0 we are looking at cpi. >> there are upside risks to inflation right now. inflation has not returned to target even as it has come down. >> it has probably been bumpier on inflation than they were expecting. >> an economy that is still robust, an inflation rate that is somewhat more sticky then you would like. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jon: a new trading day starts

now. live from new york city, good morning, good morning. take a look at the price action. equity futures on the s&p 500, negative five point 2% after snapping a winning streak in yesterday's session. lower on the nasdaq 105.2% also. -- by .2% also. the 10-year, four point 4197. cpi at 8:30 eastern, retail sales are taking place on friday morning. before we get to that, looking ahead to retail sales and economic data, let's set the scene. donald trump and joe biden in the same room later this morning, box office. annmarie: there will be a pool at the top so we will witness the greeting at the oval office. these two men as far as i'm concerned, they have not been in the same room since june when

joe biden ended his political career in that disastrous debate performance. there is historical context. eight years ago, obama invited donald trump in to carry on this tradition. four years later trump did not give that grace to biden. today, biden will reestablish it. jon: state and treasury. annmarie: what is shocking to me as a drip feed that the state department might go to senator marco rubio of florida. a source told me that the trump camp is pushing to put laura trump, donald trump's daughter-in-law, in that seat. donald trump had a flurry of statements, where is the secretary of state pick. it is more interesting that he has yet to publish that. jon: we will think about the

data in our future and to do that you have to work out where the emphasis is in donald trump's second administration, what the policy mix will look like, and a sequencing for the next few years. dani: the marketon inflation. the fear is that you have a fed that has started to cut into not just growth but into a potential 2025 where you have that fueled by trump's policies. the remarkable thing is that you have a bond market squarely focused on that and fearful of the economic data to come, and a stock market that has remarkably been able to shake it off. jon: all-time highs after all-time highs on the s&p 500. after that data drops, we will catch up with the minneapolis fed president, neel kashkari. we will catch up with citi as the postelection market runs out of steam. we'll catch up for the report on trump's department of government efficiency. we began counting down to cpi at 8:30 eastern. stocks snapping a five-day winning streak. citi writing, markets were in

euphoria pre-election, sentiment ha run postelection. drew, welcome to the program. the bullishness is overwhelming. this was citi to the upside. mike wilson, morgan stanley, further follow-through to the upside. investors are floored by regime change, 6100 for 2025, 7k for 2026. are we getting ahead of ourselves? drew: i have to laugh because of the headlines. i feel like it might be easier for the media to get the strategist in a room and have an auction. do i hear 7000, 8500, here we go. i understand a lot of the calls into year end, people will highlight seasonality and sentiment being strong.i get

a lot of the news around deregulation and tax cuts are feeding the sentiment and euphoria beast, but we have to remember normally you get a little selloff into elections and the postelection rebound we didn't get this time. the set was strong coming in. sentiment, the news flow, it was very strong. at some point, you think, there's got to be a breather. jon: do you need a catalyst to stop this train? drew: yes. i think what you're talking about to kick off the show, rates may have been it for the last couple of days. the bond market closed on monday and then you have a double basis point move and you see the market come back. we're watching this on our fair value model because that has been declining. rates could be something near to consider. dani: markets came back, but the s&p fell by one third of a percent. have bond yields gone far enough to kick that off? drew: we are not seeing it in

sentiment, but we are seeing people profit take. it always feels good for your career to put a number out there. like, we are trying to say the market will cap at this level. what we are trying to say is, fundamentally, we still like the market. there is not a catalyst to completely blow up a bull market. earnings were good. we didn't get a ton of follow-through on guidance, but we said that going into the quarter that you shouldn't expect that within election in the way. but we have run pretty far, pretty fast. a little bit of backfill giving you upside into year end, and then you can assess what you think 2025 has in store. dani: are the fundamentals ok for small caps? you have a quarter of the companies in the russell 2000 unable to earn enough money to pay down their interest payments as bond yields are going higher. our fundamentals -- are fundamentals ok there?

drew: they are getting better. it is the incremental move. we are glass half-full on small-cap, but compared to other strategists who have been pounding the table, earning growth looks good, you're sitting there going -- when i look at companies where you care about earnings, the earnings growth for next year will come in below the s&p 500. yes, you have rate headwinds. on top of that, when we look at the economic data, we are not in this soft landing. everyone can argue either side. for small-cap to structurally outperform at an index level, we think that you need lower rates and early cycle. we like the stock picking down there. we think that is a nice alternative to the other 493, but you can't ignore mega cap. annmarie: is the catalyst for pullback going to be january or

february when we might get tariffs? drew: yes. when we looked at the price action postelection, we think a lot priced in lower taxes and deregulation. dani: the good stuff. drew: absolutely. when you have a bull market,t hat is feeding the beast. what is getting messy is trying to figure out tariff impacts. this isn't a surprise, because we were talking about this in february 1 of the first times that i came on your show. the issue was isolating the effect. then you have the dollar moves on top of it which makes it messier. and then you have companies that can ask, basically, to have tariffs waived. we saw that in the first administration too. the impacts are hard to tell her the market is brushing that off until we get more clarity on the. annmarie: the market is brushing off the bad stuff, but the good stuff, donald trump is going to have one of the slimmest

majorities in the house of representatives in history. much tighter than in 2017. what gives the market this excitement that actually they think that those tax cuts are going to get across the finish line? drew: you have to extend the tax cuts already given and then listen to kamala on the campaign trail and you go, no one wants to raise taxes as a politician, right? you have more confidence that will come through. deregulation, probably more of an executive order thing. you can see how that can be priced in early. it is the question around tariffs. can they do broad and a slim majority? a little doubt on that negative catalyst. if it is targeted, can markets shake that off? jon: what do you like right now? a lot has moved. small caps are up by something like 9%, banks 10% in five sessions, regionals up by almost 13.

what are you advocating for into year end and beyond? drew: still like the cyclicals. we are talking about this big move postelection off of two years of relatively no move. something like banks, they were moving on a good fundamental story and positive sloping yield curve before we got this trump kicker. small caps, like a stock picking down there, because if you think that housing is under supply, you can find a ton of housing stories in small-cap. capital markets names as well are doing well. asset managers, a lot of that is down cap. somatically everyone wants to talk about the sexy tech trades out there, but infrastructure has been a theme we have been on all year. it is just, what are we going to build? we still need roads and bridges and that will have tailwinds, too. jon: appreciate your time. trying to work out where we will

be in this market that has ripped in the last week or so. equity futures on the s&p 500 are a little softer. with your bloomberg brief, uehara. yahaira: tapping elon musk and vivek ramaswamy to lead a department of the department of government efficiency referring to elon musk's favorite cryptocurrency dogecoin. the president-elect said that they will complete their work no later than july 4, 2026. the latest on the president-elect's cabinet. john radcliffe as the director of the cia. he previously worked as the national intelligence director at the end of trump's first term and served as a republican congressman from texas.trump nominated pete hegseth as defense secretary, a fox news host and army national guard officer. confirmations need to be

approved by the senate. the owner of 7-eleven is set to be considering a management buyout to take itself private according to bloomberg sources. they say that the transaction could be worth $58 billion, the biggest buyout ever in japan. a new deal could be presented as an option for shareholders in case the canadian company behind circle k becomes more aggressive in buying seven&i. jon: next on the program, the department of government efficiency. >> i will create a government efficiency test conducting a complete financial and performance audit of the entire federal government. elon, because he is not very busy, has agreed to head that task force. jon: live from new york city this morning, good morning. ♪

i can't believe you corporate types 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.

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jon: live from new york city, welcome to the program. the financial markets, equity futures on the s&p 500 are a little softer down .2%. let's go through those numbers. the stock investors thrilled by a regime change to a more pro-business administration. 2024, 27 k. we will come back to that a little later. under surveillance this morning, the department of government efficiency. mr. trump: we have a new star, a star is born, elon. i will create a government efficiency task with conducting a complete financial and performance audit of the entire federal government. elon, because he is not very busy, has agreed to head that

tax force -- task force. elon will always come through. jon: president-elect donald trump picking elon musk and vivek ramaswamy to lead a department of government efficiency to slah government bureaucracy and wasteful spending. operating outside of the government they will undertake a complete financial and performance audit of the federal government. joining us is jessica taylor of the cook political report. i know that it has department in the title, but if you take that out, how much authority does this have? if your senator looking at what is happening in this department of government efficiency, what are you thinking? biden congress would have to -- jessica: congress would have to create this department. it's unclear if trump thinks that this would be cabinet level. that would require more steps and different things and more bureaucracy, ironically. it certainly seems like this is an advisory commission and that they can advise trump on things to do, but are they going to get

a salary? these are the questions that are yet unknown. clearly, it shows the influence that elon musk has had on his campaign and will have in the new administration. annmarie: this sounds like some kind of task force and advisory panel with no actual power to execute on anything. working with the office of management and budget to basically give recommendations. on the campaign trail, vivek ramaswamy was running and talked about getting rid of things like the department of education. obviously, that would need to go through congress. is there any appetite in congress to get rid of big institutions like that? jessica: given that there will be a very small house majority and slim 53-47 senate majority, it will require bigger steps to do that. i think slashing these big things and doing away with a lot

of the federal workforce -- which, they would un-create jobs -- it would meet with pushback in d.c. those things make for good campaign trail talking points, putting them into practice is different. dani: you mentioned congress and the slim majority. in the senate, there is going to be a very important vote. the first time that republicans have voted for a new leader in 18 years because mitch mcconnell had such a hold on that power. can you explain who you think will come out on top when it comes to john cornyn, john thune, rick scott. jessica: i think john thain probably has the -- john thune probably has the edge. if it goes to a second ballot, that could make for interesting things. the johns are the most in the mo

ld -- in the mold, john o'connor -- mitch mcconnell would not shake things up. there have been people calling the senate offices urging people to support him. he has a couple of things working against him. this is a secret ballot. senators hold these decisions closer to the vest. the senate ultimately, they are institutionalists. shaking the senate up in this way is going to be hard. he is a very divisive, rick scott, figure within the senate. he chaired the national republican senatorial committee in 2022 and his tenure was maligned by many within the republican party. they actually lost a seat that cycle. he did not intervene in primaries and the way that steve daines did that did deliver them the majority.

