>> animal spirits are back and the outlook is pretty bright. there is a sense of optimism we have not seen. >> the setup is positive that at the index level we do not expect to see huge divides and we are looking for broader returns. >> they have been driven by a narrow collection of stocks and narrow stock leadership is fragile. >> you have animal spirits and the uncertainty removal and strong growth. >> you could see equities continue to run. >> this is bloomberg surveillance with jonathan

ferro, lisa abramowicz and annmarie hordern. lisa: welcome back. we enjoyed a key read on inflation with market euphoria taking a coffee break. stocks pulled back the most in three weeks, 0.6% as yields rose. jonathan ferro is off. joining us is peter, the head of macro strategy and he will tell us whether this is a moment or pivot point we are -- we have been waiting for or in terms of people taking a break along uncertainty? peter: it is hard to get a good pullback into december. the seasonality is there and everything seems to be lazy. there is a risk. what i have been warning clients is that i felt early on we were going to calm down and trample be ok and everyone has got to such a consensus that it will be smooth with trump. he is going to reset some of

these points and i expect chaos and friction. lisa: is this a pivot point and we can read something into the fact that we did not see a 58th record high and we saw a retrenchment amid geopolitical turmoil? annmarie: the market is raking up to some of the reality that this will not constantly be smooth sailing. he has already starting to have these conversations about renegotiating trade deals with canada and mexico and obviously going on with china. what is happening with china is under the biden administration which is a tit-for-tat coming to the tech industry. yesterday going after nvidia with his probe in response to an export control from the biden administration. we are in this and the market is waking up to this and that we will get more to that next year. lisa: a 0.6% decline that shakes our expectations coming in tandem with an increase in

benchmark yields. some of this could arguably and you can pick whatever narrative that you want and find some buyers of the idea. some of it might have come from a new york fed november survey that showed that the share of people that expect to do better financially in the next coming year reached the highest level going back to february 2020 before the pandemic. how much is this how people reassessing how sticky inflation might be renewing emphasis on what we might get? peter: i look at the university of michigan and they break down by republican and democrat. you have seen a big spike. this suggests market psychology. it takes a while for people who say things might be worse and everyone who voted said it would be better. these are very sentiment driven and it tends to follow the stock market. for all of the hype the s&p 500 is up less than 1%. you would think if i close my eyes what is the s&p 500 doing,

it has to be up five or 6%. that chance of a pullback is real and it could be coming. annmarie: on top of that report, the respondents are talking about the fact that there is a stronger and better economy. to your point on the politics this is what john authers leads with. inflation switcharoo. how your party is doing is how you expect the economy to perform. lisa: the market is firming up after the terrible fall of -0.6%. you are seeing firming up across the board without performance across the nasdaq. s&p futures generally flat. you are seeing some dollar strength in the euro falling about .25%. the yields are inflecting upwards. watch for .2% ahead of a key percent of options amid a vacuum of data. we have $50 billion of

three-year notes. crude prices taking a breather as people take a look at the turmoil with syria and say maybe it is contained? coming up bob is the equity rally. ellen wald to shed some light on the turmoil in the middle east and what its implications are and kayla --cayla seder expecting a cpi event. bob dole of cross market is brought -- cautious saying that risk asset returns are likely to be lower after very strong returns in 2024. u.s. equities are increasingly vulnerable to corrections given valuations and earnings expectations. bob joins us. do you think that yesterday was indicative of some of the powerlessness of some of the high valuations at a time of great uncertainty? bob: certainly. when i look at my screen i see

25 times trailing and 23 point four. and i say i guess the world is perfect and it would have to be to justify those valuations. the world is not exactly perfect. expectations are high for the economy and for what the trump administration can do. and those good news items must come in to sustain these levels. lisa: you are not exactly a raging bear, and you still see gains in coming. how do you nuance the message of caution without necessarily pulling back to a time where other people are saying we are just beginning some kind of ai revolution in u.s. equity markets? bob: i would not go to 100% cash but if i have made a lot of money and i was tempted to take money off the table i think that is ok. i am fully invested and i have been moving more towards neutral.

my biggest overweight has been financials. i am trimming them. my biggest underweight has been health care. i am doing some bottom fishing. just moving a little more neutral and uncertain about where we are heading in the new year. is the trump administration going to pound the table on cost-cutting or tax cuts, or is it more about deportation and tariffs? they will give very different answers. annmarie: you know that politics are a second concern for markets, but they are likely to inject volatility. do you move politics to being the first order of business one it comes to the concern for markets in 2025? bob: only the effect on the economy. the economy and earnings come first. politics particularly in this environment have a more than normal impact on the prophets. annmarie: when it comes to things like pulling back on financials, a lot of analysts

say that actually they are overweight because they are looking at potential m&a activity and the regulation that trump might usher in given that he did so. why at this moment would you pullback on something as specific as financials? bob: it is my largest overweight. i love the stocks but i do not want to be a pig. i recognize that the valuations have moved up some and trees do not necessarily to the sky or in a straight line. i am just taking money off the table. if i was not overweight financials i would get there. peter: given your concern are you finding opportunities in stocks that focal -- that focus globally or focus on the u.s.? bob: my mandate is all u.s. but there are interesting things on josh overseas notwithstanding different environments. we see for earnings over there. back to the core portfolio you

want to push for earnings with high earnings predictability, persistence and strong and free cash flow. dividend stocks and dividend growth stocks do better next year. peter: you will focus on the dividend sector for next year? bob: dividend growth. peter: any other outliers that you have that maybe are not top of mind that you think could be interesting? bob: i will come back to quality although it is not exactly quality, earnings persistence and free cash flow. those stocks have done fine on the way up, and when we get the inevitable pullback i think the stocks will go down less than the market showing outperformance. lisa: i'm wondering if you see egg -- any signal from oracle. shares have been flying high and they came out basically in-line. i was looking for some kind of catastrophe to justify the fact that there shares were down and

i could not find it but it highlighted those high valuations. how vulnerable are these companies in the text space to disappointments when it comes to earnings? bob: you read it well to say that earnings were ok and not great. and then you see the stop doing what it did and you say what i my missing? the expectations are high in too many places at a multiple in the low 20's. things that are nearly perfect. oracle's earnings were not perfect, just ok. lisa: we just got small business optimism and some of these peripheral reads shed light on how much the mood has changed. you can make the argument that this is just because of the election and some sort of optimism in terms of regulatory pullback. we saw a surge to the highest level going back to 2021. the biggest jump in this optimism going back to 1980 at a time of surprise after surprise

the upside. how much of a risk it is that we are underestimating the strength of the economy and what it means for inflation on yields and the fed's path ahead. bob: you nailed it. look, stocks have moved up a lot to discount the good news that is supposedly coming and that is why you see sentiment on the stock market and the conference board percentage of americans who think that stocks will be higher 12 months from now. that is not the time to pound the table. you make another good point, inflation, it is not going to 2% without a recession. it is stubborn and likely to move up more. you talked about the three handle for the cpi and it is nowhere close to two. lisa: this is a reason that may be a bond market holds the keys. thank you so much for being with us.

we really appreciate it, a fascinating moment as we await cpi. let us get you an update on stories elsewhere. here is your bloomberg brief. >> emmanuel macron is bringing together a broad group of political parties as the search for a new prime minister continues. he will meet today with all political parties who have indicated that they are willing to compromise and form a government. he vowed to name a successor after the ousting of the government last week. the country is still looking to pass a stopgap spending bill allowing operations to continue without a full budget for 2025. the brazilian president is in intent -- intensive care after undergoing emergency surgery. the hospital said that the craniotomy was uneventful and he is being monitored. he felt headaches late monday evening and a brands -- brain

scan showed a hemorrhage resulting from an accident he suffered at home in october. coffee futures hitting another record high surpassing levels not seems -- since 1972. crop setbacks and droughts have's -- have brought about the serve -- the surge. other sub commodities have also risen sharply including cocoa and orange juice. lisa: thank you. are we looking at a mocha chino that will cost $25? >> it is about five or six dollars. all of this is just years in the making disappointing crops. what it is getting more expensive. lisa: this is so frustrating. up next, something vastly more serious, uncertain future. >> it is not a group i am quick

to trust in our history has proven that when islamist militias ride -- rise to power their true side will come out and they will have to try and get control if they want to seize that control. lisa: that is coming up next but we take you to the women, money and power event where francine lacqua is sitting with the bank santander executive chair. >> it has been divine -- designed in a way that incentivizes anybody american or non-american to invest in if you do well you get benefits. if you look at what customers are doing they are investing more in the united states and europe. it is the carrots and the stake. in europe we give them the stake. the u.s. begins in the carrot. so yes, i do believe that investment right now, as it is now, will continue to favor the united states. again, we have identified the issue and we just need to act.

i do think, as i said that this competition is one of those things that might make us move. francine: is europe over banked and do we need consolidation? ana: if you as a company is in a market that does not grow much and you are one of the biggest in your country, the only way to grow is in monica -- market consolidation. cross-border consolidation is very hard. the numbers do not work. and we saw that the latest crisis, 15 years ago. if you have a europe when there is a crisis, europe becomes the euro in germany and the euro in italy, it does not work. there are many other things we need to fix. i think that things have to change a lot before you see it cross-border consolidation, but you continue to see activity and market because there is a space for growth, which is very limited.

given the geography that a lot of the european banks are acting in, the tendency would be to get scale and profitability and growth. francine: will we ever see a proper bank in europe and is that something that should be a goal as europe faces many challenges? ana: a banking union -- first it is hard to have further, -- consolidation. ♪

lisa: right now we are looking at markets that are range bound after the bigot selloff which sounds dramatic but when you look at the pullback it was -0.16% and we are seeing green as the s&p futures tried to claw to .1% gain. under surveillance, one of the main focuses is syria's uncertain future.

