill, you've been in the room, you understand what this is like. give us a sense potentially of the tension that might be brewing between the fed and president-elect trump. >> on the short run there's not going to be much attention because they would cut interest rates a bit further. but you look at what president-elect trump is proposing, higher tariffs, deportations and fiscal stimulus, that's going to tend to boost inflation, disrupt economic growth because tariffs will force people to reorient their supply chains, and it's going to make the environment more difficult. but as powell said last week, we don't assume, we don't gas, we don't speculate.

they are not going to act until they actually see the agenda take form. so don't expect any near-term response from the fed. but in the longer term if he does what he said he is going to do, it's going to be a difficult economic ride. dani: if trump does anything big or abrupt, the central bank is responsible to mitigate fully the economic impact. so what is the needle to thread. do not respond to soon will be don't know the extent but also not waiting too late that you just can't do anything at that moment. >> i do think there is a risk that if trump is very aggressive in terms of his policy choices that the federal reserve, we will be waiting to see what happens and when it happened, they will be bigger than expected and have bigger consequences for growth and nation. at that point i think the fed would be in the behind the curve. that is not a near-term story. that is probably late 2025, first half of 2026. just at the time that powell is

ramping up his term as chair. nus: good morning to you, bill. in your opinion to this morning to talk about the divergent reaction from the bond market and the equity market. i want to focus on the bond market because it has been a wild ride. this morning we are waking up again, and the question i would put you is this. we don't know anything about the fiscal policy exactly. when you look at the term of premium in the bond market, the debate is how much more term premium there needs to be if there's going to be such a large deficit. maybe on the brink of where they needs to be a lot more term premium to all u.s. treasuries. >> i think that there needs to be more to reflect the uncertainty about the economic outlook in the unsustainable fiscal path of the united states. that is one area where powell actually did speak up last week. saying that the fiscal policy is

unsustainable and the president-elect trump does all the things he wants to do in terms of corporate tax reduction, the fiscal situation is going to worsen, not improve going forward. i think that the path to higher bond yields, this is the most likely path. people have change their expectations of rid of fed is going in terms of short-term interest rates. just a couple months ago people were expecting the federal funds rate the bottom below 3%. now the markets are expecting it to bottom at three and three quarters percent. so you have a fire -- higher federal funds rate and a higher bond yield display construction. manus: so the direction of travel you say is higher in yields. you look at the response from powell at the news conference, and we touched on this with various people, rb going to hear much more -- i don't know what the right word is. aggressive, demonstrative, exacting language from the fed? what word would you choose that the fed rhetoric needs to become more emboldened in 2025?

>> i think the fed is actually going to be very mild in terms of their language. they are going to assess monetary policy based on what they think is appropriate. it's going to take time for that to manifest. i think the language will be actually not combative at all. you saw last week, reporters asked trump -- powell how are you going to react to the trump policy mix? he said no comment. in the short term the fed is going to keep its head down and conduct policy based on how the economy is doing right now. dani: if we can take a step back to the reaction that we see here and now, you write that you find the stock market response baffling. tax cuts and deregulation. what are they missing? >> i think the stock market had this notion that we are going to have deregulation. we are going to have corporate

tax cuts and that is going to boost corporate profit margins. that is a fair part of the argument. but i think what they are missing is all the consequences of the other parts of the trump agenda. higher tariffs mean higher inflation. any disruption in lower productivity growth. deportations affect the supply of labor. an unstable fiscal path mean higher interest rates. when i look at the bond market and the stock market, i think the bond market is going to put increasing pressure on the stock market. we are starting from a point of the stock market valuations are already extremely high. so if bond yields go up i think that way on the stock market. annmarie: given that backdrop, how difficult it this december meeting going to be for the fed? >> i don't think it's going to be that difficult because i think powell laid it out pretty clearly last week. they think the risk of the inflation and the labor market are roughly in balance. they think monetary policy is still restrictive so they are heading back toward neutral slowly. i think a 25 basis point rate

