♪ >> there's going to be volatility, there always is, but you've got to keep your eye on the ball. >> markets will likely be volatile over the coming year. >> it doesn't necessarily mean that it continue this robustly going into 2025, but we know the seasonality continues to drive people into markets. >> i do think the market has gotten ahead of itself a little bit. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning, good morning. for the audience worldwide, bloomberg surveillance starts right now.

coming into tuesday after closing for a 54th all-time high on the s&p 500, on the s&p, a record high. the nasdaq 100, record high. futures just a little bit softer across the board. as we wait for more economic data, a little bit later, job openings. as we anticipate the big one on friday, payrolls friday. lisa: there's a lot of noise but to me this is really the main driver. yesterday we saw the 54th record high, and why? not because of the drama in france, because frankly ism manufacturing came in better than expected. all you are seeing new orders pick up to the highest levels going back to march. this is a u.s. economy absolutely driving some of the gains and the optimism despite some of the noise we keep hearing elsewhere. jonathan: cut or skip? that with the title of the speech that came from governor wally yesterday. as of today i'm leaning toward continuing the work which

started in returning monetary policy to a more neutral setting. lisa: basically be heard from john williams from chris waller. the word on the street, "eh." it is going to depend. tom williams, i expect it will be appropriate to move toward a more neutral setting overtime. very difficult to get a sense of timing either way. this seems to be the fed setting up for a cot and a very different communication. annmarie: jonathan: compare and contrast united states versus europe. in the u.s., cut or skip? in europe, cut or cut really big? 25 or 50 seems to be the conversation, and for good reason. annmarie: when you look what is happening in france, we are on the brink of the government collapsing. in about 24 hours france may not have a government. this is nonsense because it is france, this is off the heels of the implosion of the german government as well. you are going to 2025 with the

top two european economies in chaos when they are supposed to be having some soda political cohesion as the deal with a war in ukraine, china dumping on their markets and also this threat of terrorists coming from the u.s. jonathan: i couldn't agree more. the biggest difference between now and 2012 is not how much wider spreads were more than 10 years ago, it is that this time the core is fragile and a decade ago it was all about reverie away from the bond market you can make the argument for the economy, the structure of europe and its future, names are just as dicey now as they were back then. >> arguably even more. to highlight that point, this time around french yields are basically trading in tandem with greece. they are just a couple basis points behind that. the bigger question here, how does the ecb respond to other bond yields outside of france? it raises the question how did

they maintain the core and set the precedent at a time when they are supposed to be a one mandate central bank responding to inflation? >> the euro yesterday a whole lot weaker. up just 2/10 of 1%. coming up this hour, we will catch up with citi, we will speak to stephen gengaro, and steve englander on a just how far the dollar can run. it's 54th record of the year so far as investors flock to u.s. assets at europe's expense. risks are likely for faster and more inflationary tariffs suggesting the trades positioning for higher inflation and a stronger u.s. dollar have more room to run. we are long u.s. equities against europe, short u.s. rates against europe and love the u.s. dollar against a who, the euro. welcome to the program and fantastic timing to talk about this trade with you. you've gone through the

so-called trump trades and stress tested them. have exhausted are they a month later? >> that's a good question. i think it depends a little bit on the asset class. in rates, we've seen a lot happening. interestingly, inflation is actually below where it was before the election and the curve is flatter. this whole idea that trump will bring very aggressive fiscal policy has been questioned a little bit just how likely it is, and secondly i think it has become also somewhat later in this whole sequencing of trump trades. on the other hand, it is still going very strong. i think the idea that tariffs are coming and that they are coming soon, if anything, has been strengthened since we had several tweets from president-elect trump, so the dollar has kept giving and we

expect it to continue because to be honest, for that trend to be over before the first salvo has been fired at europe by the trump administration is really quite unlikely. so that we do expect to keep going and we still position, as you point out. as you also pointed out, we have the underway trades against europe, that is more driven by european weakness rather than by this fear of fiscal policy in the u.s. because that has been pared back, and we think rightly so. lisa: how low is the bar to potentially unleash a little bit of euro strength given that as you stress tested this dollar long, i'm sure you and everybody else noticed how much it is absolute consensus. >> the two traits are based on consensus.

in some sense, that is probably still the stronger foundation, and the reason is that the pboc in many ways is your friend and they are limiting volatility in many ways. that means that the trend is smoother and that it is easier to write it and the conviction is really still very strong because china will have to let the currency weaken more as the first tariff proposals really materialize. on the euro zone, there could be positive surprises, but to us the biggest one would probably be in ukraine which is of course part of the policy agenda of president-elect trump. if you remember what happened in 2022, there was very strong reaction to the downside. a peace deal would not be symmetric in the sense that the

moves should be much smaller, but certainly there is huge pessimism out there. that is probably one of the bigger risks that we are seeing, but it does really require -- and if anything, the opposite is happening in that they want to make sure ukraine is on a strong a footing as they can be going into the new administration so if anything right now, the de-escalation under trump might be a big risk. lisa: this larger question the people keep asking, at what point will american exceptionalism quietly erode some of the fiscal dominance that the united states has?

essentially, why is it that the u.s. and how long can the u.s. avoid some of the bond vigilantes that the likes of france are facing as they face fiscal dysfunction? how much are you watching gold as a barometer of that? >> gold is an indicator of that and interestingly a deaf, -- interestingly enough, gold has sold off has not come back since the trump election. but the backend of the breakeven curve is actually lower than it was before the election. and i think the reason is the economic picks that president trump made, or one important reason would not necessarily lead to one physical expansion. scott bessent is a fiscal hawk

and i also thought it was interesting that trump had this tweet over the weekend about how important the dollar dominance is for him. if you think dollar dominance is an important policy goal, you cannot direct your fiscal accounts, clearly. and that is in line with what some of his economic officials are also saying. so i think there has been a bit of a re-think that may be the fiscal situation will not be quite as dire as people were expecting during the election campaign when the budget did feature in the victory speech and it did feature subsequently in some of the comments. if anything, the market is saying this particular risk has come down. i think the doomsday scenario of a huge acceleration of the fiscal side is not quite -- anymore.

after -- annmarie: after we got the announcement, we then got trump coming out and talking about tariffs on canada. do you view this threat as credible in the sense that these could be blanket tariffs in january, or are these the opening salvo to a negotiation? >> it looks very much like a negotiation tool. whether you get tariffs or we get someone from the art of the deal. that is still an open question, but i would say so far what has been treated has clearly been with the idea of a negotiation. and you saw it. the mexican peso, since then it has stabilized. why has it stabilized? because there was a call between the mexican president and president-elect trump and that seems to have cooled down the situations. it will be a difficult

negotiation, but in the end i think it is likely that mexico, for example, will play ball when it comes to the border on some of these other issues. and it seems to me so far that we push out these demands. it is not saying -- which is also under discussion. so far it looks more like the art of the deal than tariff man but certainly we will have to watch carefully how this is going forward. annmarie: so you think there is going to be some restraint on fiscal spending. what is the biggest uncertainty you have about trump policies next year? >> don't get me wrong, the terrace clearly still have a lot of uncertainty. there is the question of whether it will be narrow, it will be broad. there will be tariffs, i think that is clear. narrow tariffs would not disturb

the market overly and would be similar to the last time an inflationary impact was really quite small and of course, the last time he crafted these tariffs in a way to really minimize inflation impact and he reportedly tried to do so again. if you talk broad terrace, it will be much harder to avoid more meaningful inflation. that will be clearly key to watch. on the fiscal side, of course we have to observe the more benign rhetoric playing out in the numbers. i think it is a very difficult fiscal situation the u.s. finds itself in, and we really have to see how it goes. the point is that it has become a policy talking point to talk about the budget deficit. i wouldn't always state that, but certainly the worst case may

be that it is not going to play out. jonathan: appreciate your time. as dirk was speaking, some breaking news, well anticipated after reporting over the last week or so. a $12 billion all stock deal for blackrock bank, the private credit manager, a $12 billion deal that we've been waiting for over the last few days. lisa: a private credit behemoth founded in 2007 by three former goldman sachs partners. this really highlights how much you've seen a convergence of private credit and public credit at a time where a lot of big asset managers are looking for fees. blackrock has been cannibalized, so the cfo coming out, very similar to what we're hearing yesterday from tom kennedy of jp morgan. jonathan: they've been quite inquisitive. there's a couple of deals lining

up for them. lisa: this is the future in the pool of assets is getting bigger but only outside of the public markets. you start to look at a place like blackrock, no fear, 0.01% fees, you have to wonder, the path forward has to look different from the past 10 years and that seems to be the pathway to their paving. jonathan: it's the deal even waiting for for about $12 billion. for an update on that and a whole lot more, let's get to bloomberg brief. >> the details on that, roughly $12 billion deal. it would be all stock. hbs would give blackrock a significant foothold in some of the hottest markets on wall street. meanwhile, israel says it is still committed to a cease-fire in lebanon after hezbollah claimed its first attack on an israeli military site since it

took effect last week. israel responded with its heaviest airstrikes on lebanon since the truce began. white house national security spokesman john kirby said the cease-fire is holding, largely speaking. and it was a record-breaking cyber monday. u.s. shoppers are expected to have spent as much as $3.5 billion yesterday. the firm raised that from an expectation of $13.2 billion for what is the busiest online shopping day of the year. spending between thanksgiving and monday is expected to reach $40.6 billion, a gain of 7% over the same time last year. and that is your brief. jonathan: more in about 30 minutes time. next, france's moment of truth. >> clearly the situation is deteriorating in france. the situation in terms of when you look at the fiscal policy is clearly now a concern for 2005 and 2026.

