>> the range of outcomes into next year will be whiter. -- wider. . > the thing to expect in the market is the momentum and optimism surrounding growth for 2025. >> before you jump immediately to what is going to happen next, understand that you have to wait because it is complicated economics, sorting this out. >> trump doesn't take office until january and a lot of the policy moves may take three months to play out. >> it is time to let the policy take effect and see what happens. >> this is bloomberg

surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jon: that's get you to the weekend. good morning, good morning. for our audience worldwide, bloomberg surveillance starts right now. coming into friday towards a week of losses on the s&p 500. down another .6% on the s&p. the nasdaq 100 down by 0.9%. the front end of the bond market yesterday, this is what it looks like this morning, yields a touch lower down three basis points. 4.3181. chairman powell shaking it up with the quote, the economy is not sending any signals that we need to be in a hurry to lower interest rates. the strength we are seeing in the economy gives us the ability to approach our decisions carefully. annmarie: he talks about how the path of the policy rate will depend on the data and how the economic outlook evolves. incoming data has been good but the economic outlook is potentially policy uncertainty as you look to the horizon of

2025 with the political economy may look like with trump to plano. is that giving power leveraged to see through december? dani: he said the impact may not happen until 2026 or 2027 but he is giving himself optionality. he sounded more like kashkari and logan where inflation has kept up in importance for the fed. this is a different powell from august where he said the time has come to adjust policy. jon: at the summit we heard from two different chairman powells. that one in jackson hole and that one in portugal. yesterday, we have the likes of evercore in this morning sending the following, a december rate cut is not a lock. dani: that is what you have the market responding. i think we got over our skis putting the emphasis on the election and what that meant for the bond market. yesterday was an example of how that trade can backfire. on the curve it was the opposite that you've seen the day before.

this reinvigorate's the trade. the idea that inflation is a problem for the fed and the labor market is looking healthy. jon: hyper data-dependent. payrolls december 6. cpi december 11. the fed decision december 18. hopefully between here and then we will find out who will lead economic policy and the trump administration because we have it all of these pic and wek can talk about them in the program. we are waiting for the treasury secretary and director of the nec. s, annmarie: it's interesting. you would think this is one of the first names trump would go on truth and say this is the individual i will have lead the economy because he ran an economic agenda. a campaign talking about the economy and the fact that inflation was high under the biden administration and those price levels have not come down. we're are still waiting in the wings to decide who will be the treasury. jon: we know it won't be jamie dimon. was it ever going to be jamie dimon?

annmarie: i saw that on truth social. where is this coming from? yesterday it was jamie dimon will not be in the administration. jamie dimon saying thank you, but i haven't had a boss for 25 years in don't plan on having one. i wonder what shareholders think of that. no boss? jon: i feel like they feel like they might be his boss. we're down by .6%. in the fx market the euro has been weak. a little strength this morning. the euro-dollar, 1.0573. we will speak to maya mcginnis. we begin with stocks falling after fed chair jay powell signaled that the central bank is in note hurry to cut -- no hurry to cut interest rates are the team at morgan stanley is looking for a trump driven

m&a boom writing the following. the u.s. election points to the higher probability of a bull case outcome. our base case is a 50% year-over-year increase in m&a in 2025. our bull case, a larger 78% increase. andrew, welcome back to the program. it is great to catch up with you following the election won for president elect donald trump. i want your opinion on what underpins the mna boom. what are you looking for that underpins the story? andrew: it is great to be here with you. this is about underlying positive trends for m&a meeting recent catalysts. if we take a step back m&a is about confidence. these are transactions that require a company to believe in the outlook for several years in advance. we have been through a period of economic volatility and uncertainty around how much would inflation rise, how much would interest rates rise, with the central banks ever start to

cut and if so how much, with the economy go into recession -- which was a widespread fear last year and this year. i think in the background you've had a lot of macroeconomic uncertainties be resolved or look better. yet m&a has really lagged the strength that you see in the economy and in markets. one reason why may be that gap still exists is there have been lingering political uncertainties. u.s. election was a well-known, uncertain event. with it passing, and i think with a lot of companies we think will see the new administration as one that will be less regulatory focused, somewhat encouraging of animal spirits. we think that that could be another positive catalyst for more m&a. jon: in your world, how m&a will be financed. how are you thinking about that? andrew: another important element is you have willingness we think which will come from more confidence in the economic

backdrop and regulatory policy, but also ability. quite a bit of dry powder out there. our colleagues estimate there is around $4 trillion of dry powder from private market investors. we think that there is another 7.5 trillion u.s. dollars equivalent sitting on nonfinancial balance sheets. and then you have financing markets that are wide open. you've seen $1.5 trillion in new issuance in ig markets in the u.s. and very low new issuance premiums, which suggests that investors are taking down that supply pretty happily. i think you are at a level of yields that are high enough to attract bond investors, but on the larger view or roughly at the 100 year average, not scary for corporate's we think in a material way. wide-open financial markets are another important part of the story. dani: does the mix stay the same? if you have something like a junk-bond you can go to the leverage loan market, you can do

high-yield bonds, and increasingly private credit. does the market open up in a more friendly m&a back towards what was the norm and going to the stock market? -- going to the junk market? andrew: we think we will see more activity there. you have a backdrop where you mentioned private credit will be an important part. private credit has already been extremely closely linked and important to leverage buyout activity over the last several years. we think that leverage activity resumes and increases. that would suggest an important role for private credit. it would suggest a market with its own substantial amount of dry powder. the strategic side is also important. we think there is a significant amount of assets on private equity balance sheets or holdings that private equity will want to dispose of. these are mature assets that have been held for longer than normal.

i think that the desire to look for a strategic buyer to those assets when those strategic buyers have a very wide open corporate bond issuance market to finance through is going to be a source of more activity. dani: one of the other reasons besides stricter regulations as to why we didn't see m&a was higher rates. we heard from a jay powell who seemingly gave himself the optionality to pause and one of the upcoming meetings. how big of a risk is that if we see rates that stall out around current levels? andrew: i think that the issue of why rates are staying higher is incredibly important. as chair powell phrased it, he was focused on the strength of the economy. if rates are staying more elevated because the economy is strong, when did we see the highest m&a of prior cycles? 1998, 1999, 2000, 2006, 2007.

those are period's with high interest rates and high economic optimism. i think there are plenty of historical examples where you can get more corporate activity at higher rates because there's confidence in the economy and because the confidence is starting to unlock more animal spirits.if interest rates are staying higher because inflation resumes or tariff policy drives higher prices, that might be different. i think we have to stay focused on why rates are moving or staying elevated. if they are staying elevated because the economy is strong and they think that that is the story through the first half of next year, i think that could correspond to healthy m&a volumes. annmarie: you mentioned potential tariffs. another policy could be immigration. what effect would that have on growth and is that a potential risk to this m&a boost you are expecting to see? andrew: it would have a significant impact on growth. i think one of the challenges of modeling major changes of

immigration policy or deportations is there is not much precedent for it in terms of thinking about the economic impact. the economic impact can be severe. i think that where markets are now is maybe you could say in the easier phase of the optimism curve when no policy change has yet been implemented so all options are still on the table. as you move into 2025, whether or not many of these policies get implemented as stated is going to be incredibly important.it is something investors everywhere, ourselves included, will have to be reactive to. we will have to adjust our views as those policies change. it is important that m&a is not just in our view a u.s. story. we are encouraged by the european commission which we think will be taking a more open view towards m&a in terms of encouraging more regional champions as you get more of a

multipolar world. there is an important story in japan as it is embracing shareholder returns and corporate efficiency and it extends to other regions as well. this is still a global story even if i think that the u.s. is leading and likely to be the main focus. jon: you are based in london. i would love your view on what clients are saying about europe. credit spreads in america are tight and everyone wants a piece of the action. you talked about the animal spirits unlocking optimism about growth coming forward in this country for now. how easy or difficult is it to sell the european story to clients at the moment? andrew: the european story has become more difficult. if i'm honest. i think that europe is facing increasing uncertainty on geopolitics with the new u.s. administration, more uncertainty on growth and tariffs, and europe went through, this year, with a weaker economic story.

weaker growth and higher inflation than the u.s.. a weaker macro backdrop to start with. i think that there is some valuation support european equities on a variety of ways, trade is unusually cheap to the u.s. even adjusting for discounts. given those uncertaintiess, it is harder to close those gaps that would have been before or under different outcomes. i think that that will lead investors to be more focused and favorable to the u.s. for the time being. jon: the election was a game changer. andrew sheets of morgan stanley looking for a boom in m&a. we are down by .5%. with updates on stories elsewhere, here is your bloomberg brief. yahaira: the biden administration finalized the contract with tsmc to give the chipmaker over $6 billion in grants to bring production to the u.s. the chipmaker already reached

some benchmarks and will earn $1 billion of the total amount this year. tsmc will also take up to $5 billion in loans. it is part of the chips act aimed at boosting domestic semiconductor production. meta saying it attends to appeal court rulings allowing states and school districts to sue the company over claims that it's absurd contributing to a mental health crisis among kids. the tech giant says that it will ask the court of appeals to review orders last month by california federal judge who rejected the company's request to dismiss complaints. the lawsuits brought by the school district were filed against tiktok, snap, and google. it is official, new york is bringing its congestion pricing plan back. governor hochul is looking to push through a revised tolling plan costing drivers nine dollars to drive into manhattan's business districts. the change will be january 5

before president trump takes office. the congestion pricing plan will be introduced with a $15 toll earlier this year, but she paused it citing the financial pressures it would put on families. jon: just like that, the financial pressures disappeared because the election passed. annmarie: resident electron says that he has great respect for the governor but he strongly disagrees with the decision on the congestion tax. jon: he is not the only one. jamie dimon is out on the running -- out of the running. >> i haven't had a boss and 25 years and i'm not about ready to start. jon: was he ever in the running? that conversation is next. live from new york this morning, good morning. ♪

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30 eastern. equity futures are lower down by 0.6%. in the bond market yields are down to basis point, 4.4276. jamie dimon is out of the running. jamie: i just want to tell the president, i haven't had a boss for 25 years and i'm not about ready to start. the most important thing, whoever had been elected, and this is my belief, they are entering and will be responsible for the most complicated geopolitical military and geo-economic situation that the world has faced since world war ii. of course, i wish him all the best. jon: president-elect donald trump ruling out jamie dimon for treasury secretary, writing, i respect jamie dimon greatly, but he will not be invited to be part of the trump administration. i thank jamie for his outstanding service to our country. the front runners remain scott bessent and howard lutnick. warning that the to do list for them will be long, given the enormous physical challenges in

the near future, including critical deadlines, the role of the treasury secretary will be more important than ever. maya, welcome to the program. walk me through the critical deadlines. how big are they and how many are there? maya: there are so many things that whoever becomes the secretary treasu -- secretary-treasurer will be inheriting. it is about to be the worst we've had in the entire country. on top of that, we had these huge expiring tax cuts that are coming up next year. we have trillions of dollars of new promises that president-elect trump has made in terms of things that he wants to implement. we have things like the debt ceiling, which have been huge tussles in congress before, leading us to very scary deadlines talking about potential default. i think with a sweep of republicans that won't be as much of a problem, but there are a number of people who don't want to increase the debt ceiling no matter what.

