>> the u.s. exceptionalism story still has some legs. >> i think america still is a good narrative. >> is no interest for anything instead of the u.s.. >> it's a story that's really hard. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city from her audience worldwide good morning, bloomberg surveillance starts right now with equity futures on the s&p 500 just about positive by one third of 1%.

it all comes down to this the final fed decision of 2024. we get a fed decision. wildly expected to be an interest rate cut. 30 minutes after that we will hear from chairman powell. >> this to me raises a really key question and you and i have been discussing this what will the market's response be to a fed chair that comes out more dovish versus one that tries to stay the course and reemphasizes the threat of stickier inflation. it's not so clear-cut cut if the market will embrace dovishness. >> whether there some consensus they cut today and skip tomorrow that's what a lot of people seem to think coming on the show. timothy: -- ann marie: same regardless of what happens even if they cut rates will be higher for longer. and they say all of this has to do with policies potentially. what happens when you are cutting into a re-acceleration may be of the economy because of policies in washington like

tariffs and tax cuts. >> this was described as a recalibration phase paid 100 basis points of cuts across three meetings. feels it we are going into something else with a different cadence. certainly looks like this fed chair is looking to get some optionality into a very uncertain 2025. lisa: the market's giving it to them. how is he going to embrace it while not seeming like he is simply following whatever the market gives him. jim at deutsche bank had this note and i really thought it was insightful. this is the third year in a row markets have overestimated just how dovish this fed would be in terms of how many rate cuts there would be. to me stocks haven't cared. so you have higher rates, you have equities the key pounding out returns and raises the question of what the market is saying this is stickier inflation and not that restrictive overrate. >> andrew was saying given this fed is so data point dependent, if they see any uptick in the unemployment rate potentially

then you could see a cut in january. >> every single fed meeting so far this year with the exception of september the two-year has rallied. yields have dropped at the front end. chairman powell we talked about this a few times he likes this one gear and that is dovish. later this afternoon will that be any different? >> i think if you look at one particular person over the wall street journal is talking about the potential for this. i think it's wonderful we are all jealous of you, you are the earpiece of the federal reserve. it raises the question we had a talk about how the 50 basis point rate cut came at the basically the cajoling of other members saying we will be much more moderate later on. does he really pivoted away to acquiesce to them or is there basically the same kind of dovish. >> in the bond market this morning yields unchanged on the

two-year. we are trading about 440 on the tenure maturity. coming up we will catch up with julian emanuel of evercore looking at the s&p 500 hit 6800. on a super bullish global fund manager survey. and we will speak to veronica clark looking to keep cutting interest rates. we be in with stocks rising trading with the final fed rate decision of 2024. julian emanuel of evercore optimistic into 2025. a combination of the long-lasting aftereffects of pandemic arra stimulus and the ai revolution will support the ai revolution to 6800. good morning. what happens at 2:00 p.m. eastern time this afternoon. >> we will get a 25 basis point cut. our central banks policy team thinks there will be three more next year. but the question is the messaging of it. as lisa pointed out moments ago, the market has been very good at reducing the number of expected

cuts and it hasn't really mattered. to us, north or south of call it three out to next december. it is probably the right way to think about it in terms of the handicap. but the question is what's the message on how things evolve given the potential for inflation to be stickier. jonathan: whatever happens you are bullish into next year. not as bullish as some on the street pray we've heard that from the likes of wells fargo. from john at oppenheimer as well. negative america put out a note we can stand above -- stay on the bubble. our things frothy into 2025. >> there are certainly parts of the market that are frothy. crypto anything is incredibly frothy that we know. other aspects of the quote unquote trump trade certainly are frothy. but we think about it more as we think about the first quarter of

2021 where you had lots of froth in the meme stocks, in spac's and profitless tech and they really crested but it did nothing for the cadence of the overall market. and for us, close to 10% earnings growth next year is the thing that can continue to repel stocks higher. >> just to combine john's questions pray he starts by asking about the fed and what they are going to do and then the bullishness the fact stocks haven't cared. at what point is there a connection between what the fed does and the reaction by stocks. in other words if they cut at what point does this give an extra boost to stocks and if they don't cut or even raise rates at what point is that torpedo some of the gains. julian: in our mind it is a function of the 10 year yield. let's go back to september when you had the initial 50 basis point cut the surprise to a lot of people was yields on both the

long end and the short end rose as briskly as they did. the only other time that that actually happened at the start of a cut cycle was 1995. the virtue -- the only real soft landing is sensibly to the one we had now. from our point of view it's not just where policy goes in at the fed. but where policy goes in the white house based on where the bond yield goes. over 4.5% will be questions over 5% which is not our base case. is where markets and assets generally and policy runs and headwinds. >> are we getting a preview of which stocks do best if yields inflect upward a bit. we saw the sort of lack of broadening out, this isolation in the magnificent seven and big tech over the past couple of weeks we saw the longest run of more decliners than advancers in

the s&p 500 in more than 100 years we've seen 12 straight days of that. is that what we can expect going forward if yields do not materially come down. >> that to us is perhaps as much of a seasonal bias as anything else. there is a tendency particularly when you've got animal spirits on the part of the investing public which clearly we have had post the election they tend to want to press the winners into year-end and obviously we've known what the winners are. in fact that actually tends to reverse in january so we wouldn't be surprised if there was a bit more market volatility as those winners paused, it doesn't say much about the rest of the year because we think those names will leave the rest of the year. it does say if we get into this environment where speculation grows ever more, that those of the names that could get you into what we would consider potentially overvalued territory. >> we see a lot of speculation

about policy and were mentioning the fact may be a 10 year yield that was out to get the market nervous. as of the third >> rail for this white house? no question. and the market told you what it thinks when the appointment of scott caused bond yields to fall very materially over the next several weeks and that was for the postelection rally. and we think someone like that since a treasury attention will actually be paid because remember if you go back and think about 2018, the mistake was is that policy got muddled with the fact that inflation was stickier but the real thing ended because the fourth quarter of 2018 selloff was that the long end bond yield started rising too much >> uncomfortably. >>if that's the ultimate check

on policies what do you think the policies will be. >> we know the intent is to promulgate the tariffs, we know that the other key will be tax policy extending the original cuts from 2017 and 18, and of course immigration and in aggregate most of the financial modeling and i'm sure most of the people you talk to say a they are inflationary on balance. be they expand the deficit and see they may not necessarily be as progrowth as expected. but as was the case in 2018 we have to see how it gets implemented. >> we seen that story over the last few weeks. you look at the retail sales of yesterday, a pretty strong the services pmi the day before pretty strong. you compare that what we saw in

germany, terrible. consumption numbers out of china awful compared expectations. just not good relative to the rest of the world. lisa: we've seen this isolation and that's one of the key questions for 2020 five how far could that divergence go between the u.s. and everybody else when it comes to rate differentials and the currency and when it comes to economic growth for the u.s. driving the rest of the world. >> having some time but my chart of the year for 2024, the chinese 10 year yield. falling and falling rapidly and then some. that is a very different world compared to the one we are talking about in the united states. >> record low for their yields. are you going to have that. he tends to have book of the year every two months or one month. book of the season. do you know what it was? >> it changes depending on the week. we will find out later, look out

for that a little bit later. bringing the book of winter. and spring of 2025 ahead of time for you a little bit later so look out. let's get an update with your bloomberg brief. >> good morning john perry president biden expresses support for a stock trade banned in congress. in interview with more perfect union biden said nobody should be able to make money in the stock market while in congress. it's unclear what impact the comments will have as several previous attempts to ban stock trading by lawmakers have failed. boeing is resuming full jet production in the seattle area after shutting down for weeks due to a lengthy worker strike according to the head of its commercial jet division. boeing has now begun building a larger 767 and 777. the company cautioning getting cut -- production back to speed will take time because some workers need to be recertified and components need to have the position. the two nasa astronauts who have

been stuck in space in september will have to be there longer according to nasa and the mission has been extended again and the pair will now return in late march or early april because of a delay in launching their replacements. the two test pilots plan on being away for eight days when they blasted off in june but multiple issues with boeing's starliner prompted nasa to leave them behind at the international space station. that's your bloomberg brief. >> how isn't this on the news every single day. you go up in space and expect to be there for eight days and could be pushing 12 months. >> i want to send them cards. if you know of someone that we can send boardgames, just something. jonathan: how are you sending them cards? [laughter] lisa: i don't know. >> what are you talking about. up next on the program sky high investor sentiment. >> it is positive. if i had to summarize a people along u.s. in the equity space.

and it's good it take something to kind of shift that. >> it's like elon musk turning into royal mail. >> i just feel bad for them what are they doing in their time. sitting there and staring at the moon. >> a long day ahead of us paid from new york city this morning good morning.

jonathan: the fed decision later on this afternoon. the s&p 500 struggling to string together two days of gains. negative breath every single day through the month of december so far. equities up by a third of 1%. in the bond market just about unchanged. and -- under surveillance, sky high investor sentiment. >> sentiment is positive. i think it's positive for a reason. there is a view that the

regulatory tax impulses for the trumpet administration are going to be positive. if i do summarize it people along u.s. versus the rest of the world and the equity space and will take something to shift that trend. jonathan: bank of america's latest global fund manager survey finding sentiment is super bullish. cash allocation at a record low with the u.s. stock exposure an all-time high. the team rising the december jump led by greater optimism on u.s. growth with the highest percentage of fund manager survey investors expecting a strong u.s. economy since at least november 2021. joining us now is elliott's of bank of america. record low asset allocation, a record high allocation to u.s. equity markets. is it time to think about leaning in the other direction. great to be here. historically these moments of extreme positioning because that's the bottom line of this

bond fund manager survey that positioning is extreme at the moment it's all about the u.s. everyone is long the theme of u.s. exceptionalism and historically this kind of extreme positioning has often been followed by turning point in the market. that also urged signals that have been flashed by the survey if you look at the cash allocation below certain key level it meant the risk assets are facing the top or experiencing a selloff and more importantly when you look at one particular metric this month the fact that investors are running record underway in terms of positioning regarding cash and that historically with a big top in risk assets in the past when five years. lisa: for u.s. assets or more

broadly given the fact the overweight is securely in the u.s. and not necessarily overseas in europe. elyas: as you guys just said there is a record high allocation to the u.s. and the allocation is more striking when you compare the rest of the world. the most overweight u.s. versus em or euro equities since june 2012. so here as well there is extreme positioning. we think more that the overshoot that's probably going to happen will still favor u.s. assets, equities in the dollar in particular but then at the time in q1 it will be a good opportunity to shift in favor of international assets we are positioning this way more favorable and valuations are much more favorable. >> is this time different? have you found in your final survey of this year that some of