>> it is not a group i am quick to trust and our history has proven that onut islam up -- osama bin laden and they probably -- they promise all of the things about liberation and they are excited to promise this , and that taste of power. as things unfold the true side comes out. and they are going to have to really impose control if they want to seize that control in syria. lisa: the rebel group that toppled the assad's family rule will form a transitional government to present chaos led by mohammed al bashir the head of the quasi government created by the islamist group. mark champion joins us. there has been a pipit in terms of the rhetoric from this group which had been identified as a terrorist organization by a number of different countries around the world basically saying we want to create

institutions. how much do people believe them? mark: i think -- the short answer is whatever the skepticism, which i think will be justified indeed, there is not much choice but to hope they mean what they say. they are the only option in town. they now own damascus and they are taking control. so far they have done everything that you would want them to do. so, you have them saying we will not tear down the institutions and drag civil servants into the street and kill them. they have ordered their soldiers to leave them alone and not touch the institutions and not to touch people in them, including someone like the new prime minister. it was not so long ago that he was part of the syrian government. and -- the syrian administration, not the government. i think you have to hope that

these guys will have learned some of the lessons that the west has learned over the past 10 or 20 years and certainly turkiye has been grooming them up in the northern areas of ad lib. -- idlib. the turkish troops were there. you have seen them kind of build a government in exile and administration in exile. and it has good, bad and ugly about it. but it is not quite what you would expect from a group that was al qaeda, basically. lisa: hope is not the strategy which is why you see israel and the u.s. bombing different sites trying to wipe out certain military provisions by the assad government. how much is that disrupting the attempt to create a government? how is that being treated by different allies in the region

like saudi arabia or uae? mark: there is no side that is -- it is disrupting what might be happening. the u.s. and israel are both basically seeing an opportunity and a moment in which to secure their positions going forward. given that they do not know how all of this will turn out. and certainly from the point of view of israel, you have someone in charge at hds. first of all he is an islamist. he has not given any indication that he is giving up islamism, and a core tenant is anti-israel. the second thing one has to recognize is the key is in his his name. his family is from the golan heights which syria considers its own. the future bears considerable

uncertainty and friction and that is what israel and the u.s. are trying to get ahead of. annmarie: different groups in different states but how much does hts sound like the taliban in 2021 coming in and saying we are not the same people with the same rhetoric and ideals that we held 20 years ago? marc: there is a lot of similarities. the only thing i would say is that you know, syria is not afghanistan. they are quite different places. it is -- if you want to look at the similarities, it is a better model being lebanon in terms of the breakdown of demography and ethics troops. it will be very difficult for hds to hold the country together and that will be there big challenge. the other thing that one has to recognize is that they know that they need money. one of the reasons that assad,

nobody fought for him is that he had about seven years after the fighting really died down in which to start rebuilding some kind of economy and creating jobs and he did nothing. he achieved nothing and had no money. his sponsors, russia and iran were not willing to part with the sums of money needed. you can imagine the discussions between golani and the turks saying if this will work for you guys you will need money and he will need us, the turks. and we will be your liaison. we will see how that plays out. i am personally quite skeptical that this will go in and he said smoothly. but, it is not the same of afghanistan. lisa: thank you for being with us. keep her -- peter sits alongside a whole host of generals, how are you viewing this from an investing and former general stance when you talk about it?

peter: we are revisiting what will happen with russia vis-a-vis ukraine. russia looks a little bit weak. prior they put tanks and aleppo and done things to support him. does that mean we press harder on putin and what is happening with iran? one of their proxies is failing. iran has done nothing but to look weak. we will see a push on this weakness that might turn out to be good for both situations. annmarie: iran needs syria for logistics, training and transport into their proxies. at the same time they could double down on what they want to do in terms of her enrichment of nuclear and building a bomb. what a rod do we get out of this? peter: we view that iran has shown themselves to be impotent. they are unable to support proxies and their attacks on israel has not done well. israel show that it could attack iran with impunity. i think they are feeling pressure.

the other thing that we think and the biden administration started to enforce the sanctions in place with russia and iran. we have let them distribute oil to fund themselves and you will see that constraint. there will be a lot of military and economic pressure. lisa: it might be a tipping point or watershed moment from the middle east. oil prices down .6% so we are not seeing massive moves. that is a key question. at what point does is create a threat to oil supplies. coming up ellen walt and the outcome for oil. what you have been hearing about , the growing unrest in the middle east. futures just reflecting upward after the biggest down day in more than three weeks. 0.6% decline. is bloomberg surveillance. ♪

>> you can't keep a good market down. stocks trying to climb to positive territory ahead of the open. yesterday the first down day in three weeks. the nasdaq climbing more than the s&p. russell 2000 the outperformer as people look to lower regulation and potentially some sort of ongoing u.s. economic exceptionalism. up about 15 basis points. the real question is,, much does that hinge on the bond market?

you are seeing yields climbing a little bit. this is underscored by the nfib small business optimism index that came out. there is a feeling small businesses and across the board incredible optimism. at what point can that come without an inflationary impulse? how can we understand the new bout -- renewed bout of optimism? annmarie: the election results show google a -- signal a shift in economic. policy they are talking about tax and regulation policy that favors growth. what about tariffs? what are the input cost for small businesses? that is a problem the market continues to ignore. they're pricing in the good stuff but ignoring the bad stuff. peter: everyone is assuming negotiations will go smooth and we will get a big win. now that everyone has shifted

this way, trump might as well up the ante. adjustment involved in the first round of negotiations believes trump feels he got screwed by xi. he said he would buy a lot of ag products. xi did not follow through. he will look for a lot of guarantees. i think you will get some negative noise and chaos around this. lisa: why talk about negativity when people feel so positive? the real question heading into friday. we have the ecb rate decision when the euro has fallen out of bed versus the dollar. that is down about .02%. 105.33. will the ecb cut by 50 basis points? a lot of people say that could be necessary. what would the reaction be like in markets? annmarie: underlying economies are saying we could use this

now. you have to think it's getting more worrisome for your when the core of europe, the two engines of growth in those economies are dealing with absolute political paralysis. we are not sure how does going to shake out. it is the periphery that is doing well. a lot of people say maybe the ecb does do it and goes 50. peter: we have in looking at this from a nato standpoint. we are seeing the economic separation. we will clearly go after china. i do think europe is in shape to fight with china maybe they should be. the german economy is vulnerable. there is a fraction or disappearance within europe and with our relationship there. i think it will be a drag on the global economy next year and that will not factor at all in the u.s. stock prices. nothing in the u.s. so far. lisa: the disappointments are more likely in the u.s. than in europe at a time when it has been priced in? ellen: so much has been priced in. i don't think the ecb will do

50. i think they probably should. it'll be counter to what they look at. it is hard to analyze europe or germany has been the juggernaut. it's pulling every thing together. we have a plan. we know what we should do. germany no longer does and that's a bit scary. lisa: a lot of us focusing on what's going on outside of markets. a 26-year-old has been charged with the murder of insurance executive brian thompson. luigi man gianni is an ivy league graduate. he was arrested in pennsylvania yesterday with a homemade gun and a manifesto, which a person's emirates -- person familiar described as anti-capitalist. i was riveted to this. the real question of what went wrong for some but he seemed to be born -- perpetuated a crime.

annmarie: you have to look at the manifesto. he apologizes for strife and trauma but it had to be done. the police department is saying this is the motivation and speaks to the mindset of this individual. i was struck with what governor shapiro said. they rested the individual in pennsylvania. this is what shapiro had to say. "in america, we did not kill people in cold blood to resolve policy differences or express the viewpoint. all of this because of the triggering online, the rage directed at the insurance company, not the potential murderer." lisa: howdy go about effecting change? -- how do you go about effecting change? you can't just go undermine the question of law and order. it raises the question of security details among executives and what kind of increased single man risk really gets raised with some companies

that have been targeted for a lot of rage. peter: everyone will have to look at their personal security if you are at one of these companies. it is scary this could happen so easily. it took a while to find this person. it is awful you get this weird discourse that makes no sense. everyone should be against crime or killing anyone, yet there is weird messaging that is bizarre and almost sad and does scare me. what does that tell people? lisa: we will keep you up-to-date. tsmc sales rising 34% in november 2 did stained growth for ai demand. the company is the go to chipmaker for apple and nvidia. it is seen as a bellwether for the buildout of ai data centers. shares are up about 80% so far this year as you see them absolutely the juggernaut of the ai industry. annmarie: incredible given we have seen some halted supply to

chinese chip designers. we have seen intel struggle with manufacturing some contracts. it is the data centers, amazon, microsoft. that is the insatiable demand they have that is really lifting up tsmc, which it feels like the skies the limit. lisa: why people are looking at who is the winners are. going back to oracle, if they were not stealing share away from the behemoth. israel launching airstrikes at hundreds of military targets in syria and sending troops deeper into the country. the army radio describing the attack as one of the biggest strikes in the air force's history after rebel groups toppled shar al-assad's government -- bashar al-assad's government over the weekend. is this an escalation or broadening out? do the generals view this as prudent risk management at a time of turmoil? peter: it's an awkward

situation. iran looks weak. russia looks weak. the scary part is, what comes out of this? how do we prevent this from escalating? so far we view that iran is the enemy of the entire middle east. israel has support during this whole conflict. i think it will reinforce that iran and these bad people are the enemy of the saudi's and the rest of the middle east to want to move on. they want to westernize their economy. saudi arabia wants to be the data center capital the world. i think they will be strong support to make sure nothing bad emerges out of syria. lisa: turning to commodities, oil paring back gains following the fall of bashar al-assad and head of opec's urine conference. ellen wald writing, "the oil market does not seen faced by these events.

the market is concerned about the growth outlook and supply growth forecast for 2025 that could put the market into oversupply." ellen, i want to start with your extremes covering the royal family of saudi arabia and your knowledge of the country that a lot of people are saying has to be the main operator in this event. what do you think the mindset is seeing the fall of syria and what their role is in trying to impose a new order in a key stronghold of the middle east? ellen: that's a great question. saudi intervention and saudi involvement at this point could really play a key role in the future of what syria looks like and whether the instability spreads to other areas of the region. the saudi's one stability. bashar al-assad was a very stabilizing force until he wasn't. now that he's gone, the potential for a real failed state and potential for more

insurgencies to take root is very high. the saudi's want to prevent that. they want a stable rule over all of syria. they have a potential right now to both influence the development of whatever new government or power comes in but also to influence how well that regime is able to hold onto power. i think oil and fuel is very critical at this juncture. even though syria has the oil and gas supplies that it needs to supply its own demand, it is not going to be able to get them up and running in time to stabilize their hold on power. syria has been dependent on iranian fuel and russia and these other pariah nations for a long time. iran is clearly not interested in supplying that fuel. we saw this dramatic tanker turnaround in the middle as soon

as the regime felt. if saudi arabia and other gulf countries with stable monarchies can step in and help provide them with electricity, the fuel and aid to start to rebuild and consolidate their hold on power, they could prove to be a very stabilizing force in syria and the rebuilding of whatever is to come. i think there is an important opportunity for the saudi's along with others in the gulf to influence the future trajectory of syria. annmarie: who is best positioned to fill the void? saudi arabia, iraq, kuwait, the e emiratis? ellen: at this point though sectarian differences matter a bit less than who comes through with the aid and the fuel and the money and the medical supplies and the food that they

are going to need. the saudi's could take a leadership role in building a coalition to supply these things and become that stabilizing force. peter: pulling this fact domestically, how successful do you think drill, baby, drill will be? do you have any thoughts, we should be trying to do with the refining industry which has been stagnant for years? ellen: i wish the refrain was refined, baby, refined instead of drill, baby, drill. production in the u.s. is at its highest. we are at 13.5 million barrels a day. we are the largest producer in the world right now. how much more do we really need to produce? how much more do we need to throw into this market that is verging on oversupply? what would help both the american people and our trading partners would be to take a look

at our refining industry to put a new refineries. we have seen refineries closing and shifting to biofuels which are not that profitable or useful. we need to maybe have new refineries and we could really keep gasoline prices down and fuel costs down that way as opposed to just producing more oil and shipping and abroad. we can only utilize so much of that in the u.s. we can also, if we had more gasoline and other fuels, we could ship that an export that equally. really we should change that refrain too refine, baby, refine. annmarie: we don't have a state oil company the way these gulf countries do. we heard from chevron last week that said we care about free cash flow more than we care about production growth. they are started to pull back in the permian. what is the u.s. in total spare capacity? ellen: great question.