the economic situation, which so far has been remarkably safe as we have gotten out of the inflationary situation, is going to have many things that the new treasury secretary and president will have to navigate. when you look at the layers of promises, which would grow the debt, and complicated policies like tariffs, this won't be an easy situation. dani: the top two contenders, howard lutnick and scott bessent, what do you make of these two? if you don't know them that well, what characteristics are you looking for in someone that can really guide through all of these to do list agenda items you outlined? maya: i don't know either them well enough at all to make specific comments. i know that they are well respected and well regarded. an important thing will be the ability to push back on some of the president's desire to say yes to everything when it comes to fiscal policy.president trump is a known entity. we seen him before in the white

house. he really liked tax cuts but he also really liked spending increases. one of the things we will have to grapple with is the trade-offs or choices. i assume they will extend the tax cuts. they need to figure out how to offset those costs so they don't add $5 trillion to the debt, which is the projected cost. that could be spending cuts, which you think republicans would support, but i think that the treasury secretary will have the role of talking about why that's important. the issues of tariffs are obviously incredibly complicated. if you think about how they affect the economy, how they affect fiscal policy, and how they affect national security, you come up with different takes on tariffs for each one. explaining -- i'm sure the president understands, but going through the trade-offs and nuances of those in conjunction with the rest of the things in the economy will be the role of the treasury secretary and the entire economic team. president trump is like to have

a diverse cabinet of diverse opinions and i hope that there is someone who is pushing for fiscal responsibility and not only using the short-term metric of the market performance or short term growth from borrowing, but looking at the long-term health of the economy. as jamie dimon said, the geopolitical and geo economic situations are the most tenuous that we've seen in decades. there was not sufficient discussion during the election of the overall vision of how to contend with those, and that will have risks for the economy. you want someone who is sophisticated. annmarie: when it comes to cutting spending that brings me to doge. you said we look forward to the creation of this new entity. can you name a single task force in the past that has been successful at cutting the budget? maya: we have seen -- the answer is no at the time.

i am not optimistic about our political class doing anything hard right now. we need to fix entitlements. we need to cut spending. we know this. these things don't happen through regular order or commission. but you see a lot of commissions, from the grace commission, to reinventing government, that put out a lot of ideas that are on the shelf and sometimes get pulled off about angst that you can do later when you're looking for offsets. when our congress and the president look at how to cut spending, they end up relying on things like discretionary spending caps, which means that they don't have to pick the actual places and spending cuts. there is a constituency for every program and they are hard to push back on, but we desperately need to look at a lot of places where we could be more efficient and cut outdated spending, because our budget is bloated and we are not willing to pay for what we have, which means we continue to borrow more. dani: where would you do that?

where would you tell them to look? maya: i would tell them to look where president trump during the campaign said don't look. our biggest problems, the industries are health-care care, national security, and spending for the tax code. that is where you will find trillions of dollars of waste over a decade. not in a single year, but over a decade. you have to look at our biggest programs for whether we should really be paying for those. social security we know is headed towards insolvency in less than a decade. it would be great if someone would talk honestly about the need to reform the program so it doesn't become insolvent and seniors have an across-the-board benefit cut. in our budget, health care is the place to start with so much waste and inefficiency. we know from the delivery of benefits that anyone willing to push back on powerful interest groups could find a lot of savings. dani: maybe we will get that in

rfk junior who has been staunchly opposed to some big corporate spending. you seem skeptical. let me give you a chance to respond. maya: i think you have to make sure that your actual priorities are the right ones. i don't know what his priorities will be, but i want to cut things without the sound policy basically the overall government's objectives are. national security, keeping people safe, question which regulations make sense and which ones don't. you start with objectives, you figure out if they should be done at the federal government level. you figure out the best ways to achieve them. you don't pretend everything is easy, because it's not. and then you make trade-offs. that will be important in this overall commission. not simple answers, but we have to start grappling with the more difficult things. jon: it is good to see you. i hope that maya is not listening. putting a number on what he is

expecting, our initial read of the landscape is that there will be $7 trillion of new spending over a decade with no real clarity on the amount that will be offset. annmarie: this would be the trajectory regardless of who won the election. if you look at promises on the campaign trail, and not all of them are policy, but there was going to be higher fiscal spending. jon: coming up on the program, president biden is preparing to meet with president xi jinping tomorrow. we will discuss with bloomberg's enda curran. you are watching bloomberg. ♪ what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

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jonathan: heading towards a week of losses on the s&p 500. down .5% on the s&p. nasdaq 100 down by three quarters of 1%. this follows the biggest weekly gain of the year so far last week when we had the presidential election. the market has been difficult to sell for many of you. you buy humiliation. and the bond market, two-year yields to 431.81. the longest such street going

back to april. without this drip of data. retail sales later. eroding the perceived bias of the federal reserve. dani: one could argue we got too over our skis with cuts and then you have this good data coming in the bond market needs to recalibrate and then you get the election and never need to recalibrate again. that you need to recalibrate again -- you need to recalibrate again. jonathan: bond yields reviving the dollar story once again. five days of euro weakness in the friday. a little euro strength this morning. 105.77, up by one half of 1%. going back to a week ago. under surveillance, dialing back expectations for a december rate cut after jay powell signals he's in a rush to lower rates further. >> the economy is not sending

signals that we need to be in a hurry to lower rates. the strength we are seeing in the economy gives us the ability to approach decisions carefully. the path to the policy rate will depend on how the incoming data and economic outlook evolve. annmarie: it will be potentially off the table depending on what the data prints show us. retail sales will be important. this idea of optionality. they want to have options. how much do they want to have options now because we have the outcome of the election and the policies that mikey on tap could be inflationary? dani: i think the december meeting will be interesting in regards to the politics. how was i going to look to donald trump if he pauses. if he cut before the auction for trump starts his term, he

pauses. i don't know what that ire would do to trump but it could still tensions. annmarie: they will be truth socials by the storm. i was on the phone yesterday and that was the conversation. you cut twice before the election but now i'm about to come into power, you know i went lower interest rates and you sign. now is the time to hit pause. jonathan: it's only about a month away. it's been a busy 24 hours. president-elect donald trump plans to end the ev tax credit. shares of tesla and rivian under pressure. tesla representatives support the decision. annmarie: musk said the u.s. should and all subsidies. dani you will talk about how this might help him. nss. why are people at the moment deciding to sell the shares when

republicans have been talking about this literally for months? you would've thought the second you saw we were going to get this trifecta you would have saw this at the market. this was already in the cards. dani: what you saw in the reaction to the stocks, one felt a lot more than the other and that is rivian. you have to figure only one of these companies can survive without subsidies. for every cart rivian makes they lose about $40,000. in the short-term it might be painful for both but tesla is the clear winner. maybe it clears out some competition. jonathan: tesla by about one quarter of 1%. china's economy showing signs of balance in the fourth quarter. october data showing consumption growth nearly catching up to factory output. three tell that's retail sales expanding the fastest and eighth months. they would to see more than just this. dani: i'm curious how much of this is temporary. china basically unleased a lot

of policy. the impact was the stock market that went through the roof. up 20% in september alone. how much of this is a one-off? one-off sentiments boost after that versus a china that only needs to respond keep that but needs to give stimulus given what type of policies we might see from the trump administration? jonathan: major tariffs coming. president biden and xi jinping meeting in peru on saturday. biden center focus on maintaining stability as the relationship transitions to the trump administration. enda curran joins us. good morning to you. can you frame this meeting? what is this going to look like over the weekend? enda: something of an exit interview for outgoing president biden. if you think of where we were a year ago in san francisco, that was a big meeting between both leaders. they set up new channels for military to military communications.

they set up new cooperations on ai and narcotics control. the biden administration says there has been progress but today's meeting will be nothing like that. president biden is heading out the door. president xi will look for this meeting knowing it's a different administration coming in. not just on the trade front but the security front. we have seen names appointed to the cabinet, very hawkish when it comes to the china side. it's a stock-taking exercise and a farewell between the leaders who have met many times. hard to see anything major coming out of it or in terms of a new direction. jonathan: let's talk about transition and change in the difference in approach. donald trump is more forceful, more blunt. joe biden claimed to be more nuanced and targeted. when i look at the biden approach, we have to highlight a failure to influence chinese policy over the last four years.

is that going to change under donald trump? enda: the plan administration presumes they can make some diplomacy and they eked out progress on ai or narcotics control. there have been plenty of critics that the china-u.s. story has stalled. that is given plenty of -- for donald trump to come in. we don't yet know what president trump is going to do in terms of tariffs. there's a lot of support among the business community for measures against cheap chinese goods or accusing china of diluting markets. tariffs will cause a get their business, drive up costs and force them to make some significant changes on how to operate. there's a case for rebalancing trade with china but it's

complicated. a lot of people are waiting to see how this will be executed. the biden administration was all about targeted tariffs. it's more a broadbrush with the incoming trump administration. annmarie: the secretary of state is a china hawk and has been sanctioned by beijing. we are waiting to see where robert lighthizer would go in trump 2.0. we heard from katherine tai. she says it's an economic matter. no matter who is in charge of the united states, we cannot withstand a china shock 2.0. is there a lot of distance between a katherine tai and robert lighthizer? enda: no. there's been such a convergence of both over the last decade when it comes to the china story. there's a hawkish view where china is a strategic competitor. they need to be measures to boost tetra tech u.s. industry. -- and protect u.s. industry.

let's not forget the global backdrop. there will be plenty of pushback, plenty of messaging about the potential damaging effects from what will happen when it comes to tariffs. the vietnam president made the point that tariffs leads to recession, poverty and conflict. a striking warning. president macron warning about the prospects of a new trade war. the u.s. can make its case it needs to do more to protect its industry but it has to sell that message on the global stage. annmarie: when it comes to the exit interview, it feels like a waste of xi jinping's time. we have seen the president-elect. in the final months is there something china and the united states could work on before trump gets to the oval office? enda: as jake sullivan reports on, it's about maintaining stability over the transition period and getting across the

message it is in the interest of both to keep that going into the next administration. this administration does not speak for the new one that will take over in january. they have a more hawkish outlook on how to go about china policy in which buttons they are going to push. china does that. they don't know what is coming down the pipe and they are waiting in terms of how much support will have for their own economy and how they will respond to specifics. there will not be much in that meeting between president biden and xi. in january, it will be a different story. dani: how much firepower are they holding back to support the device economy if it said by policies coming out of the new white house? enda: it's clear they are holding back at the moment. they had significant group to spend money if they need to. there have to borrow on global markets. you saw the chinese-u.s. dollar

bond this week. they will respond by putting more money into the economy. you saw the retail sales overnight, a little bit of a bump up in the right direction. if they can get growth, that 5% target for this year, they will probably take that. no doubt if we are in a trade war six-month from no china will be forced to respond on the ground in china. dani: how should we think about some of china's international investments? you saw china move out and allotted to mexico. something trump has said he will target. what could be the impacts on emerging markets? enda: there's been a reshuffling of chinese investment in global investment. china was the go to place to put your factory a decade ago. that companies have been shuffling around the world to escape those u.s. tariffs. dear point, the u.s. -- to your

point, u.s. trade policy is wising up to that. it might make that trade stories more complicated. we have to wait for specifics to see what the trump administration does. whether or not -- on paper they say they will not welcome chinese investment in the u.s. we will have to see if that changes. if we are in a trade war a few mutts without involving tariffs and export restrictions and other investment controls, no doubt that will make investing in china more complicated and doing business with chinese companies in other countries were complicated too. jonathan: always fantastic to catch up with you. enda curran. who is at the top of the naughty list? we caught up with robert casey.