the sentiment indicators haven't had the same kind of readthrough in future market performance they've had in the past just because this is a unique time. it is unique and fundamental structural divergences. elyas: absolutely. this time it's different in terms of the fact we have never seen for instance the behemoth of the megabus and seven group of stocks in history. when we ask investors about the most crowded trade for 21 months in a row they have been saying the long magnificent stocks is the most crowded trade and the fact the u.s. also looks very exceptional is also because the rest of the world looks very unexceptional. there's a lot of concern regarding growth opportunities in the rest of the world. this time it's different because the divergence has not existed in the past but historically when we go back to the surveys,

the kind of tops and extremes we see in positioning, the fact cash allocation is low, of the fact that cash levels are also low has often coincided with a turning point and we are cognizant of that. >> where are the contrarians going. elyas: who are the contrarians today and if those who believe there will be a q1 overshoot just because growth will surprise to the upside in particular in the u.s., you lose contrarians should be looking at international assets at commodities as well. at the allocation to commodities dropping to the lowest level since june of 2017. so international assets, europe commodities these would offer the best opportunities, but the true contrarian entering 2025 are those who think economy growth will be surprising on the downside those who still believe it is possible. and should opt in favor of cash

and bonds. >> lisa is sitting there nodding her head. it's almost reflexive. >> i was just thinking that that really is contrary and right now to think about a downturn and then i was singing about andrew. he's describing. jonathan: i think she was just surprised by them saying it mud that -- this time it might be different. i want to talk about what elliott's was talking about. the international bank drop and the question anne-marie asked. >> no question about it and we are getting a lot of questions about it. if you think about the last decade, valuation alone the disparity was not the proper catalyst to own the rest of the world versus the u.s. or versus the mag seven. and we don't think that's the case yet.

what we want to cra couple of macro turning points. most especially a peak in the dollar. we are at all-time levels. we've seen the brazilian currency in the headlines yesterday. really all of these currencies and when you think about it, recall back to the first trumpet there was a time when president trump became uncomfortable with the strong dollar. so if we get messaging like that at some point if in fact the economy may be shift slower for some unexpected reason, that's when we think the move towards the rest of the world and then the other thing and you pointed this out earlier is that particularly with regards to china and the message it sends the rest of the world yes we understand they are trying to reflate but the bond market is telling you it is not successful. >> what is going wrong in china

right now. that chart of chinese bond yields just rolling over aggressively. what does that tell you? julian: it really reflects to the fact that the dynamics around the property market are very complex and are likely a longer-term workout than any short-term stimulus patch. lisa: to go to that point, there is this feeling and talking about one of the contrarian ideas is a downside shift to growth. how much is that only in the united states and does that coincide with the top in the dollar. i ask this because we are seeing a downside to growth in china as evidenced by the yield chart. we are seeing a downshifting europe. so how much is that what has to happen to send the dollar lower and reversal of the trades. >> that would be sort of the likeliest series of events. but i would also say that if you think about things

geopolitically, if you were to see a greater semblance of calm either on the ukraine russia front or in the middle east. that could be the catalyst for the lower dollar and that could be the catalyst for more confidence in a higher potential growth trajectory in europe so that's the virtuous case and it's certainly possible. >> it's a relative story and we've asked the question on repeat over the last few weeks how little needs to go right in europe to get this trade to go on the other direction given how depressed expectations already are. >> i've been waiting for some upside surprises. it's been a little rough. lowest business confidence going back to 2020. i saw that thinking i think you need to kick the bar a little bit higher. >> still my favorite question for the end of the year talked about this with you in the green room. ask someone where they think the dax is year-to-date. it's up by more than 21% which is amazing. that's the benchmark in germany. lisa: i need to take notes

because i know what your year-end question will be, your year end chart. >> book of the year. special programming, the fed decides bloomberg surveillance special we get t casebook of the year. lisa: book of the winter, a book of the spring. jonathan: when does that start? 1:32. it's good to see you julian. thank you. up next on the program we will catch up with pg&e ceo patti on the biden administration's fifth d billion-dollar loan offer. ♪

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jonathan: average price tag on the s&p 6600, the low, six k, very bullish compared to last year, looking when the average for this year year-end was 48 33 on the s&p 500. lisa: what did people get wrong? two things. one, how the market would respond to higher yields. they do not get wrong how low yields would go. they expect them to be lower. two, they underestimated the

significant seven -- the magnificent seven. jonathan: and to some extent, they have been conditioned looking out to 2025. the nasdaq up by .30%. in the bond market, the two-10-30 year, yields unchanged but the 10 year, 4.4027. comparing to where we are now to the last fed decision, the close on tens, 4.3257, on 2, 4 .20, so we have not moved much. lisa: but to the extent we have, it has been the market ratcheting up expectations for longer-term neutral rates and throwing up question for the fed, how restrictive are we and how much further are we from neutral given the fact this

market seems to be issuing no signs of falling off the grid? jonathan: the dollar is a whole lot stronger creed we have repeated this the last week or so. we have only had one down week for the dollar index for the fourth quarter. euro-dollar clinging to 1.05. lisa: when do you get to the peak dollar? julian emanuel said that would be the tipping point at the time we could invest internationally. how far do we have to go there before it becomes a problem for other countries in the u.s. where you have a trump administration who would like to increase exports at a time when they are increasingly expensive for countries around the world? jonathan: look at brazil, we are talking six against the u.s. dollar. in canada, levels we have not seen since 2020. it is not just europe but everybody else. lisa: what lies in the dollar stronger? -- why isn't the dollar

stronger, and if it does get stronger, does that become a problem? you are right, there's no problem to lean into the dollar because who are you going to get excited about, germany or canada? they are having a friendly holiday spat. jonathan: a kumbaya moment. lisa: a festive holiday fight. jonathan: we will talk about this later. the ex-wife pushing 107. lawmakers unveiled a bill to extend government finding infighting on attaching funds to agriculture disaster and other issues picking it up to the mid deadline. lisa: elon musk said the bill should not pass and posted a photo saying ever seen a bigger piece of pork? annmarie: this is something speaker johnson wanted to avoid and it was the downfall for former speaker kevin mccarthy. it would give lawmakers a pay rise.

this is controversial for the republican party, so they only democrats in the house. lisa: they talk about high fluting goals and good policies, and very come down to it, can we pass the budget? i don't know, can we throw a couple more things in it? jonathan: here's one reason people dislike politicians, there are many, an individual who has been in washington, d.c., for four or five decades on his way out on the last few months in washington, d.c., decides that they should be able to try stocks in congress? where has he been? annmarie: i think this might be personal for him. i think this might be about nancy pelosi. i don't think the two of spoken since she threw him under the bus and pushed him aside and said it is time for you to step down. you need to pass the baton on. i'm talking about in the summer and he passed the baton to kamala harris and she lost.

there has been speculation about the fact that her husband is an investor. i think maybe this is directed toward her. lisa: this feels like when you leave high school and you tell everybody what you really think in the yearbook. that's all. just saying. jonathan: let's get these little tidbits from lisa about what childhood was really like. the biden administration set to open a trade investigation into chinese semiconductors. the probe could result in tariffs or other measures to restrict imports -- imports on older model semiconductors on the products containing them like medical devices, cars, smartphones and weaponry. annmarie: they have debated this for months. whether to initiate the investigation, the interesting aspect is that they went ahead with the probe, the trump administration needs to pick it up. i see no daylight for it when it comes to china and semiconductors. i think they'd be happy to pick up the investigation. jonathan: i wanted to squeeze in

this conversation, possible deal that would create the third-largest automaker. discussions have accelerated after foxconn approached nissan about taking a stake. talk to us about why this is happening right now? >> it is a matter of sort of disaster and trying to a verdict in the case of nissan. honda has been reluctant to do something like this. there have been talks for months about these companies potentially working together, but on a smaller scale, as there may be some cross shareholding, but not an out and out merger. years ago when carlos ghosn was unceremoniously pushed out at nissan, japan's government was concerned about the long-term future of the company.

and those concerns have only been sort of realized. and they saw in honda a potential savior in terms of a fellow japanese partner who could help them, and what we've seen since then is a company that has gone from crisis to crisis that really hasn't been able to get out of its own way. jonathan: it is looking more and more as a distressed asset. we will spend more time with you to talk about this. elsewhere, the biden administration is offering pgn the a loan of up to $50 million for rated generation, battery storage and transmission lines. it is to help them meet increasing demand and lower consumer bills. the ceo joins us now for more. cap sorry to closing the deal?

patti: we have conditional commitments. a couple of weeks we think we could finish close the deal. jonathan: what would this enable you to do? patti: save money for customers. this is a straight passed through to customers and our service area and we would save over a billion dollars for customers. it is a replacement for other traditional debt financing. so up to $100 million a year annual rate savings for customers. when electricity is essential to powering the growth of california, we need to make sure it is affordable. lisa: as we have a number of private capital infrastructure heads, and are showing talk about interest from the private sector to finance projects, and that the future head only has private-public partnerships, i'm wondering how much you are thinking about where you would like public financing and where

you see private financing? patti: i think it is a standard mix. we did a big equity issuance week ago, completing all of our equity funding for our five year, $63 billion program. we did a 63 billion equity race last week and we combine that with traditional debt. this just access financing. there's no role for governments in the projects themselves. our labor, our workforce, they deliver benefits for customers, get it at a lower cost. lisa: how urgent is it to build up the capacity to produce power right now? we talk about the data plans and how much energy they require in addition to extra cooling and a whole host of other necessities. how instrumental is it for there to be additional capacity to prevent prices from becoming astronomical? patti: i see the opposite impact, we call it net beneficial large loan.