i don't think we can really talk about the u.s. in terms of spare capacity. there is no state run oil company -- state-run oil company. for a long time in the height of the fracking period we had this ethos where everyone had to produce even if they weren't even making of their costs simply because than to keep ahead of payroll. you could be sure the drive was to increase production. that is not the case now. you have companies like chevron, exxon really consolidating. there's a lot of consolidation in the permian. you are seeing less of this push and more of a sense of what is the healthy growth rate? what is healthy for the company? i don't think we will necessarily see much more growth or significant amount of growth in terms of oil production. i think the focus should be on what do we do with this oil and

how are we best using it and how can companies maximize their profits with the oil they are drilling. lisa: ellen wald of the atlantic council, thank you for your time and your insights on saudi arabia. the focus in washington, d.c. might be how to maximize profitability. it's on a number of other things as well. let's get an update on that. here is your bloomberg brief. yahaira: donald trump's defense nominee pete hegseth told him donald trump told him to keep fighting for confirmation. he appeared on fox's sean hannity last night after meeting with a key senate republican joni ernst. hegseth has been looking to bolster support amid allegations of sexual misconduct, alcohol abuse and workplace mismanagement. after the meeting, joni ernst said she will support hegseth and she looks forward to a fair confirmation hearing. going restart a production of

its workforce 737 max model last week. production resumed last friday. the move comes a month after a strike by 33,000 factory workers shuttered the airplane maker's commercial manufacturing. shares are off by nearly 40% this year. michelin announced its new york 2024 stars this week, a modern korean restaurant joined the three-star club. it is the first korean restaurant in the u.s. to get the top ranking. daniel was demoted down to two stars. that is your bloomberg brief. lisa: i imagine the reservations just shot through the roof in just one night. annmarie: there is one this week for tuesday at 9:00 p.m. lisa: that is where the focus is. rate cut optimism. >> the fact the on employment rate went up means -- unemployment rate went up means the fed will be come cutting by

25 basis points. lisa: that is coming up next. this is bloomberg surveillance. ♪ ♪ ust gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

are everywhere you turn. we're letting curiosity light the way. asking smart questions about opportunities like advances in healthcare. and how these innovations will create a healthier world tomorrow. better questions. better outcomes.

>> futures inching higher. now pretty much across the board. the s&p and nasdaq futures up almost .1%. more if you look at the nasdaq. part of this comes without cooperation from yields. how much conviction do people have about the fed becoming less restrictive? under surveillance this morning, growing rate cut optimism. >> the challenge would have been a consistently strong report. this is a somewhat stronger port. -- strong report. the fact the rate went up meant

that the fed will become to book cutting by 25 basis points. the market will increase the probability of this happening. lisa: which is what is going on now with an 86% chance of a rate cut priced in for next week's. -- next week's meeting. the fed rate decision next week. cayla seder of state street global writing, "current trends are not consistent with the fed's summary of economic projections. our daily measurement of online inflation suggest november inflation should come in line with consensus." thank you so much for being here. how bondable is the market to a wake up call even if there is just the medium-sized surprise to the up when it comes to inflation? cayla: when it comes to next week the market looks very convinced a cut is coming.

this concern about inflation trending higher and being too sticky will probably more of a 2025 story. when we think about the reaction last winter, we saw consistent spot prints. when we see the spot three print, maybe the fed could look for that but for how long. lisa: it is one thing for the fed to look past it to cut rates. it's another for the bond vigilantes to say not so quick and then you see a selloff in the long end. how much of that is a telltale sign given we have a fed rate cut baked into market expectations? cayla: the long end could be susceptible here. that is something we are looking at with auctions and seeing -- i know. auctions. seeing what demand is like there . one thing to next year is the likelihood for a bear steepening and there are consequences and that feed into a lot of our equity views. that is something -- maybe not

so much a story for next week but it could be a story for 2025. annmarie: with the unemployment rate taking higher -- ticking higher, does the biased shift towards inflation? cayla: i think that is right. when we look back at september there is concern around the labor market. i think when we look at some of the inflation trends there is underlying stickiness there and it is consistent. when we look at the labor market, it is tricky when it is a balance. that means if you see moderation you are worried balance will tick into weakness, but we don't see that yet. that puts more of the rhetoric on the inflation part of the story. lisa: what is he evinces assist on inflation going into 2025? is it the policies are what is

going on in the underlying economy? cayla: it is helpful to look at where the progress on inflation has been made. will policy really enable the progress to continue. a lot of the progress has been on the good side and not as much on the services side. is this -- will the goods disinflation continue? will the services inflation really crack? can housing. we have not sick -- and housing. we have not see much progress on the housing front yet. it is deafening going to be a big story next year. this specially when you think about how the treasury is going to find of the deficit. is there going to be a shift away from bills and into notes? that could shift -- you have implications for asset allocation. when you look at the real money data we see very underweight fixed income, above average exposure to equities and a

little above average exposure to cash. if we see the increase in issuance on the notes side that could increase demand for fixed income at the expense of cash. peter: you would see a yield curve that is steepening then and that would put pressure on equities as money chases that? cayla: agreed. lisa: that has been the key question. at what point is that increase in the yield curve and up torpedoing optimism? cayla seder of state street, thank you for being with us. peter tchir, you spent the whole hour with us. do you agree with us, that idea that essentially this is a market that is underpriced for that type of bear steepener? peter: would pay a lot of attention to positioning. it seemed insane woman got to 445 on tens. now we can start going back the other way. everyone got ahead of themselves on the bearish sentiment. i think it is relentless and i

do think the fed is done in this meeting. they will slow down after that and that will cause problems across the yield curve. lisa: relentless. go on. to what level are you talking? peter: i think we get back to 450 on tens as early as january. maybe higher. in this environment i think of the risk of a 50 gap higher as much greater than a gap of 50 lower. the market is not well-positioned for that. liquidity does not seem deep. that tells me risk is the push to higher yields. i do not think china will be buying treasuries. they have their own problems to deal with. there's a lot of pressure coming into the new year and we have become complacent. lisa: basically watch the options. coming up, don't miss dan skelly, morgan ortagus, and jill carey hall as markets climb out

from the stupor of a .6% pullback yesterday. this is "bloomberg surveillance ." ♪

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>> looking at the fed. >> what can continue on for another year? the fed continues to ease. >> the risk is elevated. i would disagree with fed officials. >> as we get closer to the 2% target, we will see the fomc started average. >> we are trying to maintain the

soft landing in the fed has done an incredible job so far of doing that. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. lisa: welcome back as stocks claw out of their one-day pause, a decline of .6%. annmarie: it is the lamest pullback. lisa: the biggest going back more than three weeks which is important as we head towards cpi tomorrow. the market once ago higher with 57 record highs. people wonder how soon before get a 58th. back to the races for the trump trade. there seems to be this euphoria hovering over markets that don't want to go down. annmarie: they don't. yesterday we had a slight pullback and a lot of this, maybe they are waking up for the tit-for-tat.

a harbinger of what could come in 2025 when you have china probing one of the biggest american companies, nvidia. this morning there was some good news. small business confidence. everyone seeing a major shift in economic policy. the market continues to price in deregulation, tax cuts. what they have yet to wake up to his tariffs and how big they will be. but they be targeted or blanketed? lisa: i want to pick of the point about small business optimism. today is a data light. ppi on thursday and offend decision next week. the peripheral data shows a shift in confidence we get was small business optimism rising to the highest level going back more than three years. the question here about whether it is assessing the right sequencing of what is coming down the pipe and whether it's a head fake or something people can lean into. annmarie: people are leaning

into the idea of deregulation that was a hallmark of trump 1.0. people think it will be a part of trump 2.0. he wants to extend tcja, the tax cuts. how much more will be added? reading the tea leaves, whether you're listening to what's going on at mar-a-lago or the senate, the first 100 days is going to be immigration. they are going to get to the tax bill potentially mid-2025. maybe we don't see that come to their fruition until the end of 2026. you have immigration policy and tariffs within the first 100 days. how negative will that be for the market before you get what people call the good stuff? lisa: markets reflecting upwards on the good stuff. stocks, whether it is nasdaq or russell 2000, up around .1%. you are looking at dollar strength. 105.25.

the euro losing a little ahead of that ecb rate decision. 10-year yields pushing upwards. we have options, including 10-year notes. $39 billion tomorrow . $22 billion of 30-year notes on thursday. oil taking a breather after yesterday's 1% rise on a bunch of turmoil in the middle east. coming up, dan skelly will join us for the entire hour as jonathan ferro takes a much-deserved week off. he's looking at the rally which is taking a breather had a key data. morgan ortagus as israel ramps up attacks. and jill carey hall why mid-caps are better positioned than small. cpi data due out tomorrow. the s&p 500 pulling back from a rally, on course for the best year in five. dan skelly looking ahead.

"we know widening tail risks given the resilience of the economy, tailwinds from animal spirits and deregulation as well as uncertain trump policy path. the earnings-per-share outlook for 2025 and 2026 were means resilient which should support positive equity returns." dan, i love this. everyone is planes all the caveats and says even with all of that we are positive. this is really hard to feel anything but. are you seeing all the good stuff being baked into evaluations right now with little attention to some of the tail risks that could inflict downward? dan: great to be back with you. just as jonathan needed a breather, it feels like the market needs a breather. lisa: we all need a breather. dan: in terms of your question, look. the pattern and sentiment today is much like it has been the last year and the last two years. we are trying to climb a wall of worry. this year it was about the path

of the fed and the election. it feels like now people are waiting to see, as everyone has talked about, the sequence of policy. i think it will be tougher markets to screen higher as long as we are waiting for those outcomes. lisa: we are looking at the russell 2000 outperforming today. the initial read was trying to outperform. how much is that a misguided policy at a time when we have been looking at the prospect of tariffs that will disproportionately affect some of the smaller companies? dan: it is complicated. tariffs could be challenging. you could have a lot of pro-u.s. domestic growth and confidence. small business confidence. the question is, how much does the top line and growth offset some of the costs? you also alluded to, annmarie, is it targeted or blanketed? it could be more of the targeted style and a little more deliberate.

as long as you have that sequence of animal spirits and growth before the ultimate cost impact, that's another factor to think about. annmarie: what is your base case when it comes to sequencing? tariffs donald could enact unilaterally without commercial support -- congressional support , he will need the house and senate. dan: we have thought about this a lot as a firm. we have talked about maybe a flurry of announcements. even if that is the base case, taking a lot of time to play out. we don't think if you have announcements in the first half of the year related to tariffs that the ultimate impact would even play out in the economy until the second half worth 2026 -- or 2026. we have a shot clock as it pertains to the midterms. you cannot wait too long to address those tax issues. annmarie: they have two years to get it done in terms of his agenda. you mentioned tariffs and how maybe that means bringing production backup.