they are saying is going to be europe. annmarie: they are preparing for tariffs on europe. this is going to be broad strokes. they will move quickly on europe, on china. looking at some of the factories the chinese are opening up in mexico all at once. jonathan: pricing of the good stuff. we were talking about the m&a boom with morgan stanley. the prospect of tax cuts. did they shift towards tariffs. dani: the tariffs could come sooner. it is the what you can enact. i wonder if the market can keep looking through it. it is pricing it in that we will not has sweeping tariffs. maybe it will be one-offs to stem competition internally. how long can that last with the market that might not get tax cuts and deregulation it once until year from now. jonathan: stocks negative by .05%. yahaira: domino's pizza moving

higher after berkshire hathaway bought shares of both companies in the third quarter. just according to a regulatory filing. the conglomerate shedding most of it ulta beauty holdings, sending the stock down in the premarket. donald trump continues to fill out his cabinet, saying he's tapping robert f. kennedy, jr. to run the department of health and human services. that was the prominent vaccine skeptic on top a massive agency overseeing everything from food, vaccines and medicine. trump has chosen doug burgum, governor of north dakota to be the next interior secretary. it will give him a significant influence over plans to boost domestic energy production. both will be confirmed by the senate. with trump picking rfk junior to lead the department of health and human services, shares of vaccine makers are falling in the premarket. trump saying rfk junior will help take on the health crisis in the country and make america

great and healthy again. that is your bloomberg brief. jonathan: we have all seen exhaustive coverage of the vaccine story. not enough on the food story. how will this individual work with the usda? how will he go to fight for the loot -- the food lobby. everyone else's focused on the other stuff. annmarie: it is the fact that he's been critical of the additives in american food. that is what they like about him. then they say not quite sure if he would him in charge of vaccine policy. jonathan: some valid points when it comes to nutrition. i wonder what the fight looks like if you confirmed. looming trump tariffs. >> any company that has not already started to move some of their production to other regions of the world is probably either in denial or may not have a risk mitigation and security strategy they probably should be having in place. jonathan: that conversation is up next.

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jonathan: as we work towards the weekend, a snapshot of the price action. equity futures done by 0.5%. bond yields just about unchanged. under surveillance, looming trump tariffs. >> any company that has not already started to move at least some of their production to other regions of the world is probably either in denial or may not have a risk mitigation and security strategy they probably should be having in place. it is hard to know what exactly the impact is going to be, the timing of the impact. even which products are going to

be affected. jonathan: retail is reporting over the next week facing down the prospect of higher tariffs and a shortened holiday shopping period. gregory melich remains optimistic. trump tariffs and tax cuts should prove neutral to positive. greg, before we get the holiday shopping and the consumption boom, can we talk about how retailers might manage inventory between now and inauguration of donald trump? whether we will see massive imports coming from china, whether it has started ahead of tariffs. greg: i don't think there is a surge ahead of tariffs. for a lot of large retailers and even smaller ones we went through this a few years ago. they have a playbook as to what they are going to need to do ahead of the shifts. what i would say is right now they are dealing with remembering the problems we had with the ports on the west coast a few years ago and getting

inventory in time. they are being cautious in terms of how much inventory they bring in quick ahead of some theoretical tariff change which will be country and product specific probably. jonathan: how much more resilient our supply chains now? have they diverted traffic away from china, away from mexico? what can you identify? greg: if you go back to pre-tariffs 2017, it looks like what retailers are getting for china is down 25% to 30%. a lot of that moved to mexico and vietnam and india. there has been a broadening out of the global supply chain. this will probably further accelerate that trend to go to where products can come in with higher quality at a lower cost. there may be some

onshoring as well. dani: january 15 is the deadline for the longshoreman and they need a new deal. what is the risk we have a repeat or something worse than we did in months prior, especially with the new administration that is less friendly to unions? greg: great question. i'm glad you brought it up. when you talk to retailers and vendors, that date hopefully will get sorted but that's a real and relevant date without theoretical tariff changes. making sure we have the products that we need if there is a disruption if the final deal is not signed by then is important. there is a lot of moving pieces. even though we think concerns are in a better spot and will be slightly better into next year, it is not a v-shaped recovery. dani: what do you anticipate the

holiday season demand to look like? greg: we are looking for retail sales to settle out at this 3% to 3.5% normal growth rate. we will get october numbers later today which we think will be in that range. the things we are watching, the categories we think are starting to have rolling recoveries, home improvement is one. after 14 quarters of negative traffic at home depot and lowe's, that's a category that will start to turn positive next year. maybe not by the first quarter but certainly later in the year. our home improvement indicator had a pretty sharp acceleration the last six months. annmarie: i'm looking at names like target, walmart, amazon. people buying big-ticket christmas items. two will fear the best? -- who will fare the best? greg: the consumer is willing to spend but they are cautious and value focused. they want to see newness.

we are seeing amazon, walmart and costco have combined for 70% of retail dollar growth this year. retail sales are up a little over 3%. if you x out those retailers, their growing 1%. for the others it is catching the right trend, having the newness, making sure you lean into value. that is how they can hold through this. amazon, costco and walmart are any good spot. annmarie: there are far fewer holiday shopping days this season. is that going to affect the outlook? greg: yes. i have the gray-haired to remember when it had a bigger impact. e-commerce growth is now 22% of u.s. retail sales. maybe it's a little less of an impact because there's more flexibly how people shop and acquire goods for the holiday. i would say it might be 50 pips of pressure because there are fewer days between thanksgiving

and christmas to get stuff done. jonathan: we went to bloomingdale's the day after halloween. straightaway, christmas music. annmarie: it was ridiculous. jonathan: appreciate your time. let's catch up again soon. greg melich. a new op-ed from scott besson, leading candidate to be the next treasury secretary under president-elect donald trump. this was an fox news this morning. "the truth is tariffs have a long and storied history as a revenue raising tool and the way of protecting strategically important industries in the united states. donald trump has added a third leg to the stool, tariffs as a negotiating tool with trading partners." annmarie: this has been the criticism that he would appoint him as treasury secretary. was he not as forthright and excited about using tariffs? in this op-ed squarely in fox news he's making the case i am on board with the tariff regime when you come into office.

jonathan: scott besson. let's talk about tariffs. time to revitalize alexander hamilton's favorite tool. we will catch up with philip compareale of jp morgan asset management, isaac boltansky who puts numbers on the republican effort in the next 12 months. the tax cuts, all of that. he is talking $7 trillion worth. we will break down what's behind that $7 trillion. we will speak to craig trudell and catch up with michael kushma following comments from chairman powell yesterday. equity futures on the s&p 500 negative by .05% and the bond market. 10-year yields just about unchanged. two-year down to 432. from new york, this is bloomberg. ♪

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

>> the range of outcomes next year will be wide. trends are moving higher and that's positive. >> the thing you have to respect and the market is the momentum and the optimism surrounding growth for 2025. >> before you jump to what will happen next, you have got to wait. it's really complicated economics to sort this out. >> trump does not take office until january. the initial policy moves may take two or three months to play

out. >> time to watch and see what happens. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: retail sales in about 90 minutes. equity futures on the s&p 500 down across the board on the nasdaq. nasdaq 100, .08%. chairman powell shaking of the market. "the economy is not sending signals we need to be in a hurry to lower interest rates. the strength we are seeing in the economy gives us the ability to approach our decisions carefully." dani: he set the time had come to adjust policy in august. it is a labor market. we saw the jobless claims yesterday that continue to be strong. it is far from falling apart. it is maybe a market asking did we get over our skis and the cuts we have been pricing? annmarie: this will depend on

incoming data. then he said in the economic outlook evolving. it will it evolve significantly and 2025 give some promises on the campaign trail from donald trump come to fruition with his trifecta in washington, d.c. jonathan: we could see major changes. in the equity market, equities down across the board. in the bond market we've had some big moves at the front end of the yield curve. heading towards a fourth weekly gain for a two-year yield. two-year down about three basis points. for the week it is up again. dani: it is shaping up to be the front end of the curve that is more interesting. after the election it was a long and fiscal concerns. concerning ourselves with what is happening with rate decisions, i think in the long term it was interesting to hear powell talk about tariffs and say his concern is growth. not inflation. he's concerned it will hamper growth when they are trying to reinvigorate it.

he might be fighting a different battle than what we have been talking about. jonathan: why retail sales are much more important. coming up, we will catch up with philip compareale as the post election rally one at a theme, isaac boltansky, and bloomberg's craig trudell on the future of tv tax credits. heading towards a week of losses following jay powell's hawkish comments. the pace of easing will be much lower going forward. the labor market weakness was misread. as long as the fed can carefully bring rates down, our thesis of a soft landing and broadening out of economic returns will be supported. good morning to you. phil: good to see you. jonathan: last time we spoke you were super bullish. phil: before the election, we were saying it was going to be really hard to fade u.s. exceptionalism.

we didn't know if it was good to be exceptional nation that exceptionalism, lower case or within clinician point -- with an exclamation point. we think it is the exclamation point. the two words i took from chairman powell yesterday, the world focused on cutting rates. mine was strength and economy. that is the fundamental story, particularly with the u.s. consumer. i have been on this program talking about the consumer a lot. the most important consumer to get right. october gave us such a big signal. it was the largest one-month gain in consumer confidence since the reopening of 2021. the biggest contribution to consumption of the third quarter since the beginning of 2023. about trillion dollars when they revised the savings rate higher. the u.s. consumer looks strong. 15% probability of recession

over the next 12 months. 15% is as low as you can possibly get for us because there is no such thing as era. -- zero. the average 10-year rate has been 4.2%. the s&p squeaked out 25% gains. it is a pretty supportive environment because of the fundamental signals. jonathan: a beautiful story. let's talk about the price of the story. credit spreads are tight. we are seeing the data coming strong. we have taken out a lot of rate cuts for the federal reserve. phil: when we were here up through the summer we were talking about the cap weighted s&p. that is part of the story but are two leaders trades have not been that. one has been equal weight. a little bit of every stock. when that is coming up is midcalf.