this is a great opportunity for the industry to add new customers and youth. we have an underutilized grid and in my service area alone, our greatest utilized 45%, so all the new demand from electric vehicles build a large loans could be beneficial for customers. an additional datacenter load can reduce bills 1% to 2% and another one million could go down two to 4%. we see new electric uses as the first time in decades we could see loan growth that lowers the cost of energy for everyone, fully utilizing assets and reducing the costs. annmarie: this loan is coming at an interesting time. it has to be finalized before a new administration. will it get done before january 20? if not, do you think this could happen under a trump energy department? patti: we are optimistic and we

have been working hard to get this done for months. it is culminating. i do think the trump administration shares our value of the importance of the grid and powering the on shoring and powering new datacenter, remaining the global leader in ai will require power, so having a better grid will be better for everyone, and we think the trump administration will see the value. annmarie: has there been communication with members of the transition team your company? patti: we have not talked to them. we are focused on finishing strong and make sure we do what we can for customers as we wrap up the year. lisa: oratory 25, what changes do you expect? whether it is revelatory framework or the desire to broader now the efficiency of the great, do you see structural changes? patti: i think we will have to

get faster at permitting. permitting reform could be a good agenda going forward. we are excited about building new infrastructure that lowers customer bills, so we need to make sure to do that safely, and environmentally sound but quickly. the faster we can move and power growth era for our company, we see ourselves as growth utility. we have created real visibility to both her dividend. we will maintain a lower dividend in the sector as a driver for creating investment capacity so we can build out this infrastructure to best serve the people of california. it serves as a model. we have an exciting project where we are demonstrating new housing units, 4500, housing is in shortage in california, 4500 new housing units, all electric, with data centers in downtown san jose who are net beneficial with heat capture to offset the

electric usage in san jose. it will be a net zero city, and we are excited about what that means for people we serve. lisa: you talk about diversifying the grid, including electrification and you are charging cars like tesla charging stations. how concerned are you about the tooth between california, tesla, elon musk, and the buildout in california as a result patti:? i don't have a tif with elon musk. he has built a great company. they have been a great customer of ours. we have implemented what we call resource energy management tools to build out infrastructure faster. tesla wanted a 3.8 megawatt charger station, and by traditional methods, we told them you can have that in four years. and then we realized with the right tools and dynamic load management, we could get a map

capacity that day, so we change the way we serve customers and tesla made us a better operator for sure. jonathan: would you like to be our resident ufo expert? patti: we are a big drone operator. jonathan: tell us if we need to get used to this. patti: drones have important rules and standards. we have a huge drone fleet. we use them to monitor and inspect assets. we were one the first utilities to operate outside of the line of roles, so we can have an operator and command center operating a drone 200 miles away monitoring and managing lines. we increased inspections by 600% as a result. i'm not flying them over new jersey, in case anybody is wondering. lisa: i love it. patti: we are not that smart but we do use drones actively and

safely to make sure we monitor the best use of equipment. jonathan: good to see you. enjoy the holidays. patti pppe of pg&e. yahaira: luigi mangione was indicted on first-degree murder charges in new york on the shooting death of brian thompson. prosecutors say the shooting was a premeditated act of terrorism and dig -- if convicted, he would face life in prison without parole. he is currently being held in a pennsylvania state prison and the manhattan district attorney said he may drop his objection to extradition and could be returned to new york by the end of the week. the pentagon denied involvement on the drone sightings in the northeastern u.s., saying that none are being flown by the pentagon or parts of the secret government test as conspiracy theories emerged online. president biden said we are "

following this closely but so far no signs of danger." elon musk is considering giving up to $100 million a month to the leader of the part b list reform u.k. party after the two left -- met on monday. he wrote that he is "in ongoing negotiations with elon musk about the donation," which should be the largest u.k. political party. it could boost performance chances in upcoming elections. that is your bloomberg brief. jonathan: amazing shift in british politics. next, the final five decision of 2025. >> how will -- powell may have another surprise in store for 2024. the market has gotten a little too concerned and hawkish about inflation. you may see a jerome powell more dovish than what the market is expecting. jonathan: i'm already skipping a year. the final five decision of 2024.

i'm looking forward to the final decision of 2025, as well. from a beautiful new york city morning, good morning. ♪

jonathan: two weeks left of 2024. equity futures on s&p 500 pushing closer to .30%. bond yields stable. the 10 year, 4.4027. the final five decision of 2024 under surveillance this morning. >> jay powell likes to surprise us. he may have another surprise. the market has gotten a little too concerned and hawkish about inflation. i think you may see a powell more dovish than what the market is expecting. what you may see him do is deliver the cut in december and then talk about how the rhetoric

is about a reduction pace, not a reduction direction. jonathan: investors are awaiting the final fed decision of the year, and citigroup wrote that softer jobs and inflation readings for november have not change the market narrative that resilient activity and sticky inflation will allow only shallow rate cuts. chair powell may sound dovish relative to this consensus. veronica clark joins us now for more. i think it is important on any fed decision day, when people say i expect chairman powell to be hawkish, i think, hawkish relative to what? the last dot plot, maybe, is that how you think about things? veronica: i think the market has set a high bar. jay powell could easily under deliver. i think you have had data the last couple of weeks that will give the fed more confidence

that the labor market is slowing and inflation is easing, and i think you will see that dynamic is evidence that rates are restrictive and they don't need to be. lisa: it seems you have simpatico with chair powell's view of the world which may be more negative in terms of economic trajectory. i look at data that people talk about showing resilience, and you point to all the reasons why you could interpret it negatively. what do you think the markets get so wrong? veronica: i do think that powell shares are more dovish sentiment. it comes down to the labor market for us, and everybody agrees on though hiring, still low layoffs, and i think most people will look at that and say this is normalization after tight labor markets. the issue is that labor market would look interesting washable from how they looked before recessions and how you get that unemployment rate rising more

sharply. until hiring fixup, i still see that as a clear risk. lisa: is this time different? jonathan: that is the second time this morning. lisa: let's be honest. people are talking about a new investment cycle and the ai revolution. people are talking about lower regulations and taxes. doesn't that set up a different landscape than one that fosters mass layoffs? veronica: absolutely, and we will see if there are animal spirits postelection. there is uncertainty on what to expect next year, and this labor market has been weakening a while. i don't see that changing the next couple of months. we have been running two to 3% gdp growth for over a year and financial conditions are easing, and still unemployment has risen by a percentage point. annmarie: what happens if we get

stricter policy from the incoming trump administration? how tighter could the labor market move? veronica: that would be net inflationary to the extent we have had stronger migration the last years. that has probably helped to loosen and bring wages down, and i think the issue is we really are not going to get a lot of clarity or action on policies until late 2025. annmarie: late 2025? veronica: i would think so. until we see actions it will take the legislation, i don't know if we will get the impact out of all these policies. lisa: out of all the policies speculating, what trump has said about the borders immediately, what are you most nervous about? veronica: in terms of new policy, if we do get big cuts to government spending, we will see

if that improves efficiencies. maybe you don't get the big hit to growth, but we do have a fiscal drop off the next years. we have the chip stack, inflation reduction act, infrastructure. a lot of that was frontloaded for 2023 and 2024. that is already slowing for 2025. jonathan: lisa on the edge of bullish is what i'm scared about. twice. annmarie: i don't recognize her. lisa: there is a narrative out there that there's been a shift in the business cycle. business has died, etc. i'm entertaining, what if this time is different and people feel more bluish? veronica: in terms of the antitrust environment, it cannot get any worse. jonathan: veronica, greatest -- veronica, good to see you, saying that german powell could be dovish. lisa: i'm not bullish, just

making the argument. it is important to understand that right now there is a reason why people are so overweight in a certain thesis. it is not simply tulips. there are returns, actual profitability, and there is the promise of all of these things, whether they get delivered remains to be seen. whether we misread the data remains to be seen, whether the trends are powerful, that is also a real possibility. annmarie: or it is just a simple. everywhere else in the world is on the back foot. jonathan: terrifying stuff. next on the program, lisa sh alett, tyler kendall, and jim bullard in the second hour of "surveillance" next. ♪

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.

>> people are setting up for the potential for the fed to sound hawkish. >> we are not as optimistic about further rate cuts. >> you may see a jay powell more dovish than expected. >> in order to manage a soft landing, we have to keep easing monetary policy. >> the labor market is stable when you look at the main features. that will put pressure on the fed as it seeks this 2% target.

>> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the second hour of "surveillance" starts now. equity futures on the s&p 500 up by .25%. people around the table are complaining about their children as we start this hour. equities right now, the nasdaq up by .25%. other small caps up by .50%. the last month, every single trading day of december, we have traded with negative breath. that has changed. the equity picture, the main event, 2:00 p.m. eastern, chairman powell makes a federal reserve interest rate decision, the final one of 2024, widely expected to be another cut. that is another 25, so 100 basis points of easing over the past freezes. lisa: a couple of issues, how much does jay powell confirm what the market is expecting,

which is a higher neutral rate for 2025, and as he pushed back against the idea that they would not welcome any material beginning in the labor market? he had that same level of conviction that this is a fragile labor market that needs to be sustained for a longer time, or is there confidence in the heat? annmarie: veronica clark says we don't know the makeup of the policies and how difficult that will be for the chairman because he will be asked, what does immigration, tariffs and tax cuts mean? you are deemed chairman during the iteration of trump, so can you tell us what these policies mean for the fed decision making? jonathan: expectations matter. when we talk about things being dovish or hawkish, relative to what? when we have the dot plot later, compare that to september, we expected to come down somewhat, but the parts that are hawkish compared to what we are pressed

for in 2025, we are already looking for two cuts, down from where the federal reserve was back in december. can they even get the market in today's meeting? lisa: maybe that is the reason why fed chair powell always seems dovish because he's not moving as quickly as the market is inferring that strength out into the future. even if they revise significantly their dot plot, how far does he have to go to edifice -- edify the market is saying? if he does, how much does it spook them? jonathan: there is the lisa we know and love. three-part act later. decision at 2:00 p.m. with the summary of economic projections, a dot plot and the forecast. 30 minutes later, a news conference with german powell. s&p up by .15%. bond yields up by almost one basis point. the 10 year, 4.40.

stability for the euro, just about 105 -- 1.05. coming up, why markets are losing the plot, chatting with morgan stanley. in the former st. louis fed president counting down to the final for decision of 2024. we begin with stocks pushing higher, going into the fed decision with a quarter rate point expected. the path is much murkier. lisa shalett says implication will be that it will be tougher more cuts in disinflationary growth acceleration to both play out. we believe growth will disappoint first and further fed action will be constrained. lisa joins us more for now. great to see you. why will further fed action be constrained? lisa s.: we are already seeing inflationary pressures build.

i know traditional economists take apart the narrative to fit -- take apart the data to fit the narrative, but we had four months of accelerating core cpi data, flat, flat out. and that is with the advantage in the tailwind of a 20% drop in oil prices year-over-year. if in fact oil prices have bottomed out because global growth has bottomed out, and if we assume that some of the cuts that have been put into the global system start to take effect in 2026, if we get stimulus out of china, if oil starts coming back and we look at the dynamics and inflation, we could have sticky inflation. this last print, you had goods prices up and food and grocery prices led the way. jonathan: why do you think the thing changes and what underpins it going into next year, bigger and harder?