-- 2025 and 2026. jonathan: that conversation just around the corner. good morning. ♪

♪♪

♪♪ the black friday sale is now on. visit sandals.com or call 1-800-sandals ♪ jonathan: two a winning streak on the s&p 500, coming into tuesday just a little bit lighter, basically unchanged so far this morning. look at for job openings. the jobs report coming a little bit later. cannick 5 p.m. eastern time. france's moment of truth. here is the latest. france facing political collapse as marine le pen is set to join a left-wing coalition in a no-confidence vote against prime minister michel barnier's government tomorrow. joining us now to run through the details, carolyn, good morning to you. what is the process and what did the next 24 hours look like? >> you're going to have a vote

of no-confidence against the prime minister at around 10:00 et tomorrow and wednesday. that is when the government may actually collapse and it is actually very likely the government will collapse given marine le pen has already said they will support this vote of no-confidence confidence that has been proposed by the far left. technically, barnier may be leaving his last few hours, maybe the shortest lived prime minister of the republic, and it is actually interesting to look at the rationale behind what marine le pen is doing because michel barnier did get a lot of concessions on a lot of the things she wanted to include in this budget, but at the very last minute she said that wasn't enough, i want this government to collapse. she is actually on trial, she could be banned from running for office.

she not necessarily behaving rationally here. according to some analysts come in the short term marine le pen light -- might prefer chaos to stability. jonathan: we saw that chaos playing out yesterday. the euro-dollar yesterday breaking below 105, the biggest one-day loss campaign to election week. a very small bounce in today's session. talked a lot about spreads. france and germany, the widest since 2012. the biggest difference between now and 2012, this morning in europe this year, going forward, very much in the core. let's talk about those challenges. not for the periphery of europe, but the core. france, germany.

how are they going to deal with what is coming down the road? >> i think that is the fundamental question here. are we set up to be in a position to reach out and basically confront the issues facing europe in the form of the united states being much more hostile? the same thing with china, does europe have the unity to do so? in the context of the french government collapse, the german government collapsed just a couple weeks ago and at the very center of the debate, i just spoke to the head of the lobby group for germany. this is a huge part of the german economy, a hard one to get a gauge on, but they were basically saying that none of the political parties going into this election the offer a treatment to the underlying disease. everyone is trying to touch on the symptoms and basically the politicians who are dealing just with kind of playing in kindergarten is literally what he said. and putting that in the context of the reality is the fact that we talked about the decline of german industry for the last two years. we know about the gas prices

after the invasion of ukraine but the reality is really hitting the road right now. cutting 11,000 jobs. bosch cutting 5000 jobs. zeman cutting 5000 jobs. ford cutting 4000 jobs. volkswagen, we don't know if it is 10,000 jobs or 40,000 jobs. jobs being cut at the very heart of german industry, and the solutions being proposed are not anything other than more unity within europe, and at a time of crisis, a lot of nationalism surges up. can you believe get a capital markets unit, can you really get a banking unit? that is a question they need to answer if they want to avoid slow agony. annmarie: how did we get here? there is a question of how much this have to do with china, a question about how much it is idiosyncratic to specific industries like the auto industry, and a question about whether it is asleep with an issue, where at money was spent,

but not necessarily on investments could have long-standing returns. >> i think that is at the heart of many of the questions. i think a lot of the critique you get from angela merkel despite the fact that these were very good growth years for germany is the fact that they basically didn't lay the groundwork for the user. she obviously was able to also maintain that relationship with vladimir putin but in her absence, even that collapse. there is all this fiscal prudence, fiscal rigor. but when it comes to the crisis, what is the point of having these seriously depressed borrowing costs if any crisis you are not willing to animate some of those funds and move things forward? it is sorta shocking when you look at five or high-speed internet penetration in germany is very poor. the train system stump of the function anymore which goes against all of the reputations that you have for germany and these issues are coming to roost. will this wakeup politicians? you may be a position where the party that brought in the debt-free, added to the

constitution in 2009 maybe willing to work around february, but we will have to see. annmarie: over the past few days we heard from christine lagarde and she was asked do you still think trump is a threat to europe and she said her thinking has changed a bit, it is now up to the europeans to transform that threat. how on earth and they going to work together to potentially fend off donald trump tariffs if they have two political crises in the top two economies? >> particularly because i was at the e.u. leaders conference just days after trump was elected president, everybody's tone was very constructive and very positive, almost forgetting with the first administration was, particularly vs. germany. he was lambasting the germans for not spending enough on defense, saying it was totally inappropriate for them to buy all their gas from russia. these were in terms of what he wanted to see change in europe and obviously it didn't change. i think that everybody is taking

this positive approach, everyone is being optimistic, but when you add up the sum of all the issues that europe is facing, you want to add to that tariffs with the united states. germany and the u.s., that is their biggest trading relationship, it is no longer china. jonathan: appreciate the update out of berlin, germany. the difficulties in europe at the moment. i think it is notable that absent in the conversation so far on this side of the atlantic tariffs, the first shots fired in mexico, canada, china, so far has been spared. lisa: at least because it is not even necessary to say it, there is already plenty of fear bake into the market. jonathan: more to come, i'm sure. coming up, wife s -- why stifl has boosted -- to a street-.

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jonathan: another series of all-time highs to kick off the month of december. s&p, a record on the nasdaq 100. the russell done a little more than .1%. in the bond market yields were pushing higher before he heard from governor waller. cut or skip. i have to say pretty obvious he was leaning towards the cut. we have to see with the data looks like between now and the next couple of weeks. lisa: he single-handedly steepened the yield curve.

there is this but. we are data dependent. that cast a bit of cold water over it. that is the gravitational force giving people hope that all things being equal, a relatively accommodative federal reserve. jonathan: there is still some distance to go in reducing the policy rate to neutral. the big debate on wall street now is how much. lisa:, of this is a big debate at the fed as well. austan goolsbee said the same thing. it is hard to know where the neutral rate is. we have to be slow and deliberate in terms of how quickly we get there. i want to hear about that, how much it is the actual focal point at the next fed meeting. jonathan: chairman powell tomorrow. the euro bouncing back from yesterday. 105.22. a lot weaker yesterday.

french lawmakers said to hold a no-confidence vote tomorrow. marine le pen's national rally and 11 coalition are joining forces to topple the government. lisa: wouldn't this be the shortest lived government going back to the 1950's for the fifth democratic regime of france? it raises the question of what they can do to remedy this. you get chaos. the next votes is in months and months. if they caved to marine le pen and continue with the deficit that increases over time, is that good for the bond market? if they don't make those concessions and the government falls apart, is that better for the bond market? annmarie: citigroup said no french government will enjoy the policy space whatsoever until the autumn of next year. everyone was inspected the

government would be on a short leash. now it will be even shorter. you will have paralysis, a lame-duck government because they cannot have elections until july because they just had an election. that is illegal under the constitution. the focus is going to go to emmanuel macron. is he going to be forced to step aside until 2027? jonathan: we are all looking at the same spread, germany versus france. france versus italy. based on what you described as a big issue between a rock and a hard place for the politicians. lisa: just wait a week. kvm won't be. greece -- maybe it won't be. the french 10-year yield is 2.918%. just wait a week because you might see italy spreads like what you see in france.

jonathan: the u.s. and china. averting the restriction on china for chips nai. the department of commerce slapping a ban on high bandwidth chips. annmarie: this is a start of a tit for tat that can only get worse when you look at some of the tariffs donald trump wants to enact on china. this comes at the tail end of the biden administration. china is responding. how much worse does this get in 2025 when you look at who he is tapping for the ustr? europeans want to basically de-risk from china and this individual is saying i think we need to decouple from china. how quickly does that unravel in the next 12 months? lisa: how can you decouple from a country that provides the raw materials for the ship

infrastructure? about 60% and 90% of the worlds chip -- gallium production. it accounts for 79% of all the global raw silicon. a situation where china holds the keys to a lot of the materials that go into the chipmaking processes. i wonder how much are we accounting for the tit-for-tat and how the escalation could go and how the u.s. is preparing to decouple when it is sourcing -- where it is sourcing the raw materials. jonathan: how do you decouple on that front? annmarie: they have the majority of raw materials and also have the majority of the processing of raw materials to make the critical components needed and things like ev batteries. a lot of commodities strategist i have spoken to have been talking about china's long game is not exporting the battery. it's happening now. it's exporting the entire car.

we will hold back on raw materials and you have to buy the car. jonathan: widely expected blackrock agreement to buy hps. they boosted alternative asset figures by 25%. close competition with kkr and global management. lisa: this is where the money is. they are giving you this nugget here. for blackrock, the addition of hps will add 35% of an increase to their fees for private credit. you look at the management of these assets. you have seen fees shrink in public markets, increasingly commoditized when private markets are growing. how else will they keep ahead at a time of the market is fundamentally transforming? jonathan: have you seen the rally and some of the names since the election? apollo just absolutely ripped. there is a view the environment will turn in their favor more in

the next 12 to 18 months. lisa:, to that was because you saw mark rowan in a condition -- in consideration for essentially becoming treasury secretary? there's an amenable force in the white house towards some of these business structures. jonathan: let's turn to tesla. raising the price target to a street high of $411. "while we have confidence in the auto business, the value creation potential from its ai-based volkswagen cape abilities and cybercab underpin a positive outlook." welcome to the program. appreciate your time this morning. can you ask line what is new about some of this and what has changed in the last few months? stephen: sure, and good morning and things are having me. when we look at tesla we have to realize it is way more than it auto company. when we look at our valuation

versus our prior price target, the auto business came down a bit and the primary reason it came down was we took more conservative approach to margins because of the potential ev tax credit in the u.s. $7,500 ev tax credit. that is the negative. on the positive side, we recalibrated a model around. driving capabilities and the impact over the next 10 years, as well as how that underpins the robotaxi/cybercab business. the biggest high-level change was elon musk's involvement with the trump administration and the high probability there are some regulations around. driving and with a roadmap is to get there. lisa: how do you price that in?