valuation is 70 times versus the 22 times you are quoting on the s&p. 13% earnings growth for next year which looks pretty good. you just don't need as many rate cuts. a little less sensitivity than small-cap. yes, we could have jumped into the deep end of the pool but we are getting there through mid-caps. it's a broadening out of u.s. exceptionalism. we are diversifying that with other things. high yield, yeah. how tight can it go? you have this fifth percentile spread, right? you look again and it's 50th percentile all in yield. a lot of clients just what the yield. a world where the fun story continues to support high yield. dani: one trade that works well as the more credit spreads tighten, the more risk assets

do. does that put any ceiling on risk overall or just the correlation out of whack considering how tight things have gotten? phil: good point. it's a whole story of macro volatility coming down. this might docket the best ratings but i can make the case that uncertainty is less now, not more. we know who is there. if history is a guide, companies put money to work the who they voted for which kids afford the broadening out rally. we are not exciting high yield to tighten. maybe it should for treasuries. one has a 100% debt to gdp and the other doesn't but that will not happen. the high-yield story is in the background. janet yellen said is like watching paint dry. that is what she wanted monetary policy to be. dani: the rally broadens out what does leadership change? phil: that is the key. i think leadership does change

the things that are more procyclical. u.s. exceptionalism, in bold letters, that does not mean mega cap. it means you have the financials and industrials taking part. that is how we are positioned for next year. our soft definition is about 2% to 2.5% growth, to percent to 2.5% inflation. if you google five with earnings, you get a lot of leadership in that environment. that is pretty supportive. one thing i don't want to see is a 50 basis point rate cut. i don't want to see a 2% cpi rate. if that is happening, we are of the fund middle story. that fundamental story. -- we're on the fund middle fundamental story. jonathan: where does that leave europe and china and japan?

where does that leave em? phil: the woman answer all of those? -- do you want me to answer all of those? we are out of our 10% overweight. in the other piece, we have a small piece in emerging markets. in 2016, if you listened to president on the campaign trail, you would not have touched em with a 10 foot pole. it was up 30%. the fundamentals won out. i'm not saying that will happen that we have an environment where china is acknowledging the emerging-market. it has fallen flat again but we want to be careful of being too underweight. the japan story gets a little complicated with the bank of japan mobilizing rates and what that does the dollar-yen. it makes it easier if the fed is not going as much. it will not be like that early august trade. in terms of pecking order, u.s.,

em, japan and europe is growing at 1% and we are growing at 3%. the european central bank is cutting. really have 75 basis points priced out to the end of next year and that is a weaker euro story which is not great for investors. annmarie: you sound so bullish. what is the risk of donald trump putting tariffs that are blanket 60% chinese imports and 10% everywhere else? phil: i go back to 2019. president trump lost the majority in the midterm elections of 2018. growth that year was 3% and inflation was 2% and the fed was cutting. i don't know if the tariffs are going to lead to inflation. it could be more of a growth side. policy air -- error probably is our biggest risk. either from the of or from the federal reserve. i think the federal reserve kind of got the message. they thought it was going to

before .4 at the end of the year. it is 4.1. policy air is probably the biggest lift. -- policy error is probably the biggest risk. annmarie: what would be the catalyst? phil: business caution and layoffs. we are watching the jobless claims closely. do claims or the labor market shows signs of cracking? there was a hoodwinked earlier this year that the fed fell for. i think it would have to come from the labor market. the uncertainty on tariffs on growth, that is the business caution that is not priced in right now. jonathan: jobless claims yesterday, 217. phil compareale of jp morgan. an update and stories -- on

stories elsewhere. yahaira: shares of rivian is falling well tesla is going up after donald trump plans to kill the $7,500 tv tax credit. the move would deal a major blow to ev adoption in the u.s. which is already weakened because of high prices and charging infrastructure. trump previously said he would reverse president joe biden's ev policies on day one of his presidency. disney predicting $1 billion in operating earnings from streaming for the fiscal year. it has plans to increase profit margins through price increases, higher at sales and a password sharing crackdown. it surpassed earnings compared to the film division in the last quarter. get ready to rumble. mike tyson will face what he seven-year-old jake paul in the ring at at&t stadium in arlington, texas tonight. they completed a weigh in yesterday with tyson slapping

paul in the face. tyson is considered to be one of the greatest heavyweights of all time all paul faced off against different opponents with his only loss coming from tommy furey last year. the event will be streamed live on netflix. that is your bloomberg brief. jonathan: thank you. boxing is dead to me. it is like merging with wwe. so sad. dani: hasn't it always been entertainment and flash? jonathan: there should be a raw realness about it for the people of come from and their hard lives and the effort and the discipline over time to go into the world's biggest age. it is just pure raw entertainment. i don't even know what it is. have any rows are they fighting? dani: i refuse to know anything about this. jonathan: no one around this table will be watching. installing the trump team. >> all options are on the table including recess appointments.

we will find out quickly if the democrats want to play ball or not. jonathan: that conversation of next. live from new york city, good morning. ♪

jonathan: equity futures on the s&p positive by .05%. a little bit of stability in the bond market. 10-year, 443.74. installing the trump team. >> the president got a big mandate from the american people that want change in the country. he wants a team in place that can do that and we will work to see if we can get that team installed as quickly as possible so he can omit his agenda. all options are on the table, including recess appointments. we will find out quickly of the democrats want to play ball or

not. jonathan: donald trump moving quickly to assemble his cabinet has many expect republicans to hit the ground running at year. isaac boltansky writing, "our view is that lawmakers will move quickly to shape a tax spending package and are channel checks suggest that they are targeting march-april for votes." that's an aggressive timetable. you put a number on things. the read of the landscape is they will be $7 trillion in new spending over a decade with no real clarity on the amount that will be offset. what goes into that seven number? what is behind $7 trillion? isaac: we are starting with $5 trillion just to extend the tax cut and jobs act portions expiring at the end of next year, as well as some that expired in the past few years. we are starting at just about $5 trillion. then you have to layer on the items the president promised from the campaign trail or other issues or priorities for members of the hill.

7.5 is a fair framing device. the unknown for all of us. what a lot of folks are doing is building out there pay for list. that is something you will hear a lot of in the next few weeks in terms of can they use tariff revenue as a means of offsetting some of these costs. where they going to find other pay fors? the department of government efficiency? other areas of the government? that will take some time. it will take some process and iterative back-and-forth with the cbo to figure how much all these things cost. the first shot across the bow was the comments from the president yesterday regarding electric vehicles. that is a big pay for right there, a couple hundred billion off the bat. annmarie: what else could we see? the fact we will see this trifecta in congress and the executive branch dial back the inflation reduction act was not exactly shocking to me.

they have been talking about it for months. what could we secret -- isaac: we knew the trump administration was going after the ira. we try to look at cost of these provisions in their political risk. within the inflation reduction act, of course electric vehicles were going to get scrutinized and likely cut back. other portions of the bill have broad bipartisan support. hydrogen, the production tax credits, the itc have broad support and should see continued support and should survive the process. i'm looking at things that maybe have not gotten as much focus. for example, graduate student lending. you can see the government pull that back. i think they will focus affair about on turning some of these dials. we will not see a lot of these provisions extended for the full 10 years. what you will see is we will have two or three years of clarity.

they will push it out as far as they can to goal seek for the deficit reduction number they are looking for. annmarie: you have one of the most aggressive timelines i've heard anyone talk about when it comes to this package. march and april for votes. are you assuming we will sail through these cabinet appointments, that they can move on to agenda items like these? isaac: my viewpoint is i think they will start fast. that is what i'm trying to get clients ready for. you will have the initial movement in the house that early because they have that wafer thin majority. we have to keep in mind with the house members there is normal attrition. resignations, death, folks going to jail. these are normal happenings for the house of representatives. they will move quickly to try to capture some of the mandate they clearly have received from the election and to ensure they have some movement while they have the majority and while they have cohesion around their goal.

i think it will still take time to get this to the senate. they will be back and forth. they will see it die a dozen times of four they get. we have to get ready for the headlines to start flowing. annmarie: we are waiting who will shepherd this three when it comes to things like spending for the treasury secretary. we heard from senator john thune talking about the advise and consent role that congress place when it comes -- plays when it comes to the confirmation process of the picks. do you think that is how it will be? will it be a process-driven approach or will the sin about to djt and say we will recess? isaac: what we are seeing is a bit of a flooding of the zone with nominees. from my seat i fighting credit we difficult to believe senate republicans are going to reject multiple controversial nominees from the president.

it was wild to me to speak to democratic contacts last night saying maybe mitch mcconnell will save us. maybe he will be the knight in shining armor. if democrats are witty for mitch mcconnell, i hope they brought a book. it is unclear he will show up anytime soon. the way i frame this with clients is we will have some failures on the nomination front. gaetz is a good example for attorney general. i would bet on that winter probably go down. the rest of them are probably going to go forward. this is something yesterday we saw with rfk junior. i think because of the focus and the ire on so many of the other nominations and because of the fact there is going to be a bit of attrition where they don't want to reject every single nomination, plus you add the risk of a recess appointment and the base case is the vast majority are going to get confirmed. that is both arithmetic and politics. dani: rfk junior is someone able

to get confirmed. you saw already pharma stocks reacting, specifically vaccine stocks. what impact could rfk have on the system? isaac: the one i am watching now is what is he do in terms of the staffing in the workforce? you have seen a lot of commentary about folks at the fda and other agencies under the purview of hhs possibly leaving. that is meaningful from a timeline perspective for approvals. that is one thing clients already care about. there are questions about capacity to run a sprawling agency with $2 trillion in spending. that is a real concern for the market. other items we are going to have to digest and probably dismiss. i don't think he's going to ban direct to consumer pharma advertising.

that is something he talked about but probably not going to do. there are a number of items on his list i don't think he will do. the broader questions about his impact on public health is about outside my purview. my focus is on what the market impact is going to be. with him and with all of these nominees we have to remember there is a divide between the rhetoric we have heard and the reality once they get to the seat. dani: they will be facing huge bureaucratic institutions. if the aim is for them to make cuts and make things more efficient, how much of that will they actually be able to do? will they be facing a different reality once they are appointed? isaac: we have to keep in mind the trump administration is moving quickly. folks have been surprised this is year five of truck and not your one. he's moving quickly on the number of fronts and showing experience we did not see the first round. even when you talk to team trump folks, they have a good 18

months. 18 months of runway to move quickly. this prioritization hierarchy happening in terms of what can get done before we all turn our focus to the midterms and we start looking at trump as a lame-duck. there will be one or two items for each of the secretaries that they are going to be able to focus on for a new ministry of perspective. -- from an administrator perspective. they will have to sell the tax cuts and probably the tariffs. that will be a big part of their day job. jonathan: give us a name. who gets the treasury seat? isaac: i'm in the besson camp. we know that he looks the part. jonathan: and he is the market favorite. isaac, we appreciate it. isaac boltansky. annmarie: the president-elect that called him central casting when it comes to scott besson. jonathan: the new op-ed from

scott besson. "donald trump added a third leg to the stool. tara s -- tariffs are a negotiating tool with our partners." annmarie: he could be someone who will maybe embrace tears but not as enthusiastic as robert lighthizer. jonathan: lighthizer would be market negative. annmarie: that is not with donald trump would like. jonathan: from new york city, you're watching bloomberg tv. ♪ harlem has everything. but i couldn't find pilates anywhere. so i started my own studio. and with the right help, i can make this place i love even better. earn up to 5% cash back on business essentials with the chase ink business cash card from chase for business.