do you see them working in parallel tax cuts and tariffs to get potentially that 50% corporate tax rate -- 15% corporate tax rate donald trump has talked about? maybe tariffs would be the stick to get people back here. dan: interesting point. we could see them working in parallel. a lot of people are playing the horse trading following the tape in terms of the appointments. let's also point out the appointments related to the potential trump team have started to circulate more around the moderates, a little more around broader thinkers versus some of the more extreme thinkers that were maybe mentioned earlier. to your point, annmarie, that's a good signal in terms of having more balance in terms of that sequencing. annmarie: it was moderate on the tariffs front? peter navarro was coming back into the west wing. dan: he did not get a position that was rumored to have been talked about earlier. scott bessent at treasury is

probably the most widely accepted reasonable voice and adult in the room in terms of the market perception of policy. annmarie: where do you want to be next year? dan: that is the big question. i would say looking backwards this is one of the rare years where the first half leaders did not remain the second half leaders. that has been a trend statistically for a decade. this year he saw a notable rotation in july and august. we think that rotation in terms of broadening out a value sectors and more cyclical sectors can play out next year. while it has been a mega cap and large-cap tech dominated market for 18 months, we see key themes emerging in mid-caps. coming back to more domestically oriented winners. some winners that may have some upside from tax reform, etc. lisa: do you think big tech will keep underperforming based on how it was performing in june or july? dan: maybe not as sharp as june or july.

you are also just at such a high level. you went parabolic in late may, early june in terms of the tech trade. positioning had to readjust violently. it will be a more moderate underperformance in our opinion. the fed has finally, via their engraved invitation in september, let everyone know they are cutting proactively while the economy is still growing strongly. that is finally letting people know leadership can emerge from other sectors, namely value sectors. the second concept i will highlight and we can get into it more as the morning persists but the idea of the absence of a negative. going back a year ago we talked about it on the show. tech spending capex flitted to ai was like a suspension of disbelief from investors. no one cared how many hundreds of billions of dollars are being spent. now the markets are starting to scrutinize that spending. they want to see more tangible results from productivity.

we have not seen that yet. lisa: i love your take on what happened yesterday. china announced it was going to be looking at an anti-monopolistic practice by nvidia in china. he saw the shares down about 2%. they are down in premarket trading .6% this morning. how much of this is something you want to be involved with trading versus just ignoring completely outright given the fact it will be a lot of tit-for-tat and we are just seeing the beginnings of it? dan: an excellent question. zooming out, the long-term potential and a lot of the excitement around ai is hard to deny. you look at long-term secular trends in the last 10 years, 20 years. 2% of the public market cap and the equity market in the u.s. created something like $70 trillion of market value. it is hard to get off these trains longer-term. in the near term we have thought about going from being more overweight a year ago to being

more of a neutral weight today because of the issues you have outlined as it pertains to policy and geopolitics. also because of the momentum shifting to other value sectors. annmarie: when it comes to these tail risks for the likes of nvidia and other technology companies, do you see the u.s. under a trump 2.0 trying to decouple from china? dan: the biggest apprise out there in china markets which are trading at 11 times earnings right now, juxtaposed against the u.s. trading at 22 times, maybe there is some type of window for a deal with china down the road. let's go back to 2016 and trump 1.0. there was a lot of rhetoric along the campaign path against mexico. mexico currencies, and equities performed badly. then we renegotiated some of the trade deals with mexico later on and the market actually was a decent performer.

there's an interesting parallel lining up right now in terms of china. there are so many different ways you can incorporate a potential deal. that can involve leaning on china to help influence and outcome in ukraine, which is another desired outcome of trump. they can also be an offering for china to get away from some of the economic malaise they have had. the art of the deal could be at play once again with china. lisa: dan skelly will look at that throughout the hour. you will be sticking with us. let's get a check on what is going on outside of business news. here is your bloomberg brief. yahaira: authorities in new york filed murder charges against 826-year-old man accused of shooting united health care ceo brian thompson. luigi mangione was arrested in altoona, pennsylvania. he was found with a ghost gun, fake ids and a three-page manifesto. mangione remains jailed what he

will eventually be extradited to new york to face charges in connection with thompson's death. donald trump's daughter trump laura trump is stepping down as cochair of the rnc amid speculation about a possible post in the senate as ron desantis will look to appoint a successor to senator marco rubio who has been tapped as the next secretary of state. laura trump telling fox news she has not talked about the possibility but she would be honored to be asked. shares of oracle are falling 7% in the premarket. they reported revenue in line with estimates but fell short of investors' lofty expectations. the cloud infrastructure business jumped 52% driven by demand from ai companies. while that's a robust rise that came in line with what analysts were expecting. another sore spot was revenue guidance which missed street expectations. oracle shares are of more than 80% of these here.

that is your bloomberg brief. lisa: it shows how high the bar has gotten for a lot of these tech companies given the fact it was not a terrible report and our using the biggest drop in more than a year. annmarie: the bars are getting way too high to clear for these tech companies. lisa: others just seem to hop over them. grappling with uncertainty in syria. >> the collapse of the assad government is an inflection for the region. the united states and israel are doing everything they can to minimize the risk. lisa: this is "bloomberg surveillance." ♪ ♪

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lisa: a little flat. yesterday's decline was the biggest going back three weeks.

you see yields continuing to inflect higher. watch this space. 10-year yields of three basis points ahead of some key options and cpi data coming out tomorrow. under surveillance, grappling with uncertainty in syria. >> the collapse of the assad government is an inflection point for the region. it does offer areas of risk. the united states and israel are doing everything they can to minimize that risk. i'm optimistic there are more opportunities for regional players to improve the middle east with iran -- the collapse of iran's axis of resistance. this requires an international effort to support those players. lisa: israel stepping up attacks on military sites in syria, sending troops deeper into the country. syria's power back and putting u.s. middle east foreign policy to the test. senior diplomats rushed to the region for allied talks on maintaining stability.

joining us as former u.s. state department spokesperson morgan ortagus. i want to get your take on what the u.s. will be involved with, how the involvement phillips over the next days and weeks. morgan: it will certainly be tenuous. the biggest focus for the u.s., and you can see this from over the weekend is isis. that is the immediate threat to our allies in the region and the middle east. we know we still have these prisoner camps that have tens of thousands of former isis members. they have children in these camps. the kurds are watching over those camps. that is the immediate threat. there was a physical caliphate of isis in iraq and syria. president obama at the end of his term and president trump the beginning of his term unleashed the u.s. military to make sure to destroy that physical caliphate. the prisons, watching over isis, making sure it does not reconstitute and protecting the kurds are going to be a focal

point for the last couple of months of the biden administration going into the trump administration. it's fascinating to see russia and iran rushing to abandon their military outposts in syria. russia is trying to get their assets and people, military personnel out and iran. that is indicative for how russia and iran use their partners in the region. as i have said about iran, they would like to fight to the last arab. to the extent that you have seen them abandon hezbollah, really abandon hamas as israel has gone after them, and now they are abandoning allies in syria as assad fled. if you are an ally or a friend in the middle east of russia or iran you have to be thinking twice about how good of a partner you have right now. annmarie: who do you think fills the gap? we were speaking with ellen wald about who fills the gap when it comes to fuel going into syria. a lot of that is a wrong.

what states could fill the void? morgan: you have a few different things going on now with saudi and the uae and qatar. per usual, you will have a healthy sibling competition between those three gulf arab states. qatar probably has the best relationship with hts, with the syrian rebels. they are the only goal state intermediate talks. saudi seems to be the most realistic of the new situation in syria. the uae in the past few weeks was working with the biden team to call for de-escalation. they had been the ones in the past for years leading the effort to normalize assad, to try to get him back into the arab league. they would argue the civil war going on since 2011, assad remained in power, it was time to bring syria back into the fold. that was the uae position and that no longer exists. saudi is very -- they have the most access to be able to help

on the oil front and the most realistic about the new situation is in syria. back to qatar, they are in the middle of it. they have the direct talks with the rebels. annmarie: how concerned do you think these goal states are about israel and overnight this incursion 16 miles southwest of damascus? morgan: the united states, israel, we are all concerned about any type of leftover weapons. chemical weapons that will -- the obama administration negotiated with russia that those chemical weapons would be destroyed in syria. we know no surprise to anyone that the russians cheated and we believe many chemical weapons remain. there is a scramble by the united states and israel not only on isis but any type of weapons that could get in the hands of the wrong proxy groups of the wrong groups that might endanger the united states, israel or her allies.

whenever you look at this in pure terms of who was up and down in the middle east, clearly iran and russia are down. anytime iran is down that strengthens the hand of the gulf arab allies. this is a good day for anybody who participated in the abraham accords. after october 7, especially after israel's incursion into gaza there was a lot of talk about with the abraham accords -- a diplomatic agreement i was a part of in the trump administration -- discussion of what they hold. with the arab states be able to stand by israel? not only did they hold, a positive sign from an economic and diplomatic perspective, they held. to me they seem stronger than ever. today i think there is a chance despite everything that's happened in gaza that you will see saudi potentially go into that deal or a bigger deal. you see russia and especially around weakend. as the houthis left human. --

yemen. whenever israel returned fire to iran after they hit them for the second time with ballistic missiles, israel largely destroyed a lot of iran's missile production capability, a lot of their air defense systems. iran is in a weakened state. most of their proxy empire across the region is basically falling apart. dan: what is your confidence level that some further escalation won't persist here? if you look at the recent history in terms of shifting power dynamics in the middle east, whether it's afghanistan with the taliban, iraq, any time a major power that falls out of favor it is rare that some of those risks don't escalate. what is your confidence level? morgan: a confidence level that things will not fall apart is pretty low. that might be the likely

outcome. certainly in syria you have some of the different factions around the country. i asked a syrian american friend who fled the country when he was nine years old, somebody who had worked with the u.s. military, who's in charge now? he said great question. even people who have worked intensely on syrian diplomacy for a long time recognized this is a massive challenge. it's interesting you bring up afghanistan and the taliban. it's a harder challenge than that. at least when the taliban took over when you all the heads of the taliban. we understood who would be leading. syria could look a lot more like libya in the aftermath of their civil war and afghanistan. -- than afghanistan. it was somewhat orderly after the taliban took over. not the group we wanted but i think there is more of a chance

in syria for it to look like libya with fighting factions. you will mostly want to -- you will mostly see russia and iran scrambling to get their people and assets out of the region. huge, huge loss from a naval perspective of the mediterranean basin for russia. that will have reverberations for a long time for russian foreign policy. lisa: morgan ortagus, thank you so much. great insights as we try to understand what to look for with the reordering of the geopolitical powers in the region. coming up, we shift to the real estate sector. danielle hale. cpi is supposed to be a significant component of the increase we may see tomorrow. this is "bloomberg surveillance ." ♪ that's a different story. with the chase ink card, we got up and running in no time. earn unlimited 1.5% cash back on every purchase with the chase ink business unlimited card