how much of the $411 price target includes the magic of the first -- a big ear listening to elon musk and his policies? is that a significant part of your increase to the price target? stephen: it certainly is. we did have a little of this built in pre-election and mr. musk's involvement. we said this repeatedly. in the short term, the stock -- when you buy tesla, you have to believe in the medium to long-term. on the full self-driving front and the robotaxi front, where using 50% of our analysis to 2034. with that gets us, and these are

large numbers, but for full self-driving it's about $155 per share. that is half of the $309 of potential upside. on the cybercab, just shy of $100 a share. that comes from what we think is a reasonable analysis. there are adoption rates that accelerate later in the decade that get us to the nine or 10-year dcf. you have to believe the full self-driving initiatives start to gain traction in the next couple of years. lisa: we are talking about a specific company that's on the epicenter of a host of different trends. some of the pain europe has experienced with germany because their auto manufacturing sector has been left behind. we talked about the dominance of chinese electric vehicles. can you push out five years and

talk about what you think tesla will be a winner, not just in the u.s. but also potentially in china at a time when it is slashing prices to compete with byd? stephen: sure. when we look at this we have to understand removals of ev tax credits -- there are challenges in the u.s. about domestic raw materials and processing, etc. they have an impact. that has hurt the legacy. it is difficulty tesla has to deal with. when you think about china and the largest tv market, there is -- ev market, there is going to be a back-and-forth on tariffs. how much of this gets implement it. how much of this gets bargained between the upcoming trump administration and china. those are factors that are

difficult to weigh. it does impact the cost and the profitability of pieces, imported components. the thing to keep in mind is while china is a large market, the market outside of china is also in or miss opportunities for tesla over the next five years. how china plays out will be extremely interesting given the cars are rolling computers. the data they pick up and share and processed, there is clearly political ramifications to all that. annmarie: they are slashing costs in china. the deliveries fell for a second month in november. how much do you think tesla will be able to sell for the remainder of the year to reach that target they said they would

have by the end of this year? stephen: that is an international global number. slight growth this year coming off a slow first half. the sales and try to were down in november. up 16% or 17% year-over-year. the other markets are going to be critical to getting to those goals. china, it will be a slog. it's a 20% of the total revenue now. it is hard to be profitable in that market given the domestic competition in china. when we look at the overall numbers for tesla for the year, we think the goal -- i think our numbers are up 1% year-over-year in aggregate. that gives you a fourth-quarter that is pretty solid. it is clearly overhead

absorption matters. they have a history of using pricing and incentives to get to their volume targets. volume is what they solve for and the price to get there. is going to be -- the chinese market is the most difficult part of the world for tesla. jonathan: the stock is down this morning by 1.4%. elon musk's record pay package was rejected by a judge in delaware. is there a risk he focuses his attention elsewhere on things like spacex? stephen: i think that -- you are talking about enormous power. i think elon musk knows his name is going to be forever linked to tesla. i think he is very focused on making sure tesla thrives long-term.

he has his hands in several different businesses. i do think from his perspective he needs tesla to thrive because everybody will link his name to tesla for history. jonathan: appreciate your time this morning. stephen gengaro on tesla. the stock is down by about 1.4% in premarket trading. an update on stories elsewhere with your bloomberg brief. dani: president-elect donald trump plans to travel to paris on saturday to attend the reopening of notre dame. trump wrote on his true social platform president imago macron has done a wonderful job ensuring notre dame has been restored to its full level of glory. it will be a very special day for all. u.k. developers are suing apple over commission charges. they claim charges of 30% on sales created an anticompetitive

tax on the nation's tech industry. apple could be responsible for repaying as much as $995 million in fees. speaking of elon musk, spacex is in discussions to sell insider shares at a valuation of about $350 billion, a significant premium to the 255 billion dollars valuation reported last week. it would cement the status of elon musk's company as the most valuable private u.s. firm. that is your brief. jonathan: dani will be back in about 30 minutes. up next, dollar dominance. >> important to not just look at the u.s. fundamentals but to cast a strong light on the eurozone fundamentals. but we haven't euros of insight -- is a weak euro story. jonathan: you are watching bloomberg tv. ♪

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jonathan: a snapshot of the price action. equities just about unchanged on the s&p 500. bond yields are higher by almost a single basis point. dollar dominance. >> important to not just look at the u.s. fundamentals but to casteurozone fundamentals. what we euro story. the market is going to this adjustment now of expectations. there's been a strong dollar policy.

there's a question mark with trump because he wants to address the u.s. trade deficit. jonathan: different government facing a no-confidence vote tomorrow. the dollar maintaining strength because of the costs it threat of tariffs. what is core trump and what is tactical trump? tactical trump is a threat of tears to see what concessions he can obtain. he joins us now for more. our that credible threats -- are they credible threats? do you believe he will follow through on them? steven: i believe, and i think they believe he will follow through on them if he does not get the satisfaction in terms of changing policies and getting some visible concessions from other countries. does he actually want to slap on

the tariffs on canada and mexico and other allies or just want them to adjust their policies and be more friendly towards buying u.s. products? that is probably the case. more than protectionism, he is probably doing a protection racket. going to them in advance of his being in power and saying if you want to avoid trouble this is what you gotta do. if you cooperate, things will be fine. i think that is his preferred direction. we will have to see how far they are willing to go and exactly what he does want to get into -- once he gets into office and if he focuses on countries that are large trading partners or focuses on china more directly because of the international security issues he sees.

lisa: i say this as we have seen some exports from the u.s. fall off significantly at a time when this has been a president who has ruffled a bit when it comes to -- waffled a bit when it comes to a strong or weak dollar. steve: care is a reason to waffled. -- there is a reason to waffle. dollar dominance is a tremendous advantage and enhances the u.s.'s role financially and politically in the world. everyone talks about the terror threat. if i was a u.s. exporter or a farmer and seen the dollar run-up to 105. it was at 109 before the trump election. if i was a manufacturer depending on exports, where is my tariff or my subsidy or protection? that segment will be damaged.

everybody -- there is something to be said for a strong dollar. often it is a sign, a positive sign that capital is flowing into your country for good reasons. that remains to be seen. to finish this thought, the judgment on the trump economic policy will not be done on the basis of tariffs. it will be done on the basis of how successful they are in terms of cutting government spending and doing the structural and productivity enhancing reforms that the team is promising. if they are successful in that, the dollar will be strong but it won't matter. if they are unsuccessful, the dollar will be weak. annmarie: can we talk about the other side of the euro-dollar trade? we are facing a french government on the brink of collapse. germany will have fresh elections at the start of next year.

are you concerned about contagion to the rest of the euro zone? steve: there is contagion but the issue is real. it is not like it would not be there if germany didn't have these problems or the other way around. the issue is that, you know, europe has had bad luck. one of their mating trading partners, china, demand for luxury goods has dropped. the tragedy of the war in ukraine damaged growth prospects. structural policy has gone nowhere. they are left with the ecb. it is the only game in town. that is what the market is looking at and saying either you will compromise on your physical goals -- fiscal goals with no hope of being put on a sustainable path or you have to

depreciate the euro through monetary policy. depending on which is emphasized, the pressure will be either in the rate market or in europe. jonathan: steve englander with the euro at 105.24. the difference between luck and policy. annmarie: people questioning if it is bad luck versus bad policies that a lot of people have been warning about. jonathan: you mentioned angela merkel earlier. a lot of those decisions can trace back to her era. lisa: it starts to turn to the attitude that europe has towards trump. it is changing in part because the realities of the world have changed dramatically since 2016. jonathan: in the second hour of "bloomberg surveillance," we will catch up with kenneth tropin, libby cantrill, oliver chen and tony rodriguez. that and a lot more. this is bloomberg. ♪

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

>> the fed may try to push through a third round rate reduction in december. >> i think they could be getting close to a loss. >> if you look at our expectations, growth has continually outperformed expectations. >> we have seen a real pickup and growth. we were promised a recession and got an acceleration. >> at some point we will have a recession.

the question is when. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the second hour starts now. welcome to the program. a snapshot of the price action after closing at all-time highs yesterday. on the s&p. another record on the nasdaq 100. equity futures up totally unchanged. looking for some economic data and we will get it later. the lineup looks like this. 10:00 a.m. eastern, some jolts job openings. the appetizer for the main event later, payrolls friday. the number we are looking for is somewhere around 200,000. sandwiched in between as we kicked off the trading week, chairman powell is speaking tomorrow. lisa: it came in the diary a little on the later side. what does he want to say? we will cut. you don't have to watch it. he's not going to have to say it.

will he weigh in on what kind of data he needs to cede to be confident that cutting in a couple of weeks time isn't going to re-accelerate the economy that continues to surprise to the upside? jonathan: governor waller, john williams are leaning towards an interest rate reduction in a few weeks time. lisa: chris waller moved the market, moved two-year yields lower. there's always a but. they will never tell you outright but they are going to do. to your point, how low was the bar and how high is the bar depending on what number we get on friday to the fact they could skip over this potential cut? jonathan: cpi next week. they are waiting for january 20. waiting for donald trump walk into the white house and officially announced some policy changes. for a lot of people they are not waiting. the trump second term has already started with regards to trade. annmarie: it started when he

trotted -- started true socialing with what he plans on doing. looking ahead to the renegotiation of usmca. whether or not is going to be tariffs on china. one place trump has not called out for tariffs yet is europe. europe is in paralysis now. he will be flying into the belly of the beast this weekend, going saturday to france. he will meet with macron. the third foreign leader he has met since the election. i wonder if micron will lean into the idea of give us a moment before you start coming after europe. lisa: the belly of the beast might be overly sympathetic given the fact he does not need to jawbone anything with europe. it is doing it itself and we have to make truth socialing i think. they still call it tweeting. at what point are people pricing and policies and looking at the raw data that continues to surprise to the upside?

we get contradictory signals from the different people on the show saying look past the headlines. it's about the data surprising to the upside. ism manufacturing yesterday. people say you have to look at the tax cuts. you have to look at other things. jonathan: the dollar strength has been the outcome. 105.24 this morning. we will catch up with ken tropin as stocks begin december at all-time highs. libby cantrill on why trump's tariff threats are pretty much guaranteed from day one. and libby cantrill, a cyber monday --oliver chen, a cyber monday shopping record. all-time highs to kickoff december. the s&p 500 notching its 54th record close so far in 2024. investors waiting to see if equity stay on track to stage a santa claus rally. joining us now is ken tropin. welcome back to the program. appreciate your time. can we think about this new

regime we are going into? compare and contrast the next 5, 10 years to the previous tenant and how different you think it will be. ken: it is going to be really interesting and so many different ways. if you think about it, trump is very action oriented. his policies in general are different from biden's. we can expect him to, as you look at some of the cabinet picks -- which lean right. i think we can expect he will follow through on some of the campaign promises. that will move markets a lot. my gut is the market is acting this way, the dollar moves higher in the yield curve steepen's. people are worried about the deficit and fiscal conservatism is a dinosaur in politics these days. jonathan: fiscal conservatism.

do you think they will test the boundaries of deficit financing once again? how far will they push things? ken: they will push until they can't. it is a market psychology issue ultimately. if there is a point in time where it seems like the deficit is running away from us, and we are not that far from there, it can spook buyers. something that is unique today that is different from the past is that there is no duration risk priced into bonds. you are not getting much of a reward, 10, 15 basis points between -- for investing in the 10-year versus the two-year. if we were in a situation where investors are spooked by the bond market, you could easily see a pretty good selloff.

you could also see the steepening would have to happen pretty drastically. the market is not looking at that. duration risk is not priced properly. lisa: i'm sympathetic to this view as i watch the auctions. there's a list of new ones next week. the same time we talk about fiscal lack of discipline in the u.s., france says hold my beer. so does the rest of the world. they are dealing with the same problem but without the growth the united states has. are you positioning for this mispricing induration right now? do you think this is an existential threat hanging over markets? ken: it's a real threat. it is legitimate. if you think about it, even if trump's policies prove not to be inflationary, and most of us think they won't be, that is concerning for the long and.

