>> there is a lot of optimism built into this market. when you are priced for perfection it can be painful. >> whether you are glass half-empty glass half-full you may interpret the data differently. >> the labor market is not completely out of the woods. >> we are looking in the one thing in the labor market we want to be confident in is that wages will grow high enough consumers can keep spending. >> we have to see all the data in 2025 and determine what we will see in the course of the year. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern.

scarlet: morning. alongside katie greifeld i am scarlet fu. jonathan ferro, lisa abramowicz, and an reporter and reordering are taking some much-needed time off. it seems like the santa claus rally israel. katie: after two straight weeks -- a little bit of green -- hard to take any move too seriously. scarlet: big tech is back on top and we have seen stronger breath which is encouraging given it is starting to get narrow. katie: it is interesting to see the broadening out. i think it is amazing to look back at this year of gains. the s&p 500 up 25%. this time last year wall street was saying we would be flat on the benchmark and here we are.

scarlet: treasuries little changed on the morning. there is a bond auction. katie: we also had one yesterday. the two-year option pretty solid. scarlet: we knew there was a lot of demand for the short end. i am keeping a close eye on dollar-yen. if you look at the price action right now and it is not significant but there has been some mornings with the finance minister against excessive fx moves and we know they stepped in in the past. katie: dollar-yen is interesting because it is a two-sided trade. there is lot on the u.s. side and the japanese side. on the u.s. side we know the dollar has been unstoppable. excited to get the 2025 outlook. scarlet: new york route making its way back towards $70 a barrel. -- newark -- new york crude

making its way back to $70 a barrel. katie: we have -- we have jordan rochester who is expecting dollar strength in 2025. let us begin this hour with stop futures incrementally higher after a fairly positive start to the holiday shortened trading week against the backdrop katie was just telling us the s&p 500 set to close out back years of 20% plus gains. let's bring in margie patel of wall street investments. she wrote that in 2025i expect another decent equity year but now with the performance we have seen this year. admitted he -- admittedly the market looks frothy. thanks so much for spending some time with us on this holiday shortened week. what are you seeing in terms of the frothiness? where is it most prominent? margie: it is not so much in the stock market.

the manifestation is about liquidity. you see it in crypto and in real estate. you see it in the explosion of private debt and private equity which has been a big boost to the financial markets and it has kept a lot of the fed actions out of the control of the fed. not like the banks where things are tightly regulated. as far as the stock market it is priced for another decent year. scarlet: talk about the interplay between those private assets, whether private credit or private equity and what that means for money flowing into equities. katie: the first -- margie: the first thing is we think the fed will make its biggest increase in history and short-term rates in 18 months and yet we did not have a recession as a result. that tells you the money flows in the financial system is under the banks thumb the way it used

to be. you see a lot of companies could go to these private markets and get better terms than they could have gotten in the public market. that is why you could say the pe is high. when you look at the profit growth under that and compare that to our treasury yields it looks rather reasonable to me. katie: one of the byproducts of the fed raising short-term rates is cash looks great. yields are relatively high on money markets. you have $7 trillion sitting in cash right now. it seems like for the past couple years people have been calling people moving off of the sidelines back more fully into risk markets. do you see that happening when you take a look at all that money market action? margie: i think you will see a lot of towel throwing from the cash equivalent market because

if you get a good deal historically in cash, but on the other hand the equity market was up 15 to 25% depending on the value names or growth names and that is a big disparity for investors. i think people have been hoping and believing we would have a recession. the recession has not come. the fed stable or cutting rates it is hard to see how we could have a recession in 2025. we are seeing 1.5% to 2.5% economic growth. i think that will draw money out to say how many of those do you want to leave that much on the table? katie: let's say you are over allocated in cash and now you have the luxury of a lot of money to deploy. when you look at the relative values of the different asset classes, specifically when it comes to fixed income, where is the best opportunity right now? margie: i think it is in equities even though we have had two terrific years.

if we have the economy glowing -- if we have the economy growing that should allow corporate profits to be up 10% or 12%. that says if that is your target on equities when you look at fixed income treasuries are staying 4.5%. if you look at high-yield you are looking at 6.5% or 7.5%. because of the fixed income market those are trading in a very small -- $.98 on the dollar. there's not a lot of capital appreciation in the fixed income world. by the same token defaults have been low. you've not been taking much risk when you go below investment grade. on the equity side we are told return should be higher. scarlet: within equities you go with what has been working all along, defensive names or do you