cut in december is still the most likely case. if the economy continues to stay stronger than -- expected, then that december rate cut might be the last for a while but that really depends on the data. the fed right now is really data-dependent in terms of where they are going. the direction of rates is downward, but slowly to get the economy is continuing to perform pretty well. annmarie: last week powell was asked about what would happen if president-elect trump tried to remove them and this morning in the wall street journal they talked about 2018. powell then said what they were reported to steve mnuchin saying he would fight his removal sought by the president. are you concerned about the independence of this fed? >> i think you always have to be concerned about the independence of the fed when you have a president elect that seems to be hostile to the fed independence. the reason why is because historically, independent banks actually do a better job in terms of managing monetary

policy to achieve the outcomes that we want in terms of inflation. independence is really driven by the fact that you would get better outcomes. people think the federal reserve is going to change course based on pressure from the president, that increases uncertainty and risk and also make the fed very shortsighted in terms of the policy in general. so i think that the fed is going to try to maintain its independent policy which was very clear last week when asked about whether he is planning to resign early. no. whether trump has the right to fire him legally, no. so powell basically said pretty clearly, i'm going to finish up my term, which ends in may, 2026, trying to close off at debate on the whole issue. annmarie: not permitting under the law. the wall street journal, he went through it in 2018. former new york fed president bill dudley, thank you so much for your time and insight. the wall street journal this morning really goes into how powell went through these motions already when it was

tweeting at him and potentially wanted to get rid of him. manus: if anything this gives some confidence. this is about confidence. you might have a verbiage between powell and perhaps the white house that will come, but this is the consequence for policy all the way around. annmarie:annmarie: coming up on the program, we look ahead to cpi. you are watching "bloomberg serveillance" right here on bloomberg tv. ♪ we invent them, we design them, we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

♪ annmarie: let's take it where we up -- a look at where we are in terms of equity futures. s&p 500 hit another all-time record high. as jonathan would say and he is out, good morning jonathan, no drama. s&p 500 futures still around 6000. that is as these personnel changes are coming out of mar-a-lago, but the trump trade continues. manus: it is up there into next year. some stocks are actually moving around this morning, let's take you through a few of them.

reporting worse than expected losses for the rental car company. i know you can probably drive. keep your eye on this. we've got honeywell spiking higher this morning. we had elliott investment building a 5 billion dollars plus position in honeywell. this is according with -- to people with knowledge of the matter. they will be pushing for a breakup and a number of other things in terms of the payout. so keep an eye on that. novavax, my apologies. revenue, 700 million dollars, that originally was $800 million. in real pressure point for them and in terms of sales, 175 to two honey 25 that is incrementally below the original guidance. annmarie: so some movers ahead

of the market open. investors eyeing the data including cpi, ppi and retail sales was a ton of fence with thursday being the big one piece is we are going to hear from fed chair jay powell himself. joining us now, sonia, thanks for joining us around the table. faced with data this week, what i you looking at? >> we are looking at cpi. inflation still matters, politics obviously front and center. but with cpi specifically, we expect some stickiness in the sector of used vehicle prices, and that should persist into the year-end and probably into the first quarter of next year. then there are some seasonal factors. that is something to keep in mind at the fed kind of navigates this rather new environment. dani: over the weekend we heard from neel kashkari who said we want to make sure inflation is vanquished. a bit of a difference from when he said the labor market is our

first and top concern. these expected to hear that change in tone widely among the fed? do you expect them to maybe not sound as dovish as they did in that decision to cut 50 basis points? >> the fed has been saying for quite some time that they are data-dependent and the was that you have to react even to some temporary influences in the data. you can't just ignore that and say we are data-dependent right now. so even though we believe the fed continue to expect inflation to slow into 2025, barring tariffs, etc. and expectation is focused on that and businesses in higher prices, we still think that they need to somehow acknowledge if inflation is temporarily sticky. manus: and this is part of your argument, another 25 basis points the december meeting, and then we continue this slightly in a transient inflation. where does that come from, i