there were weak candidates like herschel walker in georgia and dr. oz in pennsylvania that got through. there were questions about fundraising and spending, all things that are working against him. again, i think that thune has the edge, but we don't have a whip count because these things are being held close to the vest, but i think it is john thune or john cornyn in that regard. annmarie: president-elect trump showed the betting markets that rick scott was starting to do well and all of it -- a lot of it has to do with social momentum. do you think this is a litmus test for trump's control on the senate? jessica: just the fact that trump has put out some of these things that he wants, like recess appointments, and you have all three of the candidates who said that they would back this shows the influence he has. is probably the reason that trump has not gotten involved in this officially. he doesn't like to be seen

backing losers. that would be the concern if he backed rick scott and he ended up not winning. could we still see an 11th hour decision for him to come in and do this? the meeting is at 9:30, so we could see. i think the fact that the senators, senate leaders, are bending to what trump wants shows the influence he has within the republican party. dani: in these early days, one of the most important things for speed is the approval of his cabinet. we have had a flurry of announcements, recently the department of defense and cia head. do you think what we've heard so far will have an easy time in an approval process or recess appointments? jessica: some of them he has not officially nominated. marco rubio for secretary of state would probably get

overwhelming support. some of the other decisions, like dhs. the one that is making the most news that happened last night was pete hegseth, the fox news host, for department of defense. that is more of a surprising one. i think some senators were asked last night about him and they didn't know a lot about them. i think that this is what the confirmation process is for, to vet and dig into these nominees. of the nominee so far, he has been the most surprising and is someone that i could see raising eyebrows and, again, we don't know what will happen yet and this just came out last night. i think that he would probably face the most difficult confirmation process. if republicans go with what trump wants, he may not, even though he is an unconventional choice to lead the pentagon. dani: we have learned during

trump's first administration that just because you have a majority doesn't mean you have control. republicans on capitol hill, are they more or less beholden to trump? jessica: probably more beholden. he has more of his allies in the senate. people who are more afraid to cross him for what would happen in a primary and different things. you do have more institutionalists. thune, cornyn, mcconnell. bernie moreno in the senate taking the ohio seat. you have people like mike lee, rick scott, ted cruz who will be loyal allies. you don't have the john mccain's any more. even people who would have at one time been questioners, like lindsey graham, have remade

themselves in trump's image. jon: jessica taylor of the cook political report. a flurry of picks yesterday afternoon, some raising eyebrows. what is wrong with tv presenters going into government? unconventional, may be. but combat, operational on the ground experience,, education. let's put that to one side, because that is a strong foundation. management experience. this is a huge department. annmarie: it is one of the biggest institutions not only in the united states but in the world. i think that is where the criticism is going to come. no one wants to criticize his tours, but it will be can this individual steer an institution that big? one criticism was the optics. a washington journal report was that trump wants to make it easier to retire or fire generals.

he does that putting someone who is a current fox news host at the head of the department. it potentially doesn't look good and waters down this person's view of strong picks that they like like congressman wa ltz. dani: with some of the picks, it has been about efficiency. how do you have someone coming in without department experience and do that to a behemoth like the pentagon? which, by the way, has failed every audit that it has ever had because it is such a beast.if that is your focus, i'm not sure how you get that done with anyone let alone someone who doesn't have that type of experience. jon: doge. annmarie: it is not a department, it is a task force. jon: providing advice and guidance from outside the government. that's the key statement released overnight. annmarie: the criticism is that elon musk may have an outsized essay on donald trump and it

doesn't have to do vest from his business interests. can he say, you need to deregulate this or deregulate autonomous driving. this is not a department or institution. one source told me that this is for vivek and elon for cats to chase a ball of string. jon: the press is going to be chasing squirrels for the next six months. elon is going to suggest cutting something on twitter, doing a poll on x, and the press will go crazy. the next 18 months will be messy. coming up, the dollar continues to rally. from new york city, this is bloomberg. ♪ y. asking smart questions about opportunities like clean water. and what promising new treatment advances can make a new tomorrow possible. better questions. better outcomes.

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jonathan: equities a little softer. similar move on the nasdaq 100. snap the five-day winning yesterday's session. the postelection rally has been absolutely stunning. in the bond market yields are high. two-year and 10-year making a move this morning. a little lower on tens. on twos, back in the 430's. cpi data dropping in about two

hours time. what would it take to disrupt the easing bias at the federal reserve? dani: we see a market considering that. we have somewhere around 50% onto they cut in december. neel kashkari said it would have to be a surprise on the inflation front. that helped fuel the bond market selloff. it meant inflation still matters. it always mattered but maybe we forgot about it in the election euphoria. a rate cut schedule is not guaranteed. jonathan: 8:30 eastern time when cpi drops. 10 minutes later, neel kashkari with his view on what it means for the outlook for monetary policy. foreign-exchange. the dollar a lot stronger against the japanese yen. dollar-yen taking out 155. up by .2%. that is a weaker japanese yen and the euro holding onto 106.12 they are looking for one for one

over at mizuho. we are on parity watch a lubricant on the euro-dollar. under surveillance, president-elect trump heading to the white house to be with president biden today at 11:00 a.m. eastern. this will set in motion the transition of power that will be completed in january. also meet with house republicans as the partiers a trifecta in washington. let's start with the first one. trump and biden in the same room. annmarie: that will be incredible to watch. president biden really want to make sure this tradition continues. the immediate invited president-elect trump into the oval office, the same oval office trump once occupied. the same desk trump once sat behind. this is something trump did not offer biden. there was not that peaceful transfer of the baton, that oval office meeting that president obama gave the president trump. this will be very interesting.

it will be a lot of style, not substance. everyone wants to know how these two individuals react. they have not been in the same room since biden's disastrous debate performance in june when he was still the nominee. dani: i find it interesting where he's going on capitol hill. he will be meeting with the house. it is not clear he is going to the senate because they have the majority leader today vote. that will be so crucial for trump of who he gets and how willing they will be to pass things like his cabinet. his allies went rick scott but maybe he's not stopping there because he sees rick scott or any of the johns willing to pass his appointees. jonathan: the president's son. will there be a conversation about parting hunter biden? annmarie: if there is a conversation, it will not be part of the pool feet at the beginning when the have these pleasantries -- feed. biden can do that himself. that is something i think trump

would look kindly on because he has talked about how much he loves family and family ties. to go to the mattresses for your family. jonathan: donald trump's cabinet coming together. picking his former national intelligence director john radcliffe to lead the cia. annmarie: this got a lot of eye rolls in washington. who is this individual? we need to do a little bit of historical analysis and history lesson. there is a law that the pentagon needs to have at least seven years distance between them selves and the military service individual who runs it. joe biden got a waiver for lloyd austin. donald got a waiver for general mattis. there is supposed to be a tradition that we have not seen in recent history except for mark esper where the top of the pentagon is supposed to be a civilian. this individual, even though he's a fox news host, his prior background checks all these boxes.

i was are minded by terry haines that eisenhower's dod head was the former ceo of general motors, engine charlie. you have to take this into historical context. you nailed it when you said it is the managerial expanse. this is a beast of an institution. jonathan: boris johnson was a journalist and then trimester. the wall street journal reporting spirit airlines preparing to file for vacancy production. the budget carrier and discussions with potholders to hammer out a plan after merger talks with frontier broke down. this talk is down 65%. the hope is we will have to deal with this all over again. the hope is if two companies come together and make a deal, the hope is we don't do this again because it will be easier to make deals with the new admin trason. that administration -- administration. dani: if they did this in 2025, would it look different? in the meantime, you have to

remember the rise and fall of the company. they changed airlines in the u.s. spirit is why we have to pay for extra baggage and why we have to pay for seat assignments. notice becoming sort of a relic of that era. something that probably would not have happened in years to come. annmarie: still waiting to see who he puts in some places like the ftc. yesterday jane fraser of citi said game on. our clients are waiting. there has been pent up demand. she think they will be a lot of m&a. jonathan: we will play the interview later this morning. that is why the financials have ripped over the last five or six sessions. foreign-exchange. the u.s. dollar hitting eight two-year high -- a two-year high. broad-based ankle lasted 2025. the interest rate cycle will come to a halt earlier at a higher level due to trump's policies. jane, welcome to the program.

not everything on the campaign trail will become reality. you are making some underlying assumptions. could you share them with us this morning? jane: with respect to the trump tariffs we don't know. no one knows how much of this tariffs would be pushed through on china or elsewhere. we are receiving some of the stairs will get pushed through. that will be inflationary. the economy as it stands now is relatively robust. we think we might see the fed cutting interest rates again in december and january. after that, we are skeptical as to whether or not the fed will be able to carry on cutting interest rates. that is a dollar positive story. jonathan: is a relative story. it is relative to the other side of the trade. let's talk about the other side. when you say tariffs are inflationary potentially, are they disinflationary the europeans? -- for the europeans?

jane: that is former difficult to understand. if trump hikes tariffs for the goods coming into the u.s., that is a tax on consumers. in europe, is a going to be tit-for-tat? how much is that tit-for-tat going to be? chinese goods get dumped in europe? there could be an inflationary impact on the tit-for-tat tariffs but disinflationary if china has a lot of extra goods they want to sell cheaply to europe. it is difficult to understand. quite difficult to really draw a straightforward conclusion at this point. that is something we have to wait and see. annmarie: when the ecb began cutting, the discussion was how far and how fast can they really go if america is not going at the same time? you described a situation where the u.s. has to cool off the on the brakes on cuts. will we have a similar conversation about the ecb that there cutting cycle might be stopped short because a few of

what happens to the euro? jane: i think the euro is a big concern for the ecb now. if you look at a trade-weighted basis, it is not particularly weak but the economy in europe, if you look at germany, is much weaker than the u.s. i would imagine if you asked any of the big german exporters you occasionally speak to, with a like a weaker euro-dollar? many would say yes. look at the structure of problems there and at some of these big german companies in recent years. the issues with china, the weak demand. china becoming more competitive in some markets. the issue with energy prices. many german companies looking elsewhere for looser labor markets. there are so many problems the exporters are trying to adjust to. a weaker euro would help them. annmarie: maybe the ecb does not

mind that. elsewhere, especially in emerging markets, the pboc has pushed back against a fastly depreciating yuan. south korea warned on volatility. are we about to enter an era of intervention from emerging markets? jane: it is something we have to watch. it does have significant ripples if it is sustained across the world. for japan, i think the bank of japan is going to be one to watch. we have that huge amount of volatility over the summer. the bank of japan has learned lessons. they have a new phrase now. they say a weaker currency can create more inflation. that is a warning to markets that they are watching that. they know they need to be lightly hawkish in their commentary to prevent the yen from weakening. annmarie: what is it going to

take for the finance minister he in tokyo -- ministry in tokyo to intervene? jane: i would be surprised if they have verbal remarks to try to give the market on edge. nobody wants to see the amount of volatility we saw in the market again in the summer. certainly they will be wary. the cost-of-living crisis in japan, which was caused by the weakness of the exchange rate this year, was one of the reasons why the prime minister had to resign. that was one of the reasons. there were lots of scandals as well but the cost-of-living crisis did not help. this has quite significant ramifications in the weakness of the yen through japanese society. there could be verbal intervention soon. annmarie: as we hear about how president-elect trump will surround himself with, we know

the policies mean a stronger dollar. he has talked about wanting a weaker dollar. how do you swear those two? jane: that can be confusing. during his first administration he talked about a weaker dollar. that was to try to sell more american goods overseas. to try to fix that huge u.s. goods trade imbalance. more recently he has talked about tariffs being the most beautiful word. maybe instead he sees tariffs as doing the work maybe a weaker dollar could. he also talked about wanting to keep the dollar as the global reserve currency. if that is the case, that hints maybe a stronger dollar is something he sees as value. it is quite confusing and difficult to square that circle. i think for now if it's going to be tariffs, well, that will be his favorite tool, that

could mean a stronger dollar is ok within reason. jonathan: this has become a very consensus trade. mizuho looking for 103 on euro-dollar. i want to understand the risk factors associated for the long dollar call. when you get worried about deficit spending, you see that a lot in emerging markets. the recent past with u.k. for instance. is there any reason to fear that might happen in the united states? jane: it's a bit unfair to compare the u.k. with the u.s. the dollar is very different. yes, you can make comparisons. they both have big account deficits and big budget deficits. the dollar has its own fundamentals. around 50% of the world's trade is still in u.s. dollars. that is why essentially it is the reserve currency and why it

is a safe haven. what happens is when there is any sort of crisis, even if it is triggered by the u.s. treasury itself, there is a demand for dollars. people think i did my dollars to pay my invoices. i need dollars to cover my dollar-denominated debt if i'm in emerging markets. there is an underlying safe haven demand for dollars that is sparked. that does not happen in the u.k. or any other country. therefore, the dollar has an independent fundamental. we should afford it some degree of protection if there is some sort of crisis about budget spinning. jonathan: the privilege of acting recklessly. jane, appreciate it as always. jane foley. 105.94. right now 106.13. yahaira: boeing delivered 14 planes in the month of october, the fewest since november of 2020 which was during the depths of the pandemic.