go and start picking up some of the underperforming sectors in the market, whether it is materials companies were energy companies? both those groups not moving more than 1% so far this year? margie: i think you really have to stick with the companies that are proven to have profit growth and a lot of that has been in the check sector, some industrial sectors tied to electrification increases and data centers will continue to do well. even energy, i think gas reiterated things will continue to do -- i think gas related will do surprisingly well because they benefit from the expansion and gas that leads to increase our power capacity. i think -- i think a low growing company will state low growing. you want to buy the higher priced stocks because they will continue to have strong earnings

in 2025. scarlet: i look at the vix and it spiked up to almost 28 on wednesday after the fed decision. we saw equity selloff and bonds selloff. it is above 16.5%. is the fed going to be the source of volatility in 2025 for the incoming white house? margie: the fed has been pretty dependable and is causing a lot of volatility in the marketplace by their actions that have not produced positive results. my money is more in the background. as far as the new administration there are of exciting ideas, lots of talk about what might happen. we will have to see how practical and how quickly some of these ideas that look favorable to business can get through. the big positive is there is no longer any talk about raising corporate income tax which would been a realtor present on the market had that gone through.

to have tax rates for corporations where they are or lower will be a positive factor for the stock market continuing to do better next year. katie: let's talk about the relationship between the fiscal side and what that could mean for monetary policy. torsten slok put out a note of risks in 2025 rest -- yesterday because he put probabilities next to them. he assigned 40% odds the fed raises interest rates in 2025. you are not seeing that being priced into the market at all right now. do you think some of the things we are talking about, tariffs, taxes, if those come to fruition should will be talking about a rate raise next year? margie: i am not show sure about the tariff situation, how soon it would be imposed, the impact of price levels. it is interesting to say historically you have often seen a second wave of inflation after the first wave. when you look at these other

signs of the marketplaces so there is plenty of liquidity, that says maybe inflation will be much harder for the fed to bring down to its target level of 2%. i think 40% sounds fine, there is that possibility later in 2025 to say this is not working, we need to raise rates, the economy is doing fine. it is a possibility but that would be a strong economy. the fed is very sensitive about unemployment rates and the economy before they act. a strong economy, that is likely. katie: what does that spell for the back end of the treasury curve? scarlett and i were talking about there has been plenty of demand for the short end. the long end of the curve has been much hairier place to be. what is your expectation in 2025 in terms of duration volatility? margie: i'm not looking for a big spike in the long end of the

treasury market because i think for domestic investors we tend to want to be shorter in maturity with things like treasuries and municipals, i think globally there are many investors and international entities that would like the long-duration because there are a lot of places where a long-term investor can get very high quality and long-duration. i don't think that will be a problem. the fed could change the issue if it looks like there is pressure in one part of the curve. the issue is the amount of financing the fed has to do because of the large deficits meaning you might have a little bit of excess supply in the treasury market versus the stock market versus the corporate bond market, high-yield market where there is a relative supply scarcity. that is what has made the spreads in the corporate market narrower which is people have extra yields and the supplies are limited and into the product market. that says to me that yield

spreads are likely to get there and we will not have any big spike in the long end of the curve for foreign institutional investors and also the fed the able to control the issue to keep that under control. scarlet: you have outlined some of the big technical issues investors need to contend with, whether in equities or fixed income. always a pleasure. happy holidays and happy new year to you. margie patel of all spring global investments. let's get you in update on stories elsewhere and check in with dani burger. dani: former president bill clinton is in a hospital in washington, d.c. after developing a fever. an aide said he was admitted to georgetown university medical center for testing and observation. the aide says the 78-year-old former president in good spirits. bill clinton has had a number of health issues since leaving office. he had a quadruple bypass surgery in 2004 and into a 21 he was in the hospital for six days

with an infection. panama was president's rallying support from former president's in defense of the country's canal following threats from donald trump to reimpose u.s. control over the waterway. he met with three leaders on monday who all signed a statement asserting the country's independence and of ptolemy over the canal. the former administrators of the panama canal authority have also rejected trump's remarks and said there is no legal mechanism through which the u.s. could take back control of the canal. restrictions are in place across the victoria state of australia due to a large bushfire in one of its most popular national parks. authorities warn of catastrophic conditions in some areas over christmas with temperatures expected to rise and strong wind forecast. residents were evacuated from the nearby towns have been told it is not safe to return. that is your brief. scarlet: we will check in with you later in the hour. coming up, the nippon steel and

u.s. steel deal hits another roadblock. pres. biden: u.s. steel has been an iconic american company for more than century and should remain totally american. >> will not let u.s. steel be sold to the japanese. katie: a rare moment of agreement. that is next. you are watching bloomberg surveillance. ♪