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jonathan: just obsession those in the equity market. on the s&p, negative by 0.5. nasdaq 100, down by 0.8. here are your morning movers with manus cranny. man is calling -- manus: over 30% of your business is in china. the guidance, modest guidance. that really is what has taken this market lower this morning, the stock lower this morning.

we think the china business is normalizing, that is what they have sent to us but this is a slippage relevant to recent quarters. more export controls, doubling down on negative. have a look at ground zero in china. retail sales up the most in china. when it comes to alibaba, the sheer size of this company, gone through a massive change about their dominant position. sales were lighter than estimated. the core business is e-commerce and the cloud. the cloud was up 7%, the strongest in three quarters. this is a recast alibaba. i leave you with a slice of pizza for the weekend. domino's. berkshire hathaway has taken a slice, this portion they have taken is under a billion dollars. warren buffett usually doesn't

get involved for less than a billion dollars. there you go for a friday. jonathan: you don't strike me as a domino's guy. manus used to say to us, no cars before mobs. shares of vaccine makers following after donald trump taps robert f. kennedy, jr. to leave the department of health and human services. he says that kennedy is known as a vaccine skeptic, will take on the health crisis in the country and make america healthy again. annmarie: there are two visions with rfk, those that like what he has set about the health, additives that we have in processed food. he has talked about things like froot loops. that it comes to the vaccine skeptic issue that a lot of people may have an issue with. isaac pulled hands he thinks he gets through. the senate cannot say no to

everyone donald trump put in front of them. the one that is most likely not going to get through is matt gaetz. dani: this is why i find the market reaction confusing. i understand the vaccine makers following but why not processed food? i try to look up every processed food maker. all of them d yesterday. there seems to be an it consistence to this market and how it is reacting to him. annmarie: some of these companies like kellogg, they put these things in american froot loops, but they use beet root extract in canada. dani: that would make it more expensive for these companies. jonathan: the fight that he is going to have, can you imagine the pharma and food lobbies simultaneously in d.c.? annmarie: we are talking about a

massive institution, even beer than the defense budget. one point $7 trillion, 87,000 employees, going from everything from medicare to vaccines. the purview will be massive which is why this is contentious. remember, they can only lose three votes on the republican side. jonathan: isaac said the president-elect was flooding the zone with nominations over the past few days. but there is this empty seat that we are waiting to be filled. economics was the epicenter of the campaign, election. we need to see who will run the national economic council, work out who will be the treasury secretary. have we had commerce yet? annmarie: we have not had the crux of what would be the economic team which is usually what is so important to the former real estate developer turn president donald trump. he campaigned about the economy. where is your economic team? we should know treasury soon.

lindsey graham apparently pushing for scott bessent to be the next treasury secretary according to the wall street journal. also reporting that howard lutnick threw his name into the ring at the last moment. this is the person running the transition, decided that he wanted to take one of the roles. jonathan: watch this space over the weekend. elsewhere, the ftc preparing to launch an investigation into anticompetitive practices at microsoft's cloud computing businesses. examining allegations that microsoft is abusing its market power by preventing companies from moving it data from the azure cloud service to computing platforms. the stock is down 0.5%. dani: maybe the reason it is not down more, by all accounts, lina khan will not be staying on in the trump administration. maybe she is working on her legacy until the last day.

by the way, microsoft is not the leader in cloud. i wonder in a new trump administration, will any of the conservatives try to carry this through into a new administration? annmarie: once we get treasury, who becomes the head of the ftc? but you nailed it, this feels like it doesn't have a lot of legs to it. lina khan try to take one last bite from the apple before she is replaced. jonathan: u.s. trade representative katherine tai saying targeted tariffs are needed to target against goods from china but cautioning against a black iteris like those described by donald trump. annmarie: she also talked about this idea of a china shock. we don't want to see a china shock. when china joined the wto in 2011, it was devastation for a number of industries. when she says something like that, what is the distance between katherine tai and robert lighthizer?

both seem like china hawks. whereas in a biden administration, she was held back by others. dani: remember when reagan was dealing with cheap auger coming from japan? katherine tai saying don't deal with it at all. reagan said you can sell but you need to manufacture here. that could be the nuance that we see with the trump administration which is different from saying we don't want any of these goods in the country. annmarie: than the national security concerns become a problem. the biden administration says we have to be careful with these autonomous vehicles and china ev's. china is an adversary, japan is an ally. jonathan: have you noticed how much less we are talking about the federal reserve, policy coming up in the white house? u.s. automakers under pressure, saying president trump is planning to eliminate a key consumer tax credit for purchasing ev's.

craig trudell joins us now. how expected was all of this given the nature of the campaigning over the last year? craig: in terms of how expected it was, looking at the trump transition team statement reacting to the report yesterday is pretty instructive. more or less, we said we are going to do it, we are going to do it. this was well telegraphed but there was maybe some hope that what elon musk cozying up so close, maybe he would have a change of heart and potentially change his tune on ev's. also some who said, no, trump will stick with the plan but tesla will be better positioned. based on the market reaction yesterday there was maybe a little bit of rethinking of whether or not that stands to reason given tesla sells more ev than anyone in the u.s. by a wide margin and the significant

number of its customers benefit from this tax credit. annmarie: elon musk posted on twitter that the government should end subsidies on all thin gs like tv's, electric vehicles. but the other side for elon musk is going to be tariffs. how difficult would it be for his business? craig: i think that's actually a potential positive for him. it will not be without issues in the sense that tesla does have a global supply chain, but they do have a significant presence in the u.s. market. they do try to insource a lot of components to a degree. will it hurt? potentially. maybe not as much as their competitors. gm and ford, similar story, stellantis. these are all companies that

have over decades outsourced a fair amount of their supply chain. the emphasis on re-shoring, legislation like the inflation reduction act, has led to this rethinking of whether we should be relying so much on components from overseas. the pandemic i think led to some rethinking on this front as well. annmarie: i remember when joe biden had the heads of ford and gm at the white house to show off the ev's. if we see an elimination of the subsidies for electric vehicles, how much money will ford and gm still put into this industry? craig: i think it's a great question. of the two of them come gm is much further along in its transition. they have not been without bumps in the road over the last few years of trying to stand up a battery joint venture with korean partners.

they really struggled to get that off the ground but they have made some headwind in the past few months i would say, brought in a very prominent tesla executive to oversee that business. they have a lot of ev's on the market and more coming next year. ford, on the other hand, both of them have pump the brakes in terms of how many ev's they are bringing how quickly, but ford is much further behind in terms of -- they tried to steal the march on gm and rushed out the mustang mach e, ford f1 50 lightning, and that business has performed well at all. so maybe this does lead them to rethink whether or not they should go even slower to shore up the profitability of that business going forward. dani: the market is voting that

tesla can survive this but rivian cannot. you can see it in the reaction where tesla is positive again. can rivian to stay afloat? what do the economic become without any ev subsidy for them? craig: this company had quite a week because we had formalization of their joint venture with volkswagen. vw a few months back announced they were going to invest up to $5 million in the company -- billion dollars in the company, update this week to 5.8 billion dollars. we saw a drop in the stock yesterday. the amount of money this company is going through, even more excessive than what we saw out of tesla a few years ago. we have seen, in tesla's case, they were able to overcome that. but what rivian needs to do is get to the point where it is making ev's at high enough volume that it sees benefit of cost.

perhaps this joint venture with volkswagen is helpful in that regard but it is also a partnership that is more so focused on software. i don't know that they will necessarily huge boost from volkswagen in terms of knowing how to put the trucks and suvs together. that has been what is vexing them the last few years. dani: should the private market be what carries these companies forward or the government? how should we look at that divide now as to whether the government should be taking risks on ev's or frankly the industries move forward and it is not time for that anymore? craig: such a great question. i do think that if you look at the u.s. as a venture capitalist investor, they had a huge win in tesla, they bet on this company, managed to really supported through some tough times.

if anything, the only reason uncle sam didn't make out better is because musk was so self-conscious about the extent to which he had his bacon saved by the u.s., that he wanted to pay the loan off early to do away with that criticism. we should note, several mrs. in terms of ev companies, battery companies that the u.s. supported that have gone out of business. but that is the nature of this style of venture capital-like investing. i do think that when we look at what has happened in china, a huge reason for why we have seen success in that country is the level of support, consistent level of support. we have not seen the amount of backing from the federal government in the u.s. more importantly, the waffling we have seen from one

administration to the next is not conducive to building a long-term healthy industry. jonathan: i appreciate your input on the subject. craig trudell on the latest from the automakers. let's get you an update on stories elsewhere with your bloomberg brief. here is yahaira jacquez. yahaira: scott bessent, top candidate for treasury secretary in the trump administration is calling for a return to alexander hamilton's favorite tool. he says the truth is that terrorists have a long and storied history as both a revenue raising tool and a way of protecting strategically important industries in the u.s.. he goes on to say that trump adds the benefit of being able to use terrace as a negotiating tool and are a way to stand up for americans. hedge funds reduce their exposure to tech giants like amazon and apple in the third quarter. that is based on the latest filings which showed holdings of amazon dropped by $11 billion in the quarter.

almost twice as many investors cut their stakes in apple than added to them. berkshire hathaway also reduced its position in apple by 25%. this coming as fund managers move out of growth stocks and move into other sectors that would benefit from rate cuts. social media platforms blue sky gained about 2.5 million users in the past week as users leave x. donald trump's election win and a change to service is pushing people away from the platform. the changes come into effect today that requires all legal disputes related to the platform to be brought exclusively in the u.s. district court for the northern district of texas or state courts in tarrant county, texas, of course, conservative-leaning. jonathan: appreciate it. i don't really understand the exit. follow the people that you like and create your own echo chamber

if you want to. dani: also the interface of blue sky, i have tried it before. you have two years and it is still this? annmarie: he is close to the president. people say we had to go there because he has the power. >> the economy is not sending any signals that we need to be in a hurry to lower rates. we are confident that with a recalibration of policy stance, strengthen the economy and labor market can be maintained with inflation moving sustainably down to 2%. jonathan: so you will just have to wait. from new york city, this is bloomberg. ♪

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jonathan: some breaking news for you in the last few moments. according to a person familiar with the matter speaking to bloomberg, russian president vladimir putin and german chancellor olaf scholz planning a phone call later today. the first direct communication potentially between the leaders in almost two years. annmarie: he has been isolated from all of these g7 leaders. what you seek taking shape is this political power out of mar-a-lago. president trump says he wants to end the war. maybe that is why he is giving put in a call. jonathan: under surveillance this morning, -- >> the economy is not sending any signals that we need to be in a hurry to lower rates. the strength we are seeing in the economy gives us the confidence to approach our decision carefully. the path of the policy rate will determine how the incoming data and economic outlook evolve.