this time it was a strike by the company's largest union that crippled operations. for the end of october boeing has delivered 305 jets. airbus has delivered 559. tech earnings and china are off to a strong start after result from media giant tencent. profits surged 47% in the quarter, surpassing estimates and driven by the release of popular mobile games. there is expectations the company will stand out against his rivals alibaba and jd.com that grapple with weak consumer sentiment in china. apple plans to announce a new smartphone device. sources tell bloomberg the wall-mounted display can control appliances, handle videoconferencing and use ai to navigate apps. tim cook has made the company after trailing behind alphabet and amazon in the smart home area. the product may officially be announced in march and could be

priced at as much as $1000. that is your bloomberg brie. jonathan: born about 30 minutes. up next, game on. >> i see in the states, the majority of the m&a activity at the moment and is likely to be that way. if it is game on. jonathan: citi up most 11% in six sessions. we will talk, the banks up next. -- about the banks up next. ♪

jonathan: but few programming notes. the cpi drops 8:30 eastern and then we will hear from neel kashkari, the minneapolis fed president. look out for the conversation. friday, u.s. retail sales on deck.

we are down a quarter of 1%. bond yields a little lower, down two basis points. under surveillance, game on. >> i see in the states, the majority of the m&a activity at the moment, and is likely to be that way. it is game on. the clients are on the front foot in the states. with, day -- m&a, there's a difference between being announced and completed. jonathan: here is the latest. regional banks surging 13% following president-elect donald trump's victory as her publicans into closer to a red sweet. loser bank regulations and more merger approvals under the incoming administration. good morning. banks have ripped up 10% and five recession -- sessions. what we pricing and? -- in? >> a better revelatory backdrop.

trump is excited to loosen regulations on m&a. it's been tepid due to the fact that regulators under the biden administration has not approved deals, taken longer to approved deals. jonathan: who does that help more? big players or small ones? herman: small ones most. potential sellers can garner higher valuations. you mentioned the stock prices ripping. that is helpful for multiples. in the event of a sale you can get a better price for a potential seller. dani: part of the reason m&a has been gummed up is high rates. people don't think you will get the price they want. how does the macro backed up with a trump presidency potentially inflationary policies collide with derogatory backup? herman: for rates that can exacerbate unrealized losses on the securities portfolio. if you recall last year that was

the big question for svb before it failed with treasuries higher in the losses have to be absorbed by the eventual buyers. that can create negotiations issues. dani: is there any fear the more populist wing of the republican party might try to push through legislation like jd vance did when he was in congress, trying to claw back pain from svb and prevent the victim getting bigger? herman: there are unknowns with the trump presidency. the banks will need to wait. there's a lot of euphoria about the potential easing of regulations. annmarie: i year ago there was concern that they were going to fail. the imf and fitch said there is a little bit of concern when it comes to the commercial real estate property at the regional banks -- that the regional things have a hold of and loans -- in loans. herman: as you have seen over

the past several quarters, the banks have stacked strong credit quality quarter after quarter. while you see losses in the commercial real estate, office real estate, that's a small portion of the portfolio of regional banks. annmarie: is it fair to say the crisis is well past us? herman: there's is more to come but it will be easily absorbed because the banks built up an allowance for potential losses and lower interest rates with the fed cuts help with the sponsors managing the office for folio. -- portfolio. annmarie: if the banks fail, who gobbles them up? regionals with regionals more big player like j.p. morgan -- or a big player like j.p. morgan? herman: the typical stance is the regionals would buy failed

regionals. you have seen the jp morgan's instance with first republic, there are worse surprises. typically, we would inspect the regionals to get bigger. jonathan: when they even want to make the kind of deals -- would they even want to make those kinds of deals? herman: they have a strong wealth management franchise. a smaller bank thatally cookie-cutter, j.p. morgan would not be interested. jonathan: you have any take out targets in mind? herman: a lot of the regionals love to expand in the southeast. thanks in texas and larger metros in the southeast are ones i think would be most attractive. jonathan: what is it about the southeast? herman: demographics. folks moving from the northeast to the south. you have seen companies moved to the southeast. there's a lot of economic activity and that is attractive

for the regionals in maybe slower growth midwest areas. jonathan: -- annmarie: massive when it comes to the individuals moving to texas or florida. when it comes to texas especially that is what people that may be senator ted cruz's seat was in progress because of the last four years this meant a massive inflow from people from places like california. jonathan: carmen chan -- hermann chan, thank you. he spoke to apollo in the last one for hours. the stock is up 17% in six sessions. dani: it's interesting because apollo said m&a will do well regardless. he's excited about wealth prospects. you have donald trump and make a great time for wealthy visuals and wealthy investors, cut taxes with more money to spend and maybe you will have regulation around 401(k)s allowing them to invest in private assets. he's looking at the whole

picture and sank any angle of this, this looks good for us that an -- and saying any angle of this, this was good for us. annmarie: 15% corporate tax rate with conditions. is that going to be feasible when you might have a one or two seat majority? jonathan: started with the story. i don't know the sequencing looks like. is it tariffs before taxes? taxes before tariffs? next are both? -- for both? i don't know what on the campaign trail gets translated to reality. annmarie: and he has two years. the midterm election of 2026, what happens to the senate? jonathan: they will be in a rush which is why you should affect another flurry of appointments soon. coming up next, seema shah, tobin marcus, earl davis and robert fishman. from new york city, futures just

a little softer. cpi is just around the corner. ♪

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>> the sustainability of the euphoria and the equity market depends on the policies. >> the market is betting on deregulation, on lower taxes, animal spirits. >> very joyful right now. one would think the trump administration want to continue that environment. >> it is possible trump just threatens and waits is even he gets and does not put of the tariffs. >> if bond yields rise, that

will put pressure on the stock market. >> this is "bloomberg surveillance," with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: it feels like a long week. the race to thanksgiving. i know you will feel the same. let's get there quickly .equity futures on the equity 500 negative by a quarter of 1%. nasdaq 100 down by close to one third. the bond market with a big move. the equity market hitting a bond shaped wall. 10-year, 440.59. twos not even gonna basis point. if you're just joining us, let's go through the next couple of days. 90 minutes away, the cpi in america. on the friday when we get u.s. retail sales. looking for some fed speak in between. dani: it seems like there's been a shift to refocus on inflation,

at least that's what we heard from neel kashkari. the surprise on the inflation front is the thing that could make them rethink december. the market seems more likely to respond to a higher inflation print today. given the incoming administration and fears of what inflation that brings, the market is refocused on inflation and on edge. annmarie: mohamed el-erian called it after the september report. he said inflation is not dead. neel kashkari concerned about it which is why it's fascinating to hear from him after the numbers drop. we get a drip feed on some of his personnel and what that means in terms of policy going forward. the journal saying robert lighthizer will get this job of tariff czar. he wants to put up the barriers and the walls. jonathan: there's a good bucket and bad bucket. in the good bucket, tax cuts and deregulation. the bad bucket, tariffs and deportations. we are focused on the former and

not the latter. you wonder if the latter comes into sharp focus in the next couple of months. annmarie: it will in terms of tariffs they can do one day one. you can use 232 in law, the commerce department could deem something a national security risk and the walls could go up. when it comes to tax cuts, everyone is getting so excited. the issue is, this majority in the house is going to be so slim. maybe the slimmest we have seen in history. the first few months they are going to have to put people in seats. trump is pulling away individuals like elise stefanik to work in his administration. jonathan: it's not all about the trump trade. the index from citi and from us a bloomberg,highs we have not seen since the spring of this year. the fed backed away because the date it was better than expected. 2 this move in bond markets --

dani: this move in bond markets was before november 5. everyone is so bulled up. you had to in the equity market to trump policies and you have 10,000 by 2026. everyone upgrading their forecast. maybe that is the risk. everybody is behind the trade now. jonathan: and starts in the next few weeks. typically we have the by now but we had to wait for the election. i'm interested what number people in the street come up with for the next 12 months. coming up, seema shah on the postelection rally. we will speak to tobin marcus as trump unveils another batch of appointments. earl davis doubling down on the united states. we begin with stocks lower is the trump-fueled rally has a bond shaped wall. cpi did at 830 eastern -- 8:30 eastern. seema shah sank the rising

likelihood is early 2025, the fed is likely to slow it's cutting rate at every meeting and rates don't fall as far as even the fed or the market had originally envisioned. seema, welcome to the program. rates why not fall as far as the market envisioned. we have had a big repricing over the last few weeks. we are pricing in basically three cuts over the next 12, 13, 14 months. can we reprice that more? seema: thanks for having me on. typically, what we have seen in the last 18 months does the market overreacts. that is why you see the swings in interest rate expectations. i don't think you will see a further repricing but it's a case where they will be a long debate. you talk about the actual policies, how much are tariffs going to increase, what will happen to the deficit? these are inflationary policies.

there will be the debate about what is the neutral rate. there are so many forces that are making it more uncertain of how far the fed really needs to cut rates. how much you can cut rates. if you look to 2025, there was certainty about where the fed was going to go. i think there is a huge cloud above that now. jonathan: we have priced out a lot of rate cuts and the equity market is still close to all-time highs and credit spreads of incredible. let's sit on credit. investment-grade credit spreads tighten so far this century. trading at 74, sub 100 basis points. levels we have not seen both in high-yield or investment-grade going back to pre-gse. when you look at those levels and how tight they are, can you get a bigger sign of confidence from investors than that one right there? seema: i think this is key.