lisa s.: our senses that animal spirits are real. clearly, there is some enthusiasm and expectation that folks should be investing. at the same time, our sense is that demand can outstrip supply here. we continue to have this have and have not economy, where the largest corporations, the richest households are somewhat interest-rate insensitive, and they have been powering consumption in the economy for 2.5 to three years now, and sentiment among the two cohorts is strong right now. lisa: when you talk about the idea that we could see a downside to growth and more weakness than expected with ongoing stickiness to inflation, the sounds like dreaded stagflation. is that where you are going with this? lisa s.: it is.

it is one of the things that we said where sequencing will matter. we expect to get a barrage, literally a machine gun of policy proposals. as journalists, you guys are accustomed to the 10 headlines a day and he tries to figure out, which four stick of the 10, and then he goes with those and then another six the next day. our best gas is that that barrage is going to create a level of noise that does undermine some of that animal spirits and creates uncertainty for the other 60% of the economy, the low-end consumer, the smaller cap companies because they cannot figure it out. i think it is that that we will see early in the year. there was an unbelievable sense that consumers are going to get tax cuts. no they are not, not in 2025. it will be in a derivative basis, the first and second derivative with the rates have

changed. your taxes are going to be exactly the same in 2025. there is no tailwind. that is all coming in 2026. lisa: this is the reason why in some ways you are advocating to unwind some trump trades people have put on. can you talk about which you think are most vulnerable to the reality check of sequencing and the delay of how long it will take to implement? lisa s.: some of the trump trades have been so staggering, it is almost obvious. the cryptocurrency trades, up 50% and 50 trading days, extraordinary. we have tesla, similar type of move. i think some of the small-cap move has begun to fade the last 10 days, our best guess is that the fading of that small-cap

trade is what reflects the potential stagflation that, hey, wait a minute, everything is great but maybe not for us. because we are still broadly with a set of unprofitable companies that have struggled to deliver upside surprise in rates. lisa: do you still like gold? lisa s.: we still like gold here. for us, the gold story is really about inflation and dollar debasement. it is a lot about the debt and deficit story. the bond market has sniffed out this joe and on various days, you see some folks trying to express a desire for term premium at the longer end of the curve. our best guess is that as debates get underway, the debt and deficit story line is going to have to get higher. annmarie: do you think we are at the peak dollar right now?

lisa s.: we are probably close, but i think a lot of things are at play. one thing i think is a profound risk, again, this is not a market pricing many risks, but we have a bifurcated currency market around the world where the dollar is strong versus virtually every other currency. if in fact we come out on day one after the inauguration and are extraordinarily aggressive with china, i think there is a nonzero risk china could come back and say, ok, we are devaluing. the devaluation of the renminbi would be hugely stabilizing across the complex. those types of risks are not being priced right here. is the dollar at peak strength? i'm not sure. but i think we are getting close, and we are very fragile

and in an unstable place. lisa: if someone looked at everything you put together, they will say, a raging bear. so let's talk about why not because you are talking about debasement of the dollar, stagflation, so give us where you really are with this. lisa s.: i think there are risks that we would like to see priced. at the same time, there is value. this is a bifurcated market. we are saying this will be an environment where there are winners and losers, so we do see some winners. we see financials, domestic industrials, portions of consumer services that are domestically based as big winners. we upgraded mid-cap growth companies as areas. we have built some diversification, we are owning japan and some parts of emerging markets. we think there are things to do

out there. we think this is an index that next year can chug along at the index level, may be you a 5% to 7%, but if you're getting 5% to 7% in a stock market richly priced on extraordinary expectations, why not own a better risk adjusted return in investment-grade bond, clipped the coop, and make it to the end of the year. jonathan: what do you like in the end, which parts? lisa s.: we have been long bulls on india. we know they stalled out. we think mexico is way oversold and that by the end of the year, we are going to find a better footing there and some of the tensions with the u.s. will be mitigated. brazil, obviously, now significantly tightening. we believe that is going to get priced and that there is going

to be opportunities to buy some value in brazil. jonathan: i have the foreign-exchange grid in front of me, once again, emerging-market, the peso up 16%, and brazil, the currency dom moore than 20, russia, down 13%. in hungary, down 11%, columbia, 11%, double-digit moves. lisa: what .2 you hadobas given the fact i have a lot of -- at what point do you hit the bottom? jonathan: appreciate your time. equities this morning on the s&p near session highs, up .30%. here is your bloomberg green for the iraq us. yahaira: scott bessett will meet with elizabeth warren today as part of a series of meetings he is having on capitol hill

ahead of his confirmation hearings next month. he will meet with several republican and democratic senators, including mitch mcconnell, ted cruz, and james lankford. ahead of has lows china factory is leaving the company. they oversaw construction of their shanghai factory will leave this week. he joined tesla in 2018 as the first employee of their first factory outside the u.s. in the milwaukee box are the 2024 nba cup champions, defeating the oklahoma thunder 97-81 in the championship game, led by m.v.p. performance from their superstar who finished with six points, 19 rebounds, and 10 assists. they bounced back to when all seven of the tournament games after starting 2-8. jonathan: is anybody watching this anymore? nba? lisa: i think that wnba took the

oxygen out of the room. i think caitlin clark, the tickets were so high -- annmarie: people prefer to see her play than the men. jonathan: i'm happy to move on with that. next on the program, the shutdown being avoided for now. >> we were proud to achieve a bill, and we ought to pass this on a regular process. we will get this done. jonathan: that conversation up next. live from new york this morning, good morning. ♪

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, nasdaq, and soul. the russell, up by .60%. the focus on the breath of the s&p 500, how many stocks are advancing versus declining? the 12th day in a row where the number of declines exceeded advances from the s&p 500. this is the second longest run in 100 years and has only been exceeded by 14 days back in 1978. lisa: it is shocking to think what does this mean? it makes people nervous because what that means is a couple of stocks are holding up the index. lisa talked about how small caps rolling over indicates the fear of potential weakening growth. on the flipside, it indicates the preeminence of a number of names that are fundamentally changing the landscape for technology. jonathan: should you be worried?

the collapse has not been confirmed by credit spreads. over this time, credit spreads have been tightening, not widening. is there something to worry about for the broader economy? the credit market for now says no. lisa: a number of them knows that i was reading, i have heard this from different investors, it sets up for a buying opportunity next year, sn she what we heard from julian emanuel well, but this is just selling the news and then resetting before early 2025. jonathan: take a look at the treasury curve, 2, 10, 30, yields higher by a single basis point. 4.4066 for this tenure.avoiding a shut down for now. >> we worked hard to achieve consensus on a bill that funds the government into march of next year. we have been working around the clock to get it done. it was intended to be and it was until recent days, a simple and clean cr, stock funding measure

to get us into next year. we ought to try to pass this in a regular process. we are committed to that and will take care allegations and get this done. jonathan: congressional leaders reaching a deal to avoid a shut down. mike johnson is bracing for pushback from house republicans, totaling over $100 billion. joining us now from the nation's capital, tyler kendall. how much opposition does. cap bill have been washington, d.c.? tyler: i was on capitol hill yesterday where we felt that growing discontent among republicans when it came to the stopgap measure by mike johnson being the one to negotiate it, and he spoke to one senior republican aide for a member of congress expected not to vote for the bill, saying it is likely the lack of pay force for funding tacked onto the bill

that is the largest ticking point. you mentioned at $100 billion in disaster relief funding for americans that are still reeling from devastating hurricanes that happened over the fall of the southeast u.s., part of a bipartisan push. president biden asked for that money in october, but we are seeing other issues, including 10 billion and economic assistance for farmers and potential curbs to u.s. investment in china. the bill paves the way for the washington commanders football team to relocate their stadium from maryland back to the nation's capital, so the bill is anything but a clear cr that you heard mike johnson heard was the original intent. despite that, we widely expected to pass. it does do two things, it likely sets of a government funding fight months into president-elect trump's new term, particularly as

republicans try to cut back on what they call gloating spending, but before that happens, it poses a challenge to house speaker mike johnson who is campaigning for the gavel again on january 3. annmarie: elon musk does not like this and he is making it clear, on twitter saying this morning it should pass, posting a photo of how big it is. you are hearing people saying, merry christmas, everybody is getting a stocking stuffer in this bill. does he have real weight when it comes to whether or not this passes? tyler: we do know that he will head up the department of government efficiency, which will look to cut the bloated government spending, but we are likely heading to another battle as the trump administration lays out priorities that will likely add to the deficit, including his proposals for tax cuts next year. when bloomberg analysis showed us that if all of the tax cuts are passed, it could add 10.5

trillion dollars, plus economic benefits his administration hopes to push through and convince republicans in the unified government to pass. when it comes to elon musk, he has advised president-elect trump, and many of the ceos will head down to mar-a-lago to meet with him, and this issue will come up, how corporate and government spending will be intertwined in a new trump administration. annmarie: we still have a number of trump nominees on capitol hill, meeting with senators. scott bessentt will sit down with elizabeth warren, and she has not been too welcoming so far. how testy could this exchange get? tyler: you had great reporting on the terminal that this meeting will happen. senator warren will be the ranking member on senate yankee next year, and as someone who has interviewed elizabeth warren dozens of times, she's known as

one of the biggest foes of wall street. also, i'm interested to see if maybe there is common ground. we know she has worked with one member of the incoming trump administration, vice president-elect jd vance when he was a senator on senate banking date, they teamed up on the executive clawback compensation bill in the event of a bank failure, so that is one potential area that she could see her more populist message breakthrough. as reporting showed, this is likely to be contentious and comes on the date of a big fed decision. elizabeth warren proclaimed herself a flow of jerome powell's. lisa: you have been making the commute from mar-a-lago to washington, d.c., how crowded are the planes? tyler: we have the reporting that most of these ceos will be heading down to mar-a-lago, but other names like mark zuckerberg

and tim cook, all in the last week going down to meet with president-elect trump. i talked to one republican strategist about this and it is a pretty good operating procedure since we know that president-elect trump often will reverse course if critics are willing to cut a deal and give him a political win. all of the ceos for the most part have shown some sort of criticism or have outright endorsed his campaign. we are seeing a pattern emerge from the meetings, one is that there going down and having facetime in person and that appears to be critical. and the second appears to be donating to his inaugural fund, using the money is a commodity to show their support. i was interested by this. quickly, we know the amazon ceo is going down there. amazon pledged one million two trump's inaugural fund. i looked at fcc filings, at the

time, amazon gave a quarter of that to biden's inaugural fund. that seems to underscore the point that there is going to be a unified government in washington next year, and that there will be more policymaking with republicans controlling both chambers of commerce. jonathan: despite inflation, that is what that is. thank you. this came from breitbart, looking forward to reaction from mar-a-lago. trump fears fed cuts will stoke the nude inflation. lisa: interesting -- will stoke renewed inflation. lisa: interesting, so it might be welcome, the hawkishness. jonathan: let's see what we get from new york, this is bloomberg. ♪

jonathan: equity futures this morning positive on the s&p 500, the nasdaq and the russell. equity futures on the s&p up by .25 percent, likewise on nasdaq, outperformance on the russell, up by .66%. let's get you morning movers with manus cranny. manus: every nation likes to create their own national champion. this time we are talking about japan, honda, we understand pursuing a merger. this one worth 8 billion with