think one of your colleagues said to us nobody pays owner equivalent rent, but some of us to pay rent. where does this stickiness come from? >> a lot of it is the seasonal factors. there's different adjustments that happened pre-covid and post-covid, some of it is not necessarily set up on the ground as much as in the data. and in the data sometimes you see things or don't see things that are felt on the ground. it is challenging for them to actually communicate that the average person which is another reason why they have to acknowledge it. manus: so where do we go in december, just how much more of a jolt do you expect in terms of the guidance for rate cuts or less rate cuts in 2025? >> i actually very much agree with who you had on right before me, they really want to keep their head down right now. they do not want to be in the limelight, they just want to

stay on the task that they selected before the election results. and then 2025 could potentially bring a lot of changes for them. >> but is it not a mistake to at least acknowledge some of it? part of it feels very on that they are talking about the current inflationary environment when you have this great. it has been building in the market of the inflation to come. sure, they did the cutting. those are pretty big ifs at this moment. >> absolutely. they are very difficult the model. we don't know how things are going to shake out. we don't know tariffs, for example. we don't know in what form, we don't know if there's going to be retaliation. we don't know the impact of business and consumer sentiment. you can't that policy. the expectation that bond yields will be going higher at least on the long end. the fed can kinda bring short ends down where they are

cutting. and the cost of capital is getting higher. it is getting more expensive to take out loans, more expensive for mortgages because of the fear of growing fiscal narratives, of growing fiscal deficits. >> this brings us to the question of financial conditions. how do you measure financial conditions especially when different parts of the economy are facing effectively a different set of financial conditions? we know that small businesses are much more impacted by higher rates than larger corporations. lower income, lower savings part of the consumer population are also more impacted by higher rates than higher net worth individuals. so the fed has somewhat of a blunt tool for a bifurcated economy. >> it almost feels like the central bank. it is going to be leading the central bank to where they go next.

you are looking at the debt ceiling. that is going to kick off in january. >> absolutely because we believe that this will potentially affect sentiment. if small business owners are not only facing higher rates because the term premium is effectively hired to impart at least some of this uncertainty, than the debt ceiling negotiations could potentially produce even more uncertainty. >> it's going to be uncertainty, that's for sure. we still need to hear from congress. thank you. let's take a look where equity markets are. the fed is almost on a different universe. they're looking at an economy that almost might not exist in january because the market right now continuously pricing in donald trump's policies, whether that is deregulation, whether that is tax cuts and whether it is going to be tariffs. you see right markets relatively flat after another record high

yesterday. >> i thought you were going to say the equity markets are also living room non-bulls we've heard from in some time. i think he said this earlier, they are pricing in all the good stuff and none of the bad stuff. we are off to the races in the sell side note after note saying that we can move higher and we are upping our price target. annmarie: maybe pricing and the bad stuff is the bond market. yields are higher since july. this concern that there is going to be a tremendous amount of fiscal spending and washington, d.c. manus: and look where that movement is other short end of the curve. everybody is talking about a higher terminal rate. i love what bill dudley had to say. he would not be a stockmarket bowl at the moment and of course, it's going to come down to how much term premium do you

get a u.s. treasuries, and that is going to be one of the biggest challenges for the bond market. >> not my words, the words of our next guest, i love this line that you said. they are in the throes of the trump trade, we see that continuing. is it sustainable or not? >> i think that is an open question. the sustainability of the euphoria in the equity market depends on the policy set that gets unveiled. we have ideas, but we don't really know. >> concepts of a plan. >> things that were articulate it during the campaign. if all of them come about, i think the inflationary concerns are real. something that we should pay a great deal of attention to. but it's unclear at this point whether all of them come together as a package. the fed's right now saying that they are data-dependent. i think in 2025 the fed is going

to be saying that they are data-dependent and policy dependent. that is how they will articulate it, because they can't really model whatever is going to come down in a premature fashion. they actually have to see where the details are. the policy uncertainty is there, the policy uncertainty will continue. at the same time, the euphoria will continue for a while as well. manus: you've got mohamed el-erian saying that these are perfectly rational market responses that we've seen so far, exuberance and equities. but the momentum is there. what is it that tempers or curves that, because the bond market has not done so yet in terms of that rise in the equity market. what could be the spoiler alert if we are not going to get a 2016 redux between now and the end of the year? >> 2016 you have to put in the context of 2015. much the same way that you have to put 2025 in the context of