people talk about the risks. what is trump going to do the economy and inflation? the credit market is telling you that investors are not worried. they are very positive about the outlook. it makes sense. yes, there are things on the horizon we need to look out for. if you're talking risk assets, unless you see a significant increase in inflation which upturns -- upends the way the narrative is moving, it is quite difficult to be positive about the market. the one caveat was credit spreads. how much tighter by the realistically going to go and will the story be anything more? dani: you've had a bond market swinging from narrative to narrative, from recession to inflation concerns. equity markets have been remarkably strong. to this point they have been right on the strength of the economy. is that the signal you want to be following? seema: i think that is the

pathway we are looking at. there is uncertainty but the one thing we can say is the election result in what comes after is reinforcing a narrative that was already in play before the election, that of a soft landing. if you look at earnings, that is solid. we talk about deregulation. that is a positive to throughout their. -- throw out there. that plays into cyclical equities. the risk assets story is pretty solid. valuations will put a speed limit but there's a story of positive returns through 2025. dani: it is almost of if stocks are trading were bond yields can go higher. the assumption is because it is growth so they can continue to rally. at what point does that and? -- end?

what do we need to see as yields push higher? seema: it needs to be what is driving deals higher? does it start the pivot and become something more concerning around inflation? the idea -- not quite stagflation but that narrative starts to build up and concerns about the deficit. what is the reason why yields are rising? there are some concerns but a lot of this is actually about the strength of the u.s. economy. annmarie: when it comes to the 10-year yield, analysts talk about hitting 5%. do you think we can see that index six to 12 months? seema: the negotiations, the tax cuts is going to be through next year -- the negotiations around the tax cuts is going to be through next year. i think there is a risk.

some numbers i have seen a recent weeks of 7% on the 10-year is highly unlikely. the bond market -- we are hoping the bond market acts as a regular eating force for the government. any push towards 5%, the economy is strong enough to handle. it is enough to maybe push the government back and start to reconsider how much fiscal stimulus they need without the risk of crowding investment and upsetting the fundamentals of the u.s. economy. annmarie: larry summers said the bond market has to educate lawmakers in washington, but that is one side of pennsylvania avenue. 20 think donald trump is regulated by? -- what do you think donald trump is regular by? seema: we don't really know what is likely to happen. a policy proposal doesn't mean policy action. we are trying to figure out that regulate force. is it bond yields or inflation?

trump was voted in because of discontent around price levels, the cost of living. a lot of policies are inflationary. a lot needs to be said and still seen of how much pushback he's going to get or turning from himself as he sees inflation increase. jonathan: the trump put is down 40k. don't you think is worst in things constrained by the equity market? will it be any different in volume two? seema: i think the position of treasury secretary is incredibly important. it was back then and probably more important now. i think he does take some pride in the performance of the equity market. maybe that's another reason why we have some sense of confidence that we think the policy will continue to reinforce a strong and vibrant for risk assets. jonathan: appreciate your time is always.

seema shah of principal asset management. people think he's moving towards scott besson and set of lighthizer. annmarie: ambassador lighthizer would probably be equity negative if you put him of the top role. as treasury secretary -- i go back to the betting markets. for the future president, he looks at them he puts on his truth social and on twitter the fact that rick scott, is maybe piquant it comes to senate majority leader. scott besson is far and away leading the crowd when it comes to the betting market. politico talked about gary cohn, but it does look like there's a lot coalescing around mr. besson. jonathan: equity futures on the s&p 500 just a little softer. let's get an update on stories elsewhere this morning. yahaira: staying on president-elect donald trump, he tapped elon musk and vikram swami to lead a new department

of government efficiency. the accurate -- acronym is doge. he announced a new department will slash regulations, cut spending and restructure federal agencies. they will complete their work no later than july 4, 26. the aviation administration halted in haiti by u.s. carriers for 30 days after spirit airlines, jack lew and american airlines reported being struck with bullets while flying the country. this comes as violence escalates in haiti as gangs have seized parts of the country at politicians struggle to contain the violence. we are seeing the japanese yen trading near 155 against the dollar, a level not seen since july. it raises the rest the bank of japan might be trying to slow. the u.s. dollar has been strengthening against the yen

and g10 currencies since donald trump's pre-election. investors are watching for signs the fed might hold rates higher, but move that would further weaken the yen. jonathan: thanks for that. 154.89. up next, under surveillance, biden and trumper united. >> i predecessor make promises he broke. >> he's incompetent. >> geely garbage others his supporters. -- the only garbage out there is his supporters. >> the world is in flames. jonathan: that conversation just on the corner. good morning. ♪

jonathan: i do survey out from bank of america. the highest overweight u.s.

stocks since 2013. postelection results show higher level of u.s. growth excitations, high inflation expectations, lower probability of a soft landing, lower cash levels, higher allocations the u.s. equities. we are close to all type lies in the s&p. futures down by .2%. biden and trump united. -- reunited. >> the threat trump poses is greater in the second term of the first. >> the whole world is laughing at him. he's a fool. he's not a smart man. he never was. >> he made promises which he broke. my predecessor failed the most basic presidential duty. >> under coco joe biden every state is nelly -- crooked joe biden, every state is now a border state. >> the worst president in the history of our country. the world is in flames. jonathan: this is going to be great. donald trump making a dramatic

return to washington with a been scheduled this morning at the oval office with president biden. biden insisting he's intent on doing everything he can to ensure a smooth transition to trump's second term. joining us now is tobin marcus. we will not sit on this for long but i went in with the transition will look like in the next few months. michael: -- tobin: they have been moving very briskly to get the jobs filled out. there are some pix that are reassuring to investors. his chief of staff pick. marco rubio for secretary of state is something a lot of people cheered. we have things that raise eyebrows. the secretary of defense is something i got a lot of concerned emails about from both democrats and republicans. it will be a mixed bag. annmarie: do you think he can get confirmed? tobin: this is the first one that i have questions about whether or not he can get to the senate.

we have not gotten a lot of clear signal so far of how much willingness there is from some marginal senate republicans to stand up on these pix. during trump's first term he had more unorthodox pics. the rest are fine. he is quite unorthodox annmarie: people forget john radcliffe was struggling maybe to get the nod when it came to the senate and trump 1.0. you mentioned marco rubio. this has only been leaked out to the press. last night we got a slew of statements from president-elect donald trump about who he's going to put in certain positions. why was that one missing? tobin: not clear. some of these reports about people that have been picked like lighthizer, multiple outlets denied it. i have not seen a lot of concrete pushback casting it

into doubt. it does not seem really deeply under dispute. trump will put these out at his own pace. a lot of people have made the point until he says it with his own mouth or his own truth social post you should not take it seriously. that when does seem solid. annmarie: we have talked of at the markets is reading this. personnel is policy. the makeup of congress. very slim margins of the house right now. the senate -- trump may pluck senators out to join his administration. what you think can get done in the first 100 days? tobin: in the first 100 days i'm not incredible optimist. i think things will take time. we will see how much they clear the lame-duck session. what a mayor not need to deal with, appropriations for fy 25, in trump's first 100 days depending on they do that now. there is blocking and tackling

that needs to get done. congress needs this huge fiscal package due through reconciliation. my guess is we see the wheels move on that in the first 100 days but ultimate he the bill comes together and gets fully enacted later in the year. annmarie: will they be dragged down by replacing individuals like congressman wells of florida and represented elise stefanik of new york? -- representative elise stefanik of new york? tobin: it hinges on having those folks in place is not that big of a deal. we will remain in a situational year where any group of congresspeople in the house that have any release the hold together can take these bills. conservatives can abstain in the moderates can obtain. -- and the moderates can obtain. my guess would be on these

things what matters like the reconciliation bill, the incentives for cohesion and team player is so strong that they will come together. stefanik might be gone for 90 days. annmarie: on the good side of what the market is pricing in, you see this getting done next year through reconciliation. what about concerns the market has with something like tariffs? how are you reading the tea leaves? tobin: the tariff threat israel. -- is real. i don't have a reason to think it will be exactly 60% on china or 10% globally in a sweeping thesis with no exceptions. a lot of this will be case-by-case. they will be differentia -- differentiation. that will add up to an expansion of tariffs. a significant event for markets.

i think it will take time to come together but when we look at his rhetoric throughout the campaign, the likely return of lighthizer in several, there's a -- in some role, there is power in tariffs and something you need to leave in place to pay for taxes, tax cut extensions and reroute level trade flows. annmarie: given the possibility of lighthizer, the it out since we have heard or likely to get. they seem like china hawks. does that give you a sense of what the focus will be for the first 100 days and suggest the market has gone too far overlooking these things? tobin: it was always our expectation coming into the possibility of a trump win, frontloaded good news and a longer timeline for the real risks to markets in terms of things like tariffs. like elements of the tax bill that might be more adverse for certain sectors.

that is what is playing out. the trajectory makes sense. this is not surprising. those risks are out there. it has always been the case that coming into this administration, unlike the trump administration, we don't have 14 points to cut in the corporate rate. it will be less unequivocal good news for markets that his first year was last time. dani: what about the department of government efficiency? if the task force, not a department. what role do you see musk and ramaswamy playing? tobin: there is no shortage of ideas of a how to make the government more efficient. the challenge is actually making the government more efficient. putting these guys in this external advisory role i don't necessarily think is going to change anything very much or change trajectory here. when it comes to streamlining

department or reducing the federal headcount, congress needs to be involved in those decisions. it's been the case for decades that attempts to do that have been stymied by congressional resistance to cutting budgets are getting rid of the small programs with a little constituency somewhere. when it comes to stream lining regulations, there are processes redoing that we had together these burdensome rulemaking processes to get summing off the books. -- something off the books. whether or not they are there advising him from out of the government, i don't think you make that big of a difference. jonathan: we appreciate your thoughts. tobin marcus. the to do list is superlong. the light of town -- about of time is like that much. annmarie: going back to that "department," a source messaged me. no power, no authority, no money. divide actually create more bureaucracy in the u.s. government -- it might actually

create more bureaucracy in u.s. government. it needs congressional approval for any recommendations. everyone is focusing on this randy department being structured. it is not an institution. it is a task force or a counsel. we have had tons of them through countless administrations. jonathan: i wonder if they will be a returned office recommendation quickly got in washington, d.c. annmarie: that would have to come from the president-elect himself and not elon musk. jonathan: it will start drama over who is in charge and what this will look like. annmarie: there will be a lot of memes. jonathan: coming up, earl davis on why he's doubling down on u.s. risk. this is bloomberg. ♪

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♪ something has changed within me ♪ ♪ it's time to try defying gravity ♪ ♪ ♪

jonathan: equity futures on the s&p 500 slightly softer. down .1%. on the nasdaq 100, down by .2% as we wait for cpi data. 60 minutes away. let's get morning movers with manus. manus: spirit airlines looks is if they have run into real headlines that headwinds. it's too big of a bite for frontier to take. they are negotiating over a $1.5 billion debt. some of that is backed by the frequent flyer program. they never really recovered from

the jetblue blockage that biden put in place. what is m&a going to look like under the trump 2? rolling over on rivian. when you went access to technology, which is what vw wants, they need to stymie the cash burn. they are doubling down on their investment. this is a symbiotic deal for both. elective vehicles, new headwinds coming down the pike in the united states of america. demand is soft and europe and china has its own set of problems. they get the cash, vw gets access to that technology. spotify, it is not a banquet but it is everything you can listen to for $12. that is what you pay every month. the stock is up this morning. which would you choose? the taylor swift concert ticket for $4000 or $12 a month to tune into spotify? the gross margins for spotify are 32%. take me back to wimbley, back to the blonde omission --

ambition tour of madonna. jonathan: thank you very much. under surveillance, president trump making good on a promise to create a department of government efficiency, or doge. elon musk will work with vivek ramaswamy. the office of management and budget. annmarie: ignore the hype. it's a white house counsel. back in september when this was floated, terry haines wrote, saying this is not bold or new in washington. if you're on the titanic and your job is spending time rearranging the deck chairs, you not going to deliver anything transformative. you are poised to waste time and jawboning. no money, no authority and no power. sure, they can give recommendations. elon musk can do that on twitter. dani: for everyone that's been pitting up tesla, maybe curb your enthusiasm.