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lisa: two hours until the opening bell. futures are reflecting higher after a day of losses yesterday. up to .1% on the nasdaq 100. the morning movers. manus: $14.1 billion is not enough to sate the market for oracle. it is having its best year since 1999, up 81%. the guidance was lighter than the market anticipated. revenue rose 8%. here is the rub.

where does oracle fit into the grand scheme of cloud services and delivery between amazon web services and microsoft? they say they have faster and cheaper cloud services than their competitors but it's about convincing people to come across. citi raised it to $194. it might be an initial knee-jerk on the guidance. let's stay with the ai overlay. it is a common theme. c3.ai. they are rolling out 50 genitive ai focused programs. this is about making it easier. if you're out customer of microsoft, how do you make using the data easier? that is what the company does. they are running trials and products with rolls-royce, the navy. this velocity is not in the price according to piper sandler. it has a material upside not yet priced in.

tsmc. talk about dominance. gaining pricing power but just a little bit lighter on the sales numbers then we anticipated for november. up 34% in november. the market was looking for 36%. if you want to understand dominance and why intel has a problem, the common controls nearly 65% of the global business and therein lies the issue for all the competition out there. lisa: thank you so much, manus. dan, you see taiwan semiconductor coming up 34% gains. looks pretty blockbuster. oracle delivering 50% rises. shares down. how much does this highlight how high the bar is? dan: these traits had worked so well for the last year. even more so related to oracle for the software pivot was very hard and fast. the last six weeks the markets have been saying we are moving

on towards the application layer of ai. that was the theme people have been thinking about for years -- for a year or so when everyone was playing with utilities. the middle layer, no one had played application. a lot of people were chasing that trait that were thrown off by a classic expectations miss. lisa: that's a real question for next year. under surveillance, a lot of people focusing on this story. authorities arresting the man they say is responsible for the shooting of united health ceo brian thompson. 26-year-old luigi mangione was apprehended in altoona, pennsylvania. he faces charges in new york, including murder and possession of forged documents. a question here of what went wrong as people look at someone who was born into a life of extreme privilege, went to a prep school where he was valedictorian, graduated from upenn, in the tech space and something once are wrong. annmarie: an incredibly bright

individual with a bright future. you look at the local reporting from individuals who went back and interviewed his high school teachers. what struck out to me was what governor josh shapiro said. we should reiterate what he said after they arrested this individual. he talked about the victory all we have -- vitriol about the hate against the man who was murdered a few blocks from where we are sitting in new york city. he has no tolerance nor should anyone for one man using any illegal ghost gun to murder someone because he thinks his opinion matters most. you are seeing this debate take on online. schapiro called it deeply disturbing. lisa: it is innocent until proven guilty. is a real question about the business implications at a time where this is a very high profile and shocking murder in broad daylight in new york city in an industry that has come under a lot of fire. there's a real question with united health reeling from the loss of their colleague, the

fact he was murder of also trying to stave off some sort of public relations issue. it raises the question of this type of backlash. this sounds callous but the market applications of it at a time when that can gain steam online or elsewhere. dan: i would say as it pertains to the insurers, this was an industry that was always under the radar from a lot of public sentiment. the vitriol, etc. this is a horrible event. i would add the industry as a whole was also trying to get back to normal after a period of massive flux. a lot of procedures coming back into play. the cost spectrum was raising anyway for the insurers. there was a lot of hope and sentiment around change with the republican senate. he saw the sector rewrite higher on top of that. now you are back to that pre-election low. the sector looks, at least from a fundamental perspective

putting all these other questions aside, the sector looks fairly attractive. if you think nothing dramatic is going to change to the cost structure. lisa: a lot of focus on washington, d.c. the deck chairs are getting rearranged and arranged again. pete hegseth has said president urged him to keep fighting. he met with joni ernst yesterday. he plans to be with senators lisa murkowski and susan collins this week, trying to salvage his nomination as he does, to maybe less fire but still quite a bit. annmarie: he is still going up on the hill and taking these meetings, notably with these modern republican senators. joni ernst is a vet and survivor of sexual abuse. this is ineligible where her voice matters and she has not come up against trump on a lot of nominees the same way susan collins has in the past. punch bowl calls it the hegseth

provide shift, this second go. it does not mean it is done yet or he has the votes. there is a chess move waiting in the wings. the wall street journal talked about it. i have been reporting on it for weeks with governor desantis signaling to trump he is willing to step in and take the job. the third moved to that potentially is laura -- lara trump taking the senate seat that governor desantis would have to appoint given marco rubio is taking over for secretary of state. lisa: that is your chess of the day. we will give you an update tomorrow. boeing restarting production of the 737 max model a month after a strike by 33,000 workers brought commercial operations to a halt. boeing shares are down nearly 40% this year. a question here about whether we are looking at a buying opportunity where you have something on the mat and maybe a revival.

are we looking at something you don't play in whatsoever? dan: stay on the sidelines for now. if you love the aerospace theme, which we do because there is a lot to like about it, you can play the aftermarket space. the parts, the suppliers, the engines. the oem's have been difficult over time despite having a duopoly. they have not always had the most consistent returns. there is so much management change at the moment. we would say play the aerospace theme via other sectors. lisa: i'm sure a lot of people are not willing to dive into quickly. home buyers are looking for signs of cooling inflation in november. the cpi report is due tomorrow morning. shelter inflation continuing to outpace pre-pandemic levels despite high interest rates. joining us is danielle hale of realtor.com. thank you for joining us. it seems like everyone has been talking about how high interest rates would cause prices to come

down. all you needed was inventory to really create a market. we are seeing inventory come back in. why are we not seeing bigger price declines? danielle: thanks for having me. that's an excellent question. some of it is the way most reporters measure market rents. we are looking at rents that are on properties that are listed for rent. the cpi looks at the rent for all properties that are lifted by renters. it is a bigger set the cpi is looking at. while market rents shot of during the pandemic, for people that renew the rent year after year or have long-term leases, those rents are a little slower to adjust. cpi was slower to pick up initially aftermarket rents shot up and slower to come down. they have come down a bit. they have been declining for 15 months. in total, the drop from the peak is only about 2%. some of that is regional differences.

some markets have cooled off faster. other markets such as the northeast and the midwest remain hot. nationwide we are down just about 2% from the peak rent we saw in 2022. dan: aside from potential dynamics within the housing markets itself in terms of supply and demand, clearly the bank market, the banking market, the lending market plays a major role in this sector. we have been talking about a lot of potential policy changes with deregulation, lower interest rates going forward. how do you factor in the potential loosening of lending standards related to all these other dynamics and how that can impact housing? danielle: we do expect to see more housing on the single-family side. if we look over the last decade, we have seen a deficit of homebuilding relative to the number of households on the market. there is need for more construction of residential buildings in the u.s. we just issued our 2025 housing

forecast. we think we are going to see a pickup in single-family construction. on the multifamily side it is a little more of a question mark. we have a high number of multifamily homes in the construction pipeline already under construction. we expect those to hit the market in 2025. that will help continue the market rental relief we have seen. we expect rents to declined by about .1% as a move into 2025. we will see the relief continue. we are also likely to continue to see some catch-up from the renters who have not moved, because market rents are quite elevated. i think we will see some relief for renters but not a lot. i think there is more opportunity for building here in the u.s. dan: how about in terms of those looking to own? access to mortgage credit and mortgage availability. is that a trend or dynamic you think may loosen in the coming

six to 12 months? danielle: mortgage availability has been ok. the bigger challenge for the housing market is on availability and the affordability of homes. one thing week spec to see in 2025 is in markets where we see a lot of government financing options, things like v.a. loans, fha loans, usda loans, we expect those markers to do well because the products tend to have more favorable financing criteria for buyers. as a result we are going to see those markets thrive in 2025. areas with a lot of military or retired military where residents are more likely to take advantage of the v.a. loan benefits and where the market is more accustomed with sellers having more familiarity with those loan products and willing to accept them from a buyer. those are areas that are poised to shine. in colorado springs, that is our

top market for 2025. that is where we spec to see the most home sales and price growth in 2025. annmarie: you brought up policies. could we see fresh impetus from this incoming trump administration and maybe the republic congress to do more on housing, affordability, building new homes? this was one of the main drivers of americans concerns. he sought and pulls. prices -- you sought in polls that rent and prices were too high. danielle: both campaigns talked about housing affordability and how to tackle it. trump talked about opening federal lands to create more land for building. they also talked about making sure we could cut through regulation to make it easier for builders to do the job. we know analysis that where the $90,000 of the cost of a new home is due to regulation and

compliance with regulation. there are likely areas of opportunity for some of that red tape to be cut through. i think trump will tackle that. the other benefits to the potential housing market of a trump administration and republican congress could come in the form of growth focus, potentially on tax reform if people are able to bring home more of their after-tax income. that helps makes the share of the budget they are putting towards housing costs a little smaller. that could be a big benefit. it is not something we have priced in. it is a risk or positive risk and an upside to the baseline. that is something we are watching to see as well. lisa: danielle hale, thank you so much. annmarie is checking out the colonist rings listings. -- colorado springs listings in addition to her three-star michelin restaurant. annmarie: this is the sunbelt top housing market of 2025. texas, florida and virginia also

in the list. the sunbelt and colorado springs. lisa: people want to go where they can play. let's get an update on stories elsewhere this morning. yahaira: israel has stepped up its attacks on military sites in syria, striking hundreds of targets across the country. according to multiple reports, the strikes targeted army bases, airports and surface-to-air missile systems. the israeli attacks have drawn criticism from arab countries, including egypt and saudi arabia which accused israel of seeking to occupy more syrian territory and sabotage the country's security and stability. sales for chipmaker tsmc rose for 34 percent and thanks to sustained demand. the taiwanese company which is the go to chipmaker for apple and nvidia reported monthly sales of 8.5 billion u.s. dollars. usmc is seen as the bellwether for data centers.

hardware supplier subpoena boost thanks in part to the launch of chatgpt in late 2010 to. list -- 2022. chinese tech company shall meet unveiled its new all of that trick suv which is expected to go on sale next summer. the yu7 will compete with tesla and the world's largest market for autos. it highlighted efforts to expand -- this is your bloomberg brief. lisa: a 2025 rotation. >> the backdrop from a cyclical perspective is positive stocks. we're are looking for broader returns and a focus on diversification to improve risk adjustment. lisa: that is coming up next. this is "bloomberg surveillance ." ♪

