>> k-fed is more likely to go to be seamless. >> piece of the caution as they are to their core data-driven in their monetary policy. and we know data are missing. >> the market looks convinced that a cut is coming. >> they're pretty certain about -- cloak starting the first half of next year, you can see the fed not explicitly but implicitly start to signal pauses. >> this is "bloomberg surveillance." jonathan: live from new york

city, good morning, good morning. this is "bloomberg surveillance." equity futures on the s&p 500 up by .2%. just a little stability. check out the nasdaq 100. your scores look like this. check out the bond markets. a big selloff at the long end of the yield curve in last week's sessions. the tenure off. -- the 10 year. your week ahead is stacked full of data. the data point of the week as u.s. retail sales. the central bank decision of the week is the obvious one, the last full week of trading for 2024. the last fed decision of the year. lisa: welcome back. it is good to see you. we've missed you. jonathan: you miss a week away and you struggle what to say next. it takes a while. lisa: we have three more hours.

i'm sure you will be fine. there is a question you about how much they can signal and how much they're going to take into account some of the potential policies coming from the new white house. annmarie: when it comes to basically what are they going to say in terms of what the market is pricing in? how divergent we have seen the fed be from financial markets. bill dudley talked about how a november towels responsibility is categorical, we don't ask, don't speculate, don't assume. this time around jay powell should be more nuanced. jonathan: i think far more interesting things going on that we should be talking about. terry haynes is going to be joining us later this hour. u.s. telecom networks hacked. and explain mysterious drones flying over new jersey. the sabotage of telecoms cables in the baltic. you put it together, the backdrop right now, the highest political risk in, what, 50

years? we still don't have a clue what's going on worldwide. annmarie: no policy by congress when it comes to the drones. there is no policy and they feel like the administration is on the back foot and they're asking for my answers. we had officials from the fbi, homeland security come out and after talk about drones over people's homes in the shutting down of airports. it doesn't seem to be enough to acquiesce people's concerns. lisa: it is not adding up. i'm sorry. it is just not adding up. they are not a threat. there over crucial infrastructure. we are not sure what they are but they are fine. one thing is not adding up with the other and that is the reason why people are very concerned about why drones are flying over their homes. jonathan: they said there are two options. either they note and they are lying to us or they don't know and that is pretty scary. lisa: basically, terry haynes

races this, even if there is an explanation that isn't necessarily china or iran or aliens, it is concerning to people who have lost a good degree of trust that we can really protect ourselves from potential spine incidents like salt-which just affected a whole bunch of other microsoft outlooks. people are looking for what black swan is out there that could potentially disrupt the sense of euphoria that is been in markets. aside from it to got in inflation, there's a big question, what is looming that we do not see? jonathan: mysterious flying objects. equity futures right now in the s&p 500 up by 2% -- up by .2%. looking for the rally in the equity market to continue. terry haynes on mysterious drone sightings along the east coast. we begin thinking of the final

trade up the year. steve remains optimistic on stocks. he joins us now. it is good to see if most the equity market is on the nasdaq, not on the s&p 500 got on the small caps. we have talked a lot about a lot of negative in the last week or so. this was not the bet coming out of the election so what has gone wrong? >> growth, outside of last week's kind of selloff, the bond market did settle after the election. that kind of settle back in. what we think, and we made a move last week and are asset allocation reflect this, just harder and harder to justify owning non-us developed markets. i think you've seen capital leave laces like europe or now you have political instability not only in france, not only in the u.k. but also germany.

they said kind of at the forefront potentially tariff risk. growth has been solved. you are seen capital flood in the united states and it is helping growth. i think you saw that last week. jonathan: a repeat for 2022. we all remember 2022. bad for stocks and bonds. would you push back against that? >> it will be an interesting week. powell, who always like to surprise us, he may have another surprise. the market has gotten a little too concerned and hawkish about inflation. inflation has been sticky. but if you look it has not really broken out of any kind of long-term range. it still appears to be grinding down. i think you may see a powell that is a little more dovish than what the market is expecting this week. lisa: hold on a second.

you say he always surprises us. he does not surprise us, he out doves every expectation from the market. >> the market has priced in a terminal right here that somewhere now between 375 and 4%. we still think it is between 3% to 3.5%. on the dot plots, generally don't see the fed erase two cuts in one dot plot. maybe they pull one, push one out. you have got a street come a fed with five cuts between now and the middle of 2026 in their dot plots. a street that has only three more cuts. i think what you may see him do is deliver the cut in december and then talk about how their rhetoric is really about reduction in pace not a in direction. we are going to go to once a quarter next year but you should not expect we are anywhere near

in and. lisa: you push back toward the view that basically we are going to have a very inflationary and potentially stagflationary policy where you get growth slowing on the heel of some of these tariffs but not necessarily inflation coming in. you think it is the opposite. a lot of trump's policies will be less inflationary than feared. why? >> one, i think when you're talking about a tariff, it can be both a tax and inflationary. it is the one or the other. if it is a tax, there is an offsetting demand piece to it. you have to take into account that tariff increase is likely going to come in the major tax cuts. you have deregulation. you have some shedding of government jobs. both of those can be either certainly progrowth but also disinflationary because they take some costs out of the system. when you put that package

together, what is happening right now in the market is we are underestimating the growth that is going to come from the policies and overestimating the inflation. the fed would be wise to be patient here. see what actually gets through the sausage making process of washington. there are a lot of steps to go between a concept and actual policy. i think if the fed were to react in anticipation of that, they may end up being more hawkish in an environment where the labor markets are softening. annmarie: they should not assume issues that we are waiting for the policies to take hold? >> i don't see what policy you're going to respond to. if you want to respond to inflation readings being a little kind of hotter over the past couple of months and decelerating to a slower pace of cuts, i think that is appropriate. again, we have talked about the chest versus checkers. if you look at the proposals out there, you can say, this is good or that is bad or that is inflationary, that is progrowth. when you look at it together, we

think you will end up with something more progrowth, somewhat pro productivity, and that will dampen some of the inflation. annmarie: back to the rising inflation 2025. he says the risk is repeat of 202260/40 portfolio underperforms significantly. can you not you 60/40 next year? >> i run multi-asset which has a lot of those portfolios it is so i categorically disagree with that sentiment. look, what you are going to see is the bond market and parts of the equity market i think have now represent opportunities. a bond market that is sitting at 4.30, four point 40 with expectations of only three cuts next year, i think there's an upside case. you see the same thing a pockets of the equity market. some of the hysteria around the health care names, around some of the staples names. we look at that and say, we are not canceling drug development in the united states. we are not going to make snack

foods illegal. if you have value opportunities as an investor, those are good contrarian plays. jonathan: some of the snack foods should be illegal. lisa: i knew you're going to say that. annmarie: or just use beetroot. jonathan: you can make simple changes and i'm with you. moves of 25 basis points. what you think is driving that? is that the data? the expected of policy change? >> i think you are seeing -- i would say you are seeing a resurrection of the term premium. whenever $36 trillion debt, running deficits at the level we are running them, and you're not concerned about growth -- the market is not looking out and saying, i've got emerging recession on our hands. you are saying the short end is coming down along with fed cuts. we think a term premium is reestablishing itself at some

level. that doesn't explain last week's move but it does explain the idea our big view if you want to think about it in terms of the market really comes from the yield curve. we expect short rates to come down come along ways to stay right about where they are. that means short of duration fixed income, we think is in the sweet spot of total return. equities have duration. small caps have 30% to 50% of their lending is variable-rate thank ted. you by value names. dividend payers based on shorter-term expectations. that is one of the reasons why last week notwithstanding we expect this market is going to broaden out and lose shorter duration equities. we will see relief as long ways stay high and short rates come down. we think the yield curve steepening is probably the big market the story of 2025. jonathan: bull market, down about a basis point on a 30 year consensus going into wednesday is pretty clear, the market is

looking for a cut this wednesday, a skip in january. morgan stanley confident about today, cautious about tomorrow. bank of america, cut today, forced tomorrow. lisa: which is why people are looking at the data. the data has been confusing. the headline figure coming in hotter than expected but everyone pointing to the fact that rent has come in quite considerably. this idea of what happened last week to me was interesting because essentially any upside surprise and you get the biggest increase in yields in the tenure going back to october 20 20 -- jonathan: should we agree food wrapped in plastic should not be out for 12 months? lisa: you have an issue have bread out on the counter for two months. jonathan: it is not bread if it has mold on it after a month. >> that is a cracker. annmarie: come on, each bread.

-- come on, you each bread. jonathan: let's get an update on stories elsewhere. dani: drone settings have picked up in recent weeks starting the new jersey and spreading throughout the u.s. northeast. new jersey governor phil murphy and new york under kathy hochul are among those developing -- to many a clear explanation. homeland security secretary told abc this week there is no evidence of foreign involvement or there's a national security risk. bitcoin has reached a new high i get on president-elect donald trump support for digital assets and optimism about microstrategy inclusion in the nasdaq 100 most of the largest virtual currency rose more than three percent monday, topping 106,000 dollars. microstrategy's inclusion in the index is expected to drive up demand for shares, allowing the company to raise more equity to invest in bitcoin. starbucks hired its first ever achieve growth officer in china. the executive is tied with

roaring back young coffee drinkers. they said they will bring tides with entertainment brands and pop culture icons to market itself. starbucks has struggled as china's economy slows with cash-strapped diners. having been opting for cheaper local brands were coffee cake cost one third of that of a starbucks cup. jonathan: up next, a mystery in disguise. >> i want to assure the american public we are on it will stop we are working in close coordination with state and local authorities. it is critical we need from congress additional authorities to address the drone situation. jonathan: how much of the american journal public think they are "on it?" that conversation up next. ♪

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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. jonathan: equity futures on the

s&p a little bit armor. -- bit firmer. big selloff last week at the longer end of the curve. double basis point move. this morning, down a basis point. on surveillance, a mystery in the skies. >> i want to assure the american public we are on edge. we are working in close coordination with state and local authorities. it is critical as we all have said for a number of years that we need from congress additional authorities to address the drone situation. our authorities are currently limited and they are set to expire. we need them extended and expanded. jonathan: the latest, drone settings in the northeast picking up in recent weeks. new groove receipt governor and new york governor demanding a clear explanation from federal officials. terry haynes running china's ongoing u.s. telecoms hack, the

drones a mystery company we can incident at u.s. cyber and signal corp. hq signaling and together are significant market negatives. terry joins us now. i will ask you the question we post into the commercial break come how on it do you think the government is? >> i think the government represents about that, it is not on it at all. whether you have admiral kirby doing his best kevin bacon and animal house impression, all is well, mayorkas who told us the border is secure and it wasn't and now it is and then it wasn't. i could go on about the administration. i they have done nothing to reassure people here. the telecoms hack is one thing. for example. what i think that is the most clear and present danger. the fact the government flat out admits he can't do anything about it in the short term is nothing short of astonishing.

not designed to bring confidence to either the public or the markets, for sure. lisa: your questioning the credibility saying the admin has squandered its credibility to the point that it's rational not to believe what it says. it goes on to say, remember the chinese spy balloon when they were trying to court federal relationships with beijing sent outlook here it is not that big of a deal? who has credibility in washington to potentially ease the concerns of americans, especially those in new jersey who are seeing drones over critical infrastructure? >> i have not read the editorial but nobody has got credibility, frankly. pretty much on any subject. mayorkas come the clip you played, coming in reveals a lot. one of the things it reveals is the administration -- this is a guy who runs the department of homeland security.