1.8 $6 billion worth of bonds to recapitalize next year, but this is about the pursuit of political experience he and how to survive in electric vehicles coming from china. some of the a senior official saying we are fighting for our lives, 12 to 14 months to survive. you have a maturity war on 1.6 billion dollars, this is about the politics of survival of your auto industry on the royal stage. that is what you are seeing. by the way, honda is just over 3%. nvidia's big this morning. microsoft reaffirming the narrative that microsoft scoops up nvidia chips in size, and the next biggest order on the ticket is meta-at 224. so a little bit of a reprieve for nvidia.

you get your lucky charms, your nature valley bars, general mills lowered their guidance because of the macroeconomic backdrop. macroeconomic backdrop, higher investment levels, bottom line is they're holding up in north america, but there isn't really a defensive sector to try and win market share in this area and that is proving tougher and tougher. jonathan: are you a nature valley bar guy? manus: it is a bar of sugar, and that is that. jonathan: carbs free. lisa: he is a big carbs free guy. annmarie: i introduced into what trix was. jonathan: back in london, a long time ago, the show began at 6:00 a.m. london time and you would start to small fish coming from the set because he would eat fish. annmarie: before grilled chicken because no carbs. he hasn't seen a carb since the 1980's. lisa: you guys are different.

i did not realize haagen-dazs was general mills. i'm going straight for the junk. as you go for the purity test. jonathan: some consider nature valley to be junk. i wanted to get to this story. under surveillance this morning, canadian prime minister justin trudeau attempting to downplay the resignation of his finance minister. "like most families, sometimes we have fights around the holidays, but, of course, like most families, we find our way through it. i love you guys. love is what families are all about." it is better when you see the video. hopefully you can find a tape but it is ridiculous. lisa: kudos to the bloomberg news headline writers, trudeau tries to brush up exit as festive family spat. this will not win him any points with the electorate who will

probably vote him out of office, considering the fact everybody can see that he did not want to release -- she did not want to release her budget, and she quit because she did not agree with him. i just the electorate in canada. the number of liberal lawmakers calling for his resignation has grown to 45 with one saying he is delusional. i spoke to our resident expert canadian who works in the white house and said, i try to explain to people in america how big of a deal this finance minister decided to resign on that day and the scathing letter she wrote. basically you have to imagine kamala harris coming out and resigning the day joe gave his state of the union. that is how seismic of a shift this was. jonathan: i could not agree more. let's turn to uber, joining the tech firms donating to trump's firm. they are each donating one

million u.s. dollars alongside the likes of meta-and amazon. according to cnn, he is set to meet with jeff bezos later today. annmarie: who is not donating? because everybody will be donating to the fund. we are hearing about companies that are willing to come up and to save you should put my name out there that i also gave $1 million. industrywide, the list is long and we are hearing about the tech world, but it would be interesting to see what banks are donating and what other companies are making sure that the president-elect knows they are giving to his inauguration. lisa: what is the money going toward? it is some kind of spectacular? annmarie: inaugurations are expensive. lisa: what's the spectacle and how significant will it be because that sets up parties and security. annmarie: i will come back with a list on potentially what they will budget for. jonathan: itemize the list so we get a breakdown. annmarie: maybe they should pull

back. don't have the inauguration. jonathan: the defense department said the mysterious drones cited across the northeastern not been flown by the pentagon. they state officials take seriously any drones flying over military sites but and that they are not concerned given the volume of daily drone flights. lisa: this is not comforting. it is like a game of charades. it is not from the army or pentagon, but why don't you tell us rather than signaling what it could be? authorities just don't want to share. annmarie: when we heard from the general, he said it is possible that some are surveilling, but you could make that with almost every case but not necessarily. pg&e's ceo saying how many drones they have to make sure to look after their infrastructure, and a lot of companies are doing that. if the u.s. government has the information, tell people because

people are talking about how they would like to get the drones out of the sky themselves and people should not take these measures into their own hands. jonathan: i think we would like answers quickly going into the weekend. micron reported after the opening bell, a chipmaker looking to be the latest firm to benefit from this demand. the founder and cio of axel capital management has been betting on the name since 2023, and anna is with us now. great year for some chipmakers, and when we talk about micron, what type of exposure we talking about? anna: at the moment, people expect the quarter to have up asp's in the 5% range and i think going forward, they may be flat to down. and you probably will not see a recovery until the back half of 2025 because there will be a little push out for smartphones at the moment.

jonathan: what is it about the back end of 2025 where you get a better tailwind? anna: there will be replacement cycle. jonathan: across smartphones. anna: smartphones, pcs. you are not seen 100% adoption by the consumer of ai. i think best buy has hired several thousands to help train consumers on the ai pcs, but there are no major up takes for the this reason as far as i'm hearing, so there may be an uptick for enterprise and consumer. lisa: people have tried to pick the next nvidia annexed big winner, and the fact that we have seen some real massive winners. broadcom seems to be the latest superstar where we have seen a moonshot in shares with them falling behind tesla with the magnificent eight. what gives you confidence that mike rounds growth has that type of moonshot at a time when

people are trying to imagine what the evolution of ai adoption looks like? anna: when i think of micron, i think of global commodity that is going to be benefiting from some of the u.s. chip stimulus, and i think long-term, you will see more demand across the board. i think about micron in terms of that long-term cycle and that right now is probably going to decline a little bit, but will come back up again later. although, last year, micron told us 2025 will be the peak, so it is a function of what overall tech adoption will be like in terms of hardware. lisa: you are investing on the tech side with micron, but you are also low-tech with respect to putting by people every day, including the nature valley bars that some people like an haagen-dazs that some people

like and enjoy. in our household, it is a stable. jonathan: that is what they would like to hear. lisa: some people grow up with lucky terms and grow up just fine. -- lucky charms and grow up just fine, but why are toward staples now? anna: we have taken a conservative approach to investing with large holdings in costco, and walmart across the board. one of the reasons for that is we are trying to go to where the puck is going. at the moment, we are seeing a slowdown in ai adoption where we see the opposite of the foam a we saw at the beginning -- fomo that we saw at the beginning of last year. it is about speed and scale, and we have seen a significant transition in terms of power you going to monetize this ai? what is it going to cost?

what is the must-have app, and what is it going to cost on a long-run basis to operate the ai once you get past the training part? annmarie: costco, walmart, target, it is where you can find good deals, do you see a slowdown on the consumer? anna: i think we are seeing a slowdown already. i went to buy coffee the other day and a pack of 20 starbucks k cups cost me $40. i think everybody is migrating toward cost saving, but i'm thinking about what will happen to the s&p 500 if there is a slowdown in tech. where will the money migrate? to me, it will migrate toward more conservative cash generating areas of the market. that means said, i think that trump is 100% pro the market, and he is surrounded by extremely smart people. i think highly of scott bess

antt and i think elon musk is one of the greatest innovators, so i'm impressed by the team he has assembled. that being said, i think technology is on a cycle of its own, and we are seeing changes in terms of focus roi, looking at intellectual property and security issues to consider, and in terms of ai governance, that needs to be addressed. jonathan: this is not the reason you are with this, you are with this because you are participating in the robinhood contest, one long, one short and and see who wins over six months. can you share with us what is behind each one of the picks? anna: my long is primarily generating cash flow. i think it gdp slows down, the stock will be pretty resilient. my short is in technology. as i said, i think you will see

a slowdown. right now, you are looking at prices of gpu rentals that have come down considerably because there was a lot of server optimization. and once you have stopped trying to train your ai, you may have excess gpu's that you are starting to re-rent to other people, so now it looks like there is more competition on the gpu rental front, so longer-term that is positive because it is going to lower the barriers to entry for new companies to come, train and create new business models. in the short-term, that may create problems for chip manufacturers and data centers. lisa: how much of that you think is underappreciated right now? why do think that is overlooked? anna: i think the ceo of microsoft mentioned it last week when he said there is no longer a chip shortage. i think we were constrained for 18 months, but that started to

resolve itself probably in the middle of the year. now i think volumes are coming to the market and you are seeing a large reseller market and you are seeing supply, to ebay and alibaba with entire gpu clusters, which is going to depress pricing. jonathan: and all for a worthy cause, so thank you. that was anna nikolayevsky of axel capital management. here is you hire hackers with your bloomberg brief. yahaira: the u.s. is set to gear up a trade investigation into chinese semiconductors in the coming days. sources say the review could impose tariffs to restrict imports on older model chips and the products containing them such as cars or smartphones. the investigation could take months to conclude with any reaction left for donald trump's incoming administration. president-elect trump chose

herschel walker to be ambassador to the bahamas. he made the announcement on to social. he had an unsuccessful run for a senate seat in georgia to hold ambassador position and will need his nomination approved by the republican-led senate. nissan is in merger talks with honda. it would create the third-largest automaker. talks between the two accelerated after foxconn approached nissan to take a stake. nissan's troubles came to the forefront after they cut their profit forecast and revealed plans to cut 9000 jobs globally. jonathan: more from yahaira jacquez and 30 minutes. next, the fed bracing for trouble. >> we don't know what the timing and substance of any policy changes will be. we don't guess, speculate or assume. jonathan: we don't guess, we don't speculate or assume. i imagine we might hear that

later this afternoon. from new york, this is bloomberg. ♪ (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

jonathan: house speaker mike johnson made comments to an american broadcaster moments ago on fox news, saying that they have a text chain together as he looked to pass a stopgap funding bill into 2025. annmarie: they are basically like us, we are all in a text exchange, but then why is elon musk same on twitter i don't agree. speaker johnson needs this to pass. why don't you just signal group chat? jonathan: the three of us are not passing bills, are we? and one of us is not the speaker of the house. maybe one of you will be in the future. lisa: they use lots of robots.