if he's much less in the white house, maybe something seamless to get done -- she complained about somebody different government regulations. what kind of power will he have the change that? annmarie: he can make recommendations. there is something to be said for his access to power and the fact given the fact this is not going to be a government department, the does not need to divest his business interests. he can recommend policy that could impact and maybe help his business interest that we will be critical and watchful that. we should really know what kind of "department" this is. it is not. jonathan: this will attract attention, that's for sure. president-elect donald trump is looking to stop the ban on tiktok. outside of china or lose its u.s. audience. it passed in april with bipartisan support.

annmarie: the pushback will begin fast. maybe even with his own national security advisor designate he has tapped, congress when -- congressman walls who has called this a chinese spy wrap. i'm not surprised by the news. future president donald trump has flip-flopped a number of times when it comes to tiktok. he was very clear with colleagues in the summer at businessweek it here's what he said. "you need competition. you have facebook and instagram and that is zuckerberg." he was changing his tune on tiktok. what is notable is the deadline is coming up, january 19. something has to be done. jonathan: was this driven out of an anti-meta and anti-zuckerberg push or something else? annmarie: he says it seems like it comes from the idea of competition. there's a lot of people that talk about the fact that one of the future president's main donors is an individual called

jeff yaz who has a serious stake in the company. jonathan: it would be upset if the company was forced to fold in the united states. apple looking to launch a new product category, working on a wall-mounted display to control appliances, videoconferencing and ai. the announcement could come as early as march. the company looking to catch up to devices made by amazon and alphabet. it is said to hold up like a tv. dani: this is my problem. it is six inches big. that is like an iphone taped to the wall. if you're across the kitchen trying to read something, they need to make the thing bigger. issue look like a tv. annmarie: you have to buy the glasses they want you to have see you can see the tiny tv on the wall. jonathan:jonathan: i don't like the future. apple down by 131%. county gather cpi data. earl davis is bullish u.s. risk

assets. he's doubling down on the usb the global economic nucleus. earl, i think we should start there. unequivocally bullish risk. what is behind that? earl: as you know, trump said we will have corporate tax cuts and deregulation, both of which are positive for growth. let's focus on deregulation. when you reduce regulations in business, you increase potential gdp. with that increasing potential gdp, that becomes a magnet for capital. you will have capital allocation increasing to the u.s. based on those policies alone. we have done this in our strategic bond fund, a global bond fund were reproduced emerging-market exposure and increased it with u.s. ig and high-yield. jonathan: looking at high-yield and ig now, incredibly tight.

let's go to the price of the story. investment grade credit spreads the lowest so far, the tightest this century. high-yield credit spreads around 250. what tightness are you anticipating? how much tighter can they get? earl: i will not put a number on how tighter they can get. i have been in the business since 1984. you have to follow the wall of money. it starts with the basics. what are your investable assets? the wall of money is enormous because of qe and every thing over the past 10, 15 years. with this policy coming about in the u.s., your asset-based is limited now -- asset-base is limited now. that is why we are not all in high-yield now but we are looking at any sort of hiccup to switch from ig to high-yield. we have about two months to do so. we want to ensure we are in

position for january 1. i call it the year of hope because you hope for the best in all these policies and for what will happen before the actual details come about. that is how we are approaching the market now. dani: we have seen credit spreads get really tight despite the fact there has been really robust supply. a lot of issuance but it largely has taken the form of refinancing. are you respecting to see another wave of issuance but this time being driven by deals? earl: yes. deals for sure because of the nucleus. you have to think about the market environment. one thing, higher potential gdp means higher real rates which means higher nominal rates. you at the potential inflationary impact of tariffs that also as the higher nominal rates . if corporations have rollovers coming, they will look to be said duration of they believe

this higher interest rate environment is here to stay, at least for the next administration. not only will deals do it because of the economic nucleus and capital coming into the u.s., but also the outlook for interest rates will help the deal flow. dani: the other party to the issuance and anza is the treasury -- bonanza is the treasury. the fed is doing qt. you have foreign central banks trying to pull back where they can from buying treasuries. are you concerned about the lack of price insensitive buyers in the bond market? earl: no. i'm concerned about the price. that is why our perspective with regards to doubling down is not a four-year story or two-year story. it's a 2025 story. there's a lot of unknowns out there. the unknowns are all around inflation. you have the impact of tariffs. you have the tax cuts that will

come about. how is that going to be funded? we are not expecting less deficit spending. we know for sure there will be more supply coming out. that is one thing in the back of our minds when we look at the risks to outlook. jonathan: that takes us to treasuries. is that contribute to higher yields across the yield curve? you think the move so far is largely off the back of better than affected economic data? -- better-than-expected economic data? earl: your nominal yield is made up of three things. breaking inflation or inflation echo vacations, of your real rate, and risk premium. we expect the state -- gravitate to 2.5% to 3% until details of the tariffs are out. that is inherently inflationary both globally and mystically for the u.s. that says higher yields.

the next part, real rates. potential gdp. a neutral real rate reflects your potential. of potential gdp is going higher, your neutral tips go higher and that pulls at higher. higher nominal rates. then you add the unknowns of exactly what is going to happen, both from a treasury issuance perspective and from a policy perspective. you need risk premium. those three things come together, it will bias you towards higher yields. jonathan: we will catch up with neel kashkari, the minneapolis fed president around 8:30 eastern time following cpi data. what would you like to understand from them? what if you don't get from chairman powell you like to hear more about? earl: good point. they will not be able to answer the question. we see conflict between powell and president trump down the line. tension is a better word.

the impact on that in an inflationary environment is significant in regards to adding to risk premium. my question would be, how do they gauge risk premium and how to they gauge their impact on the risk premium with the potential conflict in regards to who was the fed chair? that is the think we are looking at in the background. we think that could lead to higher yields. jonathan: that is really smart. earl, appreciate your time. looking forward to the conversation with neel kashkari later. that was earl davis. that question will be on repeat at every news conference the next year. annmarie: we know for the first iteration he was jawboning jay powell on twitter. scott besson talked about putting a shadow fed chair and with powell. trump said he will not get rid of powell if powell is doing the right thing. for trump, that is cutting

interest rates. this is a real estate developer. that is how he views the world. what happens if tariffs drive inflation in the fed has to potentially either cut the cutting cycle or hike? there will be a lot of jawboning and some consternation. jonathan: we introduced to a risk in the last week for 2025. let's get it on stories elsewhere. yahaira: let's start with president-elect donald trump's latest cabinet picks. he tapped john ratcliff to be director of the cia. he previously worked as a national director at the end of trump's first term and served as a republican congressman from texas. trump nominated ptech seth as defense secretary. he's a fox news host and army national guard officer. the new york times has reported special counsel jack smith plans to resign before president-elect donald trump takes office. smith's response but for the two

federal cases against trump, one an alleged attempt to overturn the 2020 election and the other involves allegedly hoarding classified documents. smith reportedly plans to completely investigate -- complete the investigations before inauguration. elizabeth moore is set to become the top democrat on the banking committee. lauren -- warren will succeed sharad brown of ohio as the panel's top democrat after he was defeated republican bernie marino. it will position warren in an area she has long been outspoken about as a critic of fed chairman jerome powell, cryptocurrencies and wall street's biggest banks. jonathan: that is the senator who might hate the next four years. of next, disney rounding out q4. >> the combination of disney plus, hulu and the espn pile flagship on our streaming service, that is a huge amount of value for consumers. jonathan: please get a preview of next.

-- we will get you a preview of next. -- up next. this is bloomberg. ♪ a lot of code. if an application needs to be modernized, then you'll need time, resources... and caffeine. if this sounds daunting, then use watsonx code assistant. built with ibm's granite code model, it's ai designed to multiply developer productivity, so you can generate code quickly. ibm. let's create.

jonathan: equity futures on the s&p down by .2%. bond market stable. 10-year, 442. disney rounding out q4. >> we tried to offer individual pieces or if people with the bundle, we are happy to do that. the combination of disney plus, hulu and the espn pile and espn flagship on our streaming service, that is a huge amount of value for consumers. when you deliver that which value, consumers are not will -- are willing to pay a little more. they are getting so much back in terms of entertainment. jonathan: disney gearing up for its final earnings report for the year. robert fishman writing, "disney has hardly been immune from the negative earnings revisions but that has befallen the industry.

there's reason to believe this disney headwinds are short-term in nature and the broader company maybe at a turning point." robert, welcome to the program. let's identify the headwinds. what do you think are short-term about the? -- them? robert: where disney is that now is needing to prove to investors the dtc story is something they can believe in and should believe in to get excited about with a long-term opportunity is and get the valuations more in line with how the company is actually performing. often overlooked data point is that the walt disney company as a whole, when you include their linear and streaming services together is actually the biggest platform out there according to nielsen ahead of youtube and netflix. it is something the company is going to continue to be focused on. investors are clear the focused on it in terms of valuing the

company on the dtc side. that year question, in terms of the short-term headwinds, what is going on now is investors need to feel confident the parks have been the wrist -- de-r isked. there is epic opening ahead of universal and may -- in may. hopefully that will be behind us now that we start focusing on dtc moving forward. dani: the other focus is going to be the search for a new ceo. wall street journal had a story out that they are not looking internally, not just internally but outside too. someone from electronic arts was floated and other people. does it make sense to bring someone up internally from the behemoth that is disney or look elsewhere?