doing everything about homeland security is the first requisite of the job. instead what he wants to say is congress hasn't given us enough authority. when you run the department of homeland security, go make the homeland secure. worry about the niceties later. maybe congress will run you in. instead what they want to do is spend a lot of time pointing fingers and telling people that it is really not their job, it is somebody else's job. that alone i think it's a very bad sign. annmarie: there is a lot of finger-pointing now, retrospect, who should have been doing this. but what policy should congress maybe work on? >> to the extent there are actually holes in the jurisdiction, they should make sure those are federal. make sure the military has the ability to do what they need to do. make sure the national guard is

involved, civilian authorities are involved. the administration essentially sat around ever since the chinese balloon and did nothing about this, did nothing to push anybody on this. so i think it finally -- fundamentally lies at the feet of the administration and not push congress to do anything about it. we have a continuing resolution that can be passed this week by congress before they go home. would not be too much to ask if they could do some of this stuff and put it in that cr as a response, but it is the biden administration interested in doing that? is congress? they are not. lisa: there's a larger question here and i think this is what you're getting at, in terms of a vacuum of power in washington, d.c. how perilous is that vacuum when there seems to be real imminent threats whether they are acknowledged or not? i seem to be covering over the

psyches of a lot of people in the market at least? >> hovering, that was good. the interregnum here is very perilous. in a lot of ways. what you have is a situation where the biden administration professes it is doing things but in fact isn't, blaming other people. the incoming trump administration meanwhile says, according to the incoming national security advisor, says they are also on it and they are coordinating with the biden administration. my view of this for what it is worth is they, being the trump people, ought to be taking a much more aggressive view of this. if they can start changing foreign policy, if they can start changing trade policy before they are in office, they can certainly light a fire under the butt of do something about

national security and get credit for it. lisa: trump writing, can this really be happening with our governments knowledge? i don't think so. let the public know now and otherwise shoot them down. there are series of articles expending why it is dangerous and illegal to shoot on property flying over your house. i am wondering from your perspective, houses going to play? what are you watching for? >> i'm watching for any progress on any of the things we just talked about whether it be the telecom network which i say for markets i think is the most disturbing since markets rely on telecom networks. whether it be the drone thing, the incident of cyber command over the weekend. any of these things. what i am looking for is somebody, anybody, to not make politics out of this but to make progress on it, informing the public as to what is actually going on and why it is going on. we are reaching a point here where the public needs reassurance.

the public in this case is being led in part by the skepticism or worse from state governors, many of whom are democrats who would normally be trying to do what they could to support the biden administration. here they are not at doll which alone tells you how alarming this is -- not at all which alone tells you how alarming this is. right now think people are just coming to grips with it and people are in decisional perspectives or places are just coming to grips with it and that is too slow. jonathan: the time to support the biden administration is long gone. terry haines, thank you. i don't think anyone advises private citizens to get on roofs and attempt to shoot these down but i'm with you, bremo. we have revisited this every four years and will do so for the next several decades, the wait until january, late january to change things out. i'm critical of politics in europe come hypercritical in the

you, but one thing they do right. there's an election, change of power, 24 hours later you are out. lisa: and it is not as if everyone can save kumbaya, let's get together. give some people think shoot them down another sign we have this under control while at dempster park is behind that. not exactly reassuring. annmarie: he saw democrats and republicans speaking from the same tomb. if they're registered, come out and tell us who these drones belong to. jonathan: i haven't got a clue. the fact we can't track them, that is the big problem. , sree kochugovindan. this is "bloomberg." ♪

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jonathan: we are almost there. equity futures on the s&p up by little more than a 10th of 1%. on the s&p, every day in december has a negative s&p 500 brett so far. the fact of the matter is coming out of the election, we were looking for a rally support and now looking for the small caps to perform. they have been down for two weeks. nasdaq 100 is up for four. lisa: i just can't stop and think king of -- i can't stop

thinking of terrible jokes. "this market has bad breath." jonathan: like humor in this market last week. lisa: market humor. let's move on. you are seeing some in the lowest correlation come the lowestbredth to thousand one, does that decline or is it a knee-jerk response to the idea we haven't necessarily seen yields on a map? i'm trying to keep going here. jonathan: it was nice to see chris rock back. can we make s&l funny again? -- snl funny again? yields are lower this morning by basis point. yields were materially high through last week.

lots of discussion over the weekend. lisa: basically the idea is yes, this is a federal reserve that is going to cut 25 basis points on wednesday, consensus. the consensus is shifting to them being more hawkish when it comes to what the project for next year in terms of the statement of economic projection. it seems like there's a coalescing around the idea at the neutral right is going to be materially higher than what it has been in the past. you can see that reflected in the yield curve and long end. jonathan: you can see it in the dollar as well. the dollar index only had one down we can the whole of the fourth quarter. euro-dollar right now looks like this. europe is tumbling toward 2025. i think we agree with that sentiment. we are down a tent of 1%. deutsche bank reflected on the ecb meeting last week, proposing 50. the policy start is stricter. tariffs have not been factored

in yet. which allows for the possibility of below neutral. if you take away everything, it is setting up to be a dovish ecb for 2025. lisa: christine lagarde hasn't necessarily been on the front foot of signaling as far as what the ecb is going to do. the question is what the policies are going to be and what this means going forward at a time where you have the likes of morgan stanley saying they think this is the first half of your story in terms of dollar strength. but once you start to get the implementation of some of these policies, you could see a reversal, especially if you get disinflation as a result of some particular tariffs. jonathan: the data out of china not great. retail sales growth weakening in november, figures rising 3% from a year ago. slowest pace in three months and undershooting even the most bearish of forecast. highlighting the urgency for beijing to once again encourage residents to spend.

lisa: this is leading people to believe the head fakes are from a number of other countries, namely the u.s., bringing forward demand for goods ahead of the potential implementation of tariffs. that is a sugar high and not necessarily masking what is going on underneath which is consumer still are not spending. annmarie: policymakers had the second time and only a decade they really want to boost consumption. to be honest, there been so many head fakes it is like the chinese consumer restrict lockdowns of the penned event. they have not recovered from the pandemic. jonathan: the curveball from last week is what they're going to do it for an exchange. no idea how much weight you should put on that report from reuters but ultimately indicating the top leaders and policymakers are considering allowing the u.n. to weaken as they brace for higher tariffs. lisa: suggesting they are going to lean into one aspect of the

economy that has been working, which is the export factory. chief exports at a time when that is the one thing that keeps working. how high will the walls be elsewhere? jonathan: moody's cutting france's credit grade, high deficit, hours after president macron appointed prince ron bayrou as a prime minister. -- francois bayrou as the prime minister. annmarie: s&p and fitch already had this level so why is moody's coming out saying the country cannot pass a budget, deutsche bank says, their commentary, moody's, future deficits is quite damming but the fact is it is a stable outlook for now and just brings it in line where s&p and fitch are. moody's is a little late to the game. lisa: the fact people are taking comfort they were on watch for downgrade further tells you the state of play. ok, not that bad, just a

downgrade but at least -- jonathan: both on the same page. how little needs to go right for this market to move the other way. lisa: that is the contrarian trade for 2025. you think about the euphoria baked into the u.s., basically china left for this paralysis we just saw, europe left for dead. maybe they don't have is that of a budget deficit for quarter and all of the sudden people flood in? jonathan: here's the latest on germany, the chancellor scholz expected to lose snap election on february 23. the new chancellor facing a host of challenges including a slowing economy and russia's war on ukraine. ollie, fantastic reporting on issues germany is facing over not just the last few weeks but the several years. walk us through the next 24 hours before we get to the big issues further down the road.

>> this begin november 6 hours after donald trump was elected president in the u.s., which by the way was very bad news for the political establishment here in germany. olaf scholz firing his finance, disagreements over the budget, how to spend the money. guess what? environment in europe where you have zero growth. those negotiations become tough and bring down governments. also france. for olaf scholz, that will be put on in full behind me at 1:00 p.m. he will deliver a 25 minute speech before lawmakers and that you are debate between the lawmakers will ensue after that. then a line vote after which we get basically the outcome of the no-confidence vote at 4:00 p.m. our time at which point he can go to the president and basically dissolve the government, paving the way for the election february 23. when we think about the issues germany is grappling with, pmi data, manufacturing -- 2.5 years of contraction. when you think about what these

parties are presenting in terms of an economic platform for changing things in germany, there is a sense to many people i speak to they are trying to treat cyclical disease with a cyclical curator structural cure. angela merkel just came out with her book. they put it in the constitution. it takes two-thirds majority to change. she says that needs to be reformed. what we are seeing from the cdu's they will not move on the debt break. lisa: even if there is due leadership, there are still a number of people and a majority that one to keep their commitment to not increase or deficit as they face off with a stagnant economy or declining the economy in the face of structural change? >> i think that is the main question. what is the point of having these really low borrowing costs if you don't use them when you need them? that is basically the issue.

we have seen this historically across german politics. this is a country that shut down the nuclear energy capacity in the midst of an energy crisis. you have a lot of these parties with strict rules that are unwilling to budge and that is been part of the problem, why this coalition did not succeed and fell apart a couple of weeks ago. jonathan: we will catch up tomorrow morning. the latest with the politics in germany. every road seems to lead back to the german chancellor angela merkel. lisa: she had a beautiful view of globalization and exporting to china and buying cheap goods from them and gas from russia. well, not exactly the panacea we are looking at now. why not increase the deficit? annmarie: debit debt break and years of underinvestment would come to infrastructure, defense. you cannot talk about their current state of german politics, economy without talking about the legacies of angela merkel. you mention russian gas. that is one of the big ones.