-- long end. the fact there is no reward for taking duration risk seems to me you have got to get going on getting some of these positions on but you have to be cautious in this transition period. i think over the next six months they play out. the dollar continues to strengthen. the yield curve steepen's. -- steepens. portfolio and asset managers is to try to take advantage of the opportunities. they don't always happened with the frequency we are looking at today. lisa: i would love to understand the contour of the opportunity. a note from max kettner at hsbc came out a moment ago saying what could be the top risk to their bullish scenario in u.s. assets. one is if there is an increase in the longer end of the yield curve to what he calls the danger zone, above 4.5%.

do you see that is something that could play out? as the yield curve steepens an incredible's the optimism around u.s. equities? -- torpedoes the optimism around u.s. equities? ken: if i'm an institutional investor it is harder to recall a more risky time. that doesn't mean i predicting a market top. if you think of it this way, we talk about the duration risk not being properly priced in. we talked about the yield curve steepening. if you talk about equities, it is the mag seven that has driven the market to not only ultimate highs but all-time high valuations. but concentration risk we have seen today in equities is way different from 10 years ago. in 2015, the top seven stocks represent at 15% of the market cap of the s&p. today it is 29%, 30%.

not only do you have fixed income concerns but in equities they are very expensive from evaluation point of view and the concentration risk -- i can't ever recall it being higher. it is spread in the technology and grow sector. annmarie: what is the biggest risk to those names? the likes of nvidia? ken: it's an enormous bet on technology. to anyone who invests in equities, unless you are specifically avoiding technology, what is happening in ai will either drive continued momentum in technology or a potential slowdown. i think this is uncharted territory. the effect technology is having on the overall market. you also have to keep in mind there's a lot of momentum

towards higher prices. one has to be careful about saying market is about the sell off. it is a moment where you -- if you had this giant run in your favor, it is time to get more diversified. annmarie: where are you going to diversified? ken: most investors have a few choices. gold is a choice. bitcoin is a choice. the alternatives space clients come to us because we are not correlated on average to equities. sometimes during price -- crises like 2008 or 1987, managers who do not have a long equity bias can really provide welcome relief to investors who are heavily overweighted in equities and fixed income. jonathan: appreciate your

thoughts as always. ken tropin, thinking a lot about how disruptive the next decade might be. we talk a lot about a set of policies stateside being reflationary. mohamed el-erian. the bond trading below 2% and it should worry the chinese government. it let some analysts to refer to the japanification of china. lisa: you have to wonder what stimulus they can provide. officials from the commonest party of china are meeting in the next couple of weeks to try to lay out some potential groundwork for additional stimulus. this comes at a time of no growth. that is the issue. winter low yields a bad thing when they represent a lack of growth necessary to support an economy that has been structured around high-growth? jonathan: low growth and overcapacity exporting it to the

rest of the world. europe will have to eat some of that. you have this disinflationary backdrop. a very different backdrop the u.s. we have talked about divergent over the years. this is why we really talked about divergence into 2025. lisa: you have to wonder where the limits are. if you think about international investors seeing a strong dollar and an actual yield they can get from u.s. treasuries, does that provide a cap on how high the yield could go or just highlight how potentially you could see people protest stimulating at a time of opulence? jonathan: it's a big theme. stories elsewhere. your bloomberg brief with dani burger. dani: france's government is on the brink of collapse after opposition lawmakers filed two motions of no confidence in the administration of the prime minister. marine le pen's and the leftist alliance and have called for votes tomorrow. they have enough members of the

national assembly to topple the government. a delaware judge has rejected elon musk's record-setting tesla pay package after shareholders supported reinstating it. the judge decided to stick with her original finding that the company's board with too much under his influence. the stock options package is worth $56 billion. by the time the judge canceled it in more than $100 billion at the close on monday. at&t says it will have sustained profit growth in the next three years and authorized to $20 billion buyback. ahead of a meeting with wall street analysts, the company issued a statement saying 2027 profits would post double-digit gains. it said 2025 earnings will be between $197 and $202 per share. that is your brief. jonathan: more from dani in about 30 minutes. up next, locking the deal. >> we will not let u.s.

steel be sold to the japanese. i would stop it if it has not been completed by the time i president. jonathan: the latest on that story of next. good morning. ♪ ♪

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at t. rowe price we let curiosity light the way. asking smart questions about opportunities like clean water. and what promising new treatment advances can make a new tomorrow possible. better questions. better outcomes. jonathan: equities on the s&p 500 just about unchanged after closing yesterday for the 54th record high so far in 2024. yields are higher by single basis point. under surveillance this morning, blocking the deal. -- locking the deal.>> i would e sold to the japanese. psychologically -- i would not let it be sold.

i would stop it if it has not been completed by the time i president. -- i am president. jonathan: reiterating his opposition to the sale of u.s. steel to new ponds deal. he says he will use tax incentives to re-invite -- revitalize u.s. steel. trump aleve tariffs are a win-win. the mere threat forces new behaviors or nothing changes and tariffs are imposed. an outcome trump seems come to but with as tariffs have their own benefits. libby, good morning. is it a blatant negotiating tactic? libby: it depends on nippon steel. he believes this. there is a political benefit. pennsylvania is an incredible state in terms of the electoral college. he also believes this. this thing we have been trying

to reinforce with client it is a deep-seated ideology and president trump has deftly changed his views on some things. this is something he has been consistent on. a mere threat in certain cases, like with canada. other cases writ large, tariffs are going up. it's a question of when, not if. jonathan: canada one. is mexico a second one? libby: the usmca review is happening. the deadline is july of 2026. that will dominate the trade landscape next year in washington. is this a threat to get concessions around the southern border in terms of fentanyl and what have you that are crossing the southern border maybe? it is quite real. you could see potentially tariffs going on mexico in the

lead up to that negotiation. this is all very fluid. we need to take him quite seriously on this. annmarie: we saw trust i -- justin trudeau have dinner with donald trump. is he trying to have negotiations now? libby: the deadline for nafta 2.0 is not until july of 2026 what he liked to begin his administration with some wins out of the gate? most likely. i'm not sure there is any expiration date come january for him. this is -- trait uncertainty is back -- trade uncertainty is back. he is willing to put these on. annmarie: the title every note, can he do that? yes. he has basically executive orders via ustr and commerce to

do this unilaterally. what do you expect after he's inaugurated? libby: the easiest thing for him to do is use section 301 investigation. that is actually going to be an important term people will become familiar with again. this is the same tool used to impose tariffs on china and 2018 and 2019. that is a live investigation. president biden used the same tool and open investigation to increase tariffs on china. that is the easiest for him, to go and increase tariffs using that live investigation. everything else becomes more murky legally. much of the 1974 trade act requires they do an investigation first before levying tariffs. the exception is if you declares a national emergency under epa . that is something he has threatened to do.

we have to take him seriously on those threats. that is the one exception outside of the live 31 investigation -- 301 investigation. annmarie: 301 falls under ustr. how much negotiation is within trump's cabinet? libby: this is something that is quite different. trump 2.0 is coming to the presidency with more experience. also without the shadow of having to run for reelection. politically may be more unleashed or unbounded in terms of some constraints he may have faced during the first trump administration. the punchline as there may be less tension between his personnel than there was in the first administration. the treasury secretary will be giving the perspective of the markets in inflation and the economy. this is a worldview that is

probably more universal in trump to point out than trump 1.0. lisa: most people in the market are not taking it very seriously and not necessarily pricing in the actuality of some of these levees. libby: it is mixed. it depends on sequencing and what we understand from the trump transition team. there is going to be a tension to the sequencing of various economic policies. while you may see some tariffs increase marginally on day one, there will be doing it in concert with other things that are may be more risk on in terms of tax cuts, deregulation and what have you. the reason i bring that up as i think the economic direction of travel is a little mixed. tariffs can be inflationary. they can hurt growth. there's a double-sided coin in terms of if and when countries

retaliate they can hurt the export sector in the u.s. it can be pretty negative. however, if it is done in the context of broader deregulation, more tax cuts, some of those effects may be less direct. what you saw in the bond market the days after the election, some of that was on deficits. some of that was pricing in higher chances of tears. 7 -- tariffs. some of that has fallen out of the market. lisa: a lot of people have been looking at the selections and bought into the story of efficiency and productivity that can offset and reduce the deficit with some of these tariffs and other tax cuts, etc. are you calling that into question? libby: we've had an active discussion about the effectiveness of the department of government efficiency which is not a department. it has now statutory authority.

lisa: it has two people in it. libby: not the most efficient structure. these regional cinnamon you have to respect. they have been incredibly successful in their professional lives. there are limits to what they can do. they can identify sources of inefficiency and waste. they can write a report which they plan to do. in terms of having the levers of control to reduce spending, they will be limited. they are not part of the government. it is congress that ultimately makes these decisions. because the recommendations arise in ultimate legislation? sure. can you see some fiscal consolidation at the margin? sure. this is where you get back to the margins of congress and how it will be incredibly narrow. one of the least reported stories of the election is how narrow republican majority be in the house. it could be eight to seek majority. they can live these two votes

and still pass legislation. when they come in in january because of the matt gaetz and michael waltz retired from the house for other things, it will be a one seat majority. zero. they cannot lose any votes. that is a constraint in terms of what can get done on the reflation side and walking get done of the spending cuts side. is easier to eat your dessert then your vegetables. tax cuts are desserts. spending cuts are vegetables. jonathan: we have eaten a lot of dessert in the last two years. libby cantrill there. up next, oliver chen as cyber monday sales had a new record. this is bloomberg. ♪

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jonathan: equity futures on the s&p 500 almost totally unchanged. flat as we kick out trading on this tuesday morning. nasdaq would hundred negative by not even .1% after closing the equity -- yesterday at a record high. let's cross over to dani burger. dani: u.s. steel falling nearly 8%. trump posting on true social -- truth social that he opposes the purchase by nippon steel, saying he wants to guarantee it remains domestically owned.