robert: that is the ultimate question for this company. clearly with bob iger at the helm they have done an amazing job leading the company. he's done an amazing job leading the company over his long tenure. the question is going to be who can replace those big shoes? the company is taking this process seriously. they will look to, as you noted, exploring all candidates outside and inside. historically, the company has gone more internal candidates. this is obviously a critical junction an inflection point for the company as a whole. you need the right people to be able to lead that moving forward. dani: james gorman, the chair at disney is leading the push. what does it disney with chair gorman look like with him having a large influence over disney? robert: i think as you alluded

to given his history he's very much focused on the succession process. he's been very vocal about that. as you just mentioned, really just exploring all the best candidates out there. whether that means internally or externally, i think he will be a thorough process. annmarie: what have been through this with bob iger passing on the baton and then taking it back. what has disney learned from that experience? robert: exactly to the point that it does need to be a broader search. it needs to be all encompassing to explore all the potential candidates and not just more of a narrow process that seemingly happened through the process. annmarie: you are looking forward to seeing how parks is doing. we had bank of america on yesterday saying people are really going out and spending on services. do you see any that starting to dwindle or even any impact from

the hurricanes when it comes to the parks in florida? robert: great question. yes. clearly, the hurricane with walt disney road shut down for a couple of days. that will impact. we expect to get an update from the company about the potential sizing of that impact for their fiscal q1, the december quarter. after that number is known, we are hoping the company can essentially reset expectations around the overall parks. i mentioned epic, which is universal's park opening in may. head of a big competitor lunch there's always noise in the system that happens and we expect the same given the size and scope of epic opening in may that it could have an impact on walt disney world. once these factors are known, we expect investors to get a little more comfortable with the trajectory from here. dani: you said your first answer

that we can concentrate on streaming. they turned to profit for the first time less quarter, disney plus. what will margins look like this time around? robert: that is one of the ultimate questions for disney. investors need to have the confidence this could look like similar margins to netflix and the longer-term. the company is giving us some building blocks in terms of how they will get there. they are clearly focused on a lot of the costs and third-party distribution fees. there is a lot we have dug into on the potential margin. a big piece of that is how to incorporate hulu going forward. we are awaiting the comcast arbitration. once it is behind us, hopefully we can get more color as to the aggregate services bundled together looks like .you

the clip at the beginning. bringing disney plus, hulu and he together, that comment -- espn together allows disney plus their linear channels to be the number one platform in terms of viewership measured by nielsen. i think that the company is very much focused on what they want to do with dtc. there was a new hire from youtube that came over as part of their focus on the technology piece of it. there is a lot that needs to be evolved on the dtc strategy and we are excited about where they can take us and ultimately where that leads to double-digit margins and beyond. jonathan: i want to talk about the circus on friday night, mike tyson and jake paul. how much money does netflix make on something like that? robert: fun question. the way that netflix is viewing this is an opportunity to push their live programming.

clearly, it is a high-profile event, as you just alluded to. i do think it will help push them forward in the advertising realm. what the company, netflix, is trying to lean in on now is the higher engagement, higher cbms for the viewership they do have an growing the ability -- and growing the ability with sponsorships. they have wwe coming on board. with the christmas games from the nfl the focus is live events here. jonathan: i guess it is working. robert, good to see you. robert fishman. up next, kevin gordon, neil dutta, and neel kashkari right here in new york city.

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>> we are looking at cpi and we think of that as important. >> people should inspect --

should expect more inflation then less. >> their upside risks to inflation right now. inflation has not returned to target even as it has come down. >> things have been bumpier than in -- then they are expecting. >> it is notth an economy that is robust and an inflation rate proving more sticky than you would like. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: let us start with the scores and then we will get to the next 30 minutes in a few days. equity futures on the s&p 500 negative by .2% after snapping a five day opening streak in yesterday's session. a little bit lighter down by point -- i .3. bond yields backing away on a 10 year yield after a double digit basis point move in the session.

the two year anchored around 4:30 -- 4.30. this going into the cpi. and then on friday we will get u.s. retail sales. the one question we have, what would it take to disrupt the easing in the federal reserve and could that happen in december. lisa: neel kashkari said that it would take the surprise on the inflation front and that could change it. it is remarkable how quickly it has gone from the labor market being the top concern back to inflation. the cpi can really move the market. it was not that long ago where we looked over cpi and were trading on weekly claims on the things that mattered. annmarie: this is one part, the concern about the resurgence of inflation based off of the trump trade and we heard from earl davis talking about an unknown implication of the tariffs. you look at what the fed and fomc said about the trade wars. they have to -- they say you have to look through the impacts.

this will be a one-time hit. does that still continue and does it depend on how big these walls are and how big the tariffs will be. jonathan: we have priced out a lot of fed easing and yet the equity market is near all-time highs because this data it has been good. jobless claims since you mentioned them down by 2.20. annmarie: we had big revisions in the nonfarm payrolls because of the oddities and hurricanes and strikes that people just wrote it off and they overlook that. i wonder how quickly can this market slip again if we get some bad labor market are we going to say we went too far on growth and now we are worried about recession? jonathan: this has slipped five verse -- five or eight times. we will catch up with kyle gordon -- kevin gordon and then david kelly of jp morgan reacting to inflation data. we will catch up with neel

kashkari on whether the data might derail a december rate cut. we begin with the equity market rally on hold as investors wait for inflation data following a repricing. kevin gordon saying that monetary policy might be hamstrung and much of the landscape is to be decided. if deficits wired in outs, higher tariffs put upward -- put pressure and imino -- and immigration policies restricts growth. and raising that rate might be for bad reasons and not good ones and that is how you see things? kevin: it is a tough -- it is tough because this is a guess of wht policies will be put in place. the thing that i struggle with if you look historically less aggressive fed easing cycles if they are not going in every single meetings, the fed tends to be a healthier backdrop. when you overlay all of the policy and uncertainty from a

tariff war labor perspective that introduces another set of risks. the unfortunate part of the fed you are talking about risks to inflation but to labor. it is not that the headwinds have not gone away automatically, it is the fact that you have to start thinking about the fact and the reality or the possibility that you could be in a position in 2025 where there are significant headwinds and then you have deflationary forces building. and from a labor standpoint in particular, if that comes via more restrictions on labor supply and you get a fanning of the embers from the wage perspective that becomes more of an issue. jonathan: in moments of maximum uncertainty and low conviction we reach for a historical parallel. we have a playbook, the first trump presidency, how useful is it? kevin: in some ways it is useful and in some ways not helpful. you can go back to the obsession with using tariffs as a tool and

looking at equity markets and how they react. on the other hand the economic environment could not be more different. when trump took office the unemployment rate had more to go to the downside and we were in that secular decline. you were in a relatively healthy growth environment and you had 2017, the best year you could get for cross risk assets with low volatility and everything was rallying in the volatility did not show up until the following year. there is a different set up this time. it is a knee-jerk reaction to go back to that era and say that this is how things can play out but we are facing a different set of circumstances. i would put most emphasis on labor in particular because when you look at the gap from the labor force perspective over the past four years it has been from the foreign-born labor force and not the nape -- not the native born. if you put a restriction on that or taking a chunk out but

phasing that in over time that puts pressure on the labor market from a growth perspective in terms of consumer spending and the power associated it. dani: we have no idea what that will look like, what form, pace or amounts for all of the policies. in 2024 before we have clarity, can you stand in front -- in front of the strain or do you want to hop on. momentum is a powerful thing. it is having its best year since 1998. now we have nudged up more. it is hard to fight against the trend when you have got close to 75% of members in the s&p trading above the 200 day moving average. that has improved along the spectrum including the russell 2000. on the one hand i would not want to fight the tape. on the other you have to start looking at these policy

narratives that are flying around for 2025. i have yet to see a model that has not suggested that the tariffs implementation as it stands right now if all of it was to be implemented would not be stagflationary. and that to me would be what comes first before you talk about the sequencing. earlier you talked about potential for fiscal stimulus and tariff policy from a unilateral perspective and not thinking about congress. it seems like everything unilateral comes first and you get some sort of fiscal aid later down the road and that is harder because you are discussing a slimmer margin in the house. dani: which is why it is shocking that they are pricing in the tax cuts like do we actually get them if you have a one or two seat majority. kevin: even the discussion about pricing things and, i have find it hard to believe that the market is pricing in the next four years.

just because the overwhelming consensus that this would be a drawn out process and we would not know when the winner was, the fact that you got a does isis result the market treated it as a clearing event and took that huge chip off of the table. i do not think we should be looking at the moves over the past week and thinking that that somehow suggests that this is what is going to be the dominant market force or the dominant parts of leadership. as a historical antidote, if you go back to 2016 from election day to inauguration day, the parts of the market that are rallying in leading are similar to what has been leading this time. in the ultimate irony, if you look at those groups and what their performance was, they ended up underperforming which lag from 2016 to inauguration day. so not to say we get a perfect repeat. you have to take a step back as an investor and not get caught up in the election narrative. dani: does that mean this is a

great opportunity to take profits and where would that be? kevin: starting mid summer that if you had seen some opportunities from the high flyers that had done well not just year to date but over the past several years and it was more in the tech and communication services, then it made sense to do so, especially if you are more nervous about higher valuation and valuation looking stretch. those were a lot of the culprits in those sectors. it made sense to start adding into deeper cyclical areas that had not done as well. and for all of the stress associated with the aggressive move in the market and how cyclical started to rally. a lot of those areas were doing well before. it was not as if there was a massive leader shift -- leadership shift about what will do well in the next several months because the election changed it. jonathan: goldman is up 55% and

morgan stanley is up. pick a bank, they have ripped over the last week. what do i do with those names? kevin: the momentum is strong. for banks in particular, that is another area i would be careful about drawing election-related conclusions because and again, i just do not want to look at the first trump administration and be the repeat of what had happened because the dynamic and environment is different. banks was the sixth worst performing sector. it is not as if you can say it is a problem or anti-regulatory and tied that to what sector and industry will outperform. i would pay attention to the underlying environment and things look relatively strong. a year from now if we see more material hits from tariff or immigration policy it is a little bit. annmarie: when it comes to the banks trump's winning when you

see the regulators at play. if kamala harris did win do you think we would see this move? kevin: i do -- i think that regardless of who the winner was, i think that if it was as decisive, still as decisive even if it went the other way you would have a similar reaction. not as strong in the bond market but that is an interesting move with the rise in yield and equities. you typically do not see that if yields were shooting up that much. jonathan: we can debate that because no one is wrong and we have to figure it out. harris win a sweep and a big war and influence i do not think that apollo is up and that big run in regional. annmarie: they would be doubling down on regulation not the idea that the valve will open and there will be the m&a activity. they are all game on and waiting on the sidelines. jonathan: i think kevin is right, clearing the event. the base case was that it would take a wild and it would not.

dani: it is quite remarkable to literally pull up any volatility index. any volatility index on any asset class a straight nose dive down which is a green light to say that if you want to buy and you are an asset manager and scared of volatility you can jump in now. dani: good to see you. overnight on election night, straight down. kevin gordon. equity futures negative by close 2.2%. with your bloomberg -- with your bloomberg brief. >> donald trump is returning to washington for a meeting at 11:00 eastern with sitting president joe biden. they are scheduled to meet the overall office, a ritual of the trans--- of the peaceful transfer of power and one that -- that trump did not offer to biden. trumbull go to capitol hill and meet with house republicans ahead of his meeting with biden. u.s. dockworkers and employees

are set to return to the negotiating table and developments following the three-day port strike. while an agreement was reached including a pay bump, additional issues were left unresolved including the one of the main sticking points which has been around automation. if an agreement is not reached by january 15, a second strike could occur making it one of the first challenges facing the trump administration. softbank will be the first to build a supercomputer with the nvidia blackwell chips. it will support local services and will eventually create an ai grid that runs across the country. this was unveiled in tokyo hosting events like this across the globe to support national efforts around ai and lessening its reliance on a few large u.s. companies. that is your bloomberg brief. jonathan: i am convinced nvidia has a summit every other week. the stock storages and it is another summit. dani: and we are like what

jacket is he wearing. annmarie: dan ives called him the rock star of semi conductors. jonathan: dan ives has a lot of names for a lot of people. jonathan: we count down to cpi at the bottom of the hour. that is next, you are watching bloomberg tv. ♪ 's brilliant? boring. think about it. boring is the unsung catalyst for bold. what straps bold to a rocket and hurtles it into space? boring does. boring makes vacations happen, early retirements possible, and startups start up. because it's smart, dependable, and steady. all words you want from your bank. for nearly 160 years, pnc bank has been brilliantly boring so you can be happily fulfilled... which is pretty un-boring