annmarie: and american flags. jonathan: we are getting a sense that elon musk does not think much of it. annmarie: it is not want to see this christmas tree bill, including pay rises for lawmakers. jonathan: it's difficult to change the ways of washington. really, we hard and we will see that play out. equity futures on the s&p closer to 135%, the 10-year, 4.41. the fed is bracing for donald trump. >> we don't know what the timing and substance of any policy changes will be. we don't know what the effects on the economy will be, specifically whether and to what extent they would matter for price stability. we don't guess, we don't speculate, and we don't assume. jonathan: the fed is expected to announce the finest interest

rate of the year and deliver economic projections ahead of an uncertain political future. joining us now to speculate is the former st. louis fed president jim bullard. welcome. good to see you. can you speculate on next year question mark you have lived it. you are on the fomc for the first trump term, how different is this one? jonathan: it's a big event -- jim: it's a big advantage we've seen this movie before. the first time it was more uncertain. this time, you know that, how for president-elect trump, how he operates, the kinds of things that they consider most important. for markets it is basically a pro business administration and that carries a lot of weight. lisa: we are talking about the potential for signaling into next year, how far do you think the fed chair is willing to go at a time where the market has low expectations of having rate cuts next year?

can he or would elect to get ahead of them and signal more restrictive stance? jim: i think the dot plot will do the job for the fed here, and it is three or two as the median number of rate cuts for next year. those will be spread out over the years. and there is a lower pace of rate reduction that come with this meeting. hundred basis points of three meetings. it will be nothing like that next year. i think it will set up a clear case for pause and january. that will give them the march meeting, and then they can look around and mostly on the inflation data at that point. lisa: are they concerned that

since the cut 50 basis points, we have seen a steadying out and then increase in your -- longer-term yields in the sense that inflation might be stickier next year? if you are still on the fed, with that concern you? jim: i maybe have a different view, as always, but i think normalization of the yield curve is the last piece of the soft landing story, so i think this is exactly what you would like to see if you had a successful soft landing growth, i guess atlanta for gdp now over 30% for the fourth quarter, unemployment close to the natural rate by most estimates. you have inflation way down from its peak, and trending toward 25 and 26. normalization of the yield curve is the last piece of that. so i think it is looking healthy

in my view. jonathan: many years ago, you planted your dot at the bottom all the way out. i wonder if you had one today, how different would that be? how much do you think it will change over the next few months relative to what we've seen the past few years? does that long dot need to keep coming up? jim: yeah, i think it will keep coming up. the committee has been more bullish. i do not like the long dot part of the dot plot is that is what you are most uncertain about, and it anchors everybody's thinking. i think what happened during 2009 to 2019 is we are in this low, real interest rate, low nominal interest rate regime, and the pandemic was big enough to knock us out of that regime. and now you are back to something closer to the 2000, 2007 time or the late 1990's, so

real rates are higher. i think that is pushing up the whole interest rate structure and that is what we are looking at the next years. jonathan: there's a common theme in the fomc, the only difference i see is in degree, not in kind. they will see -- say things like we are a long way from neutral so we can keep making a move. when they say things like that, what is guiding them on how far away they are from neutral? jim: the median of the committee things neutral. or the neutral policy rate is 3%, and you need about, depending on how you calculated, 100 basis points on top of it to combat the fact that inflation is still on target, so that gives you 4% as a ballpark, and where the committee is today coming into this meeting is too high for that, so that is why

they feel like that comfort in making this move today, and they will be able to get more data the next 90 days and see what is moving next, but they feel pretty comfortable i think, and they feel comfortable making this move today. jonathan: good to see you. jim bullard, the former st. louis fed president. lisa: stop reading my mind. make the dot plot great again, that is essentially what we are looking at. jonathan: i love that, just putting it right at the bottom, making a mockery of it. lisa: but he has fallen back in love with it. jonathan: predicting higher interest rates back to where we were before and it wasn't happening. things changed again. next, we catch up with victoria fernandez from cross more global investments, and then jonathan pingle of jp morgan.

the third hour of "surveillance" just around the corner. ♪

>> we don't quite know what's happening in the u.s. economy and it is something other central banks are looking at. >> u.s. exceptional story has

some life. >> there is no interest for anything except the u.s. >> from the moment u.s. exceptionalism is a hard story to put -- on. jonathan: this snapshot of the price action looks like this. some outperforms on the small caps. the rustle up by .9%. -- the russell up by .9%. the story of the month, 12 days of negative. lisa: deutsche bank noted this is the second time in 100 years. the key is whether it is the running out of the trump trade or the beginning of a reassertion of big tech in leadership yet again at a time

when there are pockets of weakness under the hood. jonathan: the projections drop at the same time. 30 minutes later a press conference with chairman powell. there are some who believe the fed will not cut today. sonali: because -- lisa: pause. i just think there is a sense that the fed should consider maybe not cutting 25 basis points based on the fact you are seeing the number of record highs and no sign there is a restrictive financing conditions. at the same time, why would they surprise the market when they have been saying repeatedly they are far away from neutral, especially when they are setting up for some type of pause.

they don't like to surprise the market and it seems like that is what is happening. annmarie: i think some individuals will come out and say maybe we shouldn't be cutting. and we don't jerome powell wants to speak to one voice and he won't have the backing of everyone when he greets the press. jonathan: we will see what we get and we will see what we get in january as well. but whatever happens in washington, a lot of things we talk about will be dictated by that. lisa: they will say, we are completely independent on the data that -- completely dependent on the data that comes in. i am sure there will be questions about what the most inflationary policies are, whether it is tariffs or immigration and potentially restrictions there. more scenario analysis, so get ready for this. annmarie: he came inside --

jonathan: he can mount and said we don't guess or speculate. i'm just repeating. annmarie: he could but that would be boring. jonathan: coming up, victoria fernandez, and gregory peters. priya misra and why she expects three rate cuts. we begin with the final fed decision of the year. victoria fernandez says the both sides are heating up in the question comes down is the fed still restrictive and according to powell the answer is yes. victoria joins us now. what is the answer according to you? victoria: i don't think we are as restrictive as the fed wants us to believe. you look at growth. you have atlanta fed gdp at 3%. we had cpi and ppi reports come out with big revisions with inflation being sticky. you have really high sentiment.

look at the small business, a three year high. you have ratios very strong on the bulls. that could be a contrarian signal and i get that but you have strong sentiment out there wind with these elements i don't know how you can say this economy feels restrictive. i say it yes, there are underlying elements under the surface that i think will bubble up but i don't think it will be until early next year. jonathan: do you think it is super bullish when the chapter thinks they are restrictive and isn't that a green light to keep buying? victoria: i think it is now and i think that is why you see the market moving up and you have the seasonality along with it. you have earnings expectations that people think optimistic but double digit growth again. next year in earnings you are not having the labor market completely fall apart. i think there are elements that are tailwinds to this economy

and you at powell in, and i know you said it will be boring but i think he will come out and say the same, we are data dependent, recalibration and everyone is going to look to the dot plot regardless of what jim bullard said and they will say what are you thinking? lisa: i don't think it is going to be boring, i think it is going to be fascinating and i cannot wait until the meeting and the press conference after. you are saying this is the tailwind and there is a question of for what assets. is it a tailwind for stocks, bonds at a time or you have a real discussion, longer-term about whether this increases the chance of stickier inflation over 2025 and 2026? what do you expect to be the reaction in the bond market, particularly at the longer end? shouldn't be a fed that leads more dovish than with the market is expecting? victoria: if you get a dovish field to the press conference i think you will have equity markets rally and bond yields

will probably come down. at least in the near term i think they come down with the expectation the fed will continue to cut. bond vigilantes will not be happy with that. let's give it a little time. i think they will come in and start singing and we will see yields move up intermediate term from there. but the initial reaction if the fed is a dovish, think you will see yields come down. lisa: it raises the question of whether the market does not think inflation is a real threat. what is it? it seems there are different answers from different asset classes. the stock market, these are saying we don't care if it is mildly inflationary let's go. victoria: there are other elements that could make it go higher. we don't know what tariffs are going to do and we don't know what corporate tax cuts or individual tax cuts are coming in. the key to a lot of this is productivity.

that can really be the output -- the element that has growth going higher. if you get productivity coming in, maybe that is a reason markets are not as concerned right now with what inflation is saying. annmarie: jay powell will assume what trump 2.0 will look like but the market is. what sectors will do well? victoria: a lot of it is on the policies we see coming through. you will have capex stronger and if you have federal spending, that helps corporations in regards to margin so you will see industrials do well. i have liked financials all year. i think you will continue to see financials do well. they have had some consolidation, but you have the deregulation story in a positive yield curve. m&a should grow and that gives you bumps on financials as well. we don't invest in crypto so i won't say that, but it has been going crazy. annmarie: you like industrials

because the tax rate? what about terrorists? i think we have to separate the tariff story out. victoria: i think we can assume with china think that would be quickly after january 20 we would see movement there. when you look at tariffs for the rest of the world, i know there has been a lot of talks in the conversations with canada and mexico, that is a different story and i wouldn't anticipate we will see those come to fruition as quickly or maybe as high a level of tariff as we are hearing right now. lisa: let's talk about bredth and we have been seeing a lot of bad. is this what we will see it next year or is this a breather of trump trade and it will reassert itself come 2025? victoria: i think we have to be

a little concerned and i know we are having a little revival and tech names are doing well and we are seeing those go. but you look at how much concentration there is in the names. the top 10 names are the 7% or 38% of the weight of the s&p 500. -- they are 37% or 38% of the weight of the s&p 500. you have to see when we hit next year and see the debt ceiling and tariffs go into play, i think we have more volatility next year. i don't think it is a small pause and we will go full on bull market. i think there are some concerns we have to be leery about. lisa: what is the hedge when there is equal risk of some acceleration in inflation or downturn? victoria: for us and for our clients it is being really diversified. not just in the stock picks you have but we want to be in the market. you have tailwinds going right now. the path of least resistance is

higher and you want to be in that market. we like those areas, financials, industrials longer-term play. i am a fixed income person so i think you lock in some rates and maybe go up to a four .75 on the 10 year and you can lock it in pier with global rates, you look at germany, 2.5%, looking at china, you can capture some of that as well and have some exposure. annmarie: do you like anything when you are looking at diversifying outside of the united states? victoria: it is tough right now. i would say yes, put your toe into europe and they will see things with the ecb cutting rates, but the issues we see out of france, germany, the poor manufacturing there. we are seeing a 230 basis point differential between u.k. and german 10 years.