nippon said they would benefit u.s. industry. american supply chains. this deal is currently under review. this is another obstacle for u.s. steel. microchip. this is what happens if you sell chips that are not ai chips. microchip technology sells car related chips, u.s. consumer related companies. shares down nearly 1.5%. they are closing a factory and arizona will affect 500 employees, saying inventories are too high. microchip has been mired in a sales slump and a c-suite shuffle. the headaches continue. rounding things out with at&t. shares up this morning 3.3%. they gave out an investor update. they will meet with wall street analysts today saying they will meet continued growth caps off by double-digit growth in 2027. they authorized a $20 billion buyback thanks to a refocusing

they have done. they have been divesting assets. directv. they will finish selling that in the first half of 2025. refocusing on the telecom root. jonathan: that stock higher by around 3.5%. under surveillance, israel sang it is committed to a u.s.-backed cease-fire. israeli forces carrying out strikes and lebanon -- in lebanon. donald trump says it will be hell to pay if israeli hostages are not released by inauguration day. annmarie: they are trying to get this cease-fire in gaza and getting the american hostages and israeli hostages released. it comes after sarah netanyahu dined with the president over the weekend. he is saying there will be "hell to pay for this." there was a cease-fire agreement when it comes to lebanon. that means nothing when it comes to what is going on in gaza. hamas would have to agree to let the hostages go. thus far, every time we have

seen a potential cease-fire when it comes to gaza, it has not gotten over the finish line. lisa: i'm wondering how difficult it will be to get something across. who are you dealing with and lebanon? the negatives of was the lebanese army, bless t -- less toothful than other militants in the region. jonathan: a new front to the tengion emerging in the last few days -- tension emerging in the last few days. annmarie: you look at syria right now and what iran does. what does russia do to come in and back aside or do they not? -- assad or do they not? it comes at a time the u.s. is going through a transition. jonathan: becoming more fragile, less. chinese -- not less. chinese plan on beginning

there were conference next wednesday. officials will map out economic targets and stimulus plans for 2025. watch this space in the next year. lisa: so far the stimulus has gone back to the same well, bolstering some of the housing property valuations as well as just staving off further weakness. at what point will they deliver money into people's pockets? people don't spend in china the way they do in the u.s. people in the u.s. will spend come hell or high water. people don't feel confident enough to buy stuff domestically , let alone on the international front. jonathan: chairman powell and xi jinping have a lot of common. lisa: go on. jonathan: policy changes from the incoming and administration and how to respond to them. if they talk to each other they would have some common ground. lisa: interesting analogy i will

have to wrap my head around, the junk physician -- juxtaposition of xi jinping and jay powell. how much to the stimulus plans are contingent on what donald trump does. their move with the banning of certain minerals, where earth minerals to the u.s. from china was an opening salvo. how much is it punitive and how much is it stimulative on the domestic territory? annmarie: you can save what jonathan said almost for everyone and ceos looking at -- look at nippon steel and u.s. steel. could the deal get done? everyone wants to see but will be the policy proposals. are they credible? what is a negotiating tactic? what is interesting about china is able to agree on the numbers but we won't know until march. let's say trump comes out and is bigger than the chinese were expecting, get they have to be to get and say that meet again and say we have to -- we have to

meet again and edit the target? jonathan: donald trump will eventually replace chairman powell. they cannot do the same thing in china. lisa: on one hand you can see that jay powell does not have the advantage of central planning. some people might argue the fed has acted in certain ways. jonathan: i'm not sure we want the fed to have that authority. lisa: we have gone far enough of this. jonathan: elon musk's record-setting pay package was struck down by a delaware judge. the court ruled the board was improperly influenced by musk when it adopted the compensation plan in 2018. the ruling will take a significant chunk out of elon musk's wealth. lisa:'s influence over the board. more importantly, delaware's role in saying what is ok and not ok in terms of interference when delaware has been the main place companies have been incorporated in the u.s. elon musk single-handedly is trying to shift the balance of

powers to taxes. he will be in court -- texas. he will reincorporate elsewhere. over elon musk's control of the company when people say it's a greatly considering his place with president-elect donald trump. jonathan: i think we have done this repeatedly in the last year or so. the benefit of hindsight. i would like everyone to go back to 2018, the day when the pay package was announced and read some of the newspaper articles. look at some of the coverage of the story. there was a real sense at the time talking about it this was unrealistic. it was on the edge of unachievable. that is why we are here, because it was achieved. we have to go back to 2018 understand how unrealistic people thought it was at the time and how amazing it is he's actually achieved some of the goals that got us to have this conversation about getting this package. lisa: that's why you're getting pushback, including from the

board that signed off once again after it was rejected the first time. it goes to the heart of what is fair for a board to decide in terms of a pay package at a time when someone is delivering what previously what was thought to be unrealistic. jonathan: people look at mark zuckerberg and the instagram and what's at deal -- whatsapp deal. people thought he overpaid. you have to basically acknowledge the fact we have seen some stunning leadership in one industry, automotive, tesla, and fantastic leadership in another, in tech from mark zuckerberg. whether you like them or not should not be part of the conversation at all. lisa: that's why this minute shakeup in terms of what kind of legislative frameworks there have been and tax frameworks and a number of different states. we are seeing the competition ramp-up. jonathan: adobe expected a cyber

monday splurge. consumer spent $13.5 billion. oliver chen saying while we see selective consumer holiday spending, by and large the consumer remains twice for and is carefully balancing needs versus wants. i want to start with luxuries. i want to ask a simple question. if luxury goes on sale, is it luxury? oliver: that's a great question in terms of the balance of luxury and nestle 70. the best brands don't go on sale and that includes louis vuitton and dior. other brands struggling including gucci, we are seeing markdowns in the department store channel that's under pressure. we don't recommend the stocks that include macy's and nordstrom and others. that is been something to watch. the consumer remains focused on value. walmart has been a top idea.

walmart is executing well with lots of great deals across food and consumables. luxury is something to watch still. as you mentioned earlier, the situation in china is more anemic growth. that is something to consider. consumer confidence has been volatile. on the one hand we have very low unemployment and a trillion dollars of savings on the sidelines. consumers are being choicefu l. really looking for the best bargains and the best luxury brands remain full price. jonathan: ipc your ability to jump between gucci and walmart. if we can stand gucci and then move on, this is important. i'm getting in hot water here. the kind of people that buy gucci and what you know they have bought gucci -- that's important -- they want the big gucci emblem. i wonder how incompatible wealth and luxury is with that particular brand. oliver: we have to have both.

what's happening at gucci is the return to a timelessness and elevation with a new designer. we like what he's doing. the turnaround take time. -- takes time. they are adding a lot of creative to this. they will be bigger and better at storytelling. that needs to happen at gucci. quiet luxury, thinking about timelessness and elevated materials is working in a way that luxury consumers are looking for value and items they can use throughout. it is a little boring. conversely, quiet luxury can be an excuse for no innovation. we really need to have both. we need to have the exuberance and the fashion and the quiet luxury. a little bit of logo in the future will be quite positive for gucci. lisa: love it.

i'm curious about how you have seen this outperformance on an ongoing basis this holiday shopping season from the online systems. this has been the trend for a long time. how does this challenge companies at a time when it is less profitable for them to sell online? four they have big physical stores not getting the same traffic as they have in prior oliver: retailers have to do everything everywhere all at once. the name is curbside pickup. you are doing more work in terms of the last mile. when you think about technology at large, the future includes digital advertising at artificial intelligence. growing these marketplace models to have third-party sellers similar to amazon. you are retaining a lot of the productivity of the box and becoming less unprofitable and online. that is happening at walmart.

it's a bigger challenge a target which is losing money online. the prospect for walmart to become e-commerce profitable will happen within one to two years, in part because they have so much scale and increasing delivery density. consumers of all kinds are choosing to pay for express shipping. that's happening as well. walmart is getting a higher household income consumer. this is difficult but it needs to work together. digital advertising is a very high margin business. 70 percent plus margins. lisa: how big of an advantage does walmart and amazon and large retailers that have these multichannel businesses have when it comes to the likes of tariffs which universally we are expect and hear about early next year to have them implemented? oliver: across the sector in terms of the analysis the earnings-per-share hits will be mid to high single digits. in terms of stocks, walmart also

has a history of working quite aggressively with suppliers on managing prices. we like the prospects of walmart. the big question and big opportunity an unintended consequence of tariffs will be passing this cost on to consumers, which may yield inflation. we will see. as much as 50% to 90% will need to be passed on to consumers. that is something to watch. you will want to own those with scale. walmart and costco fit the bill. annmarie: you are not excited about macy's. are there any department stores you like? will they have to lean into more sales leading up to christmas? does cyber monday even exist anymore or just cyber week? oliver: it is definitely the cyber month. t-40.

the events have started earlier and are more spread out. people are not trampling each other anymore. not as excited as it used to be -- not as exciting as it used to be. as we think about department stores, we like nordstrom rack, but what does that mean? department stores are changing to be more off-price and offer value. nordstrom rack did a pretty good job. the big problem is getting younger customers in stores and store traffic. the nature of competition is changing rapidly and apparel. thinking about social selling. that is something department stores are facing. the major is more exquisite product. macy's is upgrading their private brands. that should be a positive for getting younger consumers and older consumers back in store. jonathan: appreciate your time, sir. oliver chen, thank you very much. from walmart to gucci and gucci

-- have i offended gucci lovers? annmarie: yes, you did. i like oliver's take. you need both, the loud and the quiet when it comes to fashion. you need a little annmarie and a little bit of jonathan. jonathan: a little bit of boring and a little bit of flash. stories elsewhere this morning. if you live gucci, good for you. dani: syrian-based rebel forces are looking for capture territory controlled by bashar al-assad after taking aleppo. al-assad's biggest allies are fighting other wars, making it difficult for the president to hold onto power without their support. china announced it will ban several materials that have military uses from being exported to the u.s. it is a tit-for-tat move after the u.s. escalated chip curves. gallium, germanium and superhard materials are not allowed to be

exported to america as an overall principal. blackrock has agreed to by private credit manager hps investors with a $12 billion all stock deal. hps manages nearly $150 billion. it gives blackrock a hold in a significant market. jonathan: cut or skip? >> the fed has pigeonholed itself and telegraphed too much easing for the next 12 months. they are stuck. jonathan: that conversation is up next. ♪

jonathan: live from new york city, welcome to the program. equity futures attempting to

push higher but not even .1%. all is quiet at the moment. under surveillance, cut or skip? >> the fed has pigeonholed itself and has telegraphed too much easing for the next 12 months and into balance sheet reduction. if they pivot away, it will look politically motivated. i think they are stuck. the data coming up friday could make the case if it comes in strong that they don't the ghosn december -- don't have to go in december. jonathan: bracing for a slew of economic data ahead of the central bank's rate decision two weeks away. christopher wallace saying, " lean towards a cut and the december meeting but it depends if the data surprises to the upside and alters my forecast for the path of inflation." tony rodriguez joins us for more. payrolls on friday. cpi next week.