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lisa: the quiet ahead of the cpi storm. looking at mild gains after yesterday's drawback. small caps outperformed yet again. up significantly more than the s&p, which is up now about .1%. under surveillance this morning, the 2025 rotation. >> the backdrop from a cyclical perspective is positive stocks. a lot of good news is priced in. the setup is positive of the index level we don't inspect to see huge rises. we are looking for broader returns. and a focus on diversification to improve risk adjusted returns. lisa: small caps outperforming postelection. looking for mid-cap outperformance in 2025. jill carey hall, writing "we are

cautious on small relative to large given small caps have the most postelection policy risk, refinancing risk. small caps have in stuck and earnings-per-share recession." lisa: i want to start with small business optimism. the highest level going back about three years at a time everyone is convinced the policy mix will be auspicious. why do you push back? jill: maybe near term we see some further upside given small business optimism, consumer confidence, momentum, good seasonality. when you look to 2025, even though there is a lot of optimism on deregulation and business from the policies, -- business-from the policies, that will help -- business-friendly policies. there's a lot to be there from deregulation in terms of costs.

for small caps overall you look at the backdrop. if we see some of the policies that could be more negative to profits in terms of tariffs and immigration policy, small caps of the most labor-intensive segment and they would be hurt the most by tariffs. that is at a time when we have seen better economic data. multiple rate cuts priced out of the market. the refinancing risk has come back. they are stuck in an earnings recession. lisa: how much the optimism is tied to policies that are inspected from the trump administration and how much is the fed cutting rates even with a growing economy at a time when there is a real inward focused on the united states and u.s. exceptionalism that would benefit some of these companies disproportionately. jill: that will be a reason why this year is going to be about picking stocks and picking response within the market rather than just buying indices.

from an index perspective, mid-caps look the best positioned. they have actually outperformed in the year following on the fed first started cutting rates. they have less postelection policy risk around tariffs and immigration reform. they are the least labor-intensive segment. their profit trends have been better in terms of revisions. in the next 12 months, they started trending up from mid-caps. they are coming down in small. that is where i would focus. from a stock perspective, if you can focus on areas of small caps that are more economically sensitive but don't have as much refinancing risk, screening on leverage and those factors, focusing on stocks that are positive rather than negative revisions since that is the scarce resource now, there is opportunities in small caps. the valuation dispersion is high. there are cheap and offensive stocks. areas for active stock selection. analysts cover about a thousand so there's a lot of opportunity

out there. dan: i feel like the refinancing risk is a reflection of a long-term structural trend from the last 10 years where private markets have picked up so many quality small assets. what you are left within the public markets in small are the levered quality names. looking forward over the next big structural trend in this coming decade, ai will impact big companies but it feels like small caps or small business models could get this intermediated. -- disintermediated. is that something your team is thinking about? jill: that is the baer case on small caps. they have morphed into the love -- bear case on small caps. there are aspects that are true. we are past peak low-quality. when we had the ipo boom, all these nonprofitable companies doing the index, some of the rebalances in the russell have

taken some of that out. some companies have started to return to profitability. we are past may be peak low-quality. i think when you look at metrics like leverage increased over time, when you look at the quality of the index, the proportion of non-earners, the long-term growth rates, not as many high growth rate stocks as it used to be and he staying private longer and ipo-ing at a bigger market cap. that is why the equity risk premium is below average but may not go back to the averages we saw in the 1980's and 1990's. i think that are positive longer-term themes for domestic mid-caps like it we saw a capex cycle or reassuring continuing in the u.s., that should benefit pockets of the segment. it is historically cheap versus large caps and that should argue you can see better price returns in the next decade. near-term we would be cautious given the prophets in -- the

profit environment. lisa: that was an interesting point. you look at the idea that private markets have picked off so many of these companies. even though you are looking at something that is structurally lower-priced, it might stay that way for a bit longer because there has been a de-rating. dan: something like 80% of businesses in the u.s. with over $100 billion in revenue are private today. it's an unbelievable fact. we also think about who will participate from the right tail perspective nai. it is -- in ai. more the fortune 100. dan: dan -- lisa: dan, thank you for being with us. coming up, emily roland, gene seroka, jason draho and we chart towards tomorrow's cpi amid

markets that are trying to inflect higher after yesterday's losses. this is "bloomberg surveillance ." ♪

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

>> the spirit is back in the

u.s., the outlook in the near term is bright, sense of optimism. >> the set up is positive but at the index level we are not looking at huge devices, more broad returns. >> in our view, narrow stock leadership is fragile stock leadership. >> you have animal spirits in the removal with strong growth. >> equities are continuing to run in that environment. >> this is "bloomberg surveillance." lisa: good morning. "bloomberg surveillance towards the cpi print tomorrow with a real question about whether we can continue that momentum below record highs. all eyes on tomorrow. jonathan ferro is off this week. we are so pleased to say nina richardson of adp is joining us.

no questions here, you can feel it in the yield space coming up. just a little bit. maybe people are underestimating the risk of inflation? annmarie: you heard it this morning, the fed said consumers are expecting higher inflation and a better economy. not overheating, contrary to the market narrative, economic narrative looking set to slow, not accelerate. we're back to square one when it comes to this debate. is it the labor market or inflation that is important for the fed? >> it's cute that you make a distinction. i think they are so tied together, the labor market and inflation. wages are the bridge tying them together. they are smart to make the distinction but also i think they are quite connected. lisa: 0.6 1% overall on the s&p 500, seems like some people are wondering if this was connected to the geopolitical risk with

syria having a complete pivot point in terms of leadership. other people say it stems from the yield space and suddenly you get better-than-expected data. how much do you get the sense, nila, that this is the driving force when people look at overseas turmoil as reinforcing american exceptionalism? we have a suit -- flex we have a superstrong jobs market with consumers spending what's supported by the strong labor market. the moves are on point when it comes to tracking inflation and the labor markets. a lot of fundamentals are feeding into the exceptionalism. globally in terms of geopolitical is what's adding to the gratefulness of that exceptionalism at a time when so much of the world is in chaos. annmarie: world in chaos,

fractured middle east, and yesterday we talked about the core of europe in political paralysis. where else is there to go? lisa: at a certain time we get an ecb rate decision on thursday with a call for a 50 basis point rate cut at a time of economic weakness. coming up, emily weiland of john hancock, equity value stalling ahead of cpa -- cpi with james soroka and shipping giants bracing for trump tariffs. jason varejo of ubs, why the fear of froth is overdone. stocks slightly higher, the s&p 500 and the nasdaq are below record highs as they wait for one of their last data points before the cpi decision. emily weiland saying that a december cut is far from a lock. the fed hiked a more pro-business policy.

we don't think they would go so far as a hike but it is getting harder to justify the cut. emily, great to see you. thanks for being with us. i want to start with if the real bar is for the fed to cut your pause next week or if the real issue is the long end of the yield curve responding to the much expected fed rate cut next week. emily: bond market is expecting a cut, there is an 86% chance of that happening. we would see a pause interpreted more as the fed hiking. we don't see it happening, but bond markets are expecting that. we think that if we get the hawkish cut that's expected next week, we could actually see re-inversion of the yield curve with the two year treasury yield pricing significantly higher. the 10 year may move up a bit, but we think it shops around

here as disinflationary trends continue. we will of course see what happens with cpi tomorrow, but it should be interesting going into next week. we may have given inflation a bit of a shot in the arm with the potential for co-cyclical policies and tax cuts. i know we have to keep edging this, but it isn't exactly what we would want going into the year-end on the upside with a wrench in the narrative relating to the fed. lisa: you have been bullish on bonds and fix income, cautious on risk. have you rethought that in the face of the potential of what we just said, inflation getting a shot in the arm? emily: i think it's about philly during out the relative best opportunities. we have elevated income available. you can get close to a 5% yield on a high quality core plus bond portfolio. we like that. we want to raise equity at this

stage but the problem is a lot of it is in the price. we just penned our outlook for 2025 in the key tagline is to resist turning up the volume on portfolios. the last two years, we just had the best two year stretch for the s&p 500 since the late 1990's coming on multiple expansions. earnings-per-share for the s&p 500 are below the high of 2022 and that could certainly continue. we don't see elevated valuations as a catalyst for a shift in leadership, we want to recognize the highs of recent history being 24 times earnings, still 9% to go and we could see multiple expansion. but a lot of things have to go right. we want to look at the portfolios that protect against that valuation. jill was on earlier talking about big cap socks and that is certainly the sweet spot for us. there are opportunities and challenges with the market

already priced for a soft landing scenario. nela: given your view that inflation could be the sleeping dragon that wakes up in 2025, what happens to multiple expansions if the fed can't cut as much as the markets expect? if the neutral rate is higher than we think right now, is there still a projection of more growth in stocks and equities over 2025? >> higher inflation and higher rates could challenge that story. we don't see much more of it. the denominator to pe ratio could be the driver of returns, but the challenge there is that markets are already expecting a 15% earnings growth, that is what analysts are penciling in right now and that is a high bar. we think there are companies that can meet the bar. there are areas of the market with high quality stocks that have great balance sheets and better abilities to protect margins, better abilities to see

organic growth. we should expect to see a rotation there. it's really about the intersection between quality and value that can power markets higher into 2025, but it is overly optimistic to think that we will be getting multiple expansions. there's a lot of sentiment pervading the market with investors on one side of the boat in terms of the optimistic view. we have to kind of rethink it when duct tape banana is selling for $6 million. that's a lot of excessive optimism for us. lisa: certainly -- annmarie: certainly. emily, you talk about everyone being on one side of the boat, but there was a pullback yesterday after china talked about and announced a probe into nvidia. your favorite sector is u.s. large-cap technology. are you concerned about that sector next year with a tit-for-tat potential trade war between washington and beijing?

emily: there is credit risk there as far as nvidia goes with other areas of the sector but it comes back to earnings growth for us in we are big believers in overtime stock prices will follow profits and right now we are seeing the best earnings growth by far in large-cap tech companies. in fact when you get down into the small cap space, earnings growth is negative. this past quarter was negative 7% with analysts back dropping into next year. it's all about finding the better relative growth opportunities in the united states. nela talked about this earlier, the fact that the fundamental story in the united states is superior to the rest of the world as far as the earnings and economic backdrop goes, leading us towards mega caps stocks. there's a valuation issue there that we want to be mindful of.