enslaved to cheap gas. they have yet to come over these policies, debt break, russian gas, and him is more probative -- political paralysis in germany is going to continue. jonathan: huge structural problems. let's talk them right now with sree kochugovindan. are they the geithner problems the ecb can address? >> i think the ecb is a challenging outlook. you have outlined a lot of the structural headwinds for germany. i think the political stasis that we are seeing is going to be something to monitor but as you say, it is very difficult to generate growth in this environment. this morning we already had the pmi for germany and france which were nudged higher but still and contractionary territory. we see the divergence between manufacturing and service sector. germany being the engine of growth and manufacturing being such a big component for driving german growth, i think the

outlook does look quite sluggish. we are looking for relatively sluggish growth from the area going into 2025, 2026. that is going to mean the ecb will be dovish going forward and we are expecting another four cuts from the ecb and with rates settling around 2% by the second half of 2025, so they are going to be quite quick in terms of the easing path. different from other countries, particularly u.s., which has a different growth backdrop. a way of growing out of the fiscal issue, something that is going to be challenging for euro area as a whole. jonathan: do you think the fate of the european economy is in the hands of european policymaker? or are they at the mercy of what happens in china, what happens with u.s. policy? >> very good point for next year. that is one of the risks we have when we create our scenarios, best case scenarios for

investors is looking at the trade challenges going forward. some of those trade barriers that are being discussed just hinted at so far, nothing concrete just yet, we don't quite know what is happening in the u.s. economy and that is something that other central banks are looking at including the ecb. we had christine lagarde mentioning about a month ago how we may need to shift our consumption patterns within europe and baby have to import other goods from the u.s. there will be a degree of negotiation from policymakers but that is separate from the ecb. what the ecb, the tools they have will be primarily through monetary policy and three easing rates. that will be -- obviously they will say it is data-dependent but for now it looks like a fairly aggressive pace of easing and that is something they will have to do in order to help shave off some of the bigger risks the euro area are facing at the moment. lisa: i want to build on what

jon is getting at, if they cut, will they borrow? we talk about a divergence between u.s. and europe, could have low rates but governments, sometimes even companies, won't borrow that much in order to invest and really innovate if ecb is accommodative, how much will that boost growth, boost the prospects of the region, even give stability to the region's currency? >> in terms of the private sector, investment does need some certainty and there so many challenges domestically, political challenges, globally of political challenges. the uncertainty around the trade parameters are going to unfortunately to be a headwind for investment from the business side over the course of the next year. we need to see some clarity and we are not going to get that until the second half of the year realistically. in terms of government borrowing, you've already

discuss the debt break is a challenge and it really depends on the makeup of the government after the february 23 election. if you get to see some sort of coalition with the greens, however, that -- we have parties are very much are against changing the debt breaks. those are going to limit the amount of borrowing from the governments there. that is a challenge. you are right this is the time to think about innovation and encouraging innovation from the corporate side. in order to keep up with competitors in china in the car industry is a prime example of that. the fact the engine of german manufacturing is facing something headwinds and effective transition from icy to ev has been lackluster relative to china which is miles ahead and also other automakers across asia. i think that is a key challenge that needs to be addressed. whether they will address it next year, it is going to be very difficult to see that

happen. lisa: do you see europe acting in a bilateral stance with the united states, especially, or do you think brussels will speak with one voice? >> i think it will be with one voice. as it stands, over the course of 2025, there is a risk, are right, in fly can get where we have the far right parties in france, germany, stating they are going to be -- they're even challenging the concept of the european union. fragmentation limited for now. the situation of brexit was different in the form of the referendum. the way it was 50% level of winning or losing that argument. i think that needs to be taken into account. fragmentation risks are marginal for now. it is going to be fairly loud voices in play but i think ultimately what we saw in the

2016 trump administration was tariffs being used to negotiate. will put on tariffs and less you shift your migration loss or you buy goods from us. that is something that europe is better to do as one voice. there will be some challenges from these individual parties. at the moment, it seems that one voice is still possible for the course of 2025. next year is key and terms of setting the outlook for the next five years given these trade parameters moving. jonathan: good to hear from you, sree kochugovindan. what will it take to end germany's love affair with fiscal austerity? lisa: i think you need a therapist for that. jonathan: hundreds of employees of the ministry went outside dressed in black, the shape of his zero.

deep in the fabric of that government. lisa:'s this goes back to the 1930's after world war ii and world war i and it goes to this idea of we never want to see that kind of inflation ever again and the scars of that go deep. at the same time, you think about the people calling the american-style evil in terms of borrowing more than you can spend and there is here. jonathan: euro-dollar, turning negative on the session. an update on stories elsewhere with your bloomberg brief, dani burger. dani: update on the deadly shooting of unitedhealth ceo brian thompson, police claim to now have overwhelming evidence tying suspected gunman luigi mangione to the fatal shooting. he hired high-powered new york defense attorney to represent him. she could argue in insanity defense or challenge the evidence and may consider a guilty plea to reduce his potential prison term. former house speaker nancy pelosi is recovering from hip replacement surgery.

her office can from the surgery took place at a germany. she is 84 years old. she suffered from a fall on friday and luxembourg during an official trip and was hospitalized. her office did not describe the details of the severity of the injury but added she is well on the mend. tesla shares, those are moving higher just slightly by a third of 1% after hitting a record high on friday. wedbush analyst come, surprise, price target on the ev maker to a streak high of 515 a share from $400. wrote in end of the trump white house will be a total game changer. that is your brief. jonathan: we will talk about tesla later in the program. look out for that. , bending on december rate cut. -- up next, betting on a

december rate cut. >> markets are pretty -- jonathan: live from new york, are watching bloomberg tv. ♪

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jonathan: live from new york city, welcome to the program. equity futures on s&p up by .2%. bedding on a december rate cut. >> the number of rate cuts they show in 2025 will go down from last time. those things together will make it pretty clear that probably going to be a pause. markets are certain about a cut. jonathan: investors gearing up for a busy week.

wednesday, at the decision of chairman powell news conference. anita richardson joins us. the word commit regards to the labor market, stability. -- the word, in regards to the labor market, stability. >> the labor market is stable if you look at the main features of it. workers are staying put. layoffs are very low by initial jobless claims. hiring has been robust. the second thing we're looking at is pretty stable wages. elevated level. that will put pressure on the fed as it seeks the 2% target. even though wage growth has been at levels higher, people are working less. for hourly workers, which make up 60% of the labor market, their pay is not keeping up with inflation. so there's this undercurrent of instability within the overall stable labor market. i don't think it stay stable in 2025.

lisa: tell us where we are heading with this? where is it going to break? labor market. >> what you're going to see is a bit of a hesitancy as you round the corner in january two a new administration, potentially new policies. i think you are already seeing some hiring back off when it comes to smaller firms. we are watching that very closely. if you try a stable wage growth pattern with sticky inflation, what you're going to see our workers who are not as happy as they have been over the last few months and we are already saying that in workers sentiment data. the loyalty to their employer, that enthusiasm about work starting to slip. lisa: i think about the m&a boom people are talking about. how much does m&a tend to lead to layoffs when there certain efficiencies of scales? >> great question. we are expecting that activity and we will be watching closely about what the overall mark on the labor market will be. you would expect there's going to be some turn, whether it is

layoffs or people voluntarily quitting is also happens during mergers and acquisitions. that might put some churn in the labor market which actually leads to higher wage growth. something to watch. it also goes back to inflation. annmarie: if more workers are staying at their current jobs, how hard is it to find a new job? >> it taking a bit longer. especially for college degree holders. which is a shock. they were used to what they heard from their friends who graduated two years ago, snapped up the labor market. that is not happening. it is taking a little bit longer to get that job. annmarie: is that because the employer some have the job or can we say maybe it is down to ai and more efficiency? >> ai is going to affect -- where it is going to sink in is at the entry level jobs. that is true across industry. excellent point. we are not sure if that is

actually happening right now because companies are still trying to implement their ai policies. what we are seeing is a slow down after record high hiring in the last two years in the college degrees just not getting -- i tell young people when they contact me, and they often do, that networking is back in style. networking that may have been lost two years ago with his digital economy, draw out your resume and somebody catches it. now you might have to talk to someone face-to-face. for genz, that is a nuclear -- a new skill to learn. jonathan: 100% any advice. a lot has changed. good to see you. up next, j.p. morgan asset management. equity futures just about positive. ♪

>> on the equity markets, i see some nervousness. >> i would expect markets to broaden out largely because the earnings differentials are likely to moderate. >> you want to be positioned in front of the economy that are growing and also have a high share of domestic revenue. >> the consumer resilience is not waning. they still have some cushion across all income cohorts, high, middle, low.

>> the market is confused as the fed is about the data. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the second hour of "bloomberg surveillance" starts right now. here is a snapshot. equities right now positive by 0.2% on the s&p. on the nasdaq 100, big cap tech, up again by 0.3%. lastly, a selloff in the market. this morning, a littleton of a bid. the 10 year -- last week, a selloff in the market, but this morning, a little bit of a bid. the big one on wednesday is that the decision and chairman problems conference. lisa: amid a confusing set of data that still gives a lot of ammunition to people who want to view this as a disinflationary environment and those who want to view it as an inflationary environment. the key question will be how the

fed paints the picture into 2025, how much they accept some of the policy as fact or wait and see and how much that trickles into their economic projections. annmarie: moment of every and publishing -- mohamed el-erian publishing this morning. some think potentially you are going to have a skip and then a very long pause. very few but maybe once we see more of trump's policies flesh out like the peterson institute will say it is a pause and then potentially a hike. jonathan: started this conversation months ago. recent inflation readings show signs of decline in inflation has stalled. there is a risk every acceleration. for investors, the big risk of next year is a repeat of 2022 where it was painful for both bonds and stocks alike. lisa: what we saw in 10 year

yields was not all of a sudden a moment everything. it was not from failed options. options were fine. this was a steady grind higher as people reassessed what it would be long-term and what the neutral rate would be. there is a real fear we are underestimating the inflationary impact and supply-chain descriptions but more importantly of immigration and the workers, the potential for salaries to really lead the increase. that was giving some people pause. jonathan: that is one part of the story. the second point supports that. the easing of the federal reserve at a time when you see those things develop that is contributing to the long and on the 10 and 30 year. when you hear people like chris wilder come out and say they believe they are a long way from neutral, it is a a lot of work to do to get to neutral. there is a bias that grips the federal reserve regardless of what the project for january. lisa: the fact that the long and has risen in terms of yield so much since the fed cut by 50

basis points, that is still a mystery. is that simply analogous to what we have seen or is there something more here that people are looking at and saying, hold on, maybe they are going and little too soon? jonathan: we are down two basis points on the 10-year. 4.38%. coming up this hour, we will catch up with kelsey berro as investors await the wednesday for decision, henrietta treyz, and wil vanloh on the outlook for energy under a second trump term. we begin this hour with stocks higher and bond yields a little lower. kelsey berro writing it is time to stop worrying about whether the fed can continue cutting interest rates. our new year's resolution is to embrace the current bond market one where the zero lower bound and negative yields are becoming distant memories. good morning. kelsey: good morning. jonathan: start with the moves last week. what you think underpinned the move? kelsey: it is interesting.

the move last week i do not think was connected to anything specific as it relates to the auctions. lisa as you mentioned, the auctions were fine. i think the data is generally consistent with the fed's current easing bias so my interpretation of the inflation data, i think they will see that and think on the margin it is actually positive because when you look at the readthrough of inflation to core pce which is the preferred measure, it'll actually be softer in november. and i think the key thing they are looking at in terms of the inflation data last week that was monumental that people are not looking at i do think as much as they should is the step down we have seen in shelter inflation. that shelter inflation, the renormalization of the primary read back to pre-covert levels, that is not through in the year-to-year rates. i am not think shelter inflation will slow further from here. just maintain is pre-covert trend.

this inflation in the pipeline on a year-over-year basis that will bring core pce closer to 2.25% to march -- by march. there are ways to interpret the inflation data but i think the inflation data has been telling the fed we stalled on progress for a little bit, but things are generally going in the right direction, so that brings us back to why yields were higher last week. i think people are setting up of the potential for the fed to sound hawkish, and i think that is probably already in the price , and now we may be looking at more of a potential if the fed were to surprise either way, it could actually be to the dovish side because the market is only pricing two cuts next year and from the fed's perspective, i don't think they have seen a lot has changed yet. the market is forward-looking. the fed on the other hand, they are still stuck in the information that they know. jonathan: the consensus view is to cut this week and skip january. do you challenge that?

kelsey: i think it is a fair base case that is in line with our base case, but when i look at the probability of january being lower than 25%, that i think could still shift between now and the next decision depending on the data we get, particularly on the labor market. the labor market data has been incredibly choppy, but as your last guest mentioned, beneath the surface it is taking longer for people to find jobs. the unknown limit rate is creeping back hired to where it was over the summer. that is the reason the fed is really focused on maintaining this easing bias despite the fact that inflation has taken longer to get back to target. lisa: because a real tell will be if the fed sigma something more dovish than the market was expecting. do you expect the long end of the yield curve to rally or selloff? kelsey: i think it is probably stable around here so i would not expect a big move either

way, but i would say in terms of our risk budget, where we are putting risk to work in our portfolios, we have been staying pretty neutral as it relates to u.s. generation. where are we putting risk to work? one, on the curve. i think there is scope for the u.s. curve to steepen. maybe it would be a twist steepen where you have the front end fall and the long and rise. if you are not buying duration in the u.s., we are still fixed income investors. we are buying duration in other places, the u.k., europe, and more recently australia. australia is one of the last central banks that has not started their easing cycle yet, so there are plenty of places to look at. lisa: you make a legitimate kiss for the u.s. but it is complicated. you start talking about -- case for the u.s. but it is complicated when you start talking about the u.s. is not just restrictive but even easier

monetary policy when you have a swiss national bank policy president talking about negative rates. no one likes them, but they work. at what point do you forget about the u.s. and go europe and australia? kelsey: that is essentially what we are doing. you can stay fairly close to home as it relates to the u.s. right now and wait for larger dislocations and take the risk budget and put it other places. the other place we continue to lean into his credit. credit has performed very well this year. one of the things we have been focused on, there is a lot of airtime, and i contribute to that airtime, on the fed. the fed has cut but not nearly as much as what people were anticipating at the start of the year. that has actually been a good thing because it reflects the fact that economic growth has been extremely strong. and if you were to invest in high yield at the start of 2024, you are looking at high single-digit returns.

you got to carry, a little bit of spread progression. that is an area we see. jonathan: what is going on with the riskiest part of credit? kelsey: in the riskiest part of credit, there is a lot more idiosyncratic stories, within the telecom sector for example. and those are places you really need to understand the specific company fundamentals, company situations that are going on, but i would say more broadly about the high-yield universe that it is so much cleaner of a universe that it has really ever been -- than it has really ever been. what is striking to look at is to look at the divergence between defaults and high yields versus defaults and leveraged loans. both are still low, but really the high-yield universe is extremely clean, and that is why

when i look at spreads that are so tight, is it justified by the fundamentals? i would say it is. jonathan: rational or irrational exuberance gripping the bond market? which is it? lisa: the key question is whether the private market puts a floor under the equality of the public what markets, including triple c. it is a reason why people are talking about a different quality of the high-yield public market that is different from the previous one. much of that was at play here? kelsey: i think that is definitely a significant story. if you think about the growth in private credit, it has gone from something that is very small relative to the high-yield and syndicated loan market to one that rivals the size of the two of them, so it is a legitimate and full asset class. the trends have changed. just to compare the index spread on high-yield today versus the

history is missing the point because the index itself has changed in terms of the quality. lisa: there has been a restructuring or basically you took all of the private debt and put it in the public hands and have seen leverage balloon in the public market u.s. government and everyone else looks a lot better and essentially there is this question of, can you have your lunch and eat it too? everyone is thinking i think so. jonathan: are we saying triple c's are not what they used to be? kelsey: again, it is very idiosyncratic and company specific so we are quite involved in that space but you have to have the resources of the research desk that the people who understand the law aspect of it, the litigation aspect of it, and that is a really specific pick your spots type of situation, so the way we have been doing it is a bit of a barbell. you choose your spots in triple

c's where we are involved and active in the negotiations of restructuring and on the other hand, you have the companies that we feel really comfortable about more on the higher quality side. jonathan: credit spreads are supertight good good to see you. equity futures positive by 2/10 of 1%. here is dani burger. dani: south korea's parliament has voted to impeach the president on saturday. with his duties now suspended, he awaits a ruling from the country's constitutional court on whether he will be removed or restored to office. the decision can take up to 180 days from the passage of the impeachment. bloomberg has learned apple is developing a giant foldable ipad like device. the company is aiming for a 2028 release. apple's goal is to avoid the crease that current products have when the screen is opened.

the kansas city chiefs trounced the cleveland browns 21-7 with patrick mahomes throwing two touchdown passes before leaving the game with an injured ankle. the philadelphia eagles beat the pittsburgh steelers for a franchise best 10th street win. the new york giants suffered a franchise record-tying ninth straight loss to the baltimore ravens, and that is your brief. jonathan: thank you. up next on the program, a spending fight on capitol hill. >> where anybody is going to be willing to cut is anybody's guess, and the deficit keeps getting bigger and the overall national debt keeps getting bigger. sooner or later, that debt will catch up with us. jonathan: janet yellen in the last week or so regretful. lisa: very regretful although she was in position to talk about it a different way for years but waited until on the way out to say it is someone else's problem now. jonathan: like catching people at 3:00 a.m. stumbling out of a nightclub regretful that they

drink too much. lisa: the walk of shame. jonathan: from new york city this morning, good morning. ♪

jonathan: just a snapshot of financial markets stateside. equities ok, up a quarter of 1%. bonds rallying. down three basis points on the 10 year. under surveillance this morning, a spending fight on capitol hill. >> offsetting costs seem to be something congress does not feel like they have to do anymore. it has been a long time since the grand bargain. even though it technically fell apart, republicans still got $80 billion worth of cuts in the budget. where anyone is linked to cut is anybody's guess, and the deficit keeps getting bigger. the overall national debt keeps getting bigger. sooner or later, that debt will catch up with us.

jonathan: lawmakers struggling to avert a government shutdown before friday's midnight deadline. the measure expected to set a new deadline, pushing the issue to trump's second turn. henrietta treyz saying investors should read into this bill. federal spending will not be cut next year. henrietta joins us now for more. welcome to the program, as always. can we put a number on this for 2025? just how big will that deficit actually be? henrietta: sure, i will put it into some context for you. federal spending will increase 1%. that is just one bill. the cr they will pass by the end of this week will increase federal spending by at least $100 billion as they try to just compensate for the hurricanes and typhoons and other disaster relief, so that is just to get through march. we will continue that for the rest of the year. annmarie: i thought we were not supposed to be in this process

the week before christmas. speaker johnson wanted to make sure everything was over and there was not this christmas tree wish list of jamming whatever you can into a cr. what happened? henrietta: it is an example of what we will get next year. when you have a zero seat margin in the house coming have to delay the toxic legislation that does the opposite of what you intended to do so you get these last-minute pieces of legislation, hope members will vote for it as they try to get out of d.c., and that is a huge proponent of getting this bill turned into law, wait until the last minute. i suspect we will see that twice next year as republicans have to negotiate with democrats on a spending bill into march 15 and beyond and also on the debt ceiling, which can either be march or more realistically july. annmarie: is there any chance they put provisions in the upcoming cr about the debt ceiling given the fact that this is game on january 1? henrietta: not this cr.

i don't expect the debt ceiling attached to the cr. they cannot do it politically until they absolutely have to. i don't think negotiations with democrats will bear fruit on that front. my question is whether it will be addressed in the march 2025 cr or if they will keep it a whole different package. late last week, senator lindsey graham who is going to be the budget committee chairman indicated he would not include it in a reconciliation bill which means republicans will have to negotiate with democrats. it is a politically toxic piece of legislation that will suspend the debt ceiling for another year or two and increase the debt ceiling by another $1.5 trillion to get a year of functionality. annmarie: these bills are just for the government to function. when are we going to see the lawmakers talk about some of the policies given the fact that they had this sweep in a reconciliation bill? henrietta: that is happening right now behind the scenes and they are trying to figure out if they will go with two pieces of

legislation or just one. the senate would like two bills, knowing and acknowledging the tax bills will take all your to write. if you wait for one piece of legislation that includes a massive deficit increase in tax bill, you are probably going to need to give trump no legislative wins until december 2025. that is obviously politically missing an opportunity, and i think what the incoming leader is recognizing his they can get a small reconciliation bill in the first half of the year that addresses the border, military spending, and immigration components, and that will spend anywhere between $20 billion and $200 billion. they are working behind the scenes now to pull the reconciliation package to but to put this into some context, the house republican conference chair is not going to meet on this topic until january 4 so it will be a while and will take all of the first part of 2025 to write that if they will get that done. lisa: are the bar so low that we

are hoping numbers of congress can get together and just keep the government open another couple must before they reconsider whether or not to keep the government open? we were talking about a fundamental question of power in d.c. as a host of threats based off, whether it is drones, buying from china, some really unfortunate incidents that happened on an army base over the weekend. what do you make of how vast this document power is now? henrietta: that the stuff that the house and senate are not equipped to handle quickly. they cannot pass legislation with any kind of speed, and as you pointed out with the cr, that usually only do things under duress at the last minute so that is an arena for either a state government or the president to do whatever he is able to do under executive order but it is not what the house and senate are equipped for. lisa: one of the aspects of government that tends to bring comfort or fear depending on your beliefs is that there are a core group of people who do not

focus on the winds of politics, they are just keeping their nose to the grind stone and paying attention to what the threats are, to surveilling the skies. are those people staying and doing those jobs? are they leaving? do we have a sense of whether the infrastructure is intact? henrietta: those core competencies, those in the federal government are folks that have chosen to dedicate their life to this. what i think is notable and missed in the conversation around cutting the employee workforces come over the last 40 years, federal employee rates have been effectively flat, meaning this is not a situation where you have some growing corporation that has this boost of employee activity. this is a relatively stable 40 year norm for a federal government that has gotten much bigger in terms of its daily interactions, it's legislation, responding to a pandemic, the great recession, the affordable care act, the chips and sciences act.

they passed all of these bills that should grow departments like the department of commerce for example. when you are investing in infrastructure $1.5 trillion, when you are investing in chips and sciences with massive vets across the country to grow batteries and semi conductor chips, you expect it to get bigger but that is not what we see in the federal government. those folks hopefully will stick around. annmarie: lisa was using language that only comes to mind when talking about drugs, surveilling what is going on. do you think in this new cr we have coming up there could be new regulatory roles regarding drones given the fact that you have seen bipartisan chris is about what is going on in neighboring new jersey? henrietta: i would be really surprised. right now, they are really tied up over the farm bill and another aid package as we anticipate trump largest additional tariffs that china then response to and hits

farmers. there were three farmers bailouts in the first trump administration and they are trying to provide them with a bailout package. that is what the debate is about right now. i have not seen it get sideways about drones but obviously senator schumer, the current majority leader, is interested in the topic so it is possible, but you mentioned the christmas trait at the beginning. they will try to keep things out of it. jonathan: are they lying to us about the drones? yes or no? henrietta: that is above my pay grade. i don't know. jonathan: we will let you go. good to see you. thank you. option one, they either know and they are not telling us or they do not know and that is terrifying. which one is it? lisa: which one do we prefer? honestly, i hope it is that we are being ghastly. but that seems to be the reason why people are concerned. annmarie: you don't really see the number of officials from

homeland security, fbi come out and have to talk to reporters because of the uproar we are seeing with these drones. the fact that a local airport had to be shut down, and then mayorkas comes out and says one of the increase is september 2023 the faa allowed nighttime drone flights. why did the faa allow that? why? jonathan: there is a reason for the loss of trust and you mentioned it early this morning. the spy balloon of almost two years ago. it was not anything, it was not anything, it is a thing and we have to shoot it down. lisa: maybe they are just christmas drones, christmas lights. jonathan: what did the chinese say the weather balloon was? a weather balloon. up next on the program, wil vanloh on surging investment to power ai. ♪

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

jonathan: i get the temptation to be bearish right now. i get the temp tatian to be bearish right now -- temp tatian to be bearish right now -- i get the temptation to be bearish right now. a seven-week run. make it eight weeks after this morning's advance. lisa: some people bought when mortgage rates were low. jonathan:jonathan: that was the corner of the century. embrace the bubble. we see that over the weekend. lisa: this is basically what we hear from everybody. brian said i was the fomo kind of got. are you still?

i can and i can't be. everyone is in this goldilocks time. have i been so bearish? have i been raising the prospect of armageddon? jonathan: less so since the election. lisa: i think there is a narrative that can be painted that things will look really ugly tomorrow, but it is a holiday season. jonathan: doing it just because christmas is around the corner. lisa: 100%. jonathan: how generous of you. the s&p 500 advancing by a quarter of 1%. on the nasdaq one -- on the nasdaq 100, higher. let's cross over to manus. manus: good morning. the personification of activism is displayed in this talk this morning. honeywell. elliott took a position in them and wanted radical change. here we go. unlocking sure that shareholder value -- unlocking shareholder value. someone has a $5 million estate

and want change, their payback . that is whatelliott elliott is extracting today. maybe activism has merit and value. ford gets a downgrade from jeffries. nine dollars on the share. you have the most amount of sell ratings on ford since 2009. the sell equivalent rating. one of the big decisions they will have to make according to jeffries is resizing if not exiting from europe, so there is a lot of issues around that. take your mind back a couple months ago. bailed on this deal. it fell apart with tapestry. finding buyers for the two brands. do they go as a one-stop shop, or is it separation and creating

a little more value there? jonathan: thank you. protect that affordable luxury. lisa: that is all it was with the antitrust forget it not just luxury but affordable luxury. i did not realize that. jonathan: affordable luxury by definition? i am not your it is. antony blinken sang the u.s. had direct talks with the syrian rebel government. also, sanctions relief. annmarie: this is going to be challenging because hts is deemed a terrorist organization by the u.s. and a number of people so how do you lift sanctions? at the same time, they are coming in with a change of tune on how they want to govern. if they are going to govern and there is this power vacuum, they would need sanctions relief for the idea to make sure that fuel and food are able to get into the country. very challenging time. luckily for this administration, they will be handing off this

problem to someone else. jonathan: what is it about syria and sanctions relief with this administration? wasn't there a report suggesting they were willing or at least exploring removing sanctions before this happened? annmarie: i have some reports on this. the biden administration and the uae were in talks and discussion of potentially lifting sanctions on assad. the reason for this would be to try to push iran back, to isolate iran. if you lift some sanctions on assad, maybe you push him back to the middle east and push back on iran. the second i read this report and you saw the fall of assad, this administration were considering, even discussions lifting sanctions on assad. it meant they had no clue the government was so weak that he was about to fall. jonathan: they missed a lot of things in the middle east the last few years for sure. homelands acuity secretary alejandra mayorkas saying the drone sightings mostly

concentrated in new jersey do not pose any public or national security threat. he said increased sightings could be the result of 2023 faa rules allowing nighttime drone flights. lisa: why did they allowed nighttime drone flights? that is another question. this coming from a number of different sources. ok, we have two scenarios. one, they do not know and that is scary. two, they are gas letting us, they don't come and there is something else. third, what if they are looking for something like radioactive material or something specific that could be a threat? there was the prospect of aliens but i do not believe that. there is a question of, is there's something else? that goes to the crux of the vacuum of leadership that raises concerns for a lot of people. annmarie: if you have no policy in congress when it comes to drones, everyday people can buy them and you and i can go out and buy a drone. if it is less than half a pound, we don't have to register it. or it could go in the hands of adversaries. that is the concern happening

right now especially when over critical infrastructure or near where airplanes are taking off and landing. lisa: i was once in florida and there was this group of guys that had this beautiful new drone and they came over and set it up and everyone gathered around to watch it and they made it go and it promptly got stuck in a tree. they spent the rest of the afternoon getting it up. jonathan: that is your experience with drones. lisa: that is my experience with drones. jonathan: just lighting. we want to talk about how much this country has been gas that by this administration over the last couple years. on the border, on the president's mental acuity, on issue after issue. this general public feels like they have been gaslit by the biden administration on several issues the last several years. annmarie: when it comes to the drones, the issue that many feel most gaslit by has to be the chinese spy balloon. it was told it is not a big deal and then it is a concern and we will not have our top diplomat go to beijing because of it.

the biden administration has squandered credibility to his point that it is rational possibly what it says, and that is why people including democratic lawmakers and governors are saying, actually, we want more information on these drones. jonathan: let's turn to apple, reportedly working on a vulnerable ipad for a release in 2028. designers are developing something like a giant ipad that unfolds into the size of two ipad pros side-by-side. apple is exploring the idea of a foldable iphone as well so they are finally making a move. lisa: but here is the obstacle, they cannot get rid of the crease. this is the whole thing, that they might get rid of the crease. apple's playbook is to do it late but do it better. annmarie: the prototype of this device has a nearly invisible crease. maybe this is something worth buying. i don't know why everything needs to be full double. jonathan: waiting for the

foldable phone before upgrading out. lisa: really? this is for you. annmarie: actually, i think it is for people who do not carry handbags. i know jonathan doesn't. jonathan: thanks for clarifying. annmarie: if you want a bigger screen but you have to fit it in your pocket. jonathan: i was in the market for a coach handbag. lisa: affordable luxury. jonathan: that was very important for me going into 2025. goldman sachs -- goldman sachs saying three times the level of energy from 2022 will be used. wil vanloh joins us now forget good morning. it is good to see you. the incoming president wants to unlock energy in america. drill, baby, drill is something we heard from him on the campaign trail. how difficult will t be? wil: first of all, thank you for having me on this morning. it will be difficult.

in terms of oil and gas production, oil in particular, we have really developed most of the shell resource plays. other than the permian, they are all either peeking and rolling into decline or they will soon. and i think the permian, maybe we could get another million or 2 million barrels a day out of it. we produce 13 million barrels a day now so maybe it gets up to 14 or 15 million but that would be the limitations of the permian. lisa: given the fact that there is runway, what could changes in the trump policies next year do fundamentally to shift the investing landscape, to shift the energy landscape from your perspective? wil: right. the big thing is lifting the lng pause from last year. there were tens of billions of dollars of investment slated to go into the next phase of lng buildout. that is critical for our allies, for america projecting its power throughout the world, to export

that energy. that is the biggest thing he can do immediately. he said firstly in office, that is something he may likely do. but i think other than that, permitting reform is the biggest thing that we need. that is not only for oil and gas but also for transmission. the wind and solar buildout continues. the biggest model is transmission. having regulatory relief in terms of how long it takes to get these powerlines permitted, permitting midstream pipelines so we can get that gas, america has a lot of natural gas, more than we do oil, so we have to be able to build the critical infrastructure to get that power and gas around the country. lisa: what has been fascinating for so many people is there is a dissidence to all the discussions around artificial intelligence, the energy required to power that, and just how long the process is to build it out from infra structure process and the fact that policies tend to ping-pong and

change quite considerably. how do you get around that when investing into a big opportunity but has major pitfalls? wil: a typical ai query takes 10 times the amount of power that a regular google search takes, so you mentioned the power demand will triple for data centers over the next five to six years. that is a massive amount of power. a data center, one gigawatt gas turbine that fires a data center could power 800,000 homes. so you think about that. data center demand for power is going to grow about 50 gigawatts over the next six years. that is enough power that we will have to install enough power to power 40 million homes. that is a lot of power. annmarie: absolutely. i cannot help but think that president trump was elected in a

few weeks later chevron is saying we will pull back on the permian. do you see more u.s. oil producers pulling back on drilling because actually the oil right now price point is not advantageous? wil: that is correct. you look at where prices are today, the inventory that is left, it is economic at these levels and that is why i say to be careful projecting how much production the u.s. can actually grow, so at these prices, no, i do not see anybody drilling more. annmarie: do you think the trump administration would be more willing to accept what the biden administration might do on the way out or do it themselves, which is to maybe start to hold back on russian oil? saying we will actually sentient oil outright, really hurt putin? at the same time, if the prices go up, that may be better for u.s. drillers. wil: it is difficult. there have been tensions in place, arguably not very good ones, and so i think clearly it

has been rumored and talked about. how effective it will be, i don't know. but i do think president trump is focused on keeping energy prices low for the american consumer, and sanctioning russian oil would have the opposite effect of that. annmarie: the other thing you mentioned is gas and how much the u.s. has natural gas. you think we will see executive order 20 comes to the lng permits. do you see it growing for the u.s. and europe because they are looking for a bipartisan wedge into acquiescing themselves into the trump administration? wil: europe is still buying a lot of gas from russia. it is not talked about much, but they have to. so that is absolutely why we need american lng to be expended significantly. we have the gas to supply to our allies in europe. it will be a critical part of trump's energy policy and something that really needs to happen. lisa: in the meantime, given that these policies are

questioned marks right now, how much are you going to the sure thing which is tech companies themselves and working directly with them to build out energy? because they need it and they need some certainty and you probably provide that with the pool of capital that you have. wil: yes. i think a couple things will happen. the problem with all the growth in ai demand for electricity is it still takes four to five years to get a gas-fired power plant built so we have to look at the existing asset-based in the u.s. today. if you look at the 200 gas turbines installed generating power greater than 500 megawatts, those run at a 55%, 56% capacity factor. so there is a lot of capacity left in existing assets but are the regulators going to allow the tech companies to take the excess power? because that excess power is needed when it gets really cold or really hot and demand surges. that will be the tug and pull. we have it. it will take a lot longer to build out the new power plants, but how will that play out

between the consumer on one hand and the tech companies on the other hand? lisa: in five to 10 years, how different with a backdrop look for big energy in the united states at a time when big oil has been self constrained in a number of different ways from their investing programs and you have upstarts like not only yourself but a host of private investors who are trained to really get in alongside big tech? wil: yeah, so i think there is a lot of capital formed. we heard about huge partnerships over the last couple months that are on data centers, supplying power from data centers. if you think about it, if you spend $1 billion on power for a data center, you will spend $10 billion on the data center itself and another $20 billion on chips, so the power component is little over 3% of the total cost of a data center. so i think there will be clearly the big companies will have to partner with both private and

public companies to get that power. but the truth is most of the power is controlled by big utilities, regulated utilities. so i do think you will see a lot more private companies coming into that space to partner with the big tech companies. jonathan: americans do not want european energy prices. that is for sure. i wonder how much pressure there will be on providers to make coal great again. how pragmatic do you think politicians, leaders and america will be on that issue? wil: well, if you look at the united states, we have retired a lot of our coal plants over the last couple decades. europe has retired even more. the u.k. retired their last remaining coal plant used to go, which is at extorting every statistic. jonathan: it is amazing, and i see the government leaders celebrate it all the time and my mother calls and tells me what her electricity bill was what her if bill was, and it is astronomical. wil: in every part of the world, china uses more coal.

we was more coal today in the world than ever before despite the drastically reduced reliance on it. the rest of the world, india, china, it is exploding. it does not matter where it is burned. there is one atmosphere, and that is the other thing we have to appreciate. coal use will continue to go up. i don't think it will in the u.s. it will in europe when they get really cold or really hot. but in asia in particular, you will continue to see massive use of coal because that is the fuel they actually have. it is about energy security. china uses ev's not because they love the environment but because they can burn coal to power the ev's and not have to import gasoline. jonathan: amazing. good to see you. wil vanloh, amazing. here is your bloomberg brief with dani burger. dani: the softbank ceo is expected to announce this

morning that he will invest $100 billion in the u.s. over four years. a person familiar said he will make the announcement at a press conference with president-elect trump forget it will also include a promise of creating 100 thousand jobs focused on ai related infrastructure. the pending sky dance and paramount merger is facing more critics. in an ecstasy filing, the combined entity would have more power to prioritize its own content over independent programmers, likely concerns raised. sherry redstone would be overpaid in the deal. moana 2 top of the north american box office for a third consecutive week. the sequel grossed 337 point $5 million in north america -- $337.5 million in north america. followed by wicked and kraven,

which debuted to an $11 million opening. jonathan: thank you. up next on the program, the looming tariff threat. >> the big question and the big opportunity and the big unintended consequence of tariffs will be passing this cost on to consumers, which may yield inflation. so we will see. jonathan: that conversation up next. ♪

jonathan: equity futures right now on the s&p positive by a quarter of 1%. under surveillance this morning, the looming tariff threat. >> the big question and the big opportunity and the big unintended consequence of tariffs will be passing this cost on to the consumers, which may yield inflation. so we will see.

we think as much as 50% to 90% will need to be passed on to consumers, and it is some thing to watch. jonathan: here is the latest this morning. retailers and consumers bracing for president-elect trump's proposed tariffs. u.s. centric companies are better positioned near term sentiment wise. simeon joins us now for more. it is good to see you. the don't you put out, why do you think private label is going to win when we embrace and brace for what could come down the road in 2025? simeon: thanks for having me on a monday to talk about private label. the last years, we had rampant inflation, consumers paying 30% more for food. all the retailers, food retailers, discount retailers are introducing new products for private label products. private label used to be synonymous with lower price. now is becoming higher-quality. they are fighting back the pricing increases to get back to

the consumers and innovating like never before. the quality has taken a quantum leap, and that is where we are seeing the shift. lisa: who is winning this? simeon: a few large winners. costco has been the big winner. that is one of the large brands in the world and they go across multiple categories. trader joe's and aldi, they have top customer this product is good quality, reliable, trustworthy. it is still walmart introducing new products, target, and some of the large grocers like kroger andalbertsons. lisa: are they coming giving supply chains with private labels? simeon: they are working to. look at what costco did with the rotisserie chicken. they could not get enough supply, so if you cannot buy them from someone, you build a plant and run it. this way you can keep the price, the famous $5.99 rotisserie chicken. annmarie: the fact that there

will be a super cycle, the latest boost to that, is that because multinationals are going to suffer under a trump administration with tariffs? simeon: a little bit. we can go on that angle. a lot of shelfstable food is still made in this country and a letter refrigerated and frozen food is made in this country but it is all about price increases and finding ways to deliver more value to the consumer, but we are seeing a shift where these mega platforms, walmart and amazon, cosco, they are garnering a much bigger percentage of overall consumer spend. lisa: we say people are down treating to walmart, but maybe it is that walmart and costco are actually offering better products and catering to higher income customers. is that really what is going on? simeon: that is exactly right. you could not have said it better than what you just said. think about aldi. aldi is coming up in social influencer circles about the quality of their organic product label.

it is in theory for lower income or lower value shoppers but they are getting the credit for high-quality private label. that is the shift that is changing. that is what these retailers are slowly accommodating to. lisa: so the walmart signal that people used to look for that when they did well everyone else did terribly and that meant the economy was tanking, has that been broken? simeon: big time. we call this thing the funnel. how much market share is walmart taking of overall retail spending? that number is roughly $.10 on the dollar. amazon is a whopping $.30 on the dollar. together, they are taking $.40 of every new dollar. walmart is doing that not because their core customer a suddenly wealthier but because they are getting more share of a middle and upper income customer naturally. jonathan: this is the argument repeatedly over the last few months. is that why simeon is you to validate your views? lisa: i appreciate that, bowdoin. jonathan: we just have to fix

that lineup. trader joe's. lisa: they move quick on the matter. it makes you feel like, what are you doing with your life? jonathan: hate it. ♪

>> the fed is more than likely to go through neutral from a restrictive stance on policy in the coming year.

>> a piece of the caution is they are to their core data driven in their monetary policy, and we know data are missing. >> the mac -- the market look convinced there is a cut coming. >> they are certain about december being a cut in january being a pause. >> starting the first half of next year, you can see the fed start to signal causes. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: i missed you too. thank you for the well more -- thank you for the warm welcome back. that was to you. lisa: it took you two hours to get back. jonathan: after two hours, i missed you. lisa: i missed you. i am glad you are back. jonathan: equity futures up on the s&p. a full week run on the nasdaq 100. the s&p 500, the biggest weekly loss. let's talk about what has been going on and what has not

happened since the election, what we thought would happen. a lot of people came on the show and said the equity line would broaden outcome of the small market is where you wanted to be. since then over the last couple weeks, big tech starting to reassert itself must -- itself, small caps starting to stumble. lisa: the big reason has to do with the bond market. you saw yields going higher. initially, they went lower. they said the trump administration agenda will not be as inflationary as we thought. maybe we will see lower yields. they started to reverse and that was the big shift where people suddenly said wait a second come inflation might be stickier. that might be affected by the fed and might undermine some of the story for the small caps. jonathan: i twitter for basis point move on the 10 year. this morning across the curve, yields come in by a couple basis points. all of that going into retail

sales tomorrow morning and a big one on wednesday. the federal reserve, overwhelmingly the consensus is a cut and then a skip. will that skip turn into a pause? lisa: at a time when there are so many uncertainties, how much will they give us that information and how much will they give us a framework of how they will be judging policy? i want to understand what their scenario analysis is at a time when they say they don't want to make projections or assumptions. ok, then what are your models? how do you begin to understand this at a time when? annmarie: that is what bill dudley had to say last week. they have to start to assume some things because the financial markets will have baked a lot of these in. we talk about what extending tcj a could mean and what tariffs could mean? oxford economics out with research saying businesses in their survey are starting to get a lot more nervous about what

the tariffs might look like and how it might impact their bottom line next year. jonathan: the problem is you have to make more than what assumption does more than one assumption, on what the policy would look like and what it will do. there is a real debate on wall street about that. we caught up with steve earlier this morning and he made the point that people are overestimating the inflationary outcome on the back of some of these policies and underestimating what could happen to growth. lisa: a lot of that comes down to people do not agree where we are now and how inflationary the moment we are now in is. some people say last week is because eggs got expensive or look at the housing market, prices are coming down, and other people are saying there is still tightness in the labor market. you can see that from just the headline number on the jobs figures, and you have to look at that as well as some of the investment and go to that instead. jonathan: chairman powell the main event later this week. equity futures on the s&p up about 0.2%. coming up this summer, we will

catch up with several hunt as markets brace for the final decision of 2024. we will speak with tom with tesla near all-time highs, and with mona. stocks higher and investors looking forward to the fed decision. sticky inflation and some unknowns in the labor market the last few months have already tempered market expectations for rate cuts after the december meeting. how the data shakes out in the beginning of the year may be a driver for markets. sarah joins us for more. sarah: good to be here. jonathan: i remember coming into 2024, it was six or seven rate cuts and then inflation data happened and it was a bit of a head fake and then the labor market data happened and was also a bit of a head fake. i think we have had four different versions of a story in 2024. is 2025 going to be different?

sarah: i don't think so because the reason you had the narratives in 2024 is we make all of these big assumptions and chart a linear path and the data says we will not be that linear. i do not think that will change. you have seen crosscurrents up and down and there are some things to be concerned about on a variety of different fronts, so i just think the lack of a clear path is probably going to be continuing. jonathan: that screams retain optionality at the federal reserve. how do they do that this wednesday? sarah: it is an interesting question and the way they present it will be important but whether you call it a skip or a pause, the inflation data, the baked in-ness of december probably means we get 25 basis points this week and we will look at it meeting by meeting. it will give them room to say we need to pause maybe or we need to skip. i don't think anyone wants to talk about reversing course yet so it is important to say this is the direction we are heading.

we need to make sure we are not going to fast so the data does not undercut it. lisa: we have seen the idea that the market expect a slower pace of rate cuts for the federal reserve. have equities fully understood this in their evaluation? sarah: i think equities will go they will keep cutting. baking in a skip, we baked in so many things that happen unbanked in the cake later that i do not know how meaningful that actually becomes, the expectation, unless it is right before and you change it in 24 hours. lisa: another way of asking this, how different are the views right now with the economy and markets between the bond market and the equity market? sarah: i think they are pretty different. the bond market is getting worried about the concerns we have that all of a sudden we are starting to get into a fiscal fight, hopefully not a physical one of a right before we get into the beginning of the new administration.

we have all of the stuff we punted in december that we will have to contend with, and equity markets are going growth is pretty good and we have great new technologies coming out. the quantum computing chip by google was a big deal for the markets to have another thing to hang their hats on in terms of the growth going forward. the ai story is playing out. the infrastructure is being built. it is starting to save them money. we need something new so that adds a new layer. equity markets are looking at that and going great. the bond market is saying there are all these things i can worry about, which is typical about those two. jonathan: a month ago, it was going to broaden. a month later, not at all. what gives? what is behind that? sarah: i hate to say this because i want the market to broaden. the equity markets are not broadening out. every time they do, something scares them because it is about growth on the smaller side, not the big tech guys growing. is the economy going to be ok?

do we get growth? will rates come down? do i think it will broaden out of the economy is good? yes, it should, but it has a lot of stops and starts. jonathan: do we keep getting squeezed into fewer and fewer things as investors? are you seeing signs of that? sarah: i think we are. everyone is still in it. no one got out and said i will switch wholeheartedly to this. they just said i will up some exposure here because that will make sense as we go down the road but no one is selling off the big tech names. lisa: we talked to you at couple months ago about why you were bullish in energy and i want to go back to that because to his point about broadening out in things at a point in time when everyone is hoping we could chase the new thing, something that mike wilson talked about, how much are we just in a sort of holding pattern right now where people are still debating with the biggest offsides risk could be to hedge against? in other words, the idea of oil being an inflation hedge, the idea of bonds being some sort of

down road to growth that. how much are we still in this question mark round of what is the biggest threat? sarah: i think we are. if you want to talk about where markets are different, the commodity markets are saying no growth is not very good. there is not an execution that there will be bigger demand. you have seen retail sales out of china this morning that were not great. there is a global issue on oil. whatever is going on in the middle east does not seem to have a big effect on the energy markets. i think that is one of those quiet things that if it becomes a problem, it becomes a very big problem very quickly but i have been bullish and wrong on energy because even though i think infrastructure is important and has value and you have seen a rereading in those stocks, it is not getting the respect it deserves, but that is very on the margin. the minute people think of slowing, they sell the whole area. it is hard to see where the biggest problems are, but there is a fight right now in different sectors about what will happen, and the technology

sector is going one way and a lot of sectors are going the other way. annmarie: when it comes to energy, it is a chinese demand issue because china is slowing, so doesn't that basically just signal we are going into more of this try polar world? sarah: yes, there is an issue internally, but there is a big driver there. not just for their own goods and services, which they are trying to inflate. they would rather see more chinese goods and services being consumed in china, but there is a big commodity piece to that too. when things are slower there, there is less demand globally for commodities. i think we are getting into more of a polarity as opposed to a continuing. you can look at europe on the lower end of that right now so i think that is important as well, but it is also we are just looking to see the excitement in one area versus the non-excitement in others and that is what the market is struggling with and why the disparity is coming back.

annmarie: what are you worried about for next year in terms of the policy questions? sarah: i am worried about a lot of things for next year but the biggest thing is the fiscal situation. post the financial crisis when we took interest rates too negative or zero, people got comfortable spending a lot more money than we have and now all of a sudden there is part of the budget that is interest expense and that has not been a problem for a long time. we are talking about trying to be more efficient in government. we could not agree on anything and that we have to pay. it is a big part of the budget. if i am concerned about something on how that works, it is how that impacts policy decisions and what people are able to do. i think right now the market is baking in some things that it thinks it is very positive but there may be a delay in some of the legislation that people are not counting on because of the fiscal situation. lisa: you talk about how there is a divergence in markets being expressed in a number of different ways, how people are not necessarily worried about some surge in inflation or

the idea of some dramatic downturn. which do you agree with? are you leading into the bubble or do you play the contrarian wager? sarah: personally, it depends on the day. professionally, you have to look at this and go, ok i want to make sure my portfolios are managed in a way i am comfortable with under a variety of scenarios. that is our job, to look at the probability scenarios and go, am i comfortable with where we are? you want to make sure you do not get out of tech entirely and you want to much of the valuations on the companies are holding a reasonable because you can be concerned about valuation depose. are we rereading forever to higher levels or are we coming back to what you consider the traditional level for pes for pick the sector, but we are elevated in some areas where you could be higher nothing you are concerned. you want to make sure you look at the probabilities and say you are comfortable in this scenario and that scenario. you have to be able to hold both

in your forward-looking thought process. otherwise, it becomes difficult to invest. jonathan: before you go, top pick for next year? sarah: that is a tough one. i think the energy infrastructure will have a place for investors, and it is cheap right now and you have good deals. look at pipelines, companies that play into lng and some of the things that are split but also some of the things that continue to have traditional things. jonathan: thank you. equity futures this morning positive across the s&p 500 and the nasdaq. here is your bloomberg brief with dani burger. dani: volkswagen's talks with labor leaders entered their fifth round of talks today. the two sides are still deadlocked on how to cut costs to make the brand more competitive. two days of negotiations have been planned but if there is the breakthrough, the union will hold a vote at the end of this week for 24 hour walkouts in january. in a statement this morning,

honeywell says it is weighing a possible separation of its aerospace business along with other strategic options. l.a. investment management called for a breakup of the industrial group. elliot welcome to this review saying honeywell is on the right course. last month, they revealed a $5 million position in honeywell. starbucks is boosting paid leave for workers. 18 weeks of paid leave at 100% of the average pay starting in march. a parent who gives -- who does not give birth will get 12 weeks.that is your brief . jonat program, the morning calls, and tesla hits a record high. that conversation with tom narayan is around the corner. this is bloomberg. ♪

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jonathan: counting you down to the opening bell. one hour and about 13 minutes away. equity futures on the s&p 500 doing ok, up 0.25%. let's get you some morning calls. first up, barclays raising the price pocket on broadcom saying the ai story remains intact despite a near-term transition. that stock is up by 2.8%. a second call from jeffrey's, noting concerns and a european presence, the ford stock is down by 3.5%. finally, raising the price target on tesla, saying trump's white house is a total game changer for the ev maker. that stock is up again this morning by 0.9%. let's stick with tesla. the ev maker surging over 70%

since president-elect donald trump won the election, hitting another record high. joining us now is tom narayan, who has an outperform rating. making you look bearish. i am sure that is not the objective. talk to me about what we are underestimating about what we might see from tesla. tom: there is a couple of things happening. one is you will get your affordable car at the beginning of next year, so a $30,000 car. a lot of folks think it could be the same aesthetic as a cyber cap, which i think looks kind of cool. what if that has fsd version 12.5, even 13 on it? a lot of folks are asking, why by any other car? there are some catalysts there. if they get unsupervised fsd approved, upside is tremendous. you can do the math on robotaxis

and get to $10 trillion of total global market and have them get a small share of it and justify a much bigger price target. i am not doing that just yet. but the upside potential is significant. jonathan: the outlook for them seems to be so much better than some of the legacy players at the moment. they are at an all-time high. ford is down this moment. jeffrey's downgrading foreign, noting inventory concerns and blooming decisions about its european presence. what are you learning about what is happening there? what are the u.s. players doing in a market where we have seen downgrade after downgrade from european players? tom: it is interesting. the best place to come to to learn about what is happening especially germany is frankfurt and to talk to the investors who are more plug-in than any of us are. i will say there are some green shoots happening. i think because politically the possibility of more right-wing politics especially in germany winning could mean actually that

the co2 regulatory cliff next year might get delayed after all. we are hearing more positive news there. it is not all names are treated equally. the one name we are giving the most that could be benefiting the most from different fundamentals and sickly are trends -- and secure trends is bmw. the main phrase i heard is not getting bullish but less negative. that is kind of what i would say about europe. lisa: that is incredible. i want to put the stories together, the idea talking about the optimism around tesla and some of the investments and the question around ford and getting rid of legacy aspects in europe, trying to shore up some of the profitability. how do somethe legacy companies, whether it is ford or volkswagen both invest in the future, which might be fsd as

well as other innovations, while preserving their current sphere? has there been some hack established for any of them that seems promising? tom: yeah, the one that sticks out is gm. look what they have done. they took a big impairment charge in china and all indications are they are evaluating that business, what is going on there. they sold one of their battery plant jv's to lg. the big news, they came out of robotaxi but are going full steam ahead into super crews there, fsd type competitor. it seems what the legacy oems can do is pick a little bit. if you are going in different directions, let's retrench and put our money into what people really want. i think there is a big push for level two plus, what tesla fsd does. i was at an event last week and they seemed to get a lot of

interest from legacy oems who want to use their product because of tesla has this fsd product and other oems don't, they need to keep up so that when seems to be where investments are, and maybe you can pull away from doing some of the other ones. lisa: that is where i was going with the question of partnering with other outside firms coming up as new technologies, this idea that maybe it does not make economic sense for some of these companies to do it themselves. how much is that the path ahead, and which are some of the companies that are benefiting the most? tom: yeah, that seems to be really where -- i mean look at what happened with volkswagen. they went with rivian, mobileye. that is the one everyone is looking at that potentially mobileye could be a big beneficiary if companies want a level two offering. yeah. and some of the suppliers, like one that does some of the wiring

, a supplier that does some, so it makes sense that instead of putting your hard-earned cash that if you are concerned especially on higher inventories or etc., maybe it makes sense to outsource that instead of vertically trying to integrate. there is a number of suppliers that could benefit and you have to look at the secular trends. electrification is one of them. that is slowing a little. assisted driving, level two plus, that could be the place i think we will see some more investments. annmarie: when it comes to legacy auto companies, last week we heard from mary barra speaking to axios. she said a regulatory framework is something elon musk is pushing the incoming trump administration to duplicate it will be better than state-by-state patrick regulations. they may be jealous of the first buddy and his parts of power but will he lift all boats on the incoming policies? tom: yeah, i do have to stress

that while getting a framework on self is definitely a positive , gm wanted to get the origin car that does not have steering wheels and petals and had to scrap it because it was getting difficulty. now it seems like it could. let's not forget robotaxis are a very local business model, so states, municipalities have to approve. while it is a high-level positive to have the first buddy, let's say, let's not forget these guys have to get approval. maybe tesla rolls out in austin, a friendly city, but what happens in california? there is some friction there. will they have to put lidar in those vehicles? the federal friendliness does not mean federal deregulation approval of robotaxis. it just means at a high level that probably the sentiment is getting more positive. jonathan: enjoy london. good to catch up. just to begin the conversation,

bmw, volkswagen down by more than 20% in 2024. stellantis down by close to 40%. google for some of these names. lisa: something less negative because there could potentially be a removal of some of the regulations. the bar is giving glover and over, which is why some people are getting bullish. jonathan: it does not take a lot. we talked about this early this morning. very little needs to go right to push this market in a different direction. up next on the program, we will catch up with mona mahajan and lydia. from new york city this is bloomberg. ♪

jonathan: some pushback from andrew ofciti. markets are running with no landing narrative despite the last two weeks of data showing job growth and core inflation are slowing pride met expecting -- the fed to be on pause for the whole of 2025. andrew pushing back against those views. lisa: all the desks on team surveillance basically have been talking about that same type of dovish surprise.

all of them talking about how this market has maybe taken it too far that we won't get the disinflation we expected two weeks ago. jonathan: tomorrow after retail sales. who knows. the bond market started the week rounding a little bit down. on a two-year down. in the equity market here's a snapshot of things. equity futures pushing higher by a few tenths of 1%. following four weeks of gains for mega cap tech in america. one hour away from the opening bell. >> we've got honeywell on the board. up this morning. institutional shareholder that is a $5 billion holding. that is elliott. transformational changes, unlocking shareholder value.

what is the growth in aerospace about 7% per annum over the next couple of years so it is about extracting value. the classic release but this is about seeing the need of the activist investor. slicing that just a few weeks ago. the free cash flow by $500 million. elliott wants extraction. ford on the downside, jeffrey's says they will face when the biggest existential questions to resize if not exit from europe. the gap widens between warranty provisions on the related cash outflows. you are looking at a nine-month target from jeffrey's on that. this is all about affordable luxury. where does it get sold off to. for saatchi and jimmy choo held within this family we understand they have one stop shop, that's

after the tapestry deal failed to materialize because of another -- a number of legal reasons. >> that stock higher by 4.6%. what can and what can get done under the biden administration, there won't be one in the next four years or so. but ultimately reflecting on the last few years, kind of bizarre. >> very heavy when it came to antitrust policy. a lot of people saying waiting on the sidelines and now we think their animal spirits in markets, potential m & a deals. >> i keep reflecting over their headquarters in february march time. it basically told us there were a lot of people who want to do a deal but didn't know the kind of deal that could get done that would pass scrutiny. that's why they weren't coming to the table and even talking

about having one. i wonder how much that changes. >> the key question to me would be who will be the test to come out there and figure out what's allowed. there will still be instructions from certain transactions. that will be an interesting trial balloon. where would you look? >> media as well. >> would spirit be filing for bankruptcy if the deal was allowed to go through. >> some of these things just did not make sense and here we are. waiting for the fed's final decision on wednesday. given calling a labor market condition strong productivity we continue to speak -- expect a rate cut. lydia welcome to the program.

it's not just the decision it's the news conference but we also get the sep. when you're looking for a cpi across growth and unemployment, what were those changes? >> when we look at the summary of economic perfection we are expecting to see the dot plot showing three rate cuts next year instead of four. and another to rate cuts in 2026. we are expecting a great gdp growth paid we had 2% in the september production we are likely to see 2.4% by the end of the year. nudging down to 4.2% and then also inflation moving higher with the latest numbers in the recent months. likely to see 2.8% for core pc. so really a reflection of the

environment or inflation has been a little stickier and growth has been holding fairly well. >> it's reactionary, how much of this is going to be anticipatory , anticipating changes from washington dc. >> i think we have a dot plot that is going to be useful providing a path and a view of where the interest rate is heading, but we also have a fed that's extremely data dependent so part of this is likely to respect reflect the data that has been coming in essentially. >> talking about some of the ways wall street is gearing up for next year. regardless of what the policies are, i'm just wondering as an economist given that we are expecting a surge in and acquisitions, we understand the economic impact of that whether it comes to efficiencies of

scale, increased productivity, do we have a sense of that? lydia: yes, when we look at the economic outlook and what we are seeing in terms of business sentiment, we are expecting to see an upside from more business friendly environment and turning business sentiment and we do think that will have an effect on dutch a mother positive impulse on growth. looking at the broader economic outlook that will be offset by some of the other policies put in place when we think about immigration and trade policy and the potential for tariffs, we are likely to get a drag from these and that will create an offset. when we think about the outlook in 2025 and 2026 we do think when you look at all of these moving parts we are likely to see gdp growth slightly lower so

we have a modest drag from all these policies. some of these impacts will be offsetting each other. >> what are you looking for when we hear from the fed given that they will probably not give a lot of guidance as to their predictions for 2025. what guidance can they give us. >> when we think about the policy assumptions i think powell is going to be sticking to this idea that we don't speculate and don't assume so this idea that they will not be putting any policy assumptions into the forecast i think when you think about fed chair powell and how he will be setting the stage in january, i think he is going to be relying on this idea that the economy is in a good place, inflation also has been a little bit stickier and the fact that the fed is essentially going to be moving in this dark room full of objects so this

idea they need to be moving more slowly i think that's the message we will be getting from powell and that's because he won't be able to highlight the information -- the risk from all these policy shifts we will get from the incoming administration. >> how much could stickier inflation not just be an annoyance for jay powell but also be difficult for m&a and dealmaking in 2025 and 2026. >> this is a key risk in terms of the inflation upside from higher stricter immigration when we think about the inflationary impulse and we've done some scenarios analysis around this proposal and the latest one which is the 25% tariff on canada and mexico and the 10% tariff on china. looking at inflationary impulse in 2025 of 0.4 percentage point

on inflation so that's going to be a key risk and we've also baked in a trajectory for inflation that will be modestly higher. there is a lot of uncertainty surrounding all these policy shifts and that's the reason why the fed doesn't want to make too many policy assumptions around tariffs but also around immigration as well. it's really a wildcard for the economy in the next two years. annmarie: you've done a lot of work on the activity we could see. it's excited to rise 10% rate who's going to be the biggest winner? >> we are expecting to see a rebound inactivity and it's on the back of this continued positive economic environment. we have less uncertainty as well if you think about where interest rates are heading, where the fed is heading. there is a bit more visibility and in this environment as we

talked about this more business friendly environment, there is some potential positive high interest rates gradually moving lower, so the outlook we are positive on the outlook in terms of seeing that rebound inactivity in 2025. jonathan: appreciate your time. getting into the federal reserve decision on wednesday. u.s. retail sales tomorrow morning. publishing the global market survey for 2025, some adjusting bits about policy in germany and the united states. interested in the comparison between the united states and europe, a few points from the survey. only 2% believe u.s. growth will be below 2% in 2025 ms that's the average expected in europe. nobody saw european growth in 2025 above the average expected

in the united states which is amazing. u.s. long-term inflation expectations of the highest in the year but in europe they are the lowest since q2 of 2021 which speaks to this different conversation around the ecb and the federal reserve. >> this screams of everybody shorting the euro because there is nothing in here that leaves anyone at all excited about the idea and has the divergence ever been wider. that i think is a really important note. annmarie: he says the base case investors think trump will be a bit less aggressive in his campaign promises on trade so maybe that's a window and an opening for at least europe word won't be as hard because of tariffs the issue europe will have is they go up on china china will only have one place to really start jumping. -- dumping. >> why be more worried about europe if these of the numbers they expect for european growth with a less confrontational donald trump, i wonder how much worse the outlook would be

otherwise. a good snapshot of where expectations are. how little needs to go right in europe to change the story a lot more. only 2% of german responses think the debt rate will remain completely unchanged. the number is notably higher outside of germany. how big of a change do we see. >> if germany borrows anymore, if they are more amenable to the idea of increasing that deficit in the short term to invest in real projects how big could the boost be some of the asset prices when paired with an ecb benchmark rate that slower print when i talk to people, this is almost consensus at this point going long china and then europe. because they will have the twofold low expectations and a central bank there will be easing much more considerably. >> taking a snapshot for equities. on the nasdaq 100 up by .5 in the bond market it's a real disruption through last week.

ugh -- on the two-year, the tenure and the 30 year. we were higher by more than 20 basis points. this morning down about three. >> almost the biggest increase we have seen in the 10 year yield going back to october of 2023 at a time when nobody can really give one reason as to why. basically it's the feeling changed. the feeling was a stickier feeling and those feelings will get discussed on wednesday. >> there's just been a massive vibe shift over the last month. looking ahead to the animal spirits of 2025 writing investor sentiment is heating up as the bar of expectations keeps rising for potential room for periodic disappointments. welcome to the program. embrace the bubble was a noteworthy headline over the weekend in barron's magazine. your view on that, should we be embracing areas of the market that of looked frothy but

expensive to bet against it in the year so far? mona: it does always feel like markets can run to the upside and downside beyond what most investors usually expect. so this scenario we are still looking at a market that is underpinned by solid fundamentals so we are looking at economy still expected to grow by 3.3% into the fed gdp now. looking at a fed still moving in the right direction moving rates lower and earnings growth is expected to be double-digit perhaps 10 to 15% in 2025 so the underpinnings are in place. markets have run quite a bit. a 27% clip higher in the s&p 500 part could we have more gains ahead, perhaps but we see more volatility and bombs along the way as well. >> is the expectations already borne out in the price in the

united states and not so much elsewhere. >> the u.s. exceptionalism story we think still has some legs here and parts of the market do look frothy, perhaps valuations of been extended. we know it's going on with mega cap technology, but the parts of the market that haven't really seen a lot of valuation extension look at the broader s&p equal weight index still trading around 17 to 18 times for the multiple, not stretched by historical metrics. part of the value encyclical parts of the u.s. market even looking down to the mid-caps sector in the u.s. not stretched historically from a valuation perspective. we think there are still opportunities for that u.s. exceptionalism to play out. those parts of the market are typically more domestic exposed as well. they have more exposure than the mega cap technology parts of the market as well so they could continue to perform in our view. >> the past two weeks have been

a little bit of a fly in the ointment to that story because that was the story in november. this idea of the broadening out. last week we saw a real outperformance in big tech and a lot of people said it was because yields were higher. how important is it for yields to keep creeping lower for the disinflation story to remain intact. mona: a contained inflation story is essential to this economic backdrop to continue to play out if inflation remains in what we think will be a 2% to 3% range, the economy can hold up pretty well. we've seen that this year as well. if we see inflation move beyond that which we don't see in a basecase case getting back to anything and that 3% plus range. that's where we start to hit real roadblocks in the economic growth picture. we know what underlies cyclical growth and parts of the market doing well is the economy continuing to do well. so we think from a consumer

perspective the important part of the story is that wage growth continues to exceed inflation so folks are taking home real wages which is helping the consumption story. that is all part of how the broadening of market leadership continues to play out. there will be ebbs and flows in that story but we think diversified portfolios will be a winning strategy in the next 12 to 18 months. annmarie: jp morgan's head of global market intelligence was talking about the fact there's potential for pullback mid-january. are you expecting a lot more volatility in the trumpet administration? >> there's a lot of eyeballs on what the administration will do on some key variables here. what is their tariff policy going to look like. all they go to the more extreme proposals where it's across the board 10% to 20%. or is the immigration policy going to look like will they implement some sort of supply shock to the labor market and then of course the --

jonathan: i think we've lost the line. i think that has gone. diversified, the rally we've had a lot of that it's just not working over the last few weeks. >> i thought you, say diversifying of the broadband. we've been hearing a lot of diversification story. i was having trouble with it last night so i relate. annmarie: that was because the drones. lisa: i think you are right. a 100% they just want to disrupt. jonathan: you've got a theory john kirby doesn't have. no one knows anything. lisa: if you want to talk let your table connection, john kirby you are welcome. >> let schedule an update on stories elsewhere with your bloomberg brief. >> the suspect in the killing of united health care ceo brian thompson has retained a high power you new york attorney and

former cnn legal analyst to represent him. he faces a second-degree murder charge. he remains in jail in pennsylvania where he was arrested last week and the da said there were indications that he may waive his extradition. coco futures hitting a fresh record high in new york. trade supplies concerns grow. it increases odds of high costs plaguing chocolatiers will worsen. plunging the world into the supply deficit. lebron james returned to the l.a. lakers in 116 to 110 victory over the memphis grizzlies. james missed two games and was away from the team most of last week due to personal reasons. he had 18 points, eight ss and five turnovers in 34 minutes of play. the lakers are 14-12 on the season. jonathan: thanks for this morning.

setting you up for the week ahead, this is bloomberg. ♪

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jonathan: the opening bell around 36 minutes away. equity futures up one third of 1% on the nasdaq up by little more than that. trading diary for the week ahead looks like this, s&p global looking at -- coming up at 9:45 eastern time. wednesday is the big one, the fed rate decision at 2:00 p.m. followed by the chair powell conference if you're around on thursday, jobless claims and rate decision from the boe and boj. if you're still around on friday you get the core pce and consumer sentiment. in europe i don't know when vacation starts over there. lisa: i think it's already started.

jonathan: german chancellor olaf scholz awaiting a vote of confidence in parliament, one he expects to lose. what's coming up? oliver: we have had this speech from the chancellor speaking before parliament that kicked off proceedings laying out his positions for the selection saying what he wants to do with another term and he's talking about spending, really spending a lot in terms of infrastructure spend and getting that up on defense. we have the debate, the two-hour debate that ensues after that. then a sort of line vote and after that we will get the outcome we will likely get a no-confidence vote on chancellor schultz and this government which will allow him to go to the president and dissolve the government and pave the way for these elections. germany the only country in the world with snap elections that take four months to get them

done. >> just quickly when does vacation for christmas beginning germany. oliver: at the end of this week. you can see the christmas tree behind me as well as the protests unfurled. jonathan: thank you. all crook out of berlin. christmas markets in germany, people fly in for those. hearing that from delta they are making more money from those flights. >> in switzerland it starts at 4:30 p.m. on friday. >> some of us are actually working the christmas week. >> some of us might check out completely at 3:30 eastern time on wednesday afternoon. i will be here. physically we will be present but mentally might be elsewhere. that's the promo for tomorrow. dan greenhouse and amanda lynam.

from new york city, thanks for choosing bloomberg tv. this was bloomberg surveillance print ♪

katie: futures are higher after stocks hit. sonali: matt miller is off today and bloomberg open interest starts right now. ♪ katie: coming up, a big week for central banks. a flurry of decisions with the fed leading the way on wednesday. fresh data may show the u.s. economy is humming along and later this hour we will get pmi data followed by retail sales

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