what numbers would change that quote? tony: for the fed now, because they telegraph they will have another 25 basis points, i think they will skip a few meetings in 2025. you will have to see a jobs number. there's been some noise in the jobs numbers because of the hurricanes and the boeing strike. probably north of 250 or south of 100,000 would cause them to move to definitively doing it or stopping. the inflation data will probably be more critical. we have really seen some pause now and the disinflationary environment. sticky inflation could become the new focus for the fed and our minds. the claims data supporting jobs is being ok and the healthy job market. if inflation suddenly starts to reverse, that can cause it to pause at the december meeting. our base case, you get the 25,

you skip january and maybe another 25 in march. lisa: is the bond market pricing and the sticky inflation you are seeing? tony: we don't think so. the market initially acted significantly based on expectations for fiscal impetus in 2025 with the extension of the tax act. that will be the primary driver of the long end, the higher fiscal spent under the new administration. the tariff and immigration policies, short-term inflation and paul's, longer-term negative for growth. it is the fiscal spending that will drive higher. the fair value is around 4.5%. we are at the lower end of that right now. we think the bond market is not priced for any kind of negative inflation surprise. lisa: do you think if we get a cpi print that is above

expectations or even just a little bit, there is a priming now in market positioning that could lead to a pretty big selloff? tony: yes. back to the highs of the last month postelection, it could lead to that. we will not see a 5% 10-year. until we have more clarity on what policies will look like on the fiscal side. jonathan: the federal reserve has been stressing the need to recalibrate. that feels like an easy 100 basis points up front. you are calling for the final 25 of that 100. closer to neutral things get more difficult. governor wally said there some difference to go -- distance to go to reach neutral. how much information is in that line from governor waller? how much is left to reduce? tony: they had neutral way below

any current estimates of neutral. they were thinking maybe this is 50 or 75 basis points. i think they are trying to balance the fact we will see that rise probably only do 1% this by the side effect neutral has increased to 125 to 150 basis point real rate. there is a little bit of a free cut in our minds. we remain in tight conditions with inflation well above target. you have a lot more restrictive ability -- restricted ability to get closer to neutral. jonathan: governor waller talked about the sensitive parts of manufacturing, offering evidence they aren't restrictive. can you give me your thoughts on that? what evidence that we are significantly restricted at the federal reserve? tony: the size of restrictiveness are little in

the housing market. there's been an impact. when you talk about the industrial side of the economy, we see it in the lowest quality of companies that have higher debt burden. that begins to erode some of their credit metrics. coverage levels. we are beginning to see a little of the consumer when you talk about auto and credit card delinquencies. they have increased. if you get some weakness in the employment market, that is when you can get an overall negative impulse to consumer spending which has been a huge support for the economy. jonathan: it begins later this morning. good to see you. tony rodriguez. in the third hour, your lineup looks like this. greg boutle, vijay rakesh, lindsey piegza, and earl davis.

from new york, this is bloomberg. ♪

>> there is going to be volatility. you have to keep your eye on the ball. >> markets are likely to be

voluble for the coming year but still upward. >> it does not necessarily mean it can continue this robustly going into 2025 but we know the seasonality continues to drive people into the markets. >> i think the market has gotten a had itself a little bit. jonathan: i heard the same argument nine months ago, six months ago, three months ago, the market has gotten ahead of itself and the market cap rallying, another close on the all-time high on the s&p 500 for the 54th time. futures positive by not even .1 percent, virtually unchanged on the nasdaq 100 and likewise on the russell going into a lot of economic data. later this morning at 10:00 a.m., job openings. tomorrow, chairman powell. thursday, were data, jobless claims.

friday, heroes in america. sonali: the juxtaposition -- lisa: the juxtaposition and the economic data is perfectly framing the moment we are in. there are no bears in because they have gotten squeezed out of this incredible rise at the 54th high in the economic data continues to outperform and has been fundamentally driven as much at has been somewhat of a valuation. jonathan: payrolls headline number looking for a bounce back. from goldman, the return of the striking workers could be worth close to 38,000, we estimate the reversal of much of the hurricane hit will be worth 50 k. the numbers people are looking for. lisa: you have to wonder how much you can expect an even bigger surprise to the upsize -- upside and how the fed could raise. some people are saying if it's not a problem if there is a big

number and the fed could still run -- cut rates. it is the reason why and what we just heard from tony rodriguez that at a certain point returns to inflation. katie: governor waller said he is looking for a cup barring any surprise in the data that we will receive. how high does it need to be for the jobs on friday to say maybe we need to go on pause? jonathan: we spent the morning talking about the differences between the united states and europe and could do several hours all over again. we are good for strong numbers in the united states and in europe we are looking for weakness. in europe we are barely keeping a government together in france, barely half of government in germany and the to do list is getting larger. lisa: which raises the question is there is no alternative. if you are going to talk about

fiscal lack of discipline in the united states, check out what is going on elsewhere that there is a problem with the deficit and there is a government to deal with it. at a certain point, how much does that help the u.s. exceptionalism story because not only is there growth in the u.s. but a lack of ability to address the weakness elsewhere. jonathan: in china, the 10 year in china, dropping below 2%. conversations about china, never mind europe. lisa: this comes as the leader of the communist party coming together how to galvanize an economy that has build up overcapacity and built on the idea of fast growth and has incredibly leveraged sector, particularly in the housing market. it becomes problematic to see where the growth is going to come from other the u.s.. annmarie: the idea that what it will all get dumped on europe if they don't have domestic demand. as the europe core is struggling

, this isn't the periphery of the debt crisis. we are not talking about greece or portugal or italy, we are talking about the top two core economies of europe going into 2025 paralyzed internally by their own political strength at a time when the to do list is massive, ukraine war, terrorist dealing with china and preparing for tariffs down the line coming from a new u.s. administration. jonathan: they are all waiting for the same thing, chairman powell. don't you agree that waiting for the same thing? they are waiting for policy is going to look like on january 20. lisa: sure, i will go there, trying to wrap my head around the policies of jay powell and xi jinping. jonathan: every single interview regardless of the background of the individual, doesn't matter with the industry is or what country they are from, every single conversation will start with the same thing, the person

who is it there, the incoming president of the united states, donald trump. the inauguration week will be the only thing people talk about. lisa: what will they do and how will they rearrange their businesses is what we will be asking. there has to be something more than just waiting and that is what i found interesting about companies. and frankly, jay powell as well. can't wait until he gives his projections in two weeks to say we will have to see. that is the reason why it becomes very interesting to see how the waiting game is playing out and people can afford to wait. annmarie: i will be at the inauguration while you are at the swiss alps and i will know what to expect. it will be executive order after executive order and potentially tariffs on day one. he already told us he is planning tariffs and already negotiating with world leaders about them. jonathan: it is going to be a busy hour. we will catch up with greg boutle of bnp paribas.

and we will speak with vijay rakesh and lindsey piegza. stocks mostly flat as the s&p notches the 54th record close of the year so far. greg boutle of bnp paribas. a key risk to markets from here are from valuations and rates, the main hurdles for them to clear coming into year end. let's talk about the hurdles. how high are they? greg: at the moment the moves in rates we haven't seen have been relatively orderly, valuations are expensive. that is what nash not what is driving it. until you have something -- is not what is driving it. jonathan: can you compare the starting position now into 2025 versus where we were in 2016 going into 2017? greg: much of the policy

rhetoric, marginal news flow feel similar. you can look to the 2016 playbook of the starting point is different. ahead of the 2016 election we had some 2% 10-year gilts in the u.s.. we are at 4.5 now could we have equities that frankly looked attractive and i we have valuations which on any metric are expensive. that is one of the big differences. one of the themes that is driving the early movers post is broadening out of the rally away from some of the mega caps that had the premium valuations and potentially to the cyclical parts of the economy that are little cheaper and benefit more from the marginal views. lisa: we talked about how the overpriced stocks, valuation story was something people were talking about nine months ago, six months ago and three months ago and we have continued to climb higher and the fundamental seem to be moving in the right direction. why would anyone left the bearish?

how can somebody be left and still be sold in? greg: what history tells us as the periods of exuberance can last a long time. and the equity markets, forward returns and correlation to valuations, there essentially isn't one. the issue with valuations and rates if you have u.s. growth slowing dramatically midway through next year then suddenly valuations become more of a concern. in the economic growth is good, the earnings growth is good and potentially bribing out there is not a chance for those valuations to come back. lisa: what do you do? greg: you can look at the rotation within the equity markets. when you look at the headline for the s&p, it is expensive it would look at the equal weight s&p less dominated by mega caps, not nearly as expensive. this theme of bribing out with the rally is what we have seen post election. you have seen massive inflows into u.s. equity.