2024. that is, we have had a riproaring rally in the market. the likelihood of that continuing on the back of deregulation, profitability, growth tax cuts would be real. at a fundamental level, things look good. but at a valuation level and cosco trades 57 times earnings, you have to kind of ask yourself how irrational is that for a retailer? manus: while everybody tells us that the consumer is to be grand, the consumer is doing fine. it is not about rates, it is about growth and that is what will sustain the upside. if you come to a situation where you have dramatically less cuts from the federal reserve, what does that due to the growth scenario and that challenge what we are talking in the equity markets? >> the growth rivals are

basically native to the economy rather than policy. the strategy that the fed is implementing is not getting in the way of that growth dynamic. so if you frame it that way, the underlying fundamental improvement can continue for a little while longer. the real question, is that already discounted in things like the profitably growth, things like that. the roaring 20's, i think conceptually, that makes some bit of sense. is that going to be linear, when we basically need to stay here for a while? >> if the fed's fourth to stop around 4% because of inflationary policies, can corporate profits and household handle that? are we in an environment where over the past few years, that is going to be ok? >> what is happening as long

rates far more than short rates. 4.30 in 10 years is higher than what we are used to. but in the context of a really good growth environment, is 430 so irrational or so detrimental? i think that is up for debate. i don't think it is going to matter that much if it is not as restrictive as people think. >> but we have this real risk that the ration is under pain, that long-term yields go higher because of concerns about the fiscal deficit, and that is something that is kind of out of the fed's control. so what happens at financial conditions are tightening and the fed wants to be cutting and you have just the long end that they can't control? kind of echoes of what happened in the u.k., maybe not as extreme. >> u.k. is a totally different situation. economically there any different place, and i think there is the risk that you have a situation where because of the physical impetus, the long rates continue

to go up in the fed maybe stalls out at 4%. but i think that combination in and of itself is probably not terrible for the equity market, because on the back of it, you probably get growth. not enough growth, but it will be growth. they will probably react accordingly. >> talk about the bifurcation, you look at those people, who have a mortgage. some people around the desk do, some don't. 50% of u.s. presidents have fixed their mortgages somewhere around 74%. the lucky people somewhere around 2.5%. that will live long and large in supplanting the covid money that was there, and that is what we need to begin to understand. we underestimated covid money and i think we are underestimating the tale of the mortgage boost. >> i think the tale of the

mortgage boost and the impact of that on consumer health, you've seen that any lot of 2024. that is despite the fact that mortgage rates, new mortgage rates went up, they it slow down. but did slow down with the cyclical part of the economy. if you look at the housing market, if mortgage rates remain here, that is probably going to remain a little while longer. but consumption on the back of what you are arguing for, it has been pretty decent. i think that is getting factored in. it is a reality that we have to deal with, but i think the markets have dealt with that for a while. >> you said it is hard to stand in front of the freight train of this bullishness and i think a lot of people feel that way right now. what understanding do you have a just how far we've gone? i know you don't want to step in front of it, but what looks mispriced to you in the aftermath of an election? >> you had, how would it end, how does the bullishness end?

i think the way these types of bullish moves end is because they exhaust themselves. that is, it is not because of some catalyst in the market or economy. that could certainly provide for be a driver, but at the end of it, after a while, basically there is nobody left. i think that if the situation we will be facing in the not-too-distant future, and that it could be driven by whatever policies are implemented. >> right now why is the market pricing in all the good stuff from this trifecta and not some of the negative market implications like a very strict immigration policy, especially looking at some of the personnel the former president is going to be leaning into as well as higher tariffs? >> animal spirits. animal spirits are rational, so i can't say they are irrational reactions, but the point is it is not being driven, in my judgment, anyway, as much by

fundamentals. i think that 2024, late 2023 rally was driven by fundamentals. now it is really animal spirits. and again, they exhaust themselves. >> thank you so much for your time this morning. let's get you an update on some of the other stories we are watching this morning. yahaira: the biden administration is unveiling plans for the u.s. triple nuclear power capacity by 2050. this includes constructing new reactors, reopening plants and making upgrades to existing facilities. the goals to be supported under president-elect trump's administration. trump has voiced support for new nuclear reactors to supply power to data centers amid the ai boom. -food shares are surging in the premarket up 5.8% after delivering better-than-expected fourth-quarter earnings. the company said it expects results to improve next year as a turnaround in the chicken business and rising demand