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when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: inflation data at 8:30 eastern time in equities going shafter -- softer with welcome stability in the bond market. let us get you some morning calls. first up evercore downgrading counter pillar to -- caterpillar

to underperform. saying that donald trump will have wildcard implications. the second call from weber at atlantic pointing to uncertainty in starbucks with the stock down 1.3%. and the lowering the price target with debt restructuring talks underway. that is stock -- start. bloomberg economics expected the print to move sideways at last and hot at worst. anticipating the price to rise after two major hurricanes helene and milton. joining us now is neil, welcome to the program. let us start with the inflation data because we have tons to talk about. what are you in the team expecting? neil: i think the consensus is around 0.3. one of the things that i have stressed is these numbers they ebb and flow.

you have to have a fundamental framework, how to think about inflation. you do not want to do is put so much emphasis on one data point without explaining the fundamental drivers for why inflation is turning up. what is clear is that the labor markets are not sending an inflationary impulse at the moment, which leaves me more confident on the trajectory of inflation even if we do get a shakeup here and there. we know from the unemployment -- that employment cost index we know that wages are slowing. and you should expect wage growth to continue to moderate. when you think about inflation it is that triangle model. expectations and supply chain issues in the labor market. we know that inflation expectations are broadly anchored and labor markets are not sending much of an impulse. i think that probably puts us on a path to 2% inflation.

hurricanes, we have a one-off shock, ok, but ultimately, if wage growth is cooling and prices for one thing go up then people have to cut back in other areas driving the prices for those areas down. jonathan: can i ask you about goods inflation and the prospect of upside risk. i imagine people will pile into durable goods worried about tariffs. how do you think about those forces through the next several months. neil: it is a wash in terms of gdp. if you have people boosting the imports to front run tariffs that will show up in inventory. so the imports will be a drag on gdp growth and the inventory boost will be a boost. i do not really think much of it one way or the other. it pays to focus on domestic demand. dani: it is remarkable how

quickly the market moved on from a fear of a weakening label -- labor market. how big of a risk is it still? neil: meaningful. you look at the survey that came out yesterdaya firms are complaining about poor sales as their biggest problem. so, historically that is coinciding with increases in the unemployment rate. if you look at the broad scope of the labor market statistics, the unemployment rate being at 4.1% is the outlier more than anything else. the quit and higher weight -- the quit and higher rate. these are consistent with the rate higher than 4.1 percent. i do not think we are out of the woods. there is some weaker gdp growth coming in the pipeline. it is going to be very difficult for consumers to sustain this 3% real consumption pays given how

weak the growth has been. we are seeing numbers in business commit -- business spending beginning to moderate. boeing is having trouble over the next quarter or two. you have weaker consumption and equipment and the housing market is flat on its back. this is an economy that might be operating at a high level on the surface, things look ok. but, underneath this is a relatively imbalanced economy with downside cyclical momentum. dani: a lot of other sentiment surveys both from the different government agencies and the fed and bank of america have been so strong. this from the investor survey. 63% now think that the u.s. economy will stay robust. when they surveyed them in on -- in december, it was only 18%. did tuesday change anything? neil: i think there is something to the idea of the trump

confidence fairy sprinkling dust over the financial markets. but i think that it is prudent to step back and think about what we are dealing with. the majorities in congress that the republicans will have, particularly in the house are very thin. there is no paul brian waiting in the wings with a trump plan to implement. i would be dialing back the enthusiasm somewhat. and i do think that the last administration probably went to the fiscal well one too many times which constrains the choices that the trump team has. so, those expecting this big bang tax cuts and fiscal spend. i think that that is going to be challenged somewhat. in my opinion it is only a matter of time before the bond market thinks about the underlying data. my sense is that fixed income is

undervalued. annmarie: and then the items that we are calling bad that people do not like, and it is tariffs. what would you think of someone like ambassador lighthizer moving over to the treasury department? neil: look. the people voted for a hawkish trade policy. and so that is what they are going to get. annmarie: will that be market negative? neil: of course. we saw this play out in the last administration. the first year he was the market's best friend because the italian -- entire motive -- momentum was for the tax cut and jobs act. once that passed in 2018 there was a hawkish approach to china with tariffs and trade policy by tweet. and we know that every time there was something announced or some kind of hawkish trade thing

coming out of the administration the markets sold off on the news. i think it is important for people to think about the sequencing. if the first year is more about deregulation and tax cuts and what can they get done legislatively, that might be more positive for markets. if that is only used in a pivot to trade that will be negative. all as equal, tariffs are not a good thing for the companies that trade on the s&p 500, many of which are global and we know that if there are tariffs, that might invite retaliatory action from other countries. jonathan: always great to catch up with you. on the latest on policy for the next 12 months. sequencing we talked about, super important, and the guiding light is cabinet positions and who gets what. if you get it in treasury it

gives a signal that things will have the kind of emphasis that was described, deregulation and a push for tax cuts. annmarie: that will be the push and pull between a bessette and lighthizer who will be this tariff czar, and have someone on the other end watching out for wall street. what is this exactly going to mean for u.s. companies. jonathan: this like larry back on the day. annmarie: it is on the shoulders the devil and the angel. jonathan: up next on the program, breaking cpi data. david kelly joining us and then the thoughts of neel kashkari. from new york your data up next. ♪ awkward question... is there going to be hing left... —left over? —yeah. oh, absolutely. (inner monologue) my kids don't know what they want. you know who knows what she wants? me! i want a massage, in amalfi, from someone named giancarlo. and i didn't live in that shoebox for years. not just— with empower,

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jonathan: inflation data in america 20 seconds away. the s&p 500 going into that software. -5.2%. in the bond market resetting higher in a -- in the two-year and 10 year. just about unchanged. the 10 year 4.42 and the two year 4.34. here is mike mckee. good morning. mike: it looks like we are bang on the consensus. .2%. the headline number. 3 -- .3 we will have to see what

the ungrounded numbers are. year-over-year basis, two .6%. that is as had cast -- as forecast for the cpi court over year-over-year basis. essentially we can say that economists did a good job of forecasting this time. whether or not it makes a difference to the fed is a different question. jonathan: it makes a difference the market because there is a beat better than expected. equity futures higher by .10% after coming into the print by about .2%. the russell and small caps up by more than one percentage point. the bond yields are lower without five basis points. the 10 year we are down about six. dani: it is not enough to undo the 12 basis points that we pushed up but it is surprising to see some relief. we have been moving in a straight line up.

this is a market that once a reason to rally. i am not sure how long this lasts because back in the minds has to be even though cpi looks good now what does it look like in 2025 with a different set of policies. jonathan: when you look through the breakdown of this data, is there good reason to have a cyber leafs. -- relief. mike: shelter prices were up .2% in the prior months. there is a significant increase in the fed is looking through shelter prices and etc. because it has slowed down so much slower than anything else and what they expected. we are seeing the expected drop of .9% in gasoline prices, and utility gas up .3%. right now cars were flat but used cars up to .7%. there is a seasonal and aspect

-- and hurricane aspect. everyone's cars gets wiped out. they buy a used car and then we will see prices go up for new cars going forward. it looks like across the board there are general increases. we are not seeing many declines. it does show that at least inflation has leveled out if not going up. jonathan: does -- dani: does that mean a cut in december is straightforward now? jonathan: not at all. the reason being we have another cpi and pce report and that labor report at the first of the month. a lot of data between now and then and jay powell made the case that no one number will be determinative because there is a lot of data. jonathan: joining us now is the jp morgan chief strategist, david kelly. good morning. your thoughts on this, are we on course for a rate cut in december? david: probably.

the key thing is that the federal reserve will not assume, speculate or predict what policy on tariffs or fiscal policy will be. they have an idea but they will not put it into thinking. i do not think they want to pick a fight. it will have a fight at some stage that they do not want to pick it right now. so markets are pricing in at a quarter-point they will do the quarter-point. i will say that markets at this stage have only priced in two more rate cuts. they are stopping short of the dot plot. they say that the fed cut short early 2026. the market is saying given this agenda and given the pieces of this agenda there will be too much flat inflation and debt growth to make that a rational policy. jonathan: the fed does not speculate and the market does which explains the daylight. would you endorse that daylight? david: i think the way that both the stock and the bond market

have acted is logical. i think that the assumption is that we will get a big fiscal stimulus. it will have to go through the reconciliation process so i think this will be a slow moving trade and everyone will pile tax cuts on throughout next year. so when it hits in 2026 it is a lot of fiscal stimulus and huge deficits rising. it is a really kind of scary thing. but, that is not there yet. what will happen in the thing that is really important is tariffs. just how aggressive and quickly do we follow this tariff agenda because the earliest of smoke signals say that the trump administration will be serious about tariffs. dani: the markets have looked through it and said maybe it is not indiscriminate but more selective. if you look at a market like that and your concerns about it, you want to push back on some of the pricing?

david: yes. i would be nervous in terms of portfolios. if people have not rebalanced they are way overweight u.s. equities and make -- mega cap u.s. equities. it is more balancing over time there are times to think moving from alexion uncertainty that is over to policy uncertainty. and there is a lot. i agree with you, the first smoke signal suggests that the tariff approach will be very aggressive. we will have to see. there are people in american business who have huge interests in not being to address -- too aggressive. you have trade agreements and yes you are pushing up the price of the stuff coming in but there will be a tariff on your suppliers. and that -- there will be a lot of conflict. annmarie: in terms of uncertainty, personnel's policy and lighthizer has been not -- has not been given the nod which many would have you as antagonistic -- antagonistic.

we had tariffs in the first iteration and abided administration caps on on. do you view them as a one shot hits, or will this continue when it comes to the re-acceleration? david: it probably continues, if you punch somebody in the nose they will punch you back. if we put on tariffs they would be i cannot believe they put tariffs on us. well you know. that is why they call it a tariff war. you just do not get to unilaterally attack them and expect nothing to happen to you. by the way, it is not just on inflation but also growth. we export to trillion dollars worth of goods in this country. all of that will be a target for countries around the world saying if you will put a tariff on you -- on us, we will put a tariff on you. jonathan: isn't that a bigger problem for europe and china? david: because we are on a trade deficit.

but tariff on tariff will make the whole world poor. there are very few things that are a stagflation elixir that can push inflation up and slow the economy down. i say this as an economist and all people who have been trained over the years realize that both academically and in practice tariffs tend to slow down global trade and make domestic companies inefficient and they push up inflation and they also push up inflation on lower income individuals because lower income households buy more goods and upper income households buy more services. dani: it sounds bearish but you said that the market moves have been logical in stocks. david: yes because there are offsets for stocks. we could get a further cut of the corporate income tax which have a huge impact on earnings. if you do have a reduction from 21% to 15% for domestic production, that could have a big impact.