we are confident with a recalibration of our policy stance, strength in the economy and labor market can be maintained with inflation moving sustainably down to 2%. jonathan: jay powell saying the fomc is in no rush to cut rates further, citing economic strength. prompting traders to pull back expectations for a december reduction. michael kushma of morgan stanley writing the surgeon yields post fed rate cut was unusual. these are the challenges of being too data-dependent when data is very noisy. december is getting more debatable. michael joins us now for more. base case, is this a pause or a cut? michael: i think they are going to cut but it will be characterized as not as a continuation to expect this continuously but reflecting again the recalibration of monetary policy to a more appropriate level given the current position of the economy but will not portend more rate cuts automatically next year. dani: something annmarie and i

have been talking about this morning is the politics, the optics of what it would look like if the fed pauses in december right before donald trump comes in. do you think that is playing on the fed's mind at all? michael: i don't think so. i think they are data-dependent. they have been whipsawed over the past year and a half. we saw this in late spring, early summer where they were getting nervous about cutting rates at all with inflation surging in the second quarter. when they took back some of the rate cuts they might expect to do, inflation turned around the other way. three rate cuts this year anyway. i don't think that is a key factor in their decision-making at all. they will follow the data, and as chairman powell talked about, the data is still pretty good. no reason to rush rate cuts. substantially lower than when interest rates were higher. dani: the bond market

recalibrated before he did. it has been this pendulum swing back and forth. before this moment, the market was pricing in substantial cuts, strong data, the election. we are pulling back about 225 basis point cuts until next year. are we in a good place, have we swung too far, where do we stand? michael: i think the economy is in a really good space. data moves around but underlying gdp growth, employment growth back to reasonable levels. the consensus expects a reasonably strong deceleration of growth next year. we have not seen that over the last several years. it is likely that that response to a deceleration of the economy if it is meaningful in terms of raising the unemployment rate. other than that there are no big imbalances, the household sector is in good shape. datable bounce all over the place but 10 year bond yields have not moved much.

i think it was june 30 we were at 3.4%. we are only up about 40 basis points over the course of the whole year. long-term yields are not moving around all that much despite all the bouncing around in the economic data. annmarie: we did have yields pushing higher on the 10-year because that is the market pricing in more policy changes on a washington, d.c. powell said we need to see the economic outlook of all. what policy risk are you potentially looking at 42025? michael: a lot of the trump agendas cut both ways. tax cuts are good but tariffs are bad. in 2017 with the terrorists were first being imposed, global manufacturing pmi peaked just before they were being imposed and the manufacturing sector decelerated a little bit. the fed was talking about rate cuts not too long after that. i think tariffs are a way to raise revenue.

the net balance of all of these things, we are not sure. i am more concerned about the labor market, if there is a deceleration of labor supply, that will reduce growth next year as well. there are lots and lots of crosscurrents at work which makes it more challenging to see will there be a deceleration like the consensus thinks or does the economy have such strength from household growth and, it will be fine? growing 2%, what is wrong with that? jonathan: michael kushma, i appreciate the input. i think you could construct the argument that the fed's easing has led to longer yields on the high-end. now that we have chipped away that using bias, whether that helps to stabilize the long end, put a lid on things for the moment. that is the latest on fixed income and the federal reserve. coming up, we will catch up with ross mayfield of baird.

from new york city, this is bloomberg. ♪

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>> generally speaking the fed is still on board with his easing cycle. >> think the fed moves lower,

even if they do it out of -- at a slower pace. >> are likely to see another 25 basis point cut in december. >> i think at the end of the day the growth story is the important one. >> any growth we may see next year will circumvent any of those headwinds. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: good morning, good morning to you all. equity futures right now -5.5 percent. the scores look like this. on the nasdaq cleared down by .3%. you'd -- .75%. u.s. retail sales, looking ahead to that after cpi, ppi, and jobless claims keep this federal reserve just a little bit cagey about reducing interest rates at the december meeting. we heard from susan collins in the wall street journal this morning, it is not a done deal. dani: it is certainly not a done

deal and powell, everybody we have heard from, are giving themselves that optionality heading into december. you see the market moving off of that pricing. it does feel like the good old days with this market is reacting to macro data and fed speak. annmarie: which is why retail sales is going to be important. paul donovan is talking about, the u.s. consumer back on display today. a notable improvement in living standards. not economic perception, which has soured. ciao would say we saw in election results. jonathan: bond yields lower across the. -- across the curve. coming up this hour, we will catch up with ross mayfield of baird. frankly of hsbc. and steve ricchiuto of mizuho on why he thinks the 10-year could creep back toward 5% in 2025.

we begin with stocks on track for losing week as investors digest fed chair powell's remarks. near term sentiment is likely the biggest risk. animal spirits returning to markets. survey data is bullish and positioning is risk-on. ross joins us now for more. i want to start with the federal reserve and what you thought of chairman powell's comments yesterday and whether they are setting up to pause in december. ross: i think they're i would caveat it that we need to see that labor data first. nonfarm payrolls was obviously messy. hurricanes, strikes. there was a lot to digest there. i think one more sour labor market report could put a 25 basis point hike back on the table. absent that, economic data has been strong enough to warrant a pause and get them started in 2025.

jonathan: that strong data has led to higher bond yields. some people are making the argument that has started to constrain equity markets this week. do you put any weight on that argument. -- argument? ross: absolutely. outside of sentiment getting away from us the biggest risk to markets over the next three months is higher long-term bond yields. we have seen in this bull market that pushing up through 4.5% on the 10 year has been a weight. i think that is a risk. we are glad to see it because economic data has been strong. to the extent it pushes the fed into the future markets are going to be more volatile. i don't think it is because for a 10% selloff, but it certainly caps the upside. dani: we have seen that volatility in treasuries in a way we historically have not. jared wintered wrote that treasuries are just for trading.

consensus 60/40 portfolios that only worked in a 2% world of record low inflation. is he right? treasuries just for trading now? ross: i don't think so. most of our clients treasuries upper income. for 15 years you can get 4.5 percent on something as safe as a 10 year treasury. we had clients who would stretch out on the credit spectrum to get that income portion of the portfolio to support them in retirement or later years of their investing careers. i think treasuries can be for income and at a certain yielded they can be a hedge as well. 2022 is a wake-up call that stocks and bonds can go down at the same time, that i don't think the 60/40 portfolio is anything close to dad. -- dead. dani: one of the arguments for owning treasuries has been reinvestment risk. yields are going to come down

and you have to get into this market. yields have been pushing higher. what does that do to an investor that has been told that so frequently? does that cause an aversion to jumping into the treasury market this time around? ross: it is certainly possible. the headline yield is the first thing people see. looking at 4.5% yield on 18 your is attractive. obviously seeing your portfolio down, your price down has been a real gut punch over the last couple of years. when bonds had an in a bull market for 40 years. the other thing is, we have a lot of people on the personal-finance side of things that are waiting for rate cuts to refinance, and you have the 10-year yield pushing up higher. there is a disconnect in the bond market right now. i think it will be rectified somewhat in 2025 as we get clarity on the fed's path. dani: another that has had false starts is europe.

europe versus u.s. has had a record on year today. there is this other argument starting to firm that because -- form that because you were going to get a lot of cuts you should be buying europe. can you be buying europe right now? ross: if forced to make a choice i would prefer the u.s. over europe. the center concentration is better in the u.s. you have more growth, you have more technology. the problem with europe over the last 10 to 15 years has been that the sector concentration is in sectors that have not been working. it is more staples and energy and things that we do not expect to work as well as tech and consumer over the next year. you also have the strong dollar story to contend with. the market thinks that strong at school -- trump is going to be a strong dollar president. under think you need to get out of europe entirely, but i would still prefer u.s. markets over europe.

jonathan: you need a lot to change in europe and change quickly. we have a call between putin and schulz. that more needs to end. you need to see germany loosen the purse strings. if those things start to line up maybe you can construct an argument to say, given what is priced, things can get better. dani: the germany piece is such a large question mark, though. with an election that is going to coincide with trump coming into office there is not clear leadership there. i mentioned bank of america saying, i europe ahead of the inauguration. purely on the fact that the ecb is going to be cutting rates. that is maybe more tactical. jonathan: they are going to have to ease big time. they have gone from worrying about inflation to the prospect of disorderly disinflation because they did go the other way so quickly. when it comes to europe this big structural problem in germany,

massive problems. ann marie, we have talked about this for years. security, relying on america. energy, relying on russia. economics, relying on china. annmarie: and they enslaved it themselves to cheap russian gas. this is the problem for the manufacturing base. they are paying more for their energy they need. then you so this u-turn from the german government saying, we need to start thinking about energy security. they were not thinking about that when they were the ones benefiting from cheap gas. jonathan: president-elect donald trump is not the source of the problems for the europeans. these are choices the europeans made. what donald trump is doing is accelerating the process for them to find solutions and find solutions quickly. this is policy in europe. we need to talk about america as well. i want to understand your assumptions on sequence, on timeline, on size. ross mayfield of baird is now gone. debbie he did not want to carry

on a conversation. -- maybe he did not want to carry on that conversation. we had bought 10 ski earlier this morning and he was talking about how aggressive the timeline would be for republicans. annmarie: i'm hearing from people that they think this deal can get done 2026. maybe the actual signing or voting starts a little bit later down the year, but he says once these cabinet appointments are in place even now they are talking about what needs to happen in terms of a force -- pay force -- pay-fors. dani: the market needs know who the treasury secretary is. that gives us shape about priorities. this is a market that is looking through tariffs at the moment. if you do get what isaac is saying and they are straight out of the gate with tax cuts that will be market-positive and allows this rally to carry on. if not a could change on a dime. annmarie: treasury, commerce,

energy, acc, ftc, these are the names we are still waiting for for the financial markets to understand president-elect president -- president-elect donald trump's priorities. jonathan: let's get you an update on stories elsewhere. here is your yahaira jacquez. >> two of elon musk's companies are moving to secure multibillion-dollar increases in valuations through new deals. according to the financial times, spacex is gearing up to launch a tender offer that will sell existing shares in the business at about $135 each. sale would value the company at more than $250 billion. musk's artificial intelligence of start up raised $5 billion at a valuation of about $45 billion. nearly double its valuation from a few months ago. sources are telling bloomberg russian vladimir putin and german chancellor olaf scholz are planning to hold a phone

call today. the call is the first direct communication between the two leaders in almost two years. it comes at a critical time for ukraine, as the country braces for the third winter under attack from russia. uncertainty over ukraine support from western allies has been growing ahead of donald trump's return to the white house. donald trump and his incoming policies have been the topic is your at the ceo summit in peru. speaking with lisa abramowicz, jamie dimon suggesting that the impacts of trump's proposed tariffs may be not -- may not be as damaging as many have feared. >> is not against trade. there are examples where that is true. if it is true they will be judiciously applied and it will get people to the table. he is going to create the option. yahaira: trump ruled out jamie dimon for a role in his next administration but praised the ceo for his "outstanding

service" to our country. jonathan: thank you. this was never a thing. how did it become a thing? annmarie: because our colleagues asked the former president, would you consider maybe could he be a treasury secretary? he said, sure. there's a lot of people under consideration. yahaira: jamie dimon made it a thing. he wrote an op-ed that they should have private business in the white house. jonathan: then he turns around and says, i don't want a boss. annmarie: i think president trump liked what jamie dimon said it -- said in davos. when he was talking about things like tariffs. telling the europeans, you need to spend more. and in that sort of took on this whole story that we are still talking about today. jonathan: i'm pleased we can put that story to bed. up next, the morning calls, plus frankly of hsbc on why nvidia's ai momentum can only keep growing. from new york city this morning, good morning.