offsets losses and the fee category. still, profit, constrained by a cow shortage in the u.s. that is not expected to improve the for at least 2026. an online grocery prices declined in october from a year earlier. that is the first such drops of the pandemic. you had to go all the way back to january 2022 see an annual decline. data from adobe is based on about one fully and visits to retail sites and more than 100 million products purchased show that among the 18 categories, two thirds of them are now in deflationary territory. something to watch tomorrow when we get cpi. annmarie: thanks so much. next, setting you up for the day ahead. cpi on deck. you are watching "bloomberg serveillance." ♪

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♪ annmarie: welcome back, very good morning to you. counting down to the opening bell, the trading diary for the week ahead is as follows. fed fee from governor waller. tomorrow, cpi plus remarks from whistle and. thursday, ppi and another round of jobless claims been more fed speak. plus, disney reports after the closing bell. and friday, we will see the hedonism, as paul donovan calls a come of the american consumer with retail sales. all of this as donald trump solidifies cabinet picks. he said to meet with president biden at the white house tomorrow. footing is now, mike sheppard. what can you tell us about some of these personnel pix, because as we all know, personnel dictate policy. >> you are right, and donald

trump is acutely aware of this. based on his first term in office, you will remember the chaotic first two years. when we saw all of this turnover . no rex tillerson, the former exxonmobil ceo didn't really work out as secretary of state. struck out with his national security advisor's of earth. this time he has been much more methodical, but also move much faster to lineup some of these selections those include marco rubio for secretary of state, representative michael waltz to be his national security advisor, and elise stefanik to leave the u.s. and the united nations and the ambassador there. so these are some key picks. we've also seen some as you alluded -- alluded to earlier on the homeland security front, looking at immigration. he's trying to set of people in place, he knows they are loyal, they are familiar with him and his leadership style and what he wants. and he is ready to try to deploy this thing, this day one agenda

as quickly as he possibly can, to contrast what we remember back in 2017. >> at this point in 2016 lumina of self -- discussing chris christie leaving. but at this point it is the street that wants to know the pick of the treasury secretary. how was that race shaping up? >> i'm glad you ask about that because we have to some news this morning from our colleagues that key advisors the president-elect trump are leaning toward scott percent. and he is of course, he runs the money. he has also been a staunch supporter of donald trump through the campaign. not only their fundraising, but writing briefing papers and speeches for the former president campaign. and he has been there really at this kind of anchor when it comes to the thinking about discussing economic policy. yesterday, he published an article in the wall street journal, an op-ed that pointed how markets were embracing the

new version of economics under trump 2.0, that the administration would like to deploy his policy. and then of course something that would endear himself to the president-elect, even had a line in that saying the dollar loves you. and that is exactly the kind of thing that will win him, when trump over, but also, trump would get somebody who knows how to speak to the markets. in this is critical because he will want to have someone out there to reassure investors about the stability and direction of the u.s. economy. and he will also need somebody who can speak authority. he is trying to get tax proposals through congress. >> p is actually leading in the market, 83%. feels like a market endorsement of an individual, and we know the donald trump cares about the betting market because they accurately predicted his been. >> yesterday it was 80%, this

morning up by another 3%. but it is about who can speak the donald trump in such a way that you could have an impact on equity and bond markets. >> this is what the street wants to know, who is going to be the treasury pick? coming up, kevin gordon joining us, and david kelley in a jp morgan asset management. thank you for joining us. jonathan and lisa are off. the civil have some interviews for us later in the week. enjoy your morning. this was "bloomberg serveillance ." >> the norwegian capitalized against the spaniard, fighting back from 5-2 down in the second set to close out his 50th win of the year.

and don't forget, tennis channel coverage starts at 5:30 eastern. let's go boys.

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>> another record high yesterday but looking lackluster, 30 minutes on the cash trade. >> coming up the trump rally finds gravity bitcoin nears 90,000. >> elliot strikes again said to have built a five billion stake