one of the other things will be production and they will be a lot of debate around that. those tax cuts for corporations will be positive. dani: libby cantrell wrote about how historically low and slim the margin will be for the republicans in the house. no one can take a day off. the president-elect might need to be careful who else he pulls from congress to join his administration. do you have conviction that they will get that 15% tax cut? david: quite possibly because you have to look at -- i think they i am not a political observer but it seems like the democrats were disparagement but this is what the people were voted for. annmarie: they will sign up for 15%? david: in house you have to get 50% and it looks to me right now that if the vote stops today it would be 222-213. that is nine seats and that is enough to get it through. jonathan: a lot to look forward

to. it is good to see you. david kelly of dave -- of j.p. morgan asset develop and. inflation data in line with expectations. stripping out food and energy at 0.3. the median estimate was 0.3. the equity price action up by .2% on the nasdaq 100 up by .10%. the outperformance up by .8%. as you expect with this move on a two year and 30 year, the yields are lower and the two year up by 10 basis points. the 30 year is down by three basis points. we get to fx and we will get to where the euro is. we are trading a little bit more positive. i am pleased to say that responding to the data is the minneapolis fed president, neil pratt -- neel kashkari. good to see you. ray to catch up. i saw some comments and for the

audience who might have missed them. it would have to be a surprise on the inflation front change the outlook so dramatically if we saw inflation surprises between now and that. it would be hard to imagine the labor market heats up between now and december and that is not that much time. inflation data around moments ago and anything in that to disrupt this bias? neel: first of all, it is fresh data so i have not had the time to go through it in a lot of detail. it seems to be confirming the path we are on. we made a lot of progress so bringing inflation down. i need to go through that component release which i have not done. goods inflation is back down to where we want it to be. services inflation which is tied to rate -- to wages is trending down. housing inflation is a lagging indicator and we know it takes a couple of years for new leases the turnover and that we are heading in the right direction.

right now i think that inflation is headed in the right direction and i have confidence. we need to wait and we have another month or six weeks of data to analyze. mike: one of the things that is very notable is a change in views about where you are going to end up. if you look at futures right now they only price and 75 basis points cuts between now and 2025. are we entering a period because we do not know what the policies will be where the dot plot and the summary of economic projections are off the table and you cannot put a lot of faith in them. and maybe you are in the attenuation phase where you slow down everything and people should expect not a lot of guidance from the fed? neel: the dot plot is something that at times i'm glad we have it and at times it is more of a frustration to fill it out because there is so much

uncertainty. over the past year or two i have been surprised at the resilience of the u.s. economy in the face of high policy rates. and yet the labor market stayed strong and economic growth continues to surprise us. for me i have been asking where is the neutral rate for the last year or two and that is not about the election but how the economy has been performing. for example, there been revisions that suggest productivity is higher than it had been in prior years. if that higher productivity environment is maintained that would tell me we are in a higher neutral rate environment. that is not about the election but how the economy has been performing. for me, that is what is leading to my own uncertainty about where is our ultimate destination. people are raising questions about what is the new administration and congress going to do. that is also adding uncertainty about what is the growth trajectory. mike: tom said yesterday, your

colleague from the richmond fed that right now there is no way to know, so one has to just kind of assume that things are going to be maybe stuck, inflation stuck above 2%. would you join in that sentiment? neel: i am not sure that inflation is stuck above 2%. it is running in the mid 2's on a pce basis. goods inflation is back down and service inflation is tied to wages and wages are gently trending down. housing inflation will take a couple of years before the new leases roll all the way through housing inflation. i have confidence that it is headed in the right direction. instead headed there fast enough? we will see. that and the labor market will guide our policy decisions. dani: back in december -- back in september you said that the balance of risk has shifted to a weakening labor market?

neel: we had seen data piling up which was pretty much pointed in one direction which was a softening labor market. we had a surprise and the other way with the labor market looking stronger and then a reversal in the job report. i still think the labor market is softening. a 4.1% unemployment rate is good and a good labor market. it is not as tight as it was two years ago. it is unquestioned that it has been softening. right now we are in a good place and we want to keep it there. i do a lot of outreach to businesses large and small as well as labor unions. generally what i hear is cautious optimism. people feel good about the outlook there are trends that are slowly softening and we want to watch that carefully. jonathan: we have to talk about the election. it is a difficult moment for monetary policymakers worldwide. the chairman was pretty clear, we do not speculate and we cannot make assumptions.

you are in the risk management business and have been for a long time, it predates your experience at the federal reserve. have we introduced two way risk in 2025 and when you think about the balance is that call for a slow approach for any move one way or the other? neel: i think we have already had two way risk. we have a risk of the labor market softening and then a risk of inflation getting stuck. i am not seeing a lot of upside risk yet, and i'm not seeing a lot of upside risk that inflation will take off. the bigger risk i am concerned is landing at 2.5 percent and instead of back down to 2%. those existed before the election and there continues to be uncertainty now. we need to let the data come to us and guide us. ultimately this comes back to the discussion a moment ago about where is the neutral rate. there is tremendous uncertainty about where the neutral rate is

and the longer the economy exceeds expectations the more signal i take that we must not be as restrictive as i would've assumed. annmarie: fed staff amy a lot -- analyze the impact to the tariffs and everyone coalesced around the idea that there is a one-off increase. it was not going to be a vicious cycle of ongoing inflation threat. did you agree at the time and do you still think that is what tariffs could do? neel: i agree with it at the time and i still agree with it but your prior guest touches on it but it depends on what the other countries doing. if it is a tit-for-tat and one country raises tariffs and you go back and forth indefinitely, that could lead to a longer-term imprint and potentially inflation expectations. we do not know what our own tariffs will be let alone what other countries will respond with. we need to be patient and see. mike: i had a note from one of the wall street analysts that i

had a line that i thought was valid. it is if you are going to forecast inflation you have to have a theory of inflation and what is causing inflation. we have a relatively strong labor market right now and concern about inflation. real interest rates just keep rising and they are working in opposition to your rate cuts. what is your theory of inflation and how come we are seeing this real rate reaction? neel: i have done a lot of soul-searching on why i missed the run-up in the first place and i was surprised in the run-up and disinflation that followed it. the one thing that has been constant was that it was not the labor market on the run-up.

it was mostly supply factors. supply chains got gummed up and it took a lot longer to resolve. the inflation took off. you put all of that together and it says when we thought we were applying two feet on the brakes we might have only a in applying one flood. this goes back to where are we going to settle. we will have to let the economy guide us. mike: we are paying as much attention cpi to the labor market. the labor market comes up in early december. we had a strong september and weak october. where is the labor market as far as you are concerned? neel: in a good place. the anecdotes that i get. i look at the data and official statistics and there is more uncertainty about the labor market statistics not just because of the hurricanes and boeing strike but because of the

large immigration flows which we are not as sure how big they are and they are time varying. so what is this month's's bre -- month's breakeven job growth. i look at the statistics and i mary it to what we hear -- marry it to what we hear. it is a healthy labor market and jobs are available and businesses are feeling good. we want to keep it that way. as we get the data and i will do my own route reach -- my own outreach to businesses large and small and labor groups to get the sense that the labor market is cooling slowly, heating up for cooling quickly. those will be important judgments into the policy deliberations. dani: your former colleague wrote an opinion piece basically saying there is a possibility that trump enacts policy in a way that does not give the fed enough time to respond and without the proper tools to respond. is that i concern you share? neel: fiscal policy is always an

input into our deliberations, analysis and assessment. i do not think that is new. it is what happens with other countries and trading partners. that type of uncertainty, we are used to dealing with it. we would like to have less uncertainty but is the world that we live in. we will take all the information as we get it and incorporate it. annmarie: there has been a lot of concern about what from 2.0 would be about jay powell. the fomc had a plan during the first iteration that maybe they would move powell to the chair of the fomc if he was going to take over the chairmanship of the abstract -- of the actual fed. would you act as a group to thwart anything coming at you that would negate fed independence? neel: we are all committed to the dual mandate goals. everybody around the table and my colleagues, stable prices and maximum employment.

number two, those goals are not controversial. i think everybody across the political spectrum wants to get inflation back down to 2% and wants to keep a strong labor market. that provides us a lot of support and then there is built-in continuity that congress design. governors serve 14 year terms, the presidents are independent and they provide continuity. between the people who are there, the commitment to dual mandate goals and the structures in place, i am confident that we will do the right thing and focus on the economy. mike: the housing market, how do you explain what is going on in the fact that prices are not coming down. and if you keep rates higher than anticipated we have already seen mortgage rates going up since you started cutting. is the housing market dead? neel: the housing market as i have studied it, the lack of

affordability not just for low income workers but middle-class families and more, it is really one that we have under built housing for the last decade. we just structurally under built so there is a shortage. i think about the notion of a neutral interest rate and think about a neutral morgan -- mortgage rate. if there is a lot demand for housing, what interest rate will clear that market? all things equal you would think a higher interest rate would clear the market. i think the housing market has its own dynamics that are driving this more than macroeconomic landscape and more than monetary policy. mike: the fed raises its hands and says it is something we cannot fix? neel: if we said we would cut interest rates to support housing affordability, setting aside the rest of our goals, what would that probably do? push up the price of housing. would improve affordability. i do not think monetary policy is well-suited to address the

structural issues going on. jonathan: can we finish on financial markets. you know them well. are you worried about getting into an asset bubble? neel: i always go back to when chairman greene in 1995 declared rational exuberance in the stock market went up for four years. i look at that and said if the fed had tried to use monetary policy to address the bubble it would have done more harm to the economy in the fairly mild recession that followed. i think monetary policy is a wrong tool to address asset bubbles. jonathan: is there something that needs to be addressed? neel: bubbles are easy to spot in hindsight. if we are in a higher productivity environment and higher growth environment and corporate torrent -- corporate earnings continue to climb one might say these asset prices are not irrational. it is hard to judge. if i knew where productivity was going i could give you a more definitive answer.

jonathan: we have credit spreads at tight levels for investment grade, tighter than anything we have seen. for high-yield you have to go back to pre-gf c. we are cutting interest rates into that. we have authority in washington, d.c. in the trump second administration that could be cutting taxes going into that. what is on your radar with regards and what would you watch to say something is going on that we need to pay attention to? neel: from a financial perspective traditionally the big sources of financial instability are leverage and maturity transformation and the intersection which is why banks are inherently risky. they take overnight money and they lend long into a. a lot of people looked at private credit and said this is a huge growing asset class isn't that scary? they seem to be much less levered than banks with longer-term funding. in those two primary dimensions

leverage and maturity transformation it does not seem to be riskier and probably less risky. we continue to look for leverage and maturity transformation. jonathan: smart and good to see you. neel kashkari, minneapolis fed president. from new york city, thank you and for choosing bloomberg tv. this was bloomberg surveillance. ♪

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>> and little bit of a turnaround in futures after the cpi print. 30 minutes until the cash trade. katie: bloomberg open interest starts right now. sonali: coming up, inflation shows another firm reading, underscoring under the -- ongoing risks that the fed will face. matt: elon musk and vivek ramaswamy europe to tackle