i need to see more positive movement coming out of europe before i think you go there and asia, there are concerns in china as well, domestic demand slow. we saw it in retail sales. they had the highest month in outflows last month. i think there is some concern there and you have to stick with the u.s. for now. jonathan: japan, europe, we have seen things starting to take place in china. is that with the chinese bond yields are about? victoria: i think was they are looking at tariffs that could be coming, you see some flight out for that reason. there is concern for you have china saying they are going to be more proactive in regard to the stimulus they put forward. they upped the federal deficit saying it will be 4% instead of 3%. not a huge move but they are trying to do some things. but there is somewhat of a trap. jonathan: the bond market

doesn't believe them. lisa: neither do a lot of other people. there is a perhaps sugar high in the equity markets. jonathan: good to see you. thank you for being with us. let's get an update with your bloomberg brief. yahaira jacquez. here isyahaira jacquez. the biden -- yahaira: a study found that lng is would raise gas prices for domestic prices and lead to global emissions increases. it said current lng shipments are enough to meet global demand for decades to come. grubhub will pay 25 million dollars to settle allegations by the ftc and the illinois attorney general that they said

the online food line ordering company will stop adding junk fees and give a simple cancellation method for grubhub plus and notify them if their accounts have been blocked. according to espn, to time wnba champion and three-time league m.v.p. asia wilson sanderling -- signing a contract extension with nike come one the highest paid shoe endorsements in women's basketball alongside caitlin clark and the other stand out. that is your bloomberg brief. jonathan: -- lisa: there is a controversy over the time cover that had her and people were saying she shouldn't have been on there and that it was the entire wnba. jonathan: my goodness.

lisa: i wanted to thank them for putting that in the brief so i can make my point. jonathan: we agree with you. who is your favorite player from new york? ok. up next, gregory peters. that is up next. this is bloomberg. ♪ to go further, you need to be ready for what's down the road. as energy demand continues to rise, we're harnessing breakthrough innovations to increase production in the u.s. gulf of mexico. our latest deepwater development, anchor, produces previously inaccessible oil and natural gas,

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watsonx helps you deploy ai wherever you need it. so you can take your business wherever it needs to go. ibm. let's create. jonathan: no more basketball. equity futures on the s&p up by more than a quarter of 1%.

bank of america upgrading expedia to buy siding signs of improving u.s. travel trends. the stock of 3%. the second call, downgrading rivian to neutral setting of the landscape for emus in the future. this top down by 1.3%. netflix forecasted for a stronger of advertising in the u.s. greg peters wrote our base case continues to see inflation as gradually easing to where the 2% target with a fed funds rate eventually set on the range of 3.5% to 4% in 2025 for this may indicate that the fed's long run rate continues to rise. greg joined us for more. let's start where you left off. how much does that need to rise? gregory: i don't think about

need but there will be continued pressure on repricing. i think it is important to remember that it has changed over time and it adjusts with the cycles and i still think in many investors minds we are stuck in the past cycle of this very low growth, low inflation cycle and i don't think that is the one we are at currently. jonathan: let's talk about pace with a destination in mind. there will be a different cadence. it started at 50 and we have gone 20 five each meeting since then and again today expected. how does that change through the year? greg: the pricing is pretty on target. one of the issues we have had over the course of the year is the aggressive pricing throughout the course of the year. it seems more rational currently, so you have basically a done deal for today. then only 50 into next year.

maybe there is some scope if the economy does decay if that picks up but on balance it seems pretty rationally priced for me and makes much more sense today than it did four months ago. lisa: deutsche bank put out a note that i keep going back to an have repeated several times this morning that this has been the third year in a row that markets have had more restrictive are overestimated how much the fed was going to cut rates in the following year. i wonder given the fact that we have seen rates seem higher than many expected and we have still seen outperformance from equities, if there is a strong message about just how high neutral is right now that you are taking to heart. greg: the markets are stuck in the past. one of the issues we have had quite candidly is this fed stepping in and the drop of the

dime, that is an outdated playbook. we are facing a different battle and that is inflation. i think the fed understands the credibility that comes with being an inflation fighter. so any sign of weakness or wobble the fed will come in doesn't make much sense to me. but if you think about neutral, i think about neutral as the range, let's get to 4%. i do believe that the policy rates currently that are set globally are for a different regime as well. if you look at when policy rates crested, rates were already coming down. i think we have to get to neutral and to me that neutral is the starting point of 4%. let's start with 4% and then we can revisit. lisa: is the implication that you see a greater degree of disinflation in the global

market then people currently appreciate? greg: inflation is a tricky one. i think we are on a path, pretty sustainable or steady path. i think what the markets are pricing in currently and what fixed income traders are starting to fret is that the inflation trend will not only stall out what reverse and so some of the weakness in the bond market you are currently experiencing is that concern that inflation might not be as under control, particularly here in the u.s., as we initially thought. i think that is the risk factor and that is what you are seeing in the pricing currently. it is something to watch out for. annmarie: is that risk being driven by what is going on in the economy or the potential outlook for policies that we could see ushered in by a trump 2.0 administration? greg: i think it is both, right.

the economy is in good shape and that has nothing to do with the changeover come january, but there are some inflationary elements that continue to be sticky. you are seeing it on the services side and the housing side. some of the elements factored in to the inflation target getting us to 2% is a lot more sticky. so as a consequence, the markets are pricing that in and then they are layering on the fact that immigration and tariffs and all the other factors all else equal more inflationary than not. annmarie: how hard will it be for powell to speak with one voice today? i go back to the peace in the wall street journal saying he has less conviction from others who strongly back the first two moves. how robust of a debate will this

be? greg: i don't think anyone really knows. i think debate is good. there are some many open questions, to have this monolithic, unilateral decision coming out of the fed without debate i think would be irresponsible. i like the debate. there should be a debate, but i think what is weighing on the fed's mind is the inflation picture with the policies that are additionally inflationary. i think we will have a unified voice today. i think the rhetoric will be much more, less dovish, let's say it, because i think they want to set the tone that they worry about inflation and i do think the narrative has shifted from worry about the labor market to a slightly more concern around inflation. lisa: what is your one question for jay powell today?

greg: the question is, what are those policies, how are you factoring that in? he will never answer that, of course, but if you go back to the last time tariffs were on the table, they were more worried about the growth impact than the inflation impact, so the markets are not thinking of it that way this time around and i don't think that is a mistake or not. to come full circle, if the tariffs do come to fruition, i think the fed might actually worry about the growth impact, which means more cuts than less than the inflation impact. that would be my question. jonathan: greg peters there. michael mckee will be at that conference later. if you go back 12 months when he implied they were thinking about reducing interest rates and then the new york fed president john williams said we are not thinking about raising the rates and then we got cpi data through

the first quarter of 2024, head fake. then we went into the summer, weak labor market data, have gone back and forth and this is why former fed vice chair said at the last meeting that the fed needed to find optionality going into 2025. that is what he has to carefully go about doing in this news conference later. lisa: does he care about the market response? i remember when that was a barometer for his success and it doesn't seem as relevant. jonathan: and the inflation years, higher equity markets were a problem. lisa: that is my point. people were saying it was a mistake. this is bloomberg. ♪

jonathan: 60 minutes away from the opening bell. equity futures positive through most of the morning. futures up by .3%. outperformance on the russell. we are up by zero point 85% going into the opening bell. let's cross over to manus cranny. >> look at this. honda pursuing nissan for a merger. $8 million in the market cap and 44 billion is the market cap on

honda. this is about creating national championships and political and financial expediency. senior advisers that nissan saying we are fighting for our life. we have 12-14 months to survive it. this is about a changing auto landscape on a global scale. whether it is surviving on ev or china or here when the credits are shredded. this has a maturity wall of $1.6 billion. this is as much about financial dependency as anything else. let's see how it turns out. down by 3%. target, you pointed this out. this was about an inventory landmine good when we did the results, the stock dropped by 20%. it was a catatonic day for the stock because they have not manage the inventory well. now you have them going tactical outperforming.

positive inflection point in web traffic. let's look at general mills. haagen-dazs, lucky charms, nature valley, i don't know about these particular products. i haven't seen thema long time. they are downloading the guidance, higher investment levels and holding onto market share in north america but it is a price competition in that market and it is about changing consumer habits and attitudes. i am the reformed in this particular scenario. jonathan: what do you want? they killed his mic, genius. maybe he can come back and tell us another time. if you go to the estimates for payrolls, you can look at the ranking on who is the best payrolls guesser, if you can call it that, of the year.

the next is our guest, jonathan pingle. number one is his son. how cool is that? lisa: i am looking at this and they don't even put jonathan pingle's name as the second one. because it is so confusing to have jonathan pingle first and second. annmarie: thanksgiving must be amazing. jonathan p: we didn't anticipate this complication when we named him. [laughter] jonathan: we had cpi. those were the biggest data points going into the meeting. lots of people still expect them to cut rates, it may be set up a pause in january. is that how you see things? jonathan p: i think that is completely how we see things.

not to sound on interesting, we are expecting a 25 basis point rate cut. i think chairman powell really previewed the language he is going to use already in his november 14 remarks in dallas where he is talking about we are not in a hurry and we have the luxury of being able to move more gradually. that is all code for we are going to skip january. jim bullard was saying they have 90 days to the march meeting to figure out what they want to do next year. lisa: let's say they go 25 basis points which the markets are saying 95% chance of and then they pause early next year. what could potentially get your attention that would adjust your expectations for the fed and it different way than it currently is? jonathan p: we are expecting a number of small changes that are actually minor-league big deals if that makes any sense. the longer run rate and terminal

rate coming up. the one thing that could change things is how chairman powell characterizes inflation. i have almost been surprised at how comfortable he has sundered with the incoming inflation data , both at the november press conference in his remarks in dallas two weeks after that. you are talking about core shelter in a range and it is going to make progress, really taking the current stickiness in stride. when i look ahead to next year and think about the dot plot continuing to cut, i think the current comfort with inflation is a big part of that. if he comes out and says something different than that, like inflation might end at 2.9% and we are stuck, i think that could really append how i think -- up and how i think -- up end how i think about them. lisa: do you think that is the case? jonathan p: our client base, a

lot of people are talking about how inflation looks sticky. the incoming administration, they talk about tears in more fiscal is all directionally more inflationary when you are already stuffed with inflation. when i look at the details, it looks like they are finally making progress and there is a lot of scope for improvement next year. think they will continue to make progress on inflation and continue to cut next year but i do not think that is the prevailing narrative amongst a lot of marketplace. annmarie: do think there is a bias jay powell has on inflation? does it keep shifting? jonathan p: it keeps shifting a lot but for fair reasons depending on how concerned they were. they were very concerned about the labor market in august and september. the september report took out risks and they are less concerned but i still think he is fundamentally concerned about where the labor market is.