protecting mid-cap industrials, really looking at the earnings drivers as the key story next year. resisting turning up the volume. nela: any risk that as the global growth story looks underwhelming that that would challenge these large tech companies who do make a significant portion of the revenue abroad. could that come back and bite the profits in the u.s.? emily: it's a great question and another reason we are watching things like the dollar. if you see a hawkish cut or the fed holding into next year like they did in the 1990 soft landing scenario, it could cause some pretty significant appreciation of the dollar, limiting the profits that they are generating, that are being generated from large-cap companies abroad. the geo read function is one we have been looking at closely to see which companies are most exposed to the revenue and the bifurcation in global economic

growth with the u.s. holding up best versus countries around the globe, another reason i think to embrace mid-cap stocks without going down into large caps where we see large -- less profitability and lower quality metrics overall. lisa: could a strong u.s. dollar hurt the renaissance of goods have to be exported? emily: it could be a challenge and is very disinflationary. a lot of investors are really focused on the potential inflationary impacts of tighter immigration policy and tariffs. remember, a stronger dollar is disinflationary, speaking to the outlook that bond yields should ultimately come down over the course of 2020 five. those disinflationary forces like lower wage growth and things like housing inventory

rising and commodity prices coming down, it all speaks to the opportunity available in terms of income and high quality bonds. lisa: what would you have to see to change your view that disinflation is taking hold? emily: you are starting to see little signs of it, looking at the small business optimism survey. that showed that there was an animal spirit coming alive again with a lot of hope around things like tax cuts and things like deregulation that i think are sparking that. but i think what you need to see is wage growth going back up. you need to see the housing markets with price appreciation that we aren't expecting. the other piece of it that is critical is if you expect the sort of double resurgence in inflation, it has to come with higher commodity prices. if you want to see or expect this 1970's style boom in inflation, you have got to see

oil prices moving higher, commodity prices broadly. we are just not seeing that right now. of course if you wake up in the morning and there's a meeting in china about a meeting about maybe doing stimulus that can change the narrative as far as commodity prices go, we see a slowing demand in china with more supply on the commodity space and we don't expect to see the surge around -- absent any major geopolitical disruption. lisa: emily, thank you for being with us. getting you an update on stories this morning, here's your bloomberg brief. yahaira: in sao paulo, the president is in intensive care after undergoing emergency brain surgery. the doctor shared that the president will remain in the icu for 48 hours as a precaution and will not be working for the next few days. the brazilian president is

expected to resume a normal life after the operation. the international air transport operations as the global airline industry will see a record 5.2 million passengers next year, calling for them to earn 46 billion dollars in net income with lower oil prices and higher demand driving profitability. tariffs and trade wars could hurt the industry. in sports, the bengals beat the cowboys on monday night football after a go-ahead touchdown from lamar chase. tied with two minutes left, they managed to block deep into bengals territory, failing to secure the ball, allowing cincinnati to set up the winning drive. dimming their chances of making the playoffs. that is your bloomberg brief. nela: we will phone into jonathan -- lisa: we will phone into jonathan ferro in the next hour to hear all about that game, which he was apparently at last night. coming up, the outlook for

shipping and trade under president-elect trump. we won't be calling in, he wasn't there, i don't think. fake news. this is "bloomberg surveillance ." ♪

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oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah. lisa: trying to claw out after yesterday's losses, stocks reflecting upwards just a touch ahead of tomorrow's cpi, you can see the outperformance in small caps in the s&p. i see yields continuing upwards. time for the morning calls. first up, hyper sailor raising their price target, calling it artificial intelligence leader. next up, virgin is upgrading american airlines to outperform, highlighting their exclusive credit card deal with citibank.

finally, morgan stanley raising a price target on tesla to $400, putting the company is the top pick in the sector for autonomous driving goals. trade officials from mexico, canada, china, warning that the proposed tariffs of donald trump would harm all of the economies involved. eugene seroka, weighing in, writing "in los angeles the implications of new tariffs are significant. for every four containers that we move, that's another job. one out of nine workers in southern california, one million people haven't jobs tied to the port complex. jean joins us now. eugene, thank you for being here. how much have you already seen influence of businesses rearranging supply chains ahead of potential changes to policy? eugene: could to be here. happy. a lot.

footwear, manufacturers, quotes are from voting, they are building up inventories on top of a relatively strong economy that continues through all of us purchasing and the other headwinds that we face geopolitically, like ongoing negotiations with dockworkers on the coast, drought conditions in the panama that have almost solved themselves. and the who the rebels pushing cargo more to the west coast. in addition to the handwringing about what tariffs could look like and building up my inventories to average costs down. lisa: there's a lot of issues there. annmarie: what's the driving force that companies really want? gene: costs is number one. annmarie: tariffs? concerns about the red sea? gene: it all goes together, but it's the unknown. we understand a bit about this east coast negotiation, a tentative agreement set to

expire on the 15th. sporadic talks at the table between the employers and union representatives. panama canal drought seems to be getting back to normal. crossings of container ships that are fully loaded better than before, but no end in sight on the security issues in the red sea. the run up on tariffs, people don't know how it's going to land. there is a long way from the campaign trail to public policy, but we are not being dismissive of anything. if there is 10% on 3 trillion in american imports, it raises a different question. annmarie: how will the executives you are speaking to that import a ton think about it? blanket or mayor -- blanket or more narrow target? gene: a lot of discussion about whether this can be negotiated, is there a deal to be had, will be targeted or blanketed? we've all heard about the broad implications. mexico and the cross hairs as

well as canada. mexico took over as the number one importing country over the last 20 years, so there's a lot at stake. folks are just trying to read what's going to happen but also prepare their inventory levels in the event that it goes down a critical path. nela: i've got several questions for you about the labor market implication of dockworkers in the adjacent employment that gets goods to stores. but before i ask that, pandemic taught us a lot about the fragility or potential fragility of the global supply chain. four years later, where are we? is it a stronger, more resilient system? or are we still vulnerable to those kinds of pandemic climate change conflicts that really shut down goods transfer four years ago? gene: i think we learned a lot from pandemic. not one of them was backed up.

we took some of the critical areas of the velocity of cargo, the right people with the proper skills on the job at the right time, making sure that we could read upstream better than before . we now have the ability to see cargo 40 days before it gets to los angeles so that we can better plan the labor, the component of the equipment and land use that we have. but making sure that we can train people up for the next generation of work is key, too. workers in los angeles are building the first training campus for goods. young people who want to enter the industry and people my vintage who need to be upscaled for tomorrow's technology, that is where the work lies today. lisa: so important, the right -- nela: that is so important, the right people for the right skills with this global supply chain and what could happen to inflation if the system doesn't work. where are you seeing shortages in the worker movement that keeps goods flowing?

gene: we are doing pretty good, but it is what is next that we are looking at. there were claims that there were not enough truckers on the job. the truckers in california didn't want to just sit in line waiting for cargo all day, they went to other sectors to do business. we want to attract, recruit, retain quality employees for tomorrow. that is a part of the training play that we are doing with the ongoing efficiency. the more a trucker can get, the more they can earn. lisa: how difficult is it to modernize port systems when you have seen a lot of strikes and concerns over job security. with automation coming to the ports, how much can you really do? do you feel tied to because of the employee pushback? gene: it's really tough. it's the most polarizing conversation we have in our industry. we have seen examples of where automatic robotics don't cut the

workforce to the degree we have witnessed in los angeles. and in southern california the results have been mixed and that doesn't give confidence to the worker for tomorrow. we have got to find a way to the middle on this. expanding land is not an option in a lake, as an example. expanding capacity through new technology is, as long as we don't leave the worker behind. annmarie: before we let you go, how much are you seeing imports from china falling in terms of the fraction of what's been coming in over the last couple of months? gene: we have talked about this for sometime now. by the end of 2022, 57% of our business was with china, today it's is 43% and dropping. yet we have continued to grow because we have been nimble enough to move to the south east asia market. nonstop service put in by the liner companies. speed to market, always the hallmark, maintained because of the non-top -- nonstop services.

that is all still there. lisa: eugene seroka, wonderful to have you on, port -- director of the port of los angeles. you pointed to this question around automation and the upgrading of talent when there is this existential fear that a change in technology will eliminate jobs. nela: it's the conflation of so many different things. the global economy, the worker, and technology all in one, you can see it right there at the port nla. lisa: which is why everyone is watching it. coming up next, td securities. just one day to go before the key cpi print. the last major rate head of let -- next week's meeting. this is "bloomberg surveillance ." ♪ no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

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lisa: good morning. we are seeing futures basically going nowhere, up a little bit as people look for some kind of direction ahead of tomorrow's cpi. right now you are seeing outperformance and the nasdaq turning lower, one hour away from the cash open. here is your morning mover. manas: how do you find your place in the ai world? that's the number we are looking at. oracle, $4 million. the market estimated 4.5 billion dollars. where do they fit into the space

against amazon along with microsoft? they would say they are faster, they are cheaper than any other provider. right now the market is more focused on the in-line revenue number. that's a little bit disappointing. but the capex number is certainly higher than the market anticipated. two hundred $10 up from $185, keep an eye on those capex numbers. tackett, it's all about the overlay. you are a data analytics company, what is your secret sauce terms of integrating customer data. the revenue is impressive, up 29%. they are rolling on 15.15 generative ai trials. this is then working with the navy. protecting data from the cloud, making it efficient and useful. that is what they say is

underpriced in this stock at the moment. giving you a snapshot of google, there is a quirk with google where they are being asked for information about the european regulators, up 14% this morning, with a new quantum chip coming to the market. 300 people within alphabet are working on quantum computing. it is all about the error correction, the endgame i'm told . that is what they are making progress towards. there are multiple fast sets with alphabet in google this morning with a cohort of people working on quantum computing solutions for all. lisa: thank you so much. endgame, quantum computing, leading one to a lot of interesting imagination thoughts. key u.s. data points in cpi coming out tomorrow, jason dray ray howell -- jason trejo writing that there isn't much to slow the rally in the near term. whether it is new data or a

political development, the market seems to be impervious to risk. jason, good morning and welcome. to me this has been one of the main questions around the rally. everyone being on one side of the boat, does that lead it to be more vulnerable to tipping over? jason: i think that's reasonable. keep running. the market doesn't seem to know whether there are political developments in europe and south korea last week our complicity or calibrated in some way. but otherwise if you look at that, the jobs data and the inflation data, there doesn't seem to be a catalyst. the markets seem to be pivoting. that could change, but right now the path of least resistance is the markets going higher. lisa: we heard manas talking about oracle, c3 ai, this

question around if they don't come out with some massive outperformance, they are punished pretty significantly. is that signal or is that noise? jason: in the markets, dispersion has been quite high. you are seeing big moves in the tech space. possibly because it's tied to the whole ai thing. in a market wide level, i don't think it's the biggest story unless you are in nvidia. it otherwise tends to be much more idiosyncratic. annmarie: you mentioned the market brushing off what's going on with paralysis at the core, but doesn't that just mean double down on the united states with more u.s. exceptionalism? jason: overall equities have gone up, but that's the quality trade with yields declining. since the sixth, the 10-year is

down and the breakeven is at more than half. it looks like a disinflationary growth trade to me. is that the case? or given geopolitical events, is it a flight to safety? some people want to own treasuries, assets, equities, all the quality of the world. nela: does that unwind when the uncertainty in the u.s. becomes more prevalent? secondary question as you think, the fed made a big pronouncement about being data dependent for two years. has the market become overly data-dependent? where each point affects the sentiment? and then the result is to ignore longer-term situations abroad? gene: the first question -- jason: the first question about the change, with april stagflation and some are landing in the goldilocks, when those narratives change you can see