if you look at where it has gone , a lot of it has gone into broad-based ets. some biggest inflows have been into the small and mid-cap scum equal weighted s&p and things like regional banks. things are -- people are looking at were it could benefit. annmarie: in the industry like specifically? greg: cyclicals are the way to play the broad now. you can look at industrials and banks. you have to look at subsectors. we've seen big divergence in tact where mega caps haven't performed and things like the software sector has. the broadening out rally out of mega caps into more cyclical parts of the economy. but higher risks further out. lisa: how much can you price in, going back to their first point about how the playbook looks different than 2016 and the starting point is different. which trade has been embraced

for trump policies have been most challenged based on the differences this time around to the economic backdrop versus 2016? greg: one of the things people don't know is the sequencing of policy. on day one, will they be tariffs and is it broad-based or more targeted. will it be fiscal. trump is spoken about domestic corpus receiving tax cuts. the sequence matters. you are talking about the fed, that also matters a lot. when you look at trump's first term, 2017 was a great low volatility risk on year. 2018 the first half was more challenging. where you see the equity market not so much driven by policies but more q4 2018, which was more monetary policy. annmarie: do you think that the sequencing is not done appropriately for the market that could be the catalyst that potentially we see people start to pull off in the equity market rally? greg: if you get policies

enacted which rather than being domestically expensive are seen as more restrictive than inflationary, that is something that could potentially very -- potentially have the effect. the order is what drives the trades. jonathan: good to see you. everyone seemingly wants a seat at the table. this is what we have heard from the meta president of formal if foreign affairs. set the following, they overdid it a bit on the platform and moderating pandemic related content. mark zuckerberg, was playing an active role that any administration needs to have a maintaining america's leadership in the technological sphere. annmarie: surprise, surprise how he was just in palm beach

meeting with president-elect donald trump, also taking a cue from elon musk and what this has meant for elon musk's stock and how you can potentially influence the outcomes we can see in the next four years. lisa: this comes back to the idea that there was a big shift in rhetoric and we saw this also from jeff bezos are the washington post and some of the discussion around that. there is a clear shift in tone and there has to be in order to have influence over policies most people think will change quite a bit. jonathan: let's get an update on stories elsewhere. dani: israel says if the cease-fire with hezbollah collapses, it will broaden its retaliation to include lebanese targets. in a statement, the defense minister said there will be no more exemption. until now we have distinguish between lebanon and hezbollah. that will no longer be the case. president-elect donald trump

plans to travel to paris on saturday to attend the reopening of the cathedral of notre dame which was devastated by fire in 20. trump wrote on his tooth social platform, the president has done a wonderful job ensuring that notre dame has been restored to the full level and even more so it will be a very special day for all. it was a career night for the cleveland browns quarterback shamus winston who threw for four touchdowns and a record of 497 yards. it wasn't enough to hold off denver as to intersections return for touchdowns for the difference in a 41-30 two broncos win. denver goes in holding the seventh and final playoff in the asc. as for the rest of the playoff picture, kansas city and the buffalo bills have clinched first. jonathan: up next on the program, morning calls plus vijay rakesh on the big c-suite shakeup over at intel. this is bloomberg.

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j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: the opening bell around one hour and about 13 minutes away. equity futures unchanged on the s&p 500. morning calls, piper sando raising the price on citi, the stock up by almost 1%. the second call from j.p. morgan raising fedex to 3.66, placing the stock on positive catalyst watch i had earnings. stock down just a bit put 4%. deutsche bank upgrading cbs to abide saying the company is poised for a comeback after a 12th -- a tough 2024.

a six-week shakeup at intel, the board forcing the ceo to step down after losing confidence in the turnaround plan. we believe new leadership could provide opportunity for new vision but faces challenging closing gaps, service cpu market share and ai server adoption completion. the challenges and the list of them are very long. vijay rakesh joins us now. always good to get your insight. we have to start the conversation about 35,000 feet before lower. the challenges to semiconductors, diversions, dispersion to the year so far. who is succeeding and who isn't and why? vijay: i think if you look at the technology space, the leaders are very clear. nvidia, and others have

definitely executed well. what stands out is a laser focus on markets and the technology leadership at the top. over the last three or four years the market cap is down 50% . to have been key core markets for them in pc come server and ai. they need to do a lot of work to crawl back up. jonathan: one observation we have heard is you can either design the chips or you can make the chips, you need to specialize in one or the other. why is that the case? vijay: what has happened over the last 10 years is a significant aggregation of ip technology from one of the biggest companies in the world.

building out technology backed up and building out leadership and building of the libraries you need for design. so nvidia, qualcomm, broadcom, you name it. that is very significant leadership versus intel. an intel versus the last year has not kept up the leadership where they have lost technology leadership. that is where the problem lies is trying to rebuild the leadership. it will take time. what the leaders is what they need at the top. lisa: initially was the reaction the stocks went higher with the retirement announced. we see the decline continued today. i wonder if this goes beyond just one person in a leadership role, whether intel can be

turned around in its current form. vijay: i think the stock definitely went up and some recognition there are significant challenges ahead. a lot of brain in this company. there is still a lot of technology, ip, parts in this business from massive markets. pcu, ai, they can do a lot and bring in the right person to turn this around. i think obviously it is linked to how they perform on the pc side and what is driving the customer to them. lisa: how much does intel need

to sell parts of itself or spend parts of itself to focus on one thing doing well, either designing chips or making them or focusing on some of the other aspects of the business? vijay: i think diversity is part of the roadmap. they have talked about trying to spin out and other segments have been focus. i think at the end of the day, they still need to regain technology and leadership. they are divesting parts getting some valuation in the market for those smaller segments but it really doesn't change the problem or solve the problem at hand which is regaining share and leadership. lisa: do you believe we could be

on the brink of a real pc refresh cycle? this has been one of the bonus rounds that people have seen hanging over intel is that eventually we will see people go out and buy a lot of personal computers that are upgraded with all sorts of fancy ai applications. are we really on the brink of that happening? vijay: we will get a windows refresh and then the end of life of windows 10. you will see a recycling that should drive move into a pcs. you will see more and more pcs coming into the market because ai pcs are being shipped into the market. as a function of that, we will see increase in the market but i don't know the customer at this

point, few and far between. annmarie: with chips, the government just finalize the grant intel and part of they agreed to not conduct stock buybacks for five years. when the new ceo takes the reins, how much are they going to be constrained by this plan that already was enacted by the previous ceo? vijay: i think that if the government is funding intel for some projects the will drive manufacturing onshore and not to drive to buybacks. it is a fair deal. i would expect the new ceo to start off from a clean slate and lay out what the roadmap is and how they intend to regain technology leadership and that

is where the focus will be. this is key to the intel in u.s. as well to bring huge technology back into the u.s. jonathan: a lot of challenges. i appreciate your time. i'm sure yesterday was a busy day for you as it was for intel. mohamed el-erian writes in and wants to talk about this. frontier airlines is selling first-class seats. this is the latest from the ceo. apparently they will install two rows of seats in the airbus. lisa: this comes after we have seen others trying to expand the airplane lounges. how does the lights of frontier, budget airline, make inroads

into something other airlines like delta and american airlines and united have all made considerable inroads in. annmarie: i didn't realize mohammed flew frontier. i didn't realize he was one of those saying we listen to customers. jonathan: there is a term for this. lisa: and then he will apply frontier? does he still have to pay for drinks? jonathan: i think so. you might. trying to make it easier for busy travelers along time ago. i feel they are slowly catching up. if you are a expensing of flight sometime soon and working at a bank, you will be flying frontier. ♪

jonathan: the airline's knobs on wall street are not flying frontier, are they? is it at delta? when the drive you up there? lisa: i am not one of those airline snobs. i have flown frontier and paper my snacks on spirit. jonathan: i imagine there could be pushback. lisa: does it include the free

snacks? annmarie: they are still expensing the snacks and the drinks. jonathan: they want the miles so they can take the vacation. lisa: they, not us. jonathan: they. one hour from the opening bell. on the s&p 500, just about unchanged so far. with the opening bell around the corner. with the morning moves, let's cross over to dani burger. dani: a second day in a row of a big rally for super micro computer, up 7% after rallying 30% yesterday. what a year it has been for this company after facing a short seller report after missing a deadline for financial report good this time around they concluded an independent review of the company and found no fraud, no mismanagement. they will also replace the cfo. for tesla, set for declines at the opening bell, down 1%. a judge for a second time get

shot down elon musk's multibillion-dollar pay package. he had threatened before when the issue arose that he would pay less attention to tesla and focus ai efforts elsewhere. other bad news for tesla, chinese sales falling, november sales falling for another month. wrapping up with at&t putting on a positive report for the financials for the year. shares up 2.6% ahead of the meeting with wall street analysts saying they expect growth to continue and be capped off with double digit earnings growth in 2027. they are also offering a $2 billion buyback. this is also thanks to the fact they have been focusing on the telecom business completing the directv sale in the first half of 2025. jonathan: morning movers, 58 minutes away from the opening bell. two weeks away from a federal reserve rate decision, two weeks

tomorrow. lindsey piegza writing the fed should be on the verge of a policy pause. while they are anxious to provide after it for two months of peak, the wrist to unlike too soon or too fast is a reignition of inflationary pressure and a reversal of the progress already made. what did you make of governor waller yesterday? lindsey: this is the general theme of what we are hearing from fed officials, setting the bar noticeably higher for a potential cause saying it is no longer about a stronger solid economy but about the data outperforming expectations. or as we heard last week, about a potential economy overheating. i do think the fed is gearing up to push through a third round rate cut in december, but as we turn the calendar page next year, if the data it remains as strong as it is, if the economy continues to prove remarkably

solid as chairman powell describe it, they will be backed into a corner and take a policy pause. jonathan: what kind of data would change it? what kind of number would it take? lindsey: looking up to the nonfarm payroll report friday, the strake will be outsized or at least we expect it but that will offset the weakness we saw the month prior. even 220,000, i don't think that would be enough to deter the fed from pushing to the december rate cut. lisa: mma i think it was. jonathan: mixed martial arts. lisa: i am trying to wrap my head around the hard words he had about getting inflation and a headlock and driving it to the ground in the last round two we are still going to cut rates. it raises the question, how much do you think they are still underestimating the inflationary usher in an economy where is not

about the labor market as the inflation rate we get the following week? lindsey: that is exactly right. the concern of the emerging weakness prompted the 50 basis point cut in september. we did not see the weakness come to fruition and then they follow through with another 25 simply because i think they were worried about having egg on their face and being too aggressive the month prior. they don't have inflation in a choke hold and they need to keep their eye on the ball because the past several months inflation has moved to the sideways with no further improvement to speak of. at this point, yes, we have made discernible progress down from peak levels but we still have the last mile to go and now is not the time for the fed to give up on the goal. lisa: john was asking earlier saying there was quite a ways to go before you get to truly a neutral rate. at the same time some of us are struggling to see the

restrictiveness in terms of rate of than a couple pockets of segments of the population. do you see us as anywhere close to restrictive? lindsey: that is a good distinction. policy is very firm and changing conditions, further improvement to disinflation does warrant less firm policy as we move towards neutral and the data normalize. we need to do so at a very slow pace. i don't think the question is do we justify further rate cuts. i see for rate cuts on the horizon but the pathway, the pace to the lower level of fed funds needs to be very controlled as to not overshoot or undermine the progress we have already seen made on the inflation front. annmarie: how many cuts could be seen next year when they have to recalibrate for potentially tariffs, tax cuts and a host of new policies coming out of washington? lindsey: assuming they push through the december 3 round cut, i see three were cuts in