at headline it doesn't look bad but it also doesn't look great. the six month moving average of payrolls is 1.43 and then 1.32. unemployment rates drifted up to 4.25 percent and households looked weak. that is all fine in a way but i don't think they wanted to we can from here. arie: if it does we can, does that mean the fed is not pause at the next meeting, not today but we could see a cut in january? jonathan p: i don't think they will cut in january and i expect the december jobs report to look ok and nothing indicates the economy will fall off the cliff between now and the january meeting. when they get into march and they consider the gradual pace, they will signal they are continuing to normalize over time and i think part of that is because they don't want to see the labor market deteriorate further. lisa: if people are worried about running way -- runaway inflation and that a lot of people haven't caught up fully

from the pre-pandemic, free inflationary urge -- pre-inflationary urge, why would they mind running the inflation hot and having a closer 3%? jonathan p: that is a fair argument. i've heard that a lot of people saying workers need to make up some gains and they are also on the other hand worried about when the inflationary mindset becomes entrenched in consumers and businesses that will make it harder potentially for them to reestablish price stability after a period of high inflation. i think about jay powell and the board and the committee and i think there has been a human element in how they think about policy. they don't want to hurt the labor market and people's incomes but on the other hand they have an inflation mandate and price stability mandate that they take pretty seriously.

jonathan: i appreciate this. enjoy the holidays. jonathan p: thank you. jonathan: the second-best labor economists in the family. [laughter] michael mckee is with us. what are you looking for it later? michael: i will, and tell you that the fed cut rates and nobody is going to care and everybody on wall street will go to the back to see who done it. the question is what do they do next. the first thing we look at is the statement. it has a line about considering additional reductions in the fed funds rate and we will look at all of these different factors. if they stick in the word any additional, that would signal perhaps a pause i had -- pause ahead. and then everyone will be looking at the dot plot and not looking at how many but how often and we will see whether that signals any pause.

that will be the main story for the markets today. you can see where it was last time. the markets feel like they will go to 2% to 3% from 4% and we will see if that holds and what signal it sells to the markets. jonathan: remember the highlights and the headlines that came from the news conference, we don't assume, speculate, guess and then a very abrupt short conversation that included i think twice. how different will it be this time around? that was the immediate aftermath of the election. what do you think the tone of the conference will be? michael: i am not even sure he will get asked about his own -- jay powell we are talking about, his own job and we know his response but i think people will ask about the effect of trump policies going forward and they will get the same answer that we are looking at it, modeling outcomes but we can't make policy because we don't know

what those outcomes would be. the one thing that might be included in the assumptions is that the tax cuts from 2017 continue and they are set to expire for individuals this year but the belief is they will be renewed and they are current policies. so if you look at current policy and what should happen, then they will incorporate that. but the tariff stove, deportation stuff, there is no way they can put that into the forecast right now. jonathan: we will come back to you in 10 minutes time. the last time we did this with the immediate aftermath of the election. it was a thursday because it was pushed back and one pushback you got back on any change in policy is we have nothing to model. we did have some posts on x in to the social about the tariffs and the number that would be put on mexico, canada and china. do you think that will be enough to start thinking about what

that would mean for the economy and start speculating in a news conference like this one later? lisa: it has been enough for the market, but the key question may be this is how the market is perceiving it. how much do you have to take that as fact? how much do you have to watch with the market is doing and goes to the crux of the question, how much are they watching financial conditions and measuring financial conditions at a time when that used to be one of the key barometers and transmission mechanisms of monetary policy. jonathan: looking for a rate cut later on this afternoon and looking for three more through 2025. priya misra joins us. is this one going to be any different? will this be another dovish jay powell? priya: i think he will keep all options open. he is not going to answer what is going to happen with policy. i am they are debating it and

have all the scenarios. is he going to tell us before the -- we know the prioritization and sequencing and details? you asked about the market impact. we have priced in this hawkish cut. i think the market is done with this or assumes this 25 happens and we are all looking to 2025 and then the market will be looking at the dot plot, so 50 basis points priced in. if that dot plot, and i hate saying it doesn't matter but it is not going to matter. what i am watching is the reaction function. what do they do with the economic projections and the unemployment rate, is the easing by is still valid? if they signal that the easing is still there and they want to be careful and continue to recalibrate and they can slow down the pace, that is the balance i will be watching. if he suggests they can slow

down in the easing is there, i think the rates will. jonathan: you get inflation, growth, unemployment, dots, longer run. as well, what is it about how it is set up there is an easing of bias and what change would you look for it later that may be says perhaps we have taken a bite out of the easing bias? priya: i will be watching what do they do with the inflation target for next year. if they move that up on the inflation projection and then they are getting nervous that you have had this hotter inflation print and the fed has not addressed it. i think for good reason because things that were giving inflation hi, mostly shelter inflation are lagging indicators. the last cpi report suggests it is coming down. if it is higher and they move the long run. higher, they may be getting nervous that we are entering this policy filed into next year with an already above

target inflation and the risk is a lot of the policies and up being more inflationary and the fed may have to pause, not because they think neutral is higher, but we are talking so much about neutral and it doesn't move that fast. there is an cyclical aspect. if the policy makes it inflationary, the fed should be much slower than the easing by. i will be watching the unemployment rate. it is getting close to 4.3% are they ok with 4.5, i don't think they are. they don't want further weakening in the labor market. lisa: especially at a time when we don't really understand some basic concepts of economics and how the fed is looking at them. what effect do rates have on slowing or speeding up the economy. these of the fundamentals and yet that is at the heart of all the questions, including whether they think the rates are

actually restrictive or whether they really are far from neutral. i am curious how you see them judging what it means to be restricted in markets that in many ways look like they are even having pockets of exuberance. priya: it comes down to soft landings are rare. we don't have that many episodes that we can look at and say we are in a soft landing. inflation is coming down for supply-side factors. you look at labor supply, an increase in productivity. that is why the decline in inflation has been painless. we don't have too many historical metrics. they look at the totality of data and i would argue that monetary policy is restrictive for certain sectors and aspects of corporate. if you need to borrow short term right now, it is restrictive. if you need to borrow or buy products from abroad, it is restrictive. look at once at -- what has happened with the financial

conditions tightening. you look at equities and credit spreads, they have eased. we are looking at an economy that the fed has to look at the entirety of the economy. i think they will judge it is restrictive for some and not others but how much? the first 100 basis points will always be easy because we knew neutral was not five and a half but i think it is somewhere between three and four and as the fed gets close to four, they had the ability. lisa: if the fed comes out and sounds more hawkish than you expect of the market is expecting, do you buy the long end of the yield curve? priya: i do, yes. not initially and maybe not over the next week because we have options coming in and concerns around fiscal policy next year but here is why i would buy because i think monetary policy is restrictive for certain parts and becomes more restrictive and

what happens to equities in that scenario. i think the rally that everyone is waiting for, we haven't had it. you get a risk off and then i don't think it is cash, think it is bonds because if you look at the policy mix, it is two-sided risk, very different from 2016 which was tax cuts and growth boost but this is an administration looking to rebalance, in my mind, not necessarily, i think you then start think about where is of value and is at the high equity valuations or bonds? you're getting 5.5 percent, 6% stable cash flows from the corporate sector that is strong, that is what you buy, fixed income. jonathan: we will end on that pitch. lisa: at a time when potentially, especially in the fed is concerned about

inflation, that actually will create a move away from equities into bonds. i thought this was interesting, this administration wants to balance things and not throw gasoline on the fire. as much as people are talking about this being pro-growth, expansionary spending, is that the case? annmarie: it is said we are going to a realignment and i would like to be a part of it. that was his pitch going into the treasury. jonathan: we will see some shift in the next year. let's get an update on stories elsewhere. let's cross over to yahaira jacquez. yahaira: the pentagon denying it is involved in the mysterious drum sightings over new jersey and in the northeast. the defense department said none of the drones are being flown by the pentagon or a part of any secret government test. instead they say a vast majority are likely being used recreationally. president joe biden commenting saying, we are following this closely. so far no sense of danger."

boeing resuming full jet production in the seattle area after shutting down for weeks due to a worker strike. a hoarding -- according to their spokesperson, they are building aircraft again. the company cautioning getting back to speed will take time because some workers need to be recertified and components may be out of position. coco soaring to new heights, futures trading above $12,000 a ton on supply fears and made -- i made mounting concerns of a weak crop. -- amid concerns of a weak crop. the worst deficit ever and forcing the drawdown of stockpiles. jonathan: up next, we will set you up for the next of the trading day as we count you down to chairman powell.

equity features on the s&p, positive across the board come up .1%. from new york, this is bloomberg. ♪

jonathan: the opening bell is 36 minutes away. equity features positive by at 1/10 of 1%. you are familiar with the day ahead and going into the weekend. the final fan decision of the year coming at 2:00 p.m. eastern followed by a news conference at 2:30. tomorrow, another round of jobless claims, rate from the boe and boj. on friday, core cpe and sentiment. and monday, conference board consumer confidence and annmarie will be here still.

michael mckee will be here to break it down. you will be in the news conference. give us a flavor of the conference and the kind of questions you will be leaning into? michael: i think everyone wants to get at where they see in inflation and therefore rate cuts going. in the inflation numbers will be very important and eight key to the news conference and what jay powell will say about it. one thing we want to mention is we have been talking about how this affects the treasury market. our friends on the money markets also having some news on the balance sheet because there is a question about when they stop qt. a lot of people think maybe first or second quarter and we will look for clues or ask jay powell whether there is any progress on that.

we are also expecting them to cut the rate they pay on reverse repose, the special facility they have by five basis points. this was hinted at in the minutes and feels like it is a technical change but could have an impact on qt because it is money market funds putting cash at the fed and that would have to go somewhere else and probably into banks and that would raise reserves and you would get a slower qt process. jonathan: are you on purple tight watch? michael: we are always on purple tie watch. it is always for jay powell on press conference day. lisa: wouldn't be surprising if he came out with bright red? jonathan: we have a whole lot

more coming up. and from new york, this is bloomberg. ♪ we're with bridget, whose husband won't be home for months and whose daughter is due any day.

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katie: it is finally fed day, the last day of 2024. 30 minutes until the start of trading. sonali: bloomberg open interest starts right now. katie: the final countdown, apollo and his colleagues set to announce another rate cut at the last meeting of 2020 four. we will discuss the implications with ron