♪ ♪

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

like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: u.s. retail sales at 8:30 eastern time. this from ian lyngen. would we be shocked by a negative print? not at all, although it is in our base case scenario. here is your 10-year yield this morning. good morning to you. we are down a single basis point on the 10 year. in the equity market we are negative by about .4% -- .5 percent. wells fargo upgrading morgan stanley, expecting shares to benefit from capital markets activity. next up, morgan stanley downgrading solar edge to underweight, seeing numerous

question marks under the incoming administration. we are down another 4.4% on that stock. rbc hiking tesla's price target, highlighting optimism on the carmaker's autonomy goals. that stock is up by about .3% in early trading. turning to nvidia. hsbc raising his price target iia street high of 200. writing, we have pondered this amazing growth trajectory and not only do we see no signs of a slowdown, we expect further upside in 2026 data center momentum, which is not fully priced in by the market. frank joins us for more. welcome to the program. i want your opinion on what is behind that train and why it doesn't slow down anytime soon. frank: sure. i think every couple months everyone goes through the same question of, can nvidia continue on this amazing growth trajectory? it is approaching uncharted territory in terms of the market cap of the company.

what we continue to see is that the overall spending and -- spending in hyperscalers and capex continues to go up. there has been a 20% upward revision in the consensus view for the four major hyperscalers. if we look at that in terms of potential server capex for ai we think that is going to be more than enough to cover nvidia's growth next year. jonathan: we have to talk about the source of that demand and how strong you believe their biggest customers are and whether those customers have demonstrated and done a good enough job of justifying their investment over the last few years. do you think they are doing that? frank: i think that is a great question. the question everyone comes back to is, this investment that is going on, what is the return, what is the monetization? it is a fair question and it is not a question that has been fully answered. from what we can see, the spending continues. into 2025 there is no sign of any slowdown. we have also seen collaboration from what we are seeing in the

supply chain in asia. we see companies that continue to see upward revisions from the nvidia supply chain. it seems to be going hand-in-hand. yahaira: just given that, frank, is there not some form of concentration risk for nvidia when microsoft makes up nearly 20% of your revenue? are these real risks if any of them pull back even slightly? frank: that is a good question. i think the risk is there, but it is diversifying. as an example, if you look at the enterprise, which is the non-hyperscalers, they are becoming a bigger part of this market. if you look 18 months ago i would say hyperscalers spending is probably 80% of the market. now it is probably looking to be 60%. it is a high concentration that risk is coming down you are seeing further expansion into the corporate world in terms of spending there. that is where you see companies

like dell, which are traditionally not leveraged to the hyperscalers growth, you are seeing strong growth trajectory in ai as well. annmarie: yahaira: yahaira: we are going to hear from the company -- dani: we are going to hear from the company on their earnings. what sort of fireworks are you expecting on the day? frank: they will have a bead on their revenues. we expect they will beat on their current quarter as well as give better guidance for the consensus. shares have had a good run into earnings. whether that is going to be enough to give the market an extra boost remains to be seen. we are taking the view that it is not just the next two quarters. if you look at all of next year we do feel confident that there will still be further upside in terms of the market. annmarie: i wanted to ask you what was going on with the doj. they sent subpoenas in november. do you see a change of

environment with the election and what policy regulation could look like for the company next year? frank: i think there is going to be a lot more, probably, uncertainty and noise now. but it does not change the fundamentals. the company's dominant position in ai is unchanged. we don't see any immediate competition. the hyperscalers themselves, who have everynterest to try and develop their own ship to reduce the dependency on nvidia is not able to do that. i think some of their own ships they are designing, the momentum is slower next year. it shows you that in terms of being able to compete we do not see anybody narrowing that gap yet. the fundamental is not going to be changed. there will be a lot more headlines, but if you just look at the overall earnings growth and expectations i think that remains largely unchanged. annmarie: what about outside the united states, geopolitical concerns? especially when it comes to the fact that the chips are made in

taiwan and we have a president-elect that is hawkish and his rhetoric is hot when it comes to china? frank: if you think about the china exposure, it is coming down. at its peak china was probably more than 20% of its revenues. it is now at a point where china itself is only going to account for somewhere around 10% of its revenue. it has come down in terms of that being an end market. as far as where chips are made, that is not something that is going to change in the near term. tsmc is building factories in the u.s., but it is going to take some time before they increase production there. the reality is that while there is going to be some rhetoric around it, it doesn't change the fact that the manufacturing base is going to stay in taiwan, given the dominance of tsmc. dani: when it comes to the politics, for the chips act, out of $123 million, a total of $33

billion -- sorry, out of a total of $33 billion only $123 million has been announced. as we head into the twilight of the biden administration what pushes do you expect them to make with the chips act? frank: there's not going to be that much time left. if you think about the chips act, you know, there has not been that much money, as you pointed out, actually given out. the majority of the chips act has helped companies like intel. have been able to get the advantages on tax credit that they have not really gotten subsidies. no one really has. i don't think it changes the calculus of things. at the end of the day the on ensuring trend is going to continue. but i don't think it really changes the trajectory where people will be looking to change their investment cycle. i think the longer-term

geopolitical events are here to stay, and companies are going to build regardless of how much funding they get. jonathan: good to catch up. going into nvidia earnings awakened why a parent -- a week away. frankly of hsbc. some reporting from jeff stein at the washington post. the trump treasury hopeful scott besson is scheduled to meet with donald trump today in florida. number one for the market right now, to become the next treasury secretary. annmarie: certainly if you look at the betting odds. it looks like he is going to be the front runner. it does look like this means donald trump has moved on from some of the other nominations and is going to be honing in on the economy. also interesting this morning, scott essen is writing this opinion piece, saying, let's talk about tariffs. dani: yesterday when rfk junior was announced betting tank. there will -- there is some

hesitancy with some picks coming out of left field. jonathan: you see in the body of this story that comes from the washington post that it is jason furman, which served under president obama. it is also jamie dimon, an endorsement from him as well. even steve bannon in the mix saying it should be scott besson. annmarie: this is an individual if you are dealing with difficult, controversial senate confirmation hearings, this is someone who potentially be able to get bipartisan support. jonathan: we will see how that meeting goes later on today, potentially. equities right now on the s&p 500 -5.5%. the next stop for this market, u.s. retail sales. we have had a drip feed of data over the last few days. all of them just eroding the fed's perceived easing bias. particularly given the comments we heard from chairman pal yesterday afternoon. up next we will hear from steve

ricchiuto of mizuho and get the thoughts of rob waldner from invesco, who will be here to react. stocks lower in the bond -- -- stocks lower. on a 10 year, down a basis point or two. we are trading around 4.42. from new york, this is bloomberg. ♪

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jonathan: seconds away from retail sales data in america, about 60 minutes away from the opening bell. equity futures on the s&p 500 negative i 0.50%. the nasdaq 100 down by .90%. looks like this, yields down on the front-end, the two-year, 4.2948, down five basis points, down one single basis point on the 10-year at 4.4158. michael mckee for more on that data. good morning. michael: rather than expected news on retail.

stronger spending by americans, .40% increase for october. the x autos comes in at 0.1%. and the retail sales control group, which is what people really care about, is down by .10% after a .70% gain in september. import prices up .30%. import prices went up. petroleum, .20%. both strong or than expected. it continues a pattern of a continued inflation issue ongoing. and then the empire manufacturing index, a go figure number, of 43 points to 41.2, so an awfully strong number there in terms of new york any fracturing. new york manufacturing not all that important to the overall numbers, but still quite interesting, taking a quick look at what moved in the markets or in the retail sales report, we

had 1.6% gain in motor vehicles, building materials a pop-up percent. we expected strength there because of hurricane rebuilding. clothing stores down .1% and we saw apparel prices collapse in the cpi and ppi, and general merchandise stores up .20%. it looks like a fairly standard kind of spread out spending during the month of october. it does not look like anything particular stands out here. jonathan: can you explain between the headline feet in the control group miss what explains the difference between them? michael: well, first look, motor vehicles came in stronger than anticipated. the monthly seasonal adjusted total is what goes into gdp, so it is a little bit of a confusion.

gasoline prices also go into the headline number. they were up only .10% because this is reported in dollar values. those two will have an impact on the headline, whereas the control group is basically your specialty stores, the retail stuff that you and ibio, and that is what goes into gdp, so congress is paying more attention to that the headline. dani: how noisy does the data start to get heading into the holiday season, does any of that capture today what we see in the data? michael: it doesn't look like it because it is october but we do start to see it show up in november, even though black friday is what people think about the kick off, we have seen a lot of spending move back into november, and you will see a lot of advertisements trying to push spending out over the months of november and december. yes, it gets a little harder to separate out what the holiday spend is, but it is seasonally adjusted, so we get some idea of

what the differences are. but at this point, you would have to say looking at this, those no reason to ink we will have about holiday season. jonathan: you have an interview in two hours, can you walk us through with the big topic will be? michael: well, i'm here at the boston federal reserve building, i we will have susan collins talking with us. we are obviously going to try to get some guidance on what the fed is going to do next. a lot of questions on whether this stall in inflation is going to keep the fed sidelined in december. jay powell opened the door for it yesterday. will be among the chief questions. we will see what the ceos in the first district of the federal reserve are saying about where they see the economy going. jonathan: looking forward to it at 10:30 eastern on bloomberg tv. michael mckee with retail sales. number. we are higher by two basis points.

the equity market with session lows on the s&p, down by 0.6%. the nasdaq down by 0.9%. joining us is stephen ricchiuto, your thoughts on the data. steven: the more interesting number where the headlines to last month. he went from zero point after to 0.8, the critical number went from 0.7 to 1.2, so if you take it out, you are still up and it is a healthy environment, and you are looking at september which is not ported in october when you think of quarterly average data. it is the level you said at the previous quarter that sets the average for the next quarter. therefore, you have a big jump in september, and i think that sets the stage for a healthy quarter gdp number, on top of several quarters of healthy gdp. jonathan: this the status report stay in november? steven: the fed should not have

been forced to come in and validate it with 25. the fed is ahead of the curve in terms of what they knew, relative to the economy and inflation story, so they should not do it trade will they or will they not? we will see, but the reality is what they are doing is a mistake. that should be the message, whether it is down a 10th or two does not matter, we are up 50, 60 basis points and that is a message. dani: what is the risk if they keep cutting when maybe they should not have started to begin with? steven: this situation you have to understand is the risk is to the market more so than the economy. if you ask most americans, do you care between 2% and 3%? the answer is no. if you ask a bond investor, that is yielding 360 at the time, what's the difference between 2% and 3%? the answer is, that is four versus five, that is a big move in the bond market. that is the critical difference, it is not for the underlying

economic environment, it is for the bond market. the problem is often the fed for the economy but the way the fed on the market has been pricing it. therefore, it opens the markets to risk. if you have an equity market that is very healthy and that is good earnings, there is no doubt about that, but not as good as they were with projections of strong earnings for the next year, you have to ask does the interest rate adjustment from 4% to 5% lead you to a position where equity valuations need to move and trot sideways for a while? dani: you said something to me last week that i've been thinking about, the idea that everybody is an indexer in the bond market and that the bond vigilantes have gone away. can you expand on that and with the bond market can do in terms of pushing around fiscal or monetary policy? steven: it becomes harder and harder to do it because the reality is, most investors are tied to generation target because they are indexing. their ability to move around that index is limited because

the fact of the matter is if you perform with the market or you slightly outperform the market and keep your job, if you slightly underperform the market, you lose your job. the reality is you try to stay as close to that benchmark duration as possible. from the hedge fund perspective, they have moved out of plane vanilla treasury securities. they are much more sophisticated in terms of structured products, much more sophisticated in terms of corporate product, much more sophisticated in terms of private equity and investments. already paying as much attention as they used to pay in the treasury bond markets? or do they look at the treasury bond market and say if i stay along over here and keep long-term rates down a little bit over here because there's no risk capital on the street, does that improve the entire rest of my portfolio? they are in a position out to make those calculations, and, therefore, you wonder whether or not if it gets you a fee because that is where the fed makes a mistake when they use bond market indicators.