2025 on a quarterly basis. 125 basis point cup recorded getting us to 3.25 by the third quarter and i think that is a reasonable neutral level. some policy issues may limit the downsize potential if we do see tariffs or sizable tax cuts lead to further inflationary pressures but that is a big question mark. under those scenarios it could be offset if we saw a sizable reduction in government spending or other areas. it is still questionable the net outcome from the incoming administration but right now, i do expect three additional rate cuts the next you're taking us to a neutral rate of 3.75. annmarie: if we get the rate cut, how hot this do you think chairman powell will be? lindsey: he is talking about a remarkably solid and strong

labor market and has laid the groundwork for a pretty solid assessment of current conditions, keeping the door wide open for a near term policy pause as soon as they deem it appropriate. if december data comes in within expectations, i think the fed continues to follow through with the third round cut come up they've already set the table for a potential pause given the strength we are seeing in the consumer, in business investment and even in housing and the sticky inflation. lisa: jon has been trying to draw a parallel between chairman powell and xi jinping. jonathan: would you like me to explain that? i am not insane. there is one similarity. they have to wait to calibrate policy to work out what policy changes would be in the united states fear that is the similarity. lisa: do they is my question. do they have to wait to understand what the policies are , similar to xi jinping who has to wait to understand what the

policies are? lindsey: that is been part of why they want to push to the third round reduction in december before we got some of the details of the policies that will be associated with the incoming administration. when that calendar page turns to 2025, if we are still talking about the strength of the data, that is where the patient's needs to come in and where we need to see the fed take a pause, move to the sidelines and allow the data to continue to evolve to dictate the best course of policy. jonathan: it is not clear to me how inflationary policy will be calibrated. and the outlook for 2025 was said the most worrisome about the terrace is growth. working it out is not that obvious -- of tariffs is growth. working it out is not that obvious. lisa: it is said that some that will come from the deportation

if they are. it all has a very big difference depending on how it goes. jonathan: it is good to see you. michael writes in an once you know it is down to 360, the high end. michael mckee joins us. we can talk about that and the data later. michael: there is an awful lot going on. the real question is, what comes next and you were just talking about it with lindsay. it is hard to figure out. at least the idea that could the tariff regime be disinflationary. it certainly could end this is the reason why. we started the tit for tat, tariffs on chips sent to china and china has put tariffs on precious metals sent to the united states. they are stopping gallium and geranium exports and a lot of extra on it -- used to make

electronic goods. a survey said it would cost 3.4 billion dollars to u.s. gdp. that is not very much money but it could be inflationary because you have to get those elements from somewhere else. prices will go up from other producers which means prices get passed along to americans peered here is an instance where tariffs could create inflation. go back to when donald trump put tariffs on the steel industry and look what happened. you can see primary metals manufacturing jobs went up initially and fabricated metals jobs, the people who use the steel went up immediately and then started falling and we ended up with fewer jobs because of the tariffs. prices went up but jobs did not and that hurts the overall economy and can be disinflationary. the question is, which of these outcomes are we going to get.

the fed has no idea. that is when we get whatever the december decision is, you can take the new economic projections and dot plot with a grain of salt until we figure out how far this goes. jonathan: you heard from lindsey piegza making the argument there seems to be a basis for them to go 25 in december and then wait. does that stack up for you? michael: that is exactly where they are. the bias is leaning toward a rate cut because the economy has slowed some and because they think they are excessively tight. if the data comes in friday and the cpi at a reasonable number we will get a rate cut. the question is when do they pause and i think january makes more sense because at that point you have the new president and he has had a couple of days to

lay out new policies and they want to incorporate that into the forecasts. jonathan: down to 360. thank you. let's continue that conversation with earl davis. outlining the speech yesterday, he said there is still some distance to go in reducing the policy written neutral. in the fixed income market every day, looking across fixed income and the global economy, for the u.s. economy, is there evidence we are restrictive and there is "some distance to go" to reduce that to neutral? earl: i would say yes on both fronts. the mandate of the fed is inflation and employment, not growth. if you look at the numbers in employment, you can see some deterioration. it is good but on a downward trend. we believe this friday's number

could be noise as related to the hurricane and whatnot. but if we get a strong number and the strong number is expected and yields go higher, we think that is a great buying opportunity to go longer duration. lisa: can you give us a sense of what is behind a long-duration call if there is something of a selloff given the fact that some people are looking at potential trump policies as inflationary. earl: i do fall in the camp that the trump tariffs are initially inflationary but definitely recessionary ultimately if more money is not printed. if more money goes to pay for higher goods because of import costs and you don't increase the money supply that means money is coming out of some other area of the economy which is inherently recessionary. that is another reason why by default even with tariffs on the pipeline that we do like buying duration. having said that, our number one

view right now and for 2025 is volatility. although we like duration and we are slightly overweight, we do think that because of the differing views and possible surprise number in pullback we will get better opportunities to go longer duration. that is why as active managers we are patient buyers. lisa: what is the driving compass in terms of the correct range or area you want to gain exposure or lighten up depending on the volatility of markets? earl: we have the answer that not many people look at. our teams active managers of when you get comfortable buying. we use a term called marginal safety. but that means is if overnights your overnight rate goes up by 100 basis points higher overnight, how long in fixed income by owning bonds does it take for you to make that money back? right now, only a 10 year bond

at 1.5 years. overnight rates go up 100 basis points tonight, you have a significant market to market loss tomorrow, because of the increased coupon and yields we are at, you make the money back in one point five years. in 2021, that was five years. so because of that, that gives us comfort to say we have the margin of safety to go along here and if we are wrong, we will still make the money back for our clients. that is the stake in the ground we used to give us a sense of when do you start going overweight and how much overweight do you go. lisa: how much do you consider the overall global backdrop when deciding what this range is given the fact that there is this incredible divergence between the u.s. market and europe and china and a question of how far it can go. do you see the chinese, european markets putting the ceiling on how high u.s. yields can go? earl: i would say it is different now.

prior to trump being elected, it was significant in regards to how do we look at global developed markets as a substitution for enhanced yield. right now it is all about the u.s. the reason why it is all about the u.s. is because of the growth policies but because of the nationalistic policies, tariffs, stronger dollar means as a portfolio manager looking globally, you need to have a majority of your funds in u.s. dollar assets. in fixed income, only a limited amount right now. there is more issuance coming but there is a significant amount of dollars on the sideline we see in the money market fund at 7 trillion and not to talk about the global money on the sidelines. we do see a wall of money coming into the u.s. in 2025 with limited supplies which is why despite how tight valuations are , better buyers of credit headed into the new year and better buyers of duration for exactly

that reason. annmarie: are there any tariff safe havens you can potentially see next year? earl: i think you have to go back to the initial thing that there are so many unknowns. until you know the details behind the tariffs and we don't expect to know the two details of what will be implemented until the end of 2025. so right now it is premature to answer that question other than being in the u.s. which gives us comfort in being long u.s.. we will get more details throughout 2025 and that will help highlight the safe zones. being canadian and in canada i think canada is a natural safe zone even though there is a lot of saber rattling. that is where i would see the safe zone but you have to see the details. annmarie: why are you waiting for the end of 2025 when we discerned that we can expect a lot of this early next year? earl: because there it may be back and forth in courts and may

be challenges. it is not fully clear where the executive power is going and how much could be implemented. jonathan: it is good to hear from you. here is a challenge for you, this from south korea, the south korean president declaring emergency martial law to safeguard a liberal south korea from the threats posed by north korea's communist forces and to eliminate antistate elements i hereby declare emergency martial law. taking place in markets and the foreign exchange channel, looking at the dollar to the korean, a weaker dollar. lisa: this comes as a present was trying to push to budgetary changes for donald trump getting into office. i wonder how much they are idiosyncratic stories and

increasing pressure being put internationally on government's already facing fragility and question around budgets. jonathan: that is the latest on the south korea this morning. an update on stories with your bluebird brief. dani: the pentagon announced a four ukraine consisting of antipersonnel mines, air defense missiles and antiarmor weapons. pentagon officials say the department of defense can issue $6.8 billion from the pentagon inventory. dod official signaled out that much equipment can be sent before president biden's exit on january 20. blackrock has agreed to by private credit manager hbs investment partners, a roughly $12 billion all stock deal. the blackrock ceo larry fink speaking on the call mom's go sing with hbs his company will be among the top five in private credit. he added that public and private credit portfolios are the future. according to a survey, shopper

spent as much as $13.5 billion on cyber monday to the firm raised expectations for the busiest online shopping year. spending between thanksgiving and monday expected to reach $40.6 billion, a 7% gain from the same period last year. that is your brief. jonathan: up next on the program, we will run you through the day ahead and the week ahead here from new york, you are watching bloomberg tv. ♪

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♪♪ the black friday sale is now on. visit sandals.com or call 1-800-sandals jonathan: 36 minutes away from the opening bell. equity still unchanged.

things get busier as the week grows older. trading diary, really speaks to that. later this morning, the jobs opening report. tomorrow, rex from fed chair j all and private payrolls. -- jay powell and private payrolls. friday, union sentiment. and november payrolls. a lot of data. lisa: the question about what this means for the fed path forward and how much the u.s. economy keeps outperforming. if we get the upside surprises, does that fuel risk on the everyone says are elevated but still going higher. you also have to retrench when it comes to what the neutral rate is an with the path forward is from the fed. annmarie: how much are we going to see u.s. exceptionalism especially in the backdrop of a much weaker euro with two economies in political turmoil. jonathan: the estimate is 224

payrolls. you have to ask, how strong is strong. we are all looking for a bounce back because of the bounce back from striking workers in from striking workers in on the hurricane effect. that in total according to goldman sachs could push 90 k. lisa: you can talk about a larger population and a higher level of job growth. i would say the reason why this is going to be a jobs report with focuses on wages, unemployment rate and how much people are going to ignore it and focus on cpi the following week. jonathan: in many ways the week begins at 10:00 eastern we start getting jobs data and then tomorrow we hear from chairman powell. a big show coming up tomorrow. we will speak to ian shepherdson . thank you for choosing bloomberg tv. this was bloomberg surveillance. ♪ ♪ where ya headed?

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matt: another record high for the s&p. katie: bloomberg open interest starts right now. sonali: coming up, an exclusive interview with the founder of cake you are capital to get his take on markets, trump and artificial intelligence. matt: