>> harder and harder to justify owning non-us developed markets. >> returns have been driven by a narrow collection of stocks. narrow stock leadership is fragile stock leadership. >> awakening of animal spirits. remarkably different than a year ago. >> enormous optimism about the u.s. but we don't know what this new administration is going to do. >> positive for a reason. the economic growth is surprising to the upside. >> this is "bloomberg surveillance." jonathan: live from new york

city, good morning, good morning. "bloomberg surveillance." equity futures on the s&p 500 just short of all time and pulling back by zero .20 5%. retail sales later this morning at 8:30 eastern time. tomorrow afternoon, federal reserve decides the sentiment is skyhigh. bank of america sentiment is now sued for bullish, cash allocation at a record high, u.s. equity allocation is at a record high. cash allocation record low brother. equity allocation record high. we are super bullish right now. lisa: what do you do? that is the ultimate question. this is the second contrarian cell signal in three months because the allocation to cash a 4% is this record low. there is a question about whether we have seen this movie before and it is rosy for the following year. when you talk about, not necessarily a negative signal. everyone is talking about that is basically people lean into

this bullishness. jonathan: negativity, governments falling and germany, france. canada and trudeau on the brink. check out the canadian dollar, week or once again. levels we have not seen going back to 2020 following disagreement with his finance minister. ruto is almost flying solo. annmarie: literally hanging onto his political life. he is been in power for nine years. you have a stunning falling out between the finance minister and this has to do with the deficit and how to control the deficit in canada. behind the scenes, a lot of disagreement on tax breaks around the holiday season. the crux comes at a time when trump is talking about more tariffs with candid and these two disagreeing, members of his own party say enough is enough. lisa: the parallels between germany and canada are remarkable. olaf scholz firing his finance minister and then getting that

no-confidence vote and having to hold early elections. the canadian finance minister resigning over guess what? budget issues. over how to respond to the tariff pressures as you were mentioning. it raises the question about whether justin trudeau can last until the next election time. there is something happening. i think it is notable in these two developed markets, there's something so similar unfolding with the financial minister pressuring the top of the ticket. jonathan: go back to the g7 meeting in the south of italy and have a look at the picture and ask yourself who is going to be left over the next few months. the looters britain and japan, gone -- the leaders have it in japan, gone. scholz basically triggering an election. trudeau, time is up. we're talking about a 20 point cap between his party and the conservatives. the only person still standing with any strength is giorgia meloni of italy. annmarie: it was all of these men coming to the south the video -- south of italy, the

individually new who would be really the main speaker representing europe dealing with the incoming administration ahead of the a selection. politico called it the last supper and that could not of a more correct. jonathan: more later this hour. coming up, we will catch up with katrina. michael shepard and mark mccormick. we begin with stocks taking a bit of a breather. fed rate decision tomorrow afternoon. franklin templeton is optimistic in the next year. the current market environment is a function of animal spirits following donald trump's factory and market liquidity that is supportive, strong market performance was not a reason to be bearish. katrina joins us now. it is good to see you. small caps on the russell. underperformance for them, and

outperformance for a market cap s&p, particularly nasdaq 100. what do you think is going on at the moment? >> at the moment we have had a period of digestion. you have had the change in the administration. we talk about this rekindling of animal spirits. i think what we're looking at is what can happen going forward in 2025. we think pretty much 2024 at the tail end, people are checking out, going on vacation. where are we setting up for 2025? i think that is the most important thing. what we need to see is the breath in the market expand. we have been talking about this for a long period of time. i think we need to see that breadth work in 2025 are you're not going to sustain it. jonathan: we went for the fund survey record low, allocation u.s. equities record high. the bar for europe is so much lower. the question we have asked quite a few times, how little needs to

go right in europe to change that story? >> i grew up as european fund manager and i've been bullish on european equities for my entire career, not exactly the best decision of my career wise. what do i is happening? europe is the u.s. poor cousin. we started the conversation with how much turmoil we are having across the region in terms of the top of the house and the transition you are having across various different markets. if you look, however, the market is cheap. the cheapness we found out is not a reason to go long equities. it is not a reason to suddenly go all in. they have done 25 basis point rate cut which is positive. they have also got the cheap valuation i mentioned most of the market has underperformed. inflation is under control. it is under the long-term target. the question is, what is the catalyst? they don't have the tech engine, ai engine we have in the united states. in terms of the labor market, you have a stable labor

market but it is not energized. even though all of these factors are positive, what is the catalyst to drive the market? i can't find one yet. lisa: what about rate cuts? one of the arguments is if you follow that cycle, that will take you to europe much more than, say, the u.s. >> in the u.s., given we're looking at some of the inflationary policies and what we expect on the horizon, what we are seeing in terms of our deficits, we are not as optimistic as the market has been about further rate cuts here. as you see in europe, rate cuts are not necessarily a driver of market performance, particularly if you're cutting rates in order to generate economic growth. so you're cutting rates in response to weakness. a very different story than we saw in the united states with the rate cuts were more of tinkering around the edges and adjustments. i can't put my hat and look at saying to european investor,

you're going to cut rates, that is the reason you want to own equities. you need an underlying story. europe needs to get back to animal spirits somehow. lisa: i think a lot of people are trying to figure that out. you are saying in order for the thesis you have come this bullish american exceptionalism story to bare outcome you need to see breadth get better. we have seen pretty bad breadth. i think about the other waiter read that every time i -- way to read that every time i say that. we have found breadth to be a poor coming signal. >> we don't want to over index to just so few stocks. i think that is the first indicator of breadth. if i look at what has driven that top part of the market, the magnificent seven, it has been ai and it has been ai fuel growth. the second stage of ai is ai permeating businesses throughout

multiple lenses. so if i look at it, the first element from our business point of view is just our own back office and the ability of ai to help us serve our customers better, get better data, meet their needs more quickly. the second element for us is from the investment lens we are looking to invest in other companies. the third element of ai is how we permeate it through actually making better investment decisions. so how do we control better for risk, how do we identify trends, how do we look at unintended correlations. i think that is the build upon of ai that is going to drive the next part of the market. this idea that ai is not just a one-man band or one person band here. it is really going to start moving into the kind of mid-caps and upper end of the larger caps. annmarie: couldn't happen next year if the fed finishes the rate cutting cycle? >> yes. i think the fed is going to be pretty much done.

i have a look at some of the notes. we have been fairly much in the camp that rates will be higher, that the rate cutting cycle will start much earlier than the market is expecting. i think the markets move to our position. we are looking at federal deficits. i think as we go into the next year, you need to have -- more people are bearish. why? they are bearish because the market has done so well. annmarie: potentially 10-year gilts hitting 6%. when does that start eating into equities? >> in terms of why you would eat into equities, if you have the long end of the market we have a ton of value sitting in the long end, overleveraged companies where the cuts are going hit you again. what you're basically saying is that fiscal deficit is going to destroy america. i cannot see that. i have a look at what is happening, everything being done to address our costs, and i think america has still got a very good narrative.

so i think we can adjust to those type of yield numbers. what we are testing to is the fact they yields come of the rate cutting cycle is pretty much at the end. it is done. jonathan: concern going up a little bit. two years ago back in 2022, recalls. labor markets have been calling, i see myself in the more cautious out of the consensus at present. there's a bit of pushback regarding the labor market if not the deficit. lisa: i never thought they would be best these but that seems to be the case. it seems like there is this feeling, maybe stop with a sins of everyone is doing just fine because you do see cooling, you see a sense of that stagnation reaching a tipping point when it comes to the mobility and labor markets. jonathan: data at 8:30, retail sales. katrina dudley, franklin templeton.

update on stories elsewhere this morning, let's crossover to dani burger with your bloomberg brief. dani: ukraine has claimed responsibility for the assassination of a russian general in a bomb attack in moscow. according to a person familiar, ukraine's he could he service carried out the killing of lieutenant general kirillov and his assistant. russia said they died when an explosive device planted on the scooter detonated near the entrance to an apartment building. investigators have opened a criminal case for murder. the new york police department is calling on congress to grant local authorities the drones that have been spotted flying around the northeast. the nypd says the inability to act gives the city vulnerable. over the weekend, nypd received 120 one drone-related reports, more than the total for all of november. the eu's opening investigation into tiktok over its handling of the rumanian elections. concerns about fake accounts and foreign interference. the probe examines whether tiktok failed to prevent

manipulation of its recommendation system improperly labeled clinical content. tiktok provided information on its efforts to address election challenges and updated its election center to the link of an official electoral commission's website. that is sure brief. jonathan: thank you. up next, tiktok. >> we will take a look at tiktok. i have a warm spot in my heart for tiktok. there are those that say tiktok has something to do with that post jonathan: live from new york city, good morning. ♪

jonathan: another bull's take on the s&p 500 for next year. looking for 6800.

one of the most bullish looking for 7100. equity futures in the s&p pulling back by a quarter of 1%. echoing that sentiment. the fund manager survey bank of america this morning. record low cash allocation, record high allocation to u.s. equities. we have seen this on repeat time and again over the past few weeks. lisa: what do you do with this? michael hart at bank of america saying there is a contrarian sell signal from overall bullishness that led cash to the lowest levels. max kettner echoing a little of what we heard. basically saying their biggest pushback from their bullish call , two things, valuations are too high and bullish. is that enough of a reason to get bearish? jonathan: a lot of people who come on this program do not want to be bearish going into 2025. lisa: how can that be? the idea of lower taxes and then the potential headwinds, but you

don't see those yet so people are saying you can't -- you feel that reticent. jonathan: s&p 500 pulling back a touch. a warm spot for tiktok. >> we will take a look at tiktok. i have a warm spot in my heart for tiktok because i won youth by 34 points and there are those that say tiktok had something to do with that. tiktok, we are a look at it. jonathan: tiktok ceo meeting president-elect donald trump mar-a-lago weeks before the ban for making favorable comments about tiktok as a social media company asked the supreme court to block the ban. mike shepard joins us. good to see you. what does a calendar look like for the social media app? >> the clock is ticking on the company.

they face this existential threat as soon as january 19. this is when that to investor ban log goes into effect. it requires chinese owner bytedance limited to sell the company to a u.s.-friendly buyer by that date or faces a ban. that means app stores may long longer service it -- may no longer service it and access by vpn could be targeted by u.s. authorities. all that could change under a trump administration, potentially, because they will be the ones largely charged with enforcing it. so trump signals of a warm feeling for tiktok could suggest he may ask his justice department perhaps to go easier on the app is this enforcement goes into place or even goes back to congress to ask for some sort of a repeal of this law. however, there is a big asterisk and that is that there is a law

on the books written very airtight following the rejection of the ban of tiktok that donald trump try to put in while he was in office. remember these warm feelings are a bit new to the president. two, lawmakers really rallied behind banning tiktok. it was an overwhelming vote in favor of doing so. it would be tough to imagine that simply accepting the law they passed and had president joe biden simply be ignored by by the successor. lisa: we're talking about marco rubio who is been talking about chinese espionage and tiktok since 2019. how divided is the transition team right now about this app? >> we are not getting too much of a window inside the room into their thinking but you are right to bring that up because marco rubio -- let's add a few more names. think of a national security advisor to donald trump also

voted in favor of the tiktok band and is a noted china hawk himself. then there is the incoming head of the fcc brendan carr who also railed against the app in the national security risks. this is what is driving this divestiture ban law and the call for the chinese owned company bytedance to sell the app. the u.s. policymakers in washington are concerned national security could be compromised. that the app could be used to gather intelligence and data on u.s. citizens, including people in sensitive roles within the government, and also be used to gather or rather to disseminate propaganda that is unfavorable to the u.s. and u.s. interest. so we will see pushback within the administration and in congress. then again, we have seen so many of donald trump's loyal supporters, his allies, the

people who work for him fall into line if that is what he wants. annmarie: he says this is because he won the youth vote. he has talked about the fact if you don't have tiktok, there is mark zuckerberg and was to make sure the competition in the tech space. trump toner by jeff yes -- trump donor jeff yes. >> those are all factors. you brought up a couple of key points. another is simply tiktok also just appeals to trump, at his instincts as a showman, an entertainer, and he also likes engaging in this kind of corporate diplomacy. we also see other high-profile tech ceos making a pilgrimage, if you will, to mar-a-lago to meet with the president-elect to try to get their voices heard, to get their business issues

presented to the with trump and tim cook.

about what investments from foreign companies would and pretty stark terms yesterday with softbank group coming to mar-a-lago to announce a $100 billion investment plan in the u.s.. he did not opportunity specifics but that she did not opportunity specifics but it would be in the area of artificial intelligence, semiconductors, other high-tech. we don't know where the money will go or what startups but it was formally embraced by trump who literally raised issues on the stage at mar-a-lago yesterday and handed the microphone over to him.

we talked about what he sees as great confidence in the incoming administration. that was a confidence that trump sensed and then even went further and dared him to try to double the investment he had just tried to announce at 100 billion dollars. so this is the sort of reception that we will see. one thing donald trump has tried to get foreign companies to do is not only invest here, operations here, he once their headquarters here. we don't see softbank moving its operations here. this is really money coming into the u.s. for projects here. lisa: i'm trying to put this together. here we have someone who is in japan investing a significant amount of money into artificial intelligence, number of sectors considered pretty sensitive for national security at the same time the deal is completely in a favorable deal. we have heard that from the current administration and the

future administration. is that relevant or is there enough apples to oranges in conflating two issues? >> i don't think you're conflating two issues because there is some dissidence that you are picking up. why is one foreign investment good and this one maybe by nippon steel bad? the big difference is the symbolism. there is a strong union interest obviously in u.s. steel and there's also just the iconic quality of the company itself, the location in pittsburgh, pennsylvania being a critical state in any presidential election -- the one we just had and the one we will have four years from now and even eight years from now. there is a stronger political component to the u.s. steel question and nippon steel's attempts to fight that he was he was something like softbank or other foreign companies trying to invest here.

it is also taking control. that is a different thing. if softbank were to try to acquire a name brand u.s. company and make it japanese owned, that would be a different story perhaps. that would also kick in the same process that is scrutinizing the u.s. steel acquisition. and that is the process we have talked about before. jonathan: mike den washington, d.c. -- mike sheppard, washington, d.c. what is and what is in a national security risk. the fact we are having this conversation around tiktok i find ridiculous. it was a national secured risk. there is no other conversation. from new york, this is bloomberg. ♪

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jonathan: it is december 17. nasdaq futures slightly positive. the russell is down about 3% and nasdaq 100 is. a percentage of outperformance for the nasdaq 100 halfway through december. lisa: this is the complete reversal of what everyone thought was the trump trade. the undervalued names were supposed to lead for the next year. is were supposed to lead for the next year?? --it continues to be

the large tech names that drive performance. jonathan: we talked about the headlines out of barons. bubbles can last longer than you can stay underweight. lisa: which is why they are cautious and recognize the fact everyone is completely bullish. they talk about a contrarian signal the same time to talk about how investors are the most underweight european stocks since 2022 as they are the most bullish and increasing allocations to u.s. stocks the most since september of 2023. at what point does the bar so low that you go into europe? jonathan: the s&p down by about .2%. two-year, 10-year, 30-year yields are higher. two-year up by three. retail sales later this morning. lisa: it will be a frustrating

number. it's the rebound effect from the hurricanes that will drive noisiest. at what point people can people get confidence from the retail sales under the hood? i will look at what people are buying. is that they are buying eggs, that's a good thing. it really speaks to the composite pmi's we got yesterday that outperformed in the u.s. jonathan: s&p global services, big upside surprise coming into the fed meeting. -- coming into the fed meeting. at the moment we are down to about 105. euro-dollar down by .2%. german business confidence just not great. lisa: a really difficult reason to push against the consensus. where lc going to go? -- where else are you going to go?

europe where you cannot see government hold together longer for a few days? japan where they are talking about hiking rates and you have this renewed weakness in the yen? what is the alternative? that is why we are watching gold. even that has not necessarily performed. embrace the bubble or go home. jonathan: the alternative is not the canadian dollar. we will talk about canada later. we give canada such a hard time on this program. lisa: we? let's not throw all of us under the bus. some of us are defenders of canada. you can be bearish but canada -- canadians are nice. jonathan: we thrive together, survived together, drowned together. we are a team. sentiment is super bullish. cash allocation at a record low for the u.s. stock exposure at all-time highs. u.s. growth optimism and a fed

that is cutting interest rates. that is the opposite of a toxic brew next year. lisa: the goldilocks soft landing? there nirvana? -- the nirvana? there is a feeling a lot of good news is priced in but there is had distanc -- hesitance. there's a disorderly rising bond yields, the t. rowe price point about getting to 6%. people are pushing against that. the likes of the biggest bull on the street john still was saying it doesn't have to be perfect. yields can be higher but ai will solve everything. annmarie: this reminds me of the chris harvey note when he said shy bulls. they are only potentially shy because they want to be contrarian. it is not driven by fundamentals. they are concerned everyone is on one side of the boat and that makes them nervous. jonathan: they are not on china. china plans to set a growth goal

of 5% for next year. officials are said to be planning to raise the budget deficit to 4% of gdp. both targets are largely in line with the economist expectations. that is the latest out of china. out of canada, pressure building on prime minister justin trudeau. calls for his resignation growing from his own party after finance minister kristi friedland step down just hours before she was inspected to unveil an economic update. annmarie: you are right to bring of the g7 photo op of a bunch of lame-ducks. that is what we are seeing this time. it is canada. it was germany and france. macron is barely holding on to power and now it is justin trudeau. it is not the opposition. it is his own party saying now might be the time to go because the finance minister stepped down in is such a scathing way. she admitted she was basically

fired because they disagreed on how to deal with their own economy and also what will happen with trump. jonathan: liberal virtue signaling is taking a beating over the last month. only a week ago the canadian prime minister comes down and says you have an ally in me. i'm a feminist. talks down to american voters for electing donald trump and not kamala harris. days later puts the pressure on his own female finance minister. annmarie: first female finance minister. freeland latest woman to exit the cabinet as others question trudeau's feminist credentials. maybe he will step aside for mrs. freeland. lisa: it comes down to debt. that is the bottom line. everyone can coalesce around that and you can signal would everyone but if the numbers don't add up everything else does, since. -- does not make sense.

jonathan: that resignation coming hours before the economic and fiscal update. we will have more later this hour. german lawmakers apart for an early election in february. olaf scholz has planned and his embattled administration -- to end his embattled administration. oliver: this was the expectation but it is significant. this is the second snap election we've had since the fall of the berlin wall. the last was in 2005. that is shared in the merkel era which has paved the path for many things we see today. what we are getting is a very fiery debate. olaf scholz really trashing the fdb, saying they are morally unfit to govern. frederick mertz of the center-right calling olaf scholz a failed chancellor. hearing more and more from the far right. they hold 20% of the vote.

they say that germany is on the brink of collapse and a vote for the cdu and frederick mertz is a vote for a war with russia. what we are getting is there official party platform, the official kickoff of the election. it feels like we have been in it for a little while. nothing to spectacularly new. the recipe is lower taxes, cut bureaucracy. no one can end the last time bureaucracy was actually cut in the government. they think they can find 100 billion euros in a cut the social benefits. we will get the same from olaf scholz later at 8:00 a.m. eastern time. that will be a lot heavier on the spending. the reality is they will have to be a coalition after this and a fear you will get basically trading one dysfunction for another. jonathan: oli, appreciate it. we talked about this a few times. the big fear going into the u.s. election was dysfunction and

american politics. in not having a clear winner. working at how this could play out the next two months. maybe we would sitting in january not knowing. the truth has been, the stability of american politics. the instability is all most everywhere else. annmarie: my sources outside of washington saying if they are in the goal for europe about how conflict was brewing in america but it's actually the opposite. there are two hot wars and political instability stretching from south korea to germany to france to now canada. jonathan: let's focus on europe. claudia buch, welcome to the program. a difficult moment for europe. how are you preparing for the upcoming trump administration? what are you suggesting to policymakers that they need to do right now? claudia: thank you for having me. it is not for me to advise

policy makers what to do. what we do with ecb is that we publish the results of our supervisory review and evaluation process for the european banks. this is important in uncertain times. one important result is the european banking sector is robust. we are seeing good levers of capitalization, good profitability and good asset quality. we are heading -- we are in a period of heightened uncertainty, geopolitical risk and it's important we have a sound banking system. lisa: one thing that's fascinating is how much has changed in terms of the economic and structural paradigm. we were talking about how different things are than 10 years ago where banks were considered too big to fail and that was the big risk. how much is the bigger risk that too many banks are too small to

succeed? claudia: interesting you mentioned how much has happened. a lot has happened in europe with regard to supervision. we have the banking union now. for 10 years now we celebrate the 10th anniversary this year we have common supervision within the ecb and within an important role of the national authorities. the ecb has taken the decision on supervision, applying the same standards across all banks. we supervised the significant institutions. we have an oversight function over the last significant institutions. this is great progress. we see that there's better capitalization, better asset quality. this is certainly amongst other things a success of the banking unit and of the single supervisory mechanism. we need to remain vigilant. in addition to do clinical risk there is also structure changes happening in the real economies.

we want to carefully -- and which form this would affect banks' balance sheets. we are not seeing an increase in nonperforming loans, although we see increasing corporate insolvencies. this is something we are monitoring carefully. lisa: in the u.s. the concern is not about solvency or risk to loans or weakness in terms of what the assets are. it is can they grow enough? can we do mergers and acquisitions? let's get the banking sheet backup. in the european region one of the biggest threats to a lot of banks is not the threat of week loans but it -- weak loans but a lack of profitability that can drive that strength to compete with u.s. banks. how much is that an increasing concern of regulators that have been tasked for the past 10 years with preventing weakness in loans? claudia: this is an interesting question.

i sometimes hear what we do in terms of regulation in europe is too conservative and would prevent the bank from lending to the real economy. this is not what we are seeing. generally, we have seen with the reforms that have been implement did post global financial crisis the bank to become stronger, more capitalized and they are in a better position to lend to the real economy. what is true is loan growth has been moderated in europe. this is to a large extent driven by higher interest rates, by the demand side. it is not due to supply-side constraints. the banks are well-capitalized and there are sufficient management buffers on top of the supervisory capital requirements. annmarie: do you expect any recent activities -- there is health and the banking sector but will we see more deals next year?

claudia: hard to say. hard to forecast. i'm not sure anyone has those numbers. what i think is happening when it comes to consolidation in the financial sector, it a a natural response of banks in a competitive environment. the digitalization of services is an important driver here. it is a for the management and the shareholders to decide how they want to respond to the changes in the competitive environment. one way can be mergers. domestic mergers, cross-border mergers. we have a clearly defined role according to the legislation in the approval process. we look at the prudential ratios, the soundness of the stakeholders involved. this is our role. it is not for us to decide. in the end the management and the shareholders have to take it.

jonathan: i'm wondering how you view the current recent instability in places like france and germany and whether you are confident there is distance between the performance of sovereign debt and bank equity? we saw that correlation spike 10 years ago. 10 plus years ago in the euro zone debt crisis. we have seen at times the european sovereign debt has been treated like it is credit, particularly in places like france. we saw that in the u.k. a few years back. how much confidence do you have around that issue? claudia: what gives me confidence is the good capitalization of the european banks. as i said before, a lot has happened in europe in the past 10 years. we have a new resolution framework in place. we have more loss bearing capacity on banks' balance sheets. these are important factors that

we can the banks -- weaken the banks. this was one of the reasons to have the banking union to break the banks' in excess and a lot has happened. -- sovereign excess. we pay attention to geopolitical risks and future uncertainties. a good level of capitalization and all that has been done to weaken the banks should give us comfort. jonathan: a lot to think about 425. claudia, appreciate your time. claudia buch, pcp supervisory board chair. -- ecb supervisory board chair. dani: divide administration has been trying to ease concerns about the thousands of drone sightings reported in new jersey and other parts of the northeast. i white house spokesperson said the drums are "a combination of personal, professional and government aircrafts."

donald trump says he thinks the white house knows more than it saying. trump added he does not think it is an enemy but suggested his new jersey golf course could be a target, saying they're flying very close to bedminster. alibaba shares are falling in hong kong, down 2%. it agreed to sell it in time department store business for around $1 billion. it will result in a loss of $1.3 billion on alibaba's initial investment. the e-commerce giant is struggling to grow with rivals. t. rowe price out with a punching and call on treasury yields, saying the 10-year may climb to 6% for the first time in more than two decades. the firm's fixed income cio pointed to inflationary policies and the growing deficit under trump. he wrote he expects seals to read 5% in the first quarter of 2025. that is your brief. jonathan: up next on the program, trudeau on the brink. >> we are less than two hours away from the fall economic

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jonathan: equity futures on the s&p down by about .3%. trudeau on the brink. >> mr. speaker, to underline the chaos we are faced with here, the finance minister resigned the day she was to present the fall budget, which was going to taint a massive deficit overrun. we are less than two hours away from the fall economic update. why won't the prime minister come in here, present it himself and put a for a confidence vote tonight? jonathan: here's the latest. pressure building on canada's

prime minister as donald trump's threat of tariffs divides the government. christie freeland resigning just hours before she was supposed to unveil the economic update. "so we have the reserves we need for a coming tariff war." it is as close as it's ever been to collapse. mark mccormick joins us now for more. you are following a closer than we are. what is next? mark: this is a common theme, not just canada. it's happening in france, germany, all over the world. the election of trump is a disruption to the existing order. a piece of this is work together in the markets and economy. we are seeing central bank tried to cut rates and stimulate the economy. fiscal policy is being used for stimulate the economy. voters are unsatisfied with incumbent.

incumbents are trying to stay in power. it is very clear using short-term incentives just to spend money to help people ahead of an election is not a long-term strategy for economic policies, especially when you think about innovation and investment. it is a common theme used on the u.k. budget. this is not a piece of what is going on in canada. this is not idiosyncratic. what is clear is that the political economy, what we call geo macro, is a force creating disruption, creating volatility, uncertainty and coming through the currencies first. lisa: how much does is push people back towards the dollar because it is not another alternative that is more put together? whether it comes to the government over the economy? mark: it reinforces dollar exceptionalism, u.s. exceptionalism. one of the things that is clear as we looked at different styles

and drivers of markets. the dollar has behind it as a tailwind the equity market. it has carrie and momentum. -- carry, momentum and growth. the one thing that is challenging his markets have been focused on mean reversion. short-term valuation models of work for the currencies all year. what we are starting to see is the momentum is a factor that's becoming increasingly more important as we push into the new year. i am weary of people coming in and buying the dollar with a couple of weeks left in the year. it is clear where we are going in the front half of next year, the strong dollar across the board. annmarie: what about going into 2026? we could see some weakness or at minimum a plateau of the u.s. dollar. mark: yeah. this is an important theme. what we are seeing is a disruption to the global trade order. we have indicators we looked at for globalization.

if you look at globalization as a theme, economic and trade peak 10 years ago. it's been going sideways. along with the correlation, as globalization was rising, the u.s. trade deficit was rising in the u.s. dollar was getting expensive. if you think about the norstar of the trump administration, one thing he talked about and i think is important to the economic policy. is eliminating the trade deficit you cannot re-industrialize the rust belt or re-industrialize the states that want it for trump -- won it for trump in the last election. michigan, ohio, pennsylvania, wisconsin. what matters is the re-industrialization and the reduction of the trade deficit, which means you need to find a way to weaken the dollar. what will be important is the world is breaking apart as a global order is being ripped apart. most countries are choosing national sovereignty over globalization. this is not a u.s. story. it's been going on for a decade.

has that order gets picked apart the dollar rallies. it is the only game in town. it is fomo, all these kind of themes. it creates conditions for the trump administration to address the major concern for industrialization, the trade deficit and strength of the dollar. if we look at our longer-term valuation models, the cheapest currencies are the yen, yuan, taiwanese dollar, all the asian currencies. jonathan: mark mccormick, thank you. how much oxygen is left up here? we are driving the price of an asset up to something that is not sustainable in the longer term but here we are. lisa: at a certain point it runs counter to the tenets of the new administration. just not yet. jonathan: up, dan greenhaus, jon lieber, sharon miller and daniel ives. from new york, the second hour of "bloomberg surveillance" is up next. ♪

>> the un-implement rate is creeping back hired to where it was over the summer. that is the reason the fed is focused on maintaining this easing bias. >> the fomc will not cut by 25 basis points. >> we are looking for a fed that remain sensitive in terms of the economy. >> we are trying to maintain a

soft landing in the fed has done an incredible job so far of doing that. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the federal reserve decision 31 hours away. we are counting down. equity futures on the s&p 500 down by a quarter of 1%. we have retail sales in america in about 90 minutes. 2:00 p.m. tomorrow afternoon we will hear from the federal reserve. we forecast the update to the previous forecast. a news conference with chairman powell 30 minute after that. annmarie: -- lisa: whether we get a sign. there was a huge battle over 50 basis points. it seemed like jay powell jawbone them into that 50 point cut. cavity message concern -- how does he message concern that maybe there is a fear of re-acceleration? annmarie: you have that with neal dunn or talking about concern going up.

labor markets have been cooling. homebuilding stocks are underperforming. i see myself on the more cautious side of the consensus at present. 2025 will be difficult for the fed. what we just heard from mr. mccormick in canada, the idea it is geo macro events driving financial markets. jonathan: the dollar still strong. why? france is a mess. germany is a mess. canada is a mess. korea is a mess. the middle east is a mess. china is a mess. lisa: maybe the vigilantes have taken a breather, except hero t. rowe price. can the u.s. continue its fiscally reckless policies because everyone else is even more fiscally restless -- reckless? as i can confidence about the u.s. and may going to bitcoin? jonathan: the unique privilege of acting recklessly. that is what the united states have. weak.

lisa: i know. the unique privilege of acting recklessly, like i feel like i do every morning. jonathan: coming up, dan greenhaus, jon lieber and --sharon miller and daniel ives. stocks mostly flat. nasdaq coming off of record as investors await the fed rate cut. dan greenhaus sees plenty of opportunity next year. it's miniature minutes year for equity and credit which leaves investors fearful of sounding too optimistic. we feel differently. the economy is doing fine. inflation has largely normalized and the consumer remains strong. dan, good to see you. would you say the street is uncomfortable he bullish going into next year? it feels like people are bullish because they feel like what is the alternative?

is there career risk associated with being slightly bearish? dan: uncomfortably bullish is the right way to put it at least from talking to people around the street and watching bloomberg tv every morning like i do. after two years for the s&p is up 20%, high yield loans and lower rated credit up 10% this year. there's a feeling that this can't continue. there is a hesitancy to embrace this. you talk to people for hours a day everyday. i think there has been -- whether you are listening as a separate story. there's been a hesitancy to embrace the bullish tone of things for several quarters now. jonathan: is there a difference between what people are saying and doing? things are tremendously bullish at the moment. cash allocation at a record low. do you sense things are that frothy? dan: i got asked if i thought

this was euphoria. i do it is euphoria. the bank of america data you just referenced plays into positioning data. it would suggest people are certainly invested depending how you measure positioning. the upper end of the range has prevailed since the gse. --gfc. people expected to continue. is it euphoria? the subsequent question becomes what separates what we are expanding now from for euphoria? thinking aloud here, there's an acknowledgment. you mentioned that geopolitical risks. there's an acknowledgment that things are not great. incoming president-elect trump's policies could be inflationary. you could have a widening of the wars, etc., etc. all of that stuff is not even a knowledge. i don't think that is where we are now. lisa: vulnerable is another way

to put it. the market becomes increasingly vulnerable to a shock when everyone is in one trait and they feel like they have been pushed into that one trait because there is no alternative. do you feel that vulnerability and some of the crowded traits where one thing could go wrong that is unforeseen and it could torpedo the mass trade that can lead to an exit is? -- exodus? dan: if something happens on the ai demand side of things. my argument has been everyone is in the trade ir we are vulnerable -- or we are vulnerable, we have seen no evidence demand is weakening at all. when you look back -- we talked about this the last few times i've been on. when you look at the 1990's, floyd nourse and the new york times talked about the stock market being in a bubble in 1995. greenspan's irrational exuberance speech was 1996.

it was not until 2000 when you started to see the demand trends weakening. it is not like we did not know we were over building and there was a story about the telecom cables can wrap around the earth 1000 times. we knew we were over building but it took until the demand trends weakened for the broader environment to weaken. whether it is ai or broadcom the last two days or any of the derivative trades, i have not heard -- i have said this a hundred times. we don't own any of these names. i have not seen suggestion on the sell side that demand trends are weakening. demand exceeds supply from anybody who has a comment. lisa: you have a big footprint looking at the potential, nations of companies in media space and other industries. this has been an area a lot of think will be really hot next

year. how much are you seeing that in the ground of analysis of companies in different sectors and which sectors do you see the most active discussions? dan: i think i'm in the camp that think next year will see a pickup in m&a activity. the issuance trends are, medic of this -- are emblematic of this. i expect to see that. you mentioned solace involved in the media space. i would point to comcast and warner bros. spinning out the linear networks with the assumption they will combine. there is a lot to do there from our standpoint. when people think about high and credit investing, a lot of the conversation is about dish. those of the types of things we pay a lot of attention to. we have a 20-year track record of investing in the media space and i think there will be a lot there to do in the space. annmarie: are you accepting a

light regulatory touch? dan: the conversation is lina khan is gone so it's game on. i don't think that is the case. when you really -- i'm sure you're aware of this -- when you dig into jd vance's philosophy and the people around him, it is not a game on type philosophy. there will be scrutiny of the big tech stocks in particular, the tech companies but i don't think -- listen. josh hawley, jd vance, tom cotton are not going to greenlight any merger in the public domain are actually from the ftc standpoint. there will be a lot of scrutiny here but will it be lighter than what we have experienced the last couple of years? that is unquestionably a yes. annmarie: do you think the idea of trump trade is overrun? dan: now. -- no. .

mayye yes -- maybe yes. bloomberg has a story about ceo confidence spiking up. small business and are apparently all republicans because that spiked up to the highest level. annmarie: political bias and some of the surveys. dan: and we been all of these surveys. no, this is going to be two years until the midterms. four years of a more right-leaning business from the climate. that is going to persist. i think -- i would be curious of your thought. there's a lot of enthusiasm about what this administration can accomplish. i am more skeptical. can you also afford no tax on tips? can you afford lowering the corporate tax rate? i'm skeptical the congress will pass that. annmarie: you are skeptical of the good stuff that would be beneficial to the business climate.

what about tariffs and things that can have a negative impact? dan: i enjoyed this conversation a lot. the talk around tariffs is so universally bearish and bad. i don't want to give away my free market going to veto -- free market, it's not optimal. i government within being dystopian in a meaningful way. everyone likes to point to the headline index that there was no meaningful jump and inflation. there was a reversal of the multiyear downward trend. core goods prices did respond. if we can get the currency to move, get oil prices lower, maybe president trump is a little from the year with the saudi's and we can get a million barrels back on the market and the whale down to that $50 -- and you can get oil down to the

$50s. annmarie: there needs to be a higher price to incentivize american companies to continue drilling. dan: we are pumping 13.5 million barrels. you have the voluntary curtailment across opec. several million barrels of spare capacity. they keep trying to bring that back on but we are worried about chinese demand. there's a lot of moving parts here. i think you politically if you are president trump your goal is to lower prices. he will be harder to spur additional production in the permian think it the saudi's to agree to pump more oil, and if you can compensate that by lowering irani and output -- annmarie: for russias. dan: the iranians are over 3 million barrels now. that is up a lot from the day president trump left office. you get one million iranian barrels of the market, compensate that with a million

saudi barrels, maybe you depressed oil prices a little in that environment. win, win. jonathan: final question to you. dan: we just started. jonathan: we are 12 minutes into the segment. which 20 think will be more difficult for the incoming administration to achieve? hi growth, low inflation, fiscal? dan: fiscal. this is a parlor game we have played for decades. no one is cutting spending. spending never gets cut. jonathan: is elon watching. dan: i will go work for doge. not full-time. the cbo puts out a report all the time of the ways you can fix the deficit. tom coburn, now rand paul puts out the ways book. this is not brain surgery. there was a movie "dave."

the fate president brings in charles grodin. he says this is the worst looking thing i have ever seen. if you put five republican economists or fiscal people in a room with five democrats, they can sell the problem over lunch. the problem is no one knows how to get reelected when they fix the problem. jonathan: that is why yields are still 4% on the 10-year. dan: thank you for having you back on and the 7:00 hour and not the 6:30. wherever you have me, i'm thrilled to come in. dan greenhaus, another happy christmas. merry christmas. here's your bloomberg brief. dani: donald trump lost a bid to have his hush money case tossed. to state court judge found the july supreme court decision granting broad immunity did not affect trump's state conviction.

trump's team argued the trial was tainted by testimony and evidence that should not of been allowed. it is unclear of the case will proceed to sentencing with trump continuing to challenge the verdict. morgan stanley looking to profit off the surgeon spacex. the is opening its specialized lending program to spacex employees who want to cash in on soaring shares would not lose their equity stake. to participate employees need of these 500,000 to invest in spacex top. it includes -- spacex stock. seven of the world's 10 busiest airline routes are to the asia-pacific region. aviation data provider oag says the biggest international route was from hong kong to taipei. second place, cairo to jeddah. and then, sold toky -- seoul to tokyo. jonathan: more from dani in

about 30 minutes. spiraling tensions between moscow and kyiv. >> there's got to be a deal. too many people being killed. that is a war. got to make a deal. putin has to make a deal. jonathan: what is that deal look like? live from new york city, good morning. ♪

jonathan: equity futures down by about .3%. another close at a record on the nasdaq 100. futures this morning pulling back a little bit. down by .2%. bond yields are higher by three basis points. under surveillance, spiraling tensions between moscow and kyiv. >> got to be a deal. too many people being killed.

that is a war that -- too many. you have got to make a deal. putin would have never gone and if i was president. we would not have had inflation. oil prices would have been lower. i had a good relationship with putin despite the russia hoax. jonathan: the ukraine is claiming responsibly for assassinating a russian general and a moscow explosion earlier on today. jon lieber, how do they close a deal with things like this happening? jon: great question. we know trump once a deal. you heard him say it several times in that clip. we think zelinski wants a deal because he wants the war to stop and ukraine is losing right now. we don't know if vladimir putin once a deal. we don't know what his incentives to get one are. it seems like he can keep the land. that is not really in dispute at least by the americans. they would be happy to carve out

that part of ukraine and give it to the russians. can he get sanctions relief? the sanctions have been sort of harmful for the russian economy. they haven't really heard the putin regime in any meaningful way. putin seems to benefit from the permanent work is waging against the west. -- war he is waging against the west. what incentives that putin has to get to a deal? ukrainians act like they recognize the need to put pressure on the russians. they are acting like they need -- a cease-fire would be in their benefit which explain recent actions over the last couple of months, the meeting with donald trump last week trying to convince him to put together a package that is more favorable to them. today's assassination which they took credit for. these things are probably about ratcheting up pressure on putin. i woody spec the u.s. to do more

that in the trump administration. trump's national security advisor talked about tightening sanctions on russia so they are getting less -- able to sell less energy abroad. he talked about biden's decision to fire more long-range missiles into russia which trump says he does not want to do. we are quite a ways away from a deal right now. it is possible the work could continue to escalate into the first half of next year. annmarie: i want to pick up on the moment when he said he divide administration should not have shot missiles into russia. he was named person of the year gala week. he said the only way you will reach an agreement as to not abandon. can we see an incoming trump administration tighten the screws on putin and that is the reason to force him to the negotiating table? jon: this has been kicked around republican circles.

trump's former national securities and other folks on capitol hill for a while now. the trick to getting a cease fire is to increase pressure. the of view -- the view that the sanctions enforcement has been relatively weak. the oligarchs are still wealthy and powerful. the ones that are still alive. there was a hope they could pressure trump into adopting this increased pressure tactic. i think you are hearing trump talk about that. trump is all over the map. he thinks the way to get into a deal is striking up a friendship with putin and having discussions about why it's good for him and it all be great. it is not as simplistic as that and it would be ironic if trump pivots post campaign to basically the biden position, you have to continue to arm the ukrainians to keep fighting a war until they win. annmarie: the biden

administration will be considering out right sanctioning russian troops. they have been using a price cap to starve putin of the money he needs to continue fighting the war. do you think that is just too little too late with the trump administration welcoming that over they think this could be inflationary and they are leaving the incoming administration with this inflationary bubble to deal with that spikes oil prices? jon: trump's energy policy is get more out of the u.s. to offset price pressures elsewhere. he has a good relationship with the saudi's. perhaps he can get them to pump more to offset this which is what biden did. on the inflationary side there is global forces that would counteract that. the question is how much pressure is put on putin. trump would probably welcome that kind of pressure, although the assassination today, i can't imagine that is a welcome development given the possibility the work continues

to escalate and russia has a lot of weapons left on the table so far that they could potentially use next. not something we have really seen recently but is a concern for the incoming trump team. lisa: investors see the prospect of a peace deal is one of the potential positive catalysts for 2025. that's according to the bank of america fund manager survey. the other potential catalyst are u.s. tax cuts and potential ai productivity gains. one of the big negatives is a global trade war. which of the options seems more realistic heading into 2025 to you? jon: we will get it all. you see the ukrainian warrants rallying on the back of a peace deal. that seems reasonable. take longer than perhaps trump is suggesting. the tariffs are going up, probably at least on china. potentially another trading partners. possibly on sectors like steel and aluminum.

perhaps the automobile industry is a place to watch for higher tariffs. you did not mention immigration. that is more of a domestic policy story but it will fuel inflation of the workforce were to dramatically reduce starting next year with more deportations. you talked about fiscal policy remains loose. i do think anything doge does will fix that. it will be no tax increases to offset that. it is a mixed policy picture. i would not say it is at all clear this is a progrowth agenda given the headwinds that will be introduced by some of the policy disruption. other sectors will do quite well in a deregulatory environment. you will get some rallies in some places in headwinds and others. jonathan: good to hear from you. jon lieber. speaking of the auto market, winner takes all. tesla up again by 2.9% this

morning. bj rakesh. tesla positioned that are relative to his peers. he wants those credits gone. this is why. lisa: to cost less to make teslas. did made it more efficient to manufacture, which is why he doesn't care and there's the hope of fsd. jonathan: daniel ives coming up a little later. up next, sharon miller on the state of small business in america.

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jonathan: the opening bell is about two hours away and retail sales in america 60 minutes from now. negative by about one third of 1%. morning movers, let's cross over to manus cranny. manus: look at nvidia. when you hear from satya nadella, saying to the market, i'm short of power, but i am not chip supply constrained. down 4.5% in december. the question you need to ask is, every major correction in this stock, is it an opportunity?

the dip on nvidia is mirrored on the other seida broadcom. broadcom is having its nvidia moment, so to speak. this is about the propulsion on ai growth. this takes me back to may of 2020 three when nvidia blasted the market and we didn't expect the kind of guidance and numbers that we got from them. bank of america says that the ai story for broadcom is growing at 3x over the next three years. there's room for other winners. it is trading at 38 times multiples, so there is limited room for error. we know that these are high wire acts. 2024, $61 million. covid products will be about the same next year as this year, but there will be changes in the inflation reduction act. that is a redesign of medicare. that is assumed in the numbers

of around $1 billion, but the reaffirmation of the revenue is the key point in the 3% bid this morning. jonathan: under surveillance, ukraine claiming responsibility for the assassination of a russian lieutenant general. ukraine security service carried out the attack. an explosive device detonating near the entrance of a moscow apartment building. annmarie: this is a rare example of a top russian general in russia and ukraine claiming responsibility. it came a day after the ukrainian secret services accused him of ordering the massive use of banned chemical weapons against troops in the country. also, they know they will be forced into this potential negotiation. they are taking any moment at the end of this year and early next year to really try to push the russians back and get as much as they can before they are forced to a table. lisa: it seems people are treating this as escalate to

de-escalate. i wonder at a certain point how much that is maybe a rosie interpretation given that vladimir putin does not take well to black eyes. annmarie: escalate to de-escalate isn't only the united states. trump setting time magazine i wouldn't abandon them. european commission is saying it is prepared to in the transit deal of gas between ukraine and russia trying to starve food and of the funds that he needs to continue war. jonathan: tiktok and bytedance asking the supreme court to block a u.s. government ban set to begin on january 19. asking to put the measure on hold as justices consider whether to hear an appeal. if there is a national security risk, it doesn't matter about anything else. this is the only thing that matters.if you believe there is a national security risk , i don't care about the kids on tiktok. i don't care if you have gen z

winning an election. if there is a national security risk, there is nothing about that. lisa: what is a national security risk and where is our standard for that. a pew research survey released in september showed 17% of u.s. adults regularly receive news from tiktok. that is a fivefold jump from 2020. if people are concerned about misinformation, manipulation of data, any of these issues, it is clear. if they are not, make that point. that is where our focus needs to be. annmarie: trump's former national security adviser told me once that this is the chinese communist party's greatest form of espionage into the u.s. if these people are so concerned, tiktok is so concerned, the companies are so concerned they went to mar-a-lago to have a meeting, sell it. if you don't want it banned, divest. jonathan: law enforcement

investigates thousands of grown sightings in new jersey and nearby states. this is resident allete donald trump suggesting keeping americans in suspense over the sightings. he is suggesting they know and aren't sharing that with the general public. lisa: we've talked about the range of potential options and people are sick of this. the fact that a representative who used to be part of the navy, an aircraft and helicopter commander, saying there is a lack of coordination and communication amongst authorities. is there the authority to talk to each other but what the drones are, the suv's in the sky that people are finding about their houses? annmarie: after trump said they know and aren't telling people come he was asked, are you privy to these briefings?he said, i'm not going to talk about it. he is an incoming president. we know jake sullivan is speaking to congressman wa lz. i assume that yes, he is pretty.

he is saying that maybe it is not too dangerous, but why aren't they telling you even though they say they are "on it." maybe they should give more details. trump clearly knows. jonathan: small business confidence has jumped above the 50-year average for the first time in more than three years. bank of america releasing their year-end small business checkpoint writing that that's not to say there haven't been challenges. small business debt levels are rising alongside a cooling labor market, but credit availability is increasing as capital expenditure suggests some rise could be attributed to future expansion and growth. we are going now for more. it is good to see you. let's talk about the change in sentiment since the election. are you seeing a big bounce? sharon: we are seeing optimism. we have seen this over the past few years, but as we come to the end of this year, is this owner optimism has increased and we are seeing capital expenditures,

people thinking about the future and what that could hold for their business in 2025 and beyond. jonathan: not just a change in feelings, a change in behavior? sharon: we are seeing activity. we are seeing loan growth picking up, lines of credit utilization uptick. that is a good sign for what is happening in the business sector. we handle clients from startup to $50 million in revenue. from small to midsize we are seeing an uptick in activity. lisa: a fascinating aspect is that the biggest risk isn't weakness from consumers, isn't weakness in ability to sell, it is inflation being stickier and eating into margins. how surprising is that when we talk about the disinflationary trend everyone is expecting into next year? sharon: it is not a surprise. inflation has been sticky. as you think about business owners, particularly in the

rental space, where they are doing business, that has increased significantly. as you think about retailers, they are paying 30% more on average because they want to get a good spot so people see them. so they are visible. rents have come up a lot. that has been on the minds of business owners, not just this year, but we have seen it more pronounced. lisa: it raises the question of vulnerability. if there is an increase in tariffs for smaller businesses that might have more difficulty than larger ones negotiating better terms, etc., how much was that something you talked about with them? your hearing more from your clients about how to maneuver in an inflationary environment where there are still opportunities? sharon: we aren't sure how that will play out. it will determine how the health of the business is at the time if the tariffs go into effect. are they going to keep it themselves if the health of the business is strong or pass it

along to the consumer? that could have inflationary impact as well. annmarie: when it comes to small businesses, goods or services, who is feeling more optimistic? sharon: i would say the services sector. we are seeing services, an uptic k in lodging, travel, and experiences. which is also what we see in consumer data. people are spending on memories. how do they take trips, and what are they doing that they can continue to do so? we see that into the business segment. we are seeing an uptick in not only travel and lodging, but in other services. professional services. binance. you're seeing an uptick in those businesses. annmarie: even with inflation potentially lingering as this concern, do you see any appetite for consumers to slow down? sharon: we have seen a very steady consumer.

as we look at data through the consumer reports, we see their balances are 30% higher than 2019. we continue to see strength in the consumer in all cohorts. they are spending. we have seen an uptick in holiday spending going into the holiday season. there is strength there and dry powder. lisa: you talked about an willingness and ability to increase leverage, and you are seeing more borrowing even though there is credit card debt escalating for small businesses. can you talk about how different that is then a couple of years ago when maybe the scars of the pandemic were hanging over businesses and they were not as willing to borrow? how much do you expect borrowing to increase? sharon: we are seeing increased demand. as you think about the balances on card, we see an uptick not only due to the inflationary pressure over the past year, but also capital expenditures.

we are seeing that pull through. we have a strong business economy.when you think about the credit and clients in the communities rebuilding. jonathan: cannot handle interest rates where they are? we get conflicting reports. sharon: they are handling the interest rates where they are and we are seeing we will have another decision on, and we expect another 25 basis point decrease in the rate. it will help. as rates come down, i think it will be easier for consumers as well as businesses -- jonathan: you aren't picking up on stress at the moment? sharon: we are not. jonathan: that's interesting when the federal reserve is saying they think that they are sufficiently respective and when we see markets at all-time highs and credit spreads super tight, and you hear from small businesses it is not hurting that much. lisa: at the same time they are increasing borrowing despite rates.

you wonder, do you end up with that increase in borrowing even if rates stay here? that is a key question a lot of people are wondering. jonathan: good to catch up with you, thank you for your time. sharon miller on small business lending and what is happening with small businesses across america now.speaking of the fixed income interest rate, yields are higher come up by three basis points. the two-year up to 4.30 at the front end of the curve. lisa: the reason we see in the uptick is because of the belief in stickier inflation that goes to what sharon was talking about. the key question will be passing along some of those increases in costs, and that a lot of these businesses can tolerate borrowing at levels currently in the market. jonathan: an update on stories elsewhere with your bloomberg brief. let's cross over to dani burger.

dani: president-elect trump says the ukraine needs to make a deal with russia to end the invasion and downplay the value of occupied land. that may signal a trump push for a settlement that codifies russian territorial gains. trump criticized the use of u.s. weapons to strike targets deep in the heart of russia. pfizer shares moving higher in the premarket trade by 3%. 2025 sales and revenue were in line with estimates helping pfizer for and off activist investor claims about mismanagement. it said sales here would be between six to $1 billion and 64 billion dollars. shares year-to-date are down just over 12%. people familiar tell us that volkswagen management and labor leaders are so far apart from a deal after talks in hanover yesterday. they are set to tell the board that prospects of an end minut -- of an imminent deal are dim.negotiations are expected to go deep into the night. if not made by wednesday the union will vote on walkouts to take place in january. jonathan: next on the program,

big tech cozying up to trump. mr. trump: i had dinner with almost all of them and the rest are coming. one of the big differences between the first term -- the first term everyone was fighting me. in this term, everyone wants to be my friend. jonathan: a big change. we will discuss that next. this is bloomberg. ♪

jonathan: the stock market picture, equities down a touch. down .3% on the s&p 500. bond yields higher up by three or four basis points. in about 43 minutes u.s. retail sales. tomorrow 2:00 p.m. eastern, a decision from the federal reserve, a news conference from chairman powell 30 minutes after that. big tech cozying up to donald

trump. mr. trump: i did have dinner with tim cook. i had dinner with almost all of them and the rest are coming. one of the big differences between the first term, the first term everyone was fighting me. in this term, everyone wants to be my friend. i personality changed or something. it is a big difference. the big difference is the first time everyone was fighting me. we are all friends. jonathan: it is a big change. president-elect donald trump hosting a series of meetings with big tech leaders including mark zuckerberg,, tim cook, and jeff bezos sometime this week. raising the tesla price target to 515 writing we believe the trump white house over the next four years will be a total game changer for the autonomous and ai story for tesla and musk over the coming years. quite a punchy price target. he makes a different point and i

would love your thoughts. he says that the new administration's policies repealing the consumer ev tax credit positions tesla better than lower ev cost structure relative to peers. how important is that piece of the puzzle? >> it's important. negative for the ev industry and positive for tesla, but if you look as they do the sweep the leg on ev tax credits, that is going to give tesla more of an advantage. that is the appetizer. the main event, what we are focused on, the gold at the end of the rainbow, it is autonomous , the ai future. that is where the lightbulb went off. if you look at the trump-musk bromance and as this plays out, it is a poker move that will be the bet for the ages when you look at a musk that on trump. jonathan: the vibes are good and

it is hard to fight against them. from a bloomberg subscriber, i believe you know the individual, they say tesla has increased since the election by something like $700 billion in market cap. the business has not grown into years despite self-driving not work. regulation doesn't help it work. market cap of waymo which has working robo taxis. my production is tesla will lose over $1 trillion in market cap. what do you say to that individual? dan: if that person was an nfl scout they are probably negative on tom brady coming out of michigan. despite all of the super bowls. the bears cannot cai on the spreadsheets, so when they are sitting in hibernation mode they don't understand the mood. autonomous is worth the tesla story. i believe that this all plays out it is the start.

i continue to view this as probably the best pure ai play out there. lisa: if you want to build on that, it might be that this person isn't necessarily looking at the same trillion dollar addition to the market cap. if you spin at the other way, why isn't this promise also lifting the stocks of gm? yes, they got out of the possibility of robo taxis on homegrown turf, but is partnering with others to do the same thing and is it being valued at all in that increase? dan: i would argue to look at alphabet. waymo, they are going to be a huge benefit for them when it comes to autonomous. this is being led by musk and tesla. in the mount rushmore, they are going to continue to own this because you have 7 million vehicles out there going to 10 million. you look at gm, the cruise is a blackeye situation.

i think down the road they could oem technology from tesla when it comes to autonomous and full self-driving. that is why you look at the beltway, the difference is that musk went from the enemy to now he will have a game changer relative to the federal regulatory landscape that i think musk could help change. lisa: to crystallize what you're talking about, some say he invested 270 $7 million in the trump campaign and gained his net worth in the process. it seems like a good financial trade. there is a larger question about fsd, are we better off with a market leader because of a status not only simply because of the technology? there have been pitfalls in the full self-driving technology for tesla, accidents and real questions around if it's ready to go. how much does it make the system more fragile to roll it out at a

time when there is one entity with such favor? dan: this will be rolled out in a process. our view is when you look at the new landscape, it is going to give tesla a much greener pasture when it comes to autonomous over tcoming years. i believe cybercab, talking about robotaxi today, this will accelerate the vision and make it real. the other thing is, when you look at optimus, that is not even factored in from a valuation perspective. in this ai party, it was 9:00 p.m. and now it is 10:00 a.m. -- -- 10:00 p.m.. the party goes until 4:00 a.m. behind those velvet ropes you have software. you have other players coming in. others will get in on the party. it goes back to where i believe we are going in 2025.

annmarie: to bring up the point of the debbie downer viewer writing in, you're talking about a vibe. where is the technology now? how much longer do we need to wait for this type of technology? dan: i think a year from now we are talking about when it comes to autonomous, when it comes to where you think we need to get to get fsd penetration, i think a year from now we will be there. i think that a big blockade has been the regulatory spiderweb in the beltway. annmarie: spiderweb won't matter if the technology isn't there. dan: i believe the technology has advanced significantly. if you look at v 13 and what they've been able to do. haters continue to hate. they hated 100 billion, right? hated 500 billion. despised one trillion. at 2 trillion they will be

yelling from the mountain tops. this ai revolution is here. it is a 1996 moment. musk and tesla will play a huge role. jonathan: another name i want to squeeze in. palantir. why doesn't that get talked about more? dan: the mesi of ai. to me it could ultimately be the next oracle, the next microsoft. the haters hate as a teenager despised as a senior living in delray beach, but i believe it is just the start of when it comes to ai this is the best use case. carve this on mount rushmore alongside the godfather of ai. carve understands the ai algorithms.

there is no other software that matches them. i think palantir is one institutionally shunned. retail has clearly been a bit ahead. just starting in terms of our view of the broader palantir story. the bears, they can't find ai in the spreadsheets when they are in hibernation mode. jonathan: i'm not sure about the tom brady, michigan comparison with market cap at $1.5 trillion. dan: it goes back to early days. bears can't see that -- jonathan: heisman winner, that kind of works. you know? dan: don't count bryce young out. i am bullish on bryce young. jonathan: i hope he makes a comeback. it is good to see you. the jetblue ceo. t. rowe price. and blackrock in the third hour of surveillance.

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>> surprise to the upside since the election, it is harder and

harder to justify owning non-us developed markets. >> returns have been driven by a narrow collection of stocks. narrow stock leadership is fragile stock leadership. >> there is an awakening of animal spirits. >> and norma's optimism about the u.s., but we don't know what this new administration is going to do. >> positive sentiment is positive for a reason. positive growth has been surprising to the upside. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: a snapshot of the prize action -- price action going into the opening bell. negative on session those down .4%. underperformance again on the russell, small caps down by zero point 6%. 29 minutes, retail sales in america, the last big data point before the federal reserve meets. that meeting is later on today. it concludes tomorrow afternoon at 2:00 p.m. eastern then we hear from chairman powell. lisa: a lot comes down to what the signal is for 2025 at a time

when people think that the economy is doing pretty well. yesterday services pmi came out better than expected raising the question, at what point will the strength of the economy translate maybe not into lower rates but since the broadening out the equity trends that we haven't seen over the past couple of weeks? annmarie: andrew hallman horse talking about consumer spending, stickier inflation across the sectors. they are seeing consumers going out and wanting to spend. the resiliency of the consumer brings you to the wall street journal editorial board saying, why, jay powell? why are you cutting yet again? this would mark a full one percentage point reduction. when you see how financial markets are reacting, how consumers are reacting to your previous cuts? jonathan: equities at records, credit spreads super tight. we talked about triple c's, the junkiest of junk.

embrace the bubble. you will get sentiment from the bank of america global fund managers survey, cash levels at record lows. lisa: 4%, which they said was the second contrarian sales signal at a time when people can only come up with reasons to sell like everyone is bullish so i feel worried. there is a kneeling that it's hard to understand what the trigger would be without the catalyst from some external event. at the same time, i think it's notable we are seeing the broadening out. jonathan: every day so far in december, continued yesterday too. lisa: 11 days of more losers than gainers. you look at this and wonder, what are people from the bottom up worried about that people from the top down aren't? jonathan: bubbles can last longer than you can stay underweight. painful to be bearish through 2024. coming up, morgan stanley as tech stocks hit another all-time

high. the jetblue ceo on the demand for premium travel options. and amanda lyman from blackrock on the fed's rocky path through 2025. u.s. retail sales before the last federal reserve decision of 2024. seeing better balance from next year saying, we see more balanced eps growth in 2025 for the s&p 500 here this should lead to better breadth, something that has been absent over the last two years. mike: this is the debate. we got the broadening out in the fall on three things. we priced out the recession risk which was creeping into markets. the fed went 50, which is a surprise and maybe not necessary. that got people juiced up. then you have the election. i would say the election was positive for two reasons. one, we got a republican sweep which markets tend to view more positively. more importantly, it was definitive so a lot of hedges

came off. hedges were in lower-quality areas. that basically pulled forward the initial move on the broadening out. now, what is happening is because rates are backup there is concern about the fed not being able to cut as much as people thought. weare seeing a de-risking and profit taking, frankly. you read the note. we said we think there is a broadening out. that is what the consensus thanks. that is the expectation. if the consensus members are hit next year, bottoms up, we will. see a broadening out it is about earnings revision. we are being more selective. we upgraded financials, we been more constructive on software and industrial names because of the earnings story, and that is how we will trade this for the next three to six months, looking at areas where revision breadth is improving. this isn't coming out of a new cycle. we are not expecting a broad rally in the way that 2025, but

more of a rifle shot to the areas where growth is improving. jonathan: it isn't a new cycle, it is a late cycle extension. why is that so important. mike: we called it classic late cycle in 2017. the fed is moving, multiples expand. over the last 12 months, that is what has happened. earnings haven't gone up for 2025-20 26, they just rolled forward. that is very typical in the late cycle period. the quality stocks have continued to work with this back-and-forth, this uncertainty around, is it a hard landing? will it be every acceleration of growth? is the fed doing enough, behind the curve or ahead of the curve? this creates opportunistic rotations. lisa: how much is this trend turbo charged by the idea that there is no alternative than the united states right now? mike: we said in the monthly

note that we put out, we were in singapore talking to investors all over the world. there is no interest for anything except the u.s. the u.s. exceptionalism idea. trump winning is like a magnet. they will put all of their resources internally. that is what the markets are seeing. the markets are saying that is correct. is it overpriced? potentially. in some stocks and sectors it is overpriced, but the move isn't wrong. investors are seeing what is right in front of them. america will take share. america has an america first agenda. lisa: when you talk about a rifle shot, you have to look at the areas of growth and you talked about a rotation in themes.this is a market looking for a new theme other than ai. what is on your bingo card as the theme that will pop up next that will be transformative for investment trends?

mike: we are trying to find areas that have not recovered from a 2-3 year recession now. in the private economy we've been in a recession. housing, i.t. spending away from consumer goods. there have been a lot of things beaten up. two areas that look interesting, we aren't there yet, consumer goods where inflation may picking up now which is good for earnings, and the second is transports. it has been like a recession because there has been no restocking or pull forward. if animal spirits come back those are two areas where there could be life. those are on our bingo card. annmarie: what are others that you could see move into depression mode? mike: i don't think there is a depression but areas will see a deceleration. semiconductors have been trading terribly. mostly because they are in a deceleration now, except for a handful of stocks really benefiting from ai. if you mentioned aiu benefited, but the reality is a handful of

stocks have seen the increase. traditional semiconductors got beat up on the idea and are selling off in memory and commodity areas. i think we will see some of that in consumer services, where we are seeing a deceleration in inflation. an adage that people do not appreciate his average stocks to better when inflation is accelerating, because that is earnings growth. that is 2020-2021. we see a diversions where consumer goods and consumer services. now we are sing services decelerate and goods bottoming out. still negative, but that will turn up. annmarie: when it comes to the most bullish catalyst next year, the bank of america fund survey talked about china, re-acceleration, ai productivity gains, peace deal in ukraine, u.s. tax cuts. what do you think would be the most bullish? mike: i think u.s. tax cuts are

off the table in terms of incremental. i could see an extension. i take that one off. annmarie: status quo? mike: if they don't extend it that is a negative. that is what i think about taxes. a peace deal, we are all hoping for that but i don't think there is a deal. i would say that the productivity thing on not only ai but productivity in general, are we going to get more productivity out of people? we aren't allowing as many immigrants in anymore and we need to find labor productivity. if we don't, that will be a headwind for businesses. some of it is ai-related and some is getting people more efficient. people are still getting to back in the office, frankly. annmarie: the federal government. mike: what i would put on the card, 26-20 seven, can we get efficiency out of the government employees that aren't bad people but are playing for a bad team?

can we get those people repositioned in the private economy as the private economy is starting to recover? lisa: you said companies tend to do better when inflation is accelerating and this flies in the face of but a lot of people are expecting year, that the disinflationary environment will be a goldilocks nirvana for equity valuations. how much is, if the fed gets what they want and we see disinflation, that could be one of the bigger risk cases to equities that have benefited from an acceleration inflation that has given them pricing power. mike: the multiple will come down. i think that this is an index risk. i've been thinking about this for a while. we had the rally in the summer where the average stock did better, s&p overweight versus market cap. it is giving up almost all of those gains. it looks like we are going to make a new low in that ratio. we will retest lows in the first quarter meaning index market cap better than equal weight, and

that is the low that i want to buy. that could mean that inflation is stickier and inflation is better, earnings are broader, and you see a rotation where the average stock does better than the index. that could mean index-level correction of 10% plus, but the average stock does better. the same happened in the early 2000. 2000 was a great year for the economy, but the index came down because the high flyers came down as rates went up. the average stock did well. that is an interesting thing that we are looking at. it is too early to do it now before you are in because this is monkey time for the last two weeks of the year. jonathan: what is monkey time? mike: you know, everybody wants to get to the holiday. no one is really taking big bets right now is my point. the first quarter could be interesting. jonathan: correction in nvidia, down 10% from the highs in november. what is going on? mike: there is a deceleration.

gross margins peaked earlier in the year. it is still robust, not a situation where they have a problem, it is just coming on sideways since the summer. we are seeing a rotation into other ai winners. the money is moving, it's normal. i don't think there's anything nefarious with that. jonathan: thank you. enjoy the monkey time into the weekend. equity future session lows down by almost .5% on the s&p. let's get an update on stories elsewhere. dani: ukraine claimed responsibility for the assassination of a russian general in a bomb attack in moscow. according to people familiar, the ukrainian security service carried out the killing of the general and his assistant. the two servicemen died when an explosive device planted on a scooter detonated near the entrance of an apartment building. investigators opened a criminal case for murder.

israeli officials say that i cease-fire with hamas is more likely than it ever has been over the past year. a working group from israel is in doha reestablishing relations with mediators. details are mostly under wraps, but two israeli officials said the cease-fire would occur in stages, the first would be to free hostages who are women, ill, or older than 51. the ceo of tiktok met with trump at mar-a-lago days before the popular video app is set to be banned in the u.s. over national security concerns. the private meeting came hours after trump suggested he would somehow try to reverse the ban to save tiktok, which he used to reach young voters on the campaign trail. jonathan: more from dani and 30 minutes. the morning calls and we will catch up with the jetblue ceo in just a moment as consumers continue to splurge on premium travel. that conversation is next. ♪

jonathan: equity futures on the s&p down .4% on the s&p 500 and bond yields higher by three basis points, the 10-year, four point 43. mizuho, upgrading tesla to outperform citing an improved outlook under the incoming trump administration. the stock is up by little more than 2%. the second call from jeffrey's downplaying match stock from hold. down by 1.8 percent. finally, upgrading albertsons to outperform highlighting growth potential following the termination of the kroger merger. the stock is up a little bit by .3%. finally, turning to consumer spending, jetblue planning to expand first class offerings in 2026 as passengers pay for premium options. the carrier cutting capacity to increase fares and focus on east coast leisure destinations.

joining us is joanna geraghty. the amount of premium is through the roof and a lot of people are trying to provide pacitti. what gives you confidence the demand will stick around? joanna: that blue has been doing premium for 10 years. this is just continuing to round out the suite of products that we have. we have a great coach experience and more space. now, more of a domestic business class seat that we will be introducing a 2026. exciting to bring it to customers and leisure markets. jonathan: the food is best in class. of done a flight to california and london. how expensive is it to provide that type of product? joanna: we look to provide differentiating experience of leaning in on certain areas. food and comfort are areas we spend a lot of time with. we have a great partnership with tuft and needle. comfort will be the area that we lean in on with interesting features of our seat product that provide more comfort to

customers. lisa: how difficult is it a thread a needle with business class given that jetblue traditionally has been an airline that caters to pleasure travel, to the idea of traveling with the family to more places -- to warm places in the wintertime. how much does that create conflict for you? joanna: everyone is a leisure customer. when you think about what you like to do on vacation, sometimes you want an elevated travel experience as well. we want an offering for every type of leisure customer. one thing we have done is returned in the northeast focusing on serving the best leisure markets out of the northeast, europe, the west coast, the caribbean. there is a real market for the premium seat. lisa: as nasa's are willing to pay more on their expense accounts than individuals -- businesses are willing to pay more on their expense accounts than individuals on vacation. what makes it worthwhile given that people on vacation typically have budgets? joanna: we are not charging what a business customer in business

class would afford. we want to make leisure affordable. we reduced fares, a better product and better service, and that is what we are looking to do. it's important for jetblue to have affordable fares and our products are accessible to the leisure customer. we are targeting someone who wants to pay a bit more but not the size for business. lisa: you've been tasked with turning around the balance sheet of jetblue and you've made progress. he reported positive earnings and pointed to progress in that. how much are you able to raise prices at a time when you see increasing consumer pushback. at the same time there seems to be ongoing demand for travel? joanna: there is healthy demand in the peak. when you think about the holidays, the summer time frame, that is where jetblue does its best. we flight a great destinations. we have seen some pricing pressure in the troughs. it is about balancing out the

year making sure that when demand is high you're focused on trying to capture your share of that demand and in the troughs reducing losses. lisa: do expect to increase fares this year? joanna: we are hopeful to keep the fares affordable to reflect the cost of service. there are costs. airport costs have gone up. labor costs have gone up. there is meaningful inflationary pressure. great food comes at a cost. when you see the grocery costs go up, the food in the aircraft will go up. we are trying to balance it and make sure that relative to the other travel out there jetblue is an affordable fare for customers and accessible to leisure customers. annmarie: there have been constraints on the airline industry when it comes to getting parts that they need and getting the planes to fly that they need, and next year there talking what tariffs and that may impact the supply chain. our you preparing?

joanna: jetblue has a unique situation. we have a number of aircraft on the ground we are paying for but aren't able to fly because they are due for an engine inspection then there isn't enough capacity. that is headwind for jetblue. as you think about tariffs, it is too soon to tell. jetblue takes a lot of aircraft from alabama, but depending on how tariffs are put in, we have exposure in europe and canada. some of our aircraft comes from there. lisa: the jetblue spirit airlines merger was blocked. you think about going at it again in the space of more mergers and acquisitions because there may be a lighter regulatory touch in washington, d.c.? joanna: we're focused on delivering our new plan, jet forward. we want jetblue to thrive as a standalone customer. we have a great product, great service, focused on flying into places. we are focused on our standalone plan right now. annmarie: you may not dip your toes back into that space, but do you think that this will be a more welcoming administration when it comes to things like mergers and acquisitions? joanna: it is hard to speculate,

because we don't know what the plan will be, but it's hard to see an administration that will be worse than the administration we had around antitrust. lisa: you have announced a number of changes when it comes to jet forward, including closing down operations and the number of cities. i believe that you're going to cut some 50 routes. is it done? are there more to come? joanna: the network is always evolving. the majority are done but we will not rest on our laurels if a market is not producing results. we will look at it and see if we can improve it, and if not we will put the planes in place that we can make money. we have to be profitable. part of that is the need to make tough decisions. jonathan: have you spoken to the incoming administration? are you planning to go to mar-a-lago anytime soon, make the pilgrimage? joanna: now i am focused on holiday travel. annmarie: a great place for the holidays. jonathan: you can combine the two. what do we call that?

joanna: we see a lot of leisure over the holidays, too. we are part of connecting people with their families over the holiday. 150,000 people per day over the christmas holiday. it is amazing when you think of what airline to do and the magic that we can deliver to customers reuniting families and making that great experience. it will be busy, tough, and my hope is that everyone can be patient and kinder. jonathan: does that mean there will be delays? joanna: perfect. delays. i wish this administration would focus more on air traffic control. that has been a meaningful pressure to jetblue and all airlines. when we think about the next administration, that is a focus area. i would love to see more hiring and better technology, and ultimately improving the amount of delays that come out of the air traffic control system. new york in particular, which is the hardest hit.

jonathan: we would like the same thing. no one likes delays, do they, bramo? lisa: going to florida is the hardest. there is always weather. winds or a random storm. some people get delayed for a long time, and they sit, and the plane gets canceled. joanna: ceos cannot control the weather. annmarie: we have an airline ceo saying they want the faa to hire more. in the incoming administration is talking about dogeifying the government. joanna: they are grossly understaffed. even with the weather we should have a more resilient aviation air traffic control system with the weather. that is something we have to deal with. lisa: are you saying that all of those delays is not because of the weather? joanna: summer definitely because of the weather, but they are exacerbated because we are significantly understaffed among air traffic control. jonathan: i never trust this excuse. you have a problem with trust as well?

lisa: there is a problem with air traffic control. annmarie: you can see how bad the weather is. jonathan: sometimes you look outside and the sky is blue and the sun is shining. joanna: air traffic control delays. jonathan: the pilot is missing, went out the day before. who knows? that doesn't happen at jetblue. just to be clear. joanna geraghty, thank you. next, we break u.s. retail sales. those numbers drop in five minutes. from new york, this is bloomberg. ♪ i can't believe you corporate types are still at it. just stop calling each other rock stars.

and using workday to put finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah. it's our son, he is always up in our business. it's the verizon 5g home internet i got us.

oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people. gotcha. take that. whoa! bruh! i'm fine. that smack looked bad. not compared to the smack down i'm giving you. you sure you're, ok? you know you're down 200 points, right? lucky, she convinced me to get help. i had a concussion that could've been game over. in actual reality, you've only got one life. don't mess with your melon. if you hit it, get it checked.

jonathan: significant data point is just seconds away. u.s. retail sales about 20 seconds away. equity futures on the s&p, negative by .4%. on the russell we are down by .5%. the bond market shipping up as follows. yields higher by two or three basis points. with your economic data let's crossover to mike mckee for more. mike: good morning. let's call it the numbers here. they are coming in stronger than anticipated. it looks like we had a good november off the top here. .7% gain, as opposed to a .6%

forecast. that is up from a .4% gain the month before. ex-auto, that is up .2%. it looks like a lot in the gas and auto in the advance number. the control number is what we care about. .4%, bang on with the forecast, and it is better than the .1% decline that we saw the month before. we will take a look at the categories here as you check the markets. jonathan: i will turn to the bond market forced -- market first. let's call it 4.26% at the front end of the curve. on the equity market down by about .5% on the s&p. the headline comes in at .7%. the estimate was .6%. the control group comes in in line.

lisa: we are looking at what looks like a distortion, particularly from auto sales. i will let mike parse through the numbers. i will say, the upside surprise is interesting to me. things look better than people previously thought and this is part of the giveback people were expecting from the hurricane we saw. but it was even better than people expected. better-than-expected economic data is the scene of 2024. jonathan: what do you see in the details? mike: it is reasonably strong throughout, which is why the core is up. it is definitely distorted by autos and other motor vehicles. the advance number for auto parts is 2.8% gain. that is reasonably strong. and gasoline prices on the month were up .1%. we have seen declines in that

category for many months, and now we get a rebound there. other than clothing stores and merchandising stores everything is up. clothing stores were down .2%. department stores are down .6%. food services and drinking places, interestingly off by .4%. that is usually seen as the one discretionary category and it is the only services category in the whole thing. furniture, up .3%. building materials, up .4%. we knew that would probably be higher because of the hurricane rebuilding. in grocery stores, down .2%. some real some declines in areas that would be related to the holidays. let's see how it turns out in december once people get shopping. lisa: aside from some of the hurricane disruptions, has there

been a trend of increasing demand and spend on the good sex? on furniture again? on home improvement? on areas that sell pretty significant deflation over the past year? mike: we have seen some change in that, that more people have been buying goods. goods spending is up, according to the government figures we had a couple of weeks ago. but does that continue? is it really the hurricane? you see a lot of cars sold when hurricanes and other natural disasters happen. people still have to get to work. they know their insurance money is coming in and they go out and buy cars. what is interesting is that we saw a .9% rise in sporting goods , hobby, and bookstores, which is the strongest one for the month here. yet department stores were down .6%. maybe we are getting more goods

than soft goods this year. jonathan: stay we will go back to mike in just a moment. retail sales come in at .7% for november. the estimate in our survey was .6%. joining us now to discuss is lorena ritchie of tea rope -- lorena ritchie of tea replies -- of t. rowe price. the data seems to be pretty decent and equity markets are skyhigh. blerina: i think the answer to that question is fairly simple. there is a degree of inertia within the institution. they started the easy set -- easing cycle it would look challenging to stop halfway. before they think they have gotten to a neutral rate, then i think let's talk a little bit about this idea that the fed has the level of interest rates is very restrictive.

therefore, in order to manage the soft landing we need to keep easing monetary policy. the information we got today from the core control group retail sale points to a very resilient u.s. consumer. we keep getting surprised by this resilience. that is supportive of the consumer. when you look at the wealth channel, that is supportive. you have home prices that have not lost value, and then you have the stock market doing well. those have been with us for the last year and a half or so. what is also new this year is the tailwind. with inflation coming down real disposable incomes are also supporting the consumer and consumers. i'm quite curious to see what this latest estimate of retail sales does to the gdp tracking for the atlanta fed. that was tracking about the .3% before this morning's release. now, compare that with the fed's

estimate of potential growth, which is 1.8%. the u.s. economy has been growing at about 3% throughout this year, which is significantly above estimates of trend growth. and then the fed thinks that mutual rates are below 3%. something has to give. it is either growth potential is stronger or a real interest rate or neutral interest rates in the u.s. economy are higher. i think this is what the fed will have to grapple in 2025. lisa: one of the reasons it has been so confusing is it is not one story. it is the goods story, the high-end retail consumers, and the low-end retail consumers. do we have a sense, looking at the retail reports we have gotten over the past few weeks, about whether the spending right now is strong because of wealthy consumers or whether it is broadening out in terms of who is spending money and who has

that capacity to do so? blerina: this is a very interesting question. we have had this continuing rebalancing in the economy. the overstretched in terms of spending post-pandemic, then we had some payback in goods and growth shifted toward services. in every report you will find outliers. you will find something that was driving retail sales higher and is going to reverse the next month. what we see is the following month some other category is bouncing back up. i think we take a step back and look at the data in aggregate i think the u.s. consumer continues to spend and a lot of that is not even coming from leverage. we have had pockets of weakness and i think affordability for the lower end consumer has been a challenge. what seems to be different in this economy is that job availability and vacancies in the labor market have been so high that people have been able to find and add hours to their

workweek. i think that is being quite supported across the board. annmarie: what does this mean for it -- jonathan opened up asking why the fed should be cutting. do you think there is a chance we will have more individuals descend on this idea of cutting in december? blerina: i think this is possible, but it is not my baseline. the one dissenter in the september meeting, governor bauman, shows dissent -- shows dissenting. but i think since then she has fallen in line with the rest of the committee. i do think that chair powell wants to show a united front, so there might be a compromise here where they go ahead with rate cuts this week but then they signal that they slow the pace of easing, so that is giving reassurance to the hawks that they will respond to data as

they come along and will have more time to decide whether a cut is appropriate in january or march, or at the april-may meeting. i think my baseline is that after december the fed takes a pause at the january meeting, and perhaps a shift to an every other meeting schedule. if the data keeps coming strong as it has been the last few months there is a possibility that this becomes an extended pause. jonathan: that seems to be the consensus view going into 2025. blerina uruci of t. rowe price. it is a conversation we cannot have with guests. at some point next year some people on this committee start to audition for chairman powell's job. lisa: there is this expectation that in 2026 chair powell is not going to be there. it's is a fed chair who has tried to maintain -- i don't want to say control, but true leadership in terms of saying, we are doing 50, everybody get on board. how much does that start to see

a splintering? you have to think they would want out-dove everyone else. annmarie: i heard from a viewer saying, we cannot believe we have not heard from the trump transition team. before trump sets foot into office the fed will have cut three times, and potentially they are talking about not touching the cut lever in 2025. jonathan: they started the hiking cycle light and there was a former official that suggested it was because they had not decided the leadership of the federal reserve. i think these things matter over the next 18 months. lisa: are there people who are going to hinge their decisions based on the political favor of mike curry or not? chair powell probably will not do that again, considering he probably will not be up for reelection in 2026. jonathan: mike mckee, the consensus view tomorrow is cut interest rates.

in january, skip. is that line up with the communication you have heard from fed officials the last few weeks? mike: the first part, not the second. fed officials made clear that they were willing to cut this time. they feel they are restrictive, and if you look at the underlying credit issues, credit charges in terms of credit cards, car loans, home loans, they are barely down from when the fed started the cutting cycle. do they pause in january? that is a hard question. we are looking right now at a november number that is not good for department stores and people like that and is very good for non-store retailers. but black friday was the last friday of november, and cyber monday actually took place in december thanks to drew for pointing that out to us.

that is the case these numbers are not telling you anything about november and it is really hard to know what it means for the economy. and if i don't know, the fed doesn't know, we are all going to wait until we get into january and get some more numbers before they will start to lean one way or the other. jonathan: people like true are selling bonds again. thank you, sir. of course, the decision tomorrow afternoon. joining us around the table, amanda lynam of blackrock. you have said this a few times. growth is key here. if the federal reserve is skipping because growth is good, great, i'm buying credit. if it is because inflation is sticky i might have second thoughts. amanda: the one thing we will be watching for is what happens to the committee's estimate of the neutral rate? that is what is key into 2025. we have had a range of commentary about, maybe we are not that far from neutral. that is something that will determine the landings on.

if we land at a structurally-high level of rates , that is a backdrop that corporate credit can digest. that translates into demand. if it is because inflation is re-accelerating, and especially if that scenario would be coupled with the weaker growth, that is a negative backdrop for credit. jonathan: a lot of people would come on the equity side and say that is meaningless going into next year. are there more difficult reasons to say the same thing about credit? amanda: at a high level we would characterize it -- our title of our outlook is cautiously optimistic. there is an opportunity cost to being underweight corporate credit risk. 2024 was a rally led by the lower-quality portions of the credit market. you need to be clear about i.e. -- about why you are buying credit in 2025.

don't buy it because you think spreads will tighten materially and because you think rates are going to fall dramatically. both of those tighter spreads and lower rates would used total returns in the typical way. through duration exposure. we are actually quite constructive heading into 2025, but recognizing it is for yield-based demand. annmarie: which raises the specter of getting up liquidity for higher yields. if you want just the yields, you want the income, it doesn't matter at what price you are going to be trading in for. you expect that to turbocharge an expansion that has been dramatic? amanda: it is a great point. even an extra 200 basis points for retail investors is meaningful when you compound that over time. we think private credit has a lot more room to run in terms of its expansion. both the addressable market of borrowers and the investors participating in it.

i do think in an environment like this where you are focused on yield, a very attractive opportunity. the other point is about the advantage of diversification in portfolios with floating we liked building in floating-rate exposures. whether that is in liquid credit or private credit. lisa: blackrock put out a report saying you expect the private markets to increase to about 30% of the share of credit in 2030. i'm wondering how much this changes the dynamic in public credit markets? how much the yield level looks different now than it has in the past? in some ways the private credit sphere is underpinning it and sometimes weaker credits get funded privately and the public markets look actually like they are a lot more creditworthy than they have in the past. is that the case? amanda: we see the banks, public

markets, and private markets -- markets. we think on that that is a positive for financial stability. the distinction you are pointing to is that for a given borrower they may be better-placed to get funding from the private markets because they are not contending with some of the technicals that exist in the public markets. rating constraints, distressed investors posting -- pushing for restructuring. those are things a company needs to be ready for in the public domain. the private markets would be a better option for them. doesn't mean they are lower credit quality. it just means they can benefit more from that financial flexibility and they may not want the noise you encounter in the public markets. the punchline is, we see an opportunity for all three of these markets. that is what we are seeing in the market. annmarie: you also note that

private debt is not just an american phenomenon. where is it broadening out? amanda: areas that are more reliant on the banking system. europe and asia have a long way to go. this has been something president lagarde has been talking about. funding innovation in europe, boosting lower productivity so it can close that gap with the u.s. the private markets have been a really important tool in the u.s. market. that is something we expect to broaden outside of north america. blerina: annmarie: -- annmarie: you went through companies thinking about tariffs next year. what is the base case of these companies? amanda: the main takeaway is dispersion, but not widespread market disruption. companies made it very clear that they have been preparing for this for years. whether that is the first trump administration or the pandemic. they have building -- been building in resilience.

the other thing that was not obvious for me, some of these companies expect to benefit from supply chain disruptions. retail said a supply chain disruption could disrupt inventory patterns of traditional retailers and they may take advantage. this is not a one-size-fits-all approach. we have to do granular credit work. jonathan: the maturity wall, how many bricks to be take out in 2024? amanda: if we have spread widening next year it is not because of a maturity wall. it is going to be because of some kind of macro vent. tariffs. the corporate borrowing sphere has in managing that. jonathan: we can survive 2025? good to know. amanda lynam of blackrock on the credit markets going into next year. with your bloomberg brief, here is dani burger. dani: another tech ceo has made the trip to mar-a-lago to meet with donald trump. smart select, ceo of grupo.com,

met with trump on monday. two discussed the appointments and a national bitcoin reserve. he follows coinbase ceo brian armstrong, who had a call with trump last month. booking holdings says the impact of inflation is dampening travel demand within the u.s. the booking cfo said customers are still booking u.s. vacations more last-minute, especially compared to europe. demand in the u.s. was overall lower than anywhere else that booking operates. turning to sports, the vikings won their seventh game in a row last night after defeating the chicago bears. minnesota was led by wide receiver justin jefferson, who had seven catches for 73 yards, including one touchdown think the vikings clinched a playoff spot and now find themselves tied with the lions for first place in the afc north. phil light -- lions and vikings will play in the last week of

the regular season. jonathan: thanks for the update this mine. up next, setting you up for the day ahead and counting you down to a federal reserve interest rate decision. ♪ ♪

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jonathan: the opening bell is about 86 minutes away. equity futures on the s&p doing ok. we are negative across the board on the s&p 500. down by about .4%. with some morning movers, let's crossover to manus cranny. >> keeping an eye on nvidia. we are in correction territory. satya nadella at microsoft, the killer line. i am not ship supply constrained. we assume they are one of the biggest customers of nvidia. he has a problem getting power, but this is a correction.

one man's misery is another man's bid. this is there nvidia moment. may 2023 we give a little bit back at the moment on broadcom, but it is up 38% in two days. i will leave you with tesla. autonomous is worth $1 trillion. the trump white house access. power, access, equals the next four years. hence the reason every single tech ceo is having dinner or giving $1 million to inauguration. jonathan: million pounds, i feel the same way. pounds are not worth what they used to be worse. lisa: we are in that kind of morning. jonathan: we are together. lisa: talking about pounds. jonathan: pounds sterling. back in my day. [laughter] anyway. here is the trading diary. the fed's final meeting of the year kicks off today. tomorrow the fed rate decision drops at 2:00 p.m. eastern time. on thursday another round of jobless claims and rate

decisions from the boe and boj. on friday, core pce and university of michigan sentiment. we are almost there. lisa: this is going to be a fascinating week. you either reconfirm this idea of sticky inflation or potentially we have another dovish surprise. that tends to be what happens when fed chair powell takes the podium. annmarie: the resilient consumer continues to show up. i think the trump administration incoming would be $30 million more. i just did the conversion. jonathan: what? annmarie: if you were going to do 100 million pounds for $100 million. jonathan: thank you for that. coming up tomorrow, neil dutta, victoria fernandez, and priya missouri of jp morgan. need to get to the holidays. need to get the 2025.

what he talking about? i haven't been on vacation. [laughter] let's wrap it up. let's go. ♪

katie: stocks hitting a wall after a big day yesterday. 30 minutes until the official start of trading. i'm katie greifeld. sonali: i'm sonali basak. bloomberg "open interest" starts now. ♪ katie: numbing up, fresh retail data suggests consumers remain resilient as investors remain -- await the final fed decision of the year. there is also a new ai darling as nvidia falls into correction territory. we will take stock of broadcom's rally. and