reputations going towards small caps that might last a few weeks. i think we will get another rotation with clarity, but it will be a short amount of time. second, regarding the data, even the investors who are confident about the recession, they are not convinced that inflation is going to come down. all it takes is two months of data to switch the narrative from one to the other, driving the markets. this year the market is up a lot but it also feels like it's been climbing the walls, they've never been convinced everything is in the all clear. lisa: the conviction right now with people being whipped around by data points and policy uncertainty, how do you benchmark where your conviction lies? jason: the u.s. economy, is it going to change much? if you look at attracting in the fourth quarter, it's at over 3% and the consumer continues to spend. my confidence in the economy next year growing is still relative. it's going to come down with the fed cutting and a conducive

environment for equity risk assets overall. the past to get there could be bumpy as we get political developments and a new administration. as it unfolds, from the past we know it's not a smooth line. if we look at the noise in 12 months, it could be a higher place but no easy ride. nela: what role does for an asset play in a typical portfolio? ignore the world, stay with a safe bet and bet on exceptionalism? jason: there's definitely a place with a broad seized. the highest they've ever been, something usually kind of breaks. the rest of the world picks up. it's important to have a long-term allocation of the markets. technically moving to suggest a favorite in u.s. equities here,

it's a clearly compelling narrative over europe with uncertainty that's cheaper, policy over the u.s., it feels clear, supportive for equity markets to perform well here. lisa: when it comes to asset class allocation, one thing that people were saying was that the death of 60:40. turns out that did really well, outperforming most other strategies and at a certain point must have gone all in on a couple of stocks, particularly nvidia. for next year, how does that pair off and shake off at a time where there is inflation risk that could be the risk that we see in equities, particularly as expressed in bonds jason:. it works well when it's well contained and investors are not worried about it. we thought it for 20 years,

until inflation became the big problem in 2022. there is complacency in the market that inflation and disinflation will continue. to me the biggest macro risk is inflation doesn't come down, it re-accelerates, and that that relationship between stocks and bonds becomes positive and not as diversified. that's why we recommend looking at other asset to include a diverse fund with private markets as a hedge. the inflation risk is likely to persist and flare up in ways that are hard to predict. that would say we don't have red wings predict inflation, so you have to proactively make your portfolio robust. lisa: jason, thank you for joining us from ubs this morning. speaking of inflation, michael mckee us now head of that in tomorrow. what are you preparing for? mike: preparing for more of the same, basically, lisa.

the fed has got to look ahead to 2025 and figure out what's going on. they have to figure out who said that, someone important, and i want to point out that the small does this prediction is that things would be great and they tend to think that things will be great at the beginning of a republican administration and then confidence falls dramatically. growth is higher under democrats. today we look at this number and then at the fact that almost all of those people forecast that they will be raising prices in 2025. where is inflation? what will we see tomorrow? the blue at the bottom is housing, the core cpi function. housing is the other light blue, automotive services, car insurance. keeping up through tomorrow,

another .2%, .3% on the month with a bit of arise year-over-year and the fed focused more on what's happening next year. for that, it's not going to be in this november data. lisa: michael mckee, thank you so much for that. just a quick word on what you are expecting tomorrow given that there is an inflation surprise that could potentially put a kink in some of the euphoria? nela: i think it will be a continuation of the pattern we saw before. that's what the labor market is telling you, that is with the housing market is telling you, no trigger that unwinds the stickiness gap. as long as inflation is sticky, every rate decision is a coin toss and it's not a great place for the markets to lisa: be. that's the reason i'm watching markets this week in general. looking ahead to those options in the fed meeting, given the stronger than anticipated economic data with increased

uncertainty around tariff immigration policy, the fed can begin to signal the possibility of a pause or skip. thank you so much for being with us. where do you think that markets are underpricing some of the risk of what you expect for next year? >> there is a bit of an underpricing for the expected pause. starting in the first half of next year, you could see the fed explicitly start to signal pauses. certainly by january into march, they could be looking at trump tariff announcements, immigration announcements and signal hands off if the economy stays as strong as it has been. we can see protracted rates on hold at these higher levels, which could actually push interest rates higher in the short term.

lisa: emily said that she could see a real flattening of the yield curve, seeing this disinflationary trend continuing. you agree with that? you think that overall there will be reassessment of the stickiness of inflation? >> in the short term there's a risk to the flattening of the curve. i think that rates can rise a bit. certainly a bit more. you could see a flat in a bit. there are worries about fiscal sustainability of course keeping it under pressure. there's lots and lots to keep an eye out for. at the end of the day the macro is not terrible. growth is doing ok. the labor market is doing ok, slightly softening over time with inflation being stickier. you are seeing that kind of divergence, here. the issue is you want to stay cautious into next year. we just don't know what the fed is going to do until they do it and you could wind up with rates

on hold for a protracted amount of time. annmarie: a growing fiscal dust of -- deficit, is that why you say this is the year of living dangerously? >> definitely. one of our number one questions from clients is -- when is the u.k. going to have the liz truss moment with the bond vigilantes go out -- come out? annmarie: next year, the u.s. liz truss moment? >> there are worries about that. i'm not in a camp, to be clear, but i think that's the risk a lot of investors are bringing up. gdp running for as far as the eye can see. that's dangerous. there's a strong demand for u.s. exceptionalism driving inflow into the u.s. we have to watch those auctions, everything is a risk here when you fly this

high. nela: that's the other side of the coin in terms of large fiscal deficits. there is demand for the debt but what happens if things cool off more than anticipated? if we see hiring freezes or pauses and hiring like we saw a prop -- pauses in rate cuts? what happens to that demand if there are chinks in the armor in u.s. rate growth? >> usually demand goes up. everyone will fly to the risk-free asset in the u.s. treasury market. what we are always worried about, less so in times of stress as we know that there will be demand for bonds as a safe haven, but the issue is -- our times good? times like now, is there a demand for bonds when everything else is yielding quite a bit as well? and you really have to compete with a lot of other asset classes? lisa: is it the opposite of what

we saw a couple of months ago from investors? >> the outlook is in two halves. there's a risk of flattening and rates remaining elevated. getting into next year we expect some of the trump policies like tariffs to keep the fed cautious and we think that rates will drift lower over next year. we want to find attractive entry points. you want to stay in a flatter curve until the second half of next year. nela: how close can the fed to get to the 2% target and if it doesn't, how does the bond market respond? >> not in a good way, certainly. i think they will eventually get to that 2% target. that target is very long-term.

they can overshoot it for a while. they undershot it in the post-2008 decade and only now have they actually started to overshoot. they will eventually get to 2%. if it seems that inflation is stubbornly stuck, there's more term premium in the curve. it's a little bit elevated. lisa: if they cut by 50 basis points as some argue that they should, not that they will, do you just go headlong into european bonds? >> i do think that the ecb will keep lowering rates. that seems to be the default path. a bit more gradual on that side. there's a lot of central banks out there between ecb and the bank of canada, certainly the fed, who are looking to ease rates. they all know that policy is

tight and they are looking to get closer to neutral, a long-term bullish tailwind. gradually, yes. just like with the u.s., you have to pick levels carefully, a lot of it is priced in and you want to wait for backups to reload. lisa: thank you so much for being with us from td securities. here are your stories from elsewhere in your bloomberg brief. yahaira: authorities in new york filed murder charges against a 20-year-old man accused of shooting brian thompson, united health care ceo, after being stott -- spotted at a mcdonald's in altoona, pennsylvania, where he was found with a ghost gun, fake ids, and a three page manifesto. he remains jailed and will eventually be extradited to new york to face charges in connection with thompson's death. a fire in malibu forcing residents to evacuate a blaze

that tripled in fire in just an hour to over 1800 acres. socal at a warning tens of thousands of residents in l.a. county that their service might be shut off if the wind intensifies further. alaska airlines is planning a global expansion next year, planning to start with flights from seattle to asia and could expand as many as 12 routes over five years, introducing a new premium credit card with a global travel perks, including a ticket on alaska or partner airline networks to increase premium seats in the fleet to 29%. lisa? lisa: thank you so much. for the entire morning, as always, up next, setting you up for the day ahead, this is "bloomberg surveillance." ♪

>> top names at the fed on bloomberg. >> the economy is in a good place right now. inflation is coming back down to target. labor markets are healthy. we are seeing solid growth. we are well-positioned. i certainly wouldn't take another one in december off the table. we will have to look carefully at the data and see what makes

sense when we get to december 18. >> nobody covers the fed like bloomberg. lisa: 38 minutes until the opening bell, here is the trading diary for the week ahead. today the opec year-end conference, the big he is cpi and macy's earnings with a ecb rate decision, ppi and another round of jobless claims. next wednesday, the main event towards the end of the year, the fed rate decision. tech sales growing 34 percent in december thanks to sustained growth. mandy is here with a -- mandeep, what is your sense with why this isn't being received with particular positivity given that they are owning the market with rapid growth? >> you could say that the expectations were higher than

the 34% growth number, but overall to me, you know, the market remains solid when it comes to ai chip demand. it has converted into a cloud workload revenue that we saw with oracle last night, 52 percent growth. it's all about hyperscalers raising the capex. so, like, there isn't really anything to find fault with here in terms of the ai story. that remains intact. you could have 1% here and there when it comes to growth rates, but $100 billion in revenue, that's the emc growing at 34 percent, it's impressive and i think it is mostly tied to ai at this point in terms of growth rates. annmarie: annmarie: i would love to get your thoughts on nvidia and china opening a probe into the company. is there going to be more tit-for-tat in the tech industry? >> absolutely. everyone is expecting tariffs to

be front and center. every administration is going to use their own way of negotiations. in this case, china is clearly seeing that aspect. nvidia being one of the biggest sellers of chips in their market, this could be one way to negotiate. as could be apple. they have a big dependency in china. it will be interesting to see how they navigate. clearly this will be a part of the tariff situation and the geopolitical aspects next year. lisa: thank you as always for your insights. wrapping up the hour, nela richardson, so kind to give us this much time, i want your take on where you see the bigger risk ahead of cpi given the people are talking about the potential for the reemergence of inflation and slowing growth next year. which is it to you? nela: pandemic upended the relationship between labor market and inflation and going into 2020 five, it's both.

higher inflation and slower growth has always been the risk. stagflation. there are ways to avoid that if we see strong and resilient consumer spending. that's if the fed can outmaneuver all of these other inflationary forces on the horizon. if not, those between risks are going to plague the year. annmarie: or if trump at two can outmaneuver with a higher inflation and growth on the fiscal impulse of policy discussions taking place. lisa: the question is, if you get both, it sounds a lot like the dreaded stagflation, which is difficult for the fed to deal with. nela, thank you so much for taking the time with us today. nela: it's been a pleasure lisa:. lisa:-- pleasure. lisa: coming up tomorrow, we get that key inflation rate ahead of

next week's federal reserve meeting. thank you for choosing bloomberg. this was "bloomberg surveillance ." ♪ what does a good investment opportunity look like? 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.

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> we start out little change and then we moved. we have 30 minutes to see what happens today. i matt miller. >> and i'm katie greifeld. bloomberg open interest starts right now. matt: stocks stall. caution mounts as investors look ahead to tomorrow's inflation report for more fed clues. oracle's