dani: you say the bond market is telling the story, and when you look at the bond market yields going up, are you looking at economic data? are people pricing and policy changes of next year? steven: the fed funds rate should go out to the two-year. this concept of varying between the two you know when the 10 you know in term premium, that's a different way of saying it is in inflation risk premium. how confident are you that the federal get to that inflation target? what you are seeing between twos and tens, inflation expectations and inflation risk. with the bond market has been taking on board as we were so confident in the bond market gentleman was so confident we could maintain 2% because we had global excess supply and the declining goods portion of the equation by the same token, and we have a service sector and a tight labor market leading to wages, so maybe there is more upside risk and and wishing them a thought. maybe we have to put in more inflation premium. annmarie: how much does this

summer meeting become political, either in the sense that they pause because there ensure policies next year, or in the sense that if they do pause, that would mean there is a cut for the consequential presidential u.s. election? steven: moving 50 required them to go in november because then it would have looked political. therefore, they moved in november. in december, you can ss&c refund 75 basis points. it's time to look against the data and decide whether or not we need to go. the reality is, the chairman said a few weeks ago that, we are still trying to figure out where neutral is. and the bond market had been so convinced, and the dots imply they thought the markets were at 3% for neutral, and now it is four, which was our number all along, and my big concern is may be given the stimulus we have in the economy, you have to assume that joe biden going to look student debt between now and the end of the year because this is the lasting legacy will be able to do. once you have forgiven the debt, you cannot owe it again, so you

are making a lot more fiscal stimulus before that of the year. the whole chips component that has not been spent. you are in a situation where may be 4% is long-term neutral but you need higher than that near-term. the real surprise is the front-end continues to price and less and less rate cuts. jonathan: so you think they might be done already? steven: i don't think they should have been moving as quickly as they did. jonathan: i'm trying to put you on the spot. steven: i think they should be done, yes. jonathan: i appreciate it. the markets are moving your way . if you are just joining us, data around, retail sales beat on a headline number. steve looked at the sensor look at those revisions. really strong provisions.off the back of the bond yields, a bit higher. joining us now is rob wal dner. your thoughts on the totality with cpi, ppi claims and moments ago retail sales. rob: the data has been pretty strong, both on the economy

side, the retail sales number was stronger and on the retail side -- inflation side, we've gotten several higher-than-expected core inflation prints. we've had three threes in a row, and that has got the market the last month and have read taking out the fed out of the pricing. dani: we have taken out fed cuts. has it, far enough? we heard from steven ricchiuto, who said the surprise could be on the front end pricing out more. would you agree with that? rob: i disagree. i think it has taken out too much. we have had cycles in the economy recently where you get a series of strong data and then weaker data, and we are in a cycle we have gotten a bunch of strong data, and it has been switched to the strong data and fiscal risks, and it always pays to trade against the narrative when it gets too far one way, and if you go back to mr. powell yesterday, he said we believe we

have inflation under control. we are going to get rates down to neutral. he thinks neutral is somewhat closer to 3.5, and he did acknowledge that they would slow down but he did not say they would stop. i think they are on a path to continue to cut rates. we have more than 50% price for december now, not very much. we don't have that much price for next year. we think that the inflation problem really is in the rearview mirror. we think it is sheltered, and when that comes out, it will become clear that the fed is right and power will continue to cut rates. the market is really taking the cuts out. so while we were negative on treasuries with three and three quarters or so, we think it is a good buy. jonathan: i would like to understand how you think about the bond curve. some people believe that the fed's easing contributed to

longer high-end yields over the last six weeks. there were some who believed this morning, coming into the long end but with different reasons, they believe as they broke that easing bias, that may limit on the long end, on the 10 year yield. can you win on that argument? rob: there is some value to the argument. if you go back to the surprise rate cut, 50 basis points, it took the yield curve steeper. that pivots of the fed courts easier financial conditions leading to the steepening of the curve. that is not the only driver. we continue to acknowledge that the best overall way to think about the level of yields in the u.s. is to think about how it is priced into the fed, so when you go back to a win, territories that 3.75, 10 year treasuries, than half ago, we had success of

rate cuts priced into the market. what has driven the move from 3.75 to 4.40 or so is those cuts. there could be some impact if it was a little bit steeper, but the biggest driver is rate expectations for the fed. dani: of course, so much of that comes down to where neutral is. i wonder what you make of the dallas fed's logan talking about this, seeing substantial signs that there neutral rate has increased and it could be close to where the its fund rate is now. where we -- will we hear more fed officials say something similar to that? rob: i doubt we will hear a lot of fed officials say that. i think she may be acknowledging -- neutral is not something that is set in stone and never moves. it depends on what the underlying momentum is, what the potential of the u.s. economy is. we know if the productivity growth we have had an the boost

in the labor market we have had coming out of the pandemic, neutral was probably a little bit higher. but in our view, neutral is traveling down to a more longer-term neutral level, which should be close to 3.5, which we think that is where powell thinks it is. it is clear that neutral is not something that you can set in stone and leave there forever. it is dependent upon factors that are driving the economy. and very difficult to observe. jonathan: thank you, we are all making this up as we go along. i think there is a sense the market believes neutral is closer to true and until recently, the fed thought it was three. they got us closer to the belief that it was three. it has crept in the last few days is consistent with the fed speakers we have heard, a bit of nervousness about whether it is closer to four or not. if you are not sure, you go a little more slowly and you extend the timeline to get back to whatever neutral might be. dani: what we have kind of heard is that and of that confidence

almost because the powell we heard from when they went from 50, basically talking about the time is now, he felt confident that we needed to cut last because neutral was lower. that you need to hurry up and get their you will damage. if you are not sure where it is, you have to slow down because the risk of overshooting it becomes more acute. jonathan: there is the phrase, recalibration. we got recalibration was 150 basis points of cutting on autopilot. turns out it might be 75 and we are there already. it is wait and see. we continue this into the weekend and next week and year-round. let's get you an update on stories elsewhere. here's your bloomberg brief. yahaira: the washington post reporting hedge fund executive scott bessent is expected to meet with donald trump and it comes as they decide who will run the treasury department. there is speculation among transition officials that trump could still pick someone else, such as former white house

economist larry kudlow or robert lighthizer. let nick and bessent are viewed as the favorites. israel destroyed an active top secret nuclear facility in iran last month, citing u.s. and israeli officials, it says strike significantly damaged iran's efforts to resume nuclear weapons research. u.s. and israeli intelligence detected activity at the facility, including research procedures they say could be used for nuclear weapons. they have continued -- iran has continued to deny that it is pursuing nuclear weapons. the eagles extended their division lead after beating the washington commanders last night during thursday night football. it was another stellar game further running back who ran for nearly 150 yards and two touchdowns. elsewhere, hockey superstar connor mcdavid became the fourth fastest nhl player in history to reach the 1000 point milestone

at just 27 years old. he becomes the 99th overall player to reach 1000 points and the second-fastest in franchise history behind the legendary wayne gretzky. that is your bloomberg brief. jonathan: thank you for all of this week. that story out of iran, it is like a scene out of "top gun: maverick." secret facilities, get in and out undetected. dani: it is made-for-tv out of central casting. annmarie: there is a lot of news with iran, elon musk met with united nations ambassador, and this might come close to the logan act. jonathan: kerry was criticized for doing something very similar. next on the program, setting you up with a week ahead. that conversation next, and we will catch up with bramo in a moment. from new york, this is bloomberg. ♪

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so you can be happily fulfilled... which is pretty un-boring if you think about it. jonathan: stocks are down by 0.6%, the opening bell 38 minutes away. yields a little bit higher, following better-than-expected revisions to retail sales and headline beats. the trading diary for the week ahead, later today, we catch up with the boston fed president susan collins, speaking with mike mckee at 10:30 eastern. tomorrow, president biden meets with xi jinping on the sidelines of the apec summit in peru. tuesday, report earnings, instead, results from target and nvidia. thursday, or fed speak and another round of jobless claims. as we look ahead to that meeting over the weekend, we are joined now by lease appeared walk us through the headlines and what

you are looking for into the weekend. lisa: a lot of the headlines are actually below the radar. a lot of it is a question mark about where the u.s. presence will be given the fact that you are not seeing as bigger presence from u.s. companies as traditionally, and you are seeing a massive presence from china and southeast asia. xi jinping rolled in here yesterday with quite a procession and flags, shutting down the whole plaza. the real question here about what the backing of power that is being left by a lame-duck president who will be meeting with xi jinping and what that will be built by. china life now as being aggressive, trying to fill the gap by investing in places like peru, chile, argentina, brazil, places with lithium, copper and other precious metals on agriculture. where is the u.s. in this? what i can feel from a lot of companies from the u.s., where the cohesive vision for u.s. companies to invest overseas in strategically important places? annmarie: from was elephant in

the room yesterday with the panel with jamie dimon, what was his message to the president-elect? lisa: [laughter] basically, his message was, thank you for such kind words, but i have not had a boston 25 years. i'm not about to start -- a boss in 25 years, and i'm not about to start having one. the response jamie dimon was getting was to president-elect donald trump's message to him saying i respect this guy but he is not going to be treasury secretary or in my cabinet. look, this is a lot of noise. there is a bigger take away from my discussion with jamie dimon. first, he does not necessarily see inflation coming down nearly as much as markets do, to what you've been talking about with respect to retail sales. on a broader level, he buys into the idea that we will see an m&a move and more investment from u.s. companies into elsewhere. but he also raised the point, where is u.s. presid -- presence around the world? this is the main takeaway.

jonathan: looking forward to your work over the weekend. looking forward to having you back next week. bramo, live from peru. special thank you to dani burger and annmarie, as always. annmarie: hey. jonathan: coming up, blackrock, and jim bullard. we are back in a trump new cycle, which means you get no weakened anymore, it just goes on and on and on. good morning to you all. thank you for choosing bloomberg. this was "bloomberg surveillance." ♪ >> welcome back to another nito tennis channel update. they defeat eliminated the aussie, but helped fritz clench his spot in the semifinals after of the results went his way. he will be making his second appearance in the final four

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matt: tears are lower on concern that the fed will not cash -- cut as much as we want. katie: bloomberg open interest starts right now. sonali: coming up, powell tells wall street to cool it saying he sees no reason to hurry rate cuts and we will get the view from the boston fed president susan collins. matt: from deals are a blow to ev's, shares slumped on