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katie: welcome back to bloomberg surveillance on this christmas eve. holiday markets are low but higher in the premarket on the s&p. we had a rally to close out yesterday in low liquidity. nevertheless you can see the s&p 500 up about .1% premarket. you go down the board, small moves overall. dollar-yen down about .1% on the

currency pair. the bond market surprisingly well behaved at the moment. 10-year treasury yield unchanged but very high levels. you take a look at crude, little bit of action. new york crude up 1%, knocking on the door of $70 a barrel. under surveillance, the nippon steel deal hits another deadlock. pres. biden: u.s. steel has been an iconic american company for more than a century and should remain totally american. >> will not yes -- we will not let u.s. steel be sold to the japanese. i would stop it if it has not been completed by the time i am president. katie: president biden said to decide the fate of u.s. steel after u.s. national security panel deadlocked in its review of the sale to the company to japan's nippon steel. biden has 15 days to decide.

let's discuss it with terry haines of pangea policy. is there any chance president biden does something other than kill this deal? terry: any chance, sure. given what they have said, the political orientation, is unlikely. i want to point out what biden is supposed to decide on. what is there is credible evidence the company itself could take action against national security and the other one is there is no other laws that exist to deal with those potential problems. that is a very specific remit. cfius is a group of not just staffers but this is chaired by the secretary of the treasury and has a bunch of other cabinet organizations is involved. it has been reported that the committee deadlocked.

the issues are difficult and knotty. what you get is a situation where what biden has to decide upon is the specific national security impact and the specific impact of the company's behavior and the like and also the effect on competition to some extent, competition in prices since the one scenario is the tie up could actually limit competition in global steel, raise prices, make it more difficult for the united states. that is the top of the waves on this. i would also point out that what trump said in that clip you played is that he would stop it if it already had not been decided. one thing he is saying there is he has no intention to revisit this upon a decision.

katie: you mentioned national security, you mentioned competition concerns. let's talk about labor concerns. a lot of these pro labor groups have said the deal has to be killed but at the same time you have a trio of democratic lawmakers, maxine waters, jim clyburn, and bennie thompson, writing to the president, encouraging him to review the deal and support the successful completion of this effort. i do you see that side of the arguments playing out? terry: in the union the question is for how policies deal with the unions is whether you will support the leadership of the steelworkers and the relevant unions or whether you will support the rank-and-file. that is been a huge split and was a huge split in the campaign and the election where the leadership went one way in the rank-and-file went another. i can tell you just from being

in pittsburgh there is a lot of support for the deal among the rank-and-file. that is not just ginned up by the companies. the politics has been clear with biden that he has said he has decided to side with the leadership over the rank-and-file. we will see if he changes his mind on that. one thing i would point out is there is very clear implications that are much broader than u.s. steel or even the steel industry itself. the leitmotif of what you've been talking about today and this week has to do withna pressuring the u.s. and the western manufacturing sectors broadly. the question for the united states is what is it going to do to support and defend manufacturing capacity. that hangs over this decision as well. markets will learn a lot about

what the u.s. national response will be on manufacturing, how much we will support and defend manufacturing and take actions that limit china's ability to compete with or destroy american manufacturing. scarlet: that is a great point and comes as u.s. steel and yvonne steel have said they need to have -- and nippon steel have said they need this in order to better confront china. i think about the signal the sense to the rest of the world about whether the u.s. still welcomes overseas investments from allies in europe and asia. what does the signal to japan and singapore looking vest in the u.s., something president-elect trump has said he wants to encourage. if you will have stiff yes make no decision -- if you will have cfius take a decision and punt to the president.

terry: the problem is not just limited to the united states. part of china's political strategy is to put the most minute pressure on western manufacturing. we see the strains resulting from that everywhere. i think of germany as a good example and what is going on with german industry and the auto sector. united states is both a huge investor but also the largest recipient of foreign direct investment. this decision is very important in part because it will send a signal way beyond the steel industry about what the united states is willing to accept and how it approaches foreign investment overall. that is precisely why the national security implications of this are front and center.

it is not just a matter of being able to have good commercial investment. you have to prove there is a problem with a specific company. that is a very high bar. what biden is doing is to drag this down into the political sphere a little bit too much. scarlet: politicians will be political. that makes sense. as you think about what other industries this would impact, especially 2025, which one should be paying attention to this, what sectors of the economy are paying attention to this cfius nondecision and how the biden white house and the trump white house will proceed? terry: it is very broad. any sector industry that has manufacturing capacity now and is looking to expand manufacturing capacity. one of the big things the trump administration has talked about is turbocharging the ability to

have more and more domestic u.s. manufacturing. trump has talked about this a lot. one of the things he talks about what he talks about tariffs. if you want to make it here then we can have a different conversation. the trump attitude will be crucial. katie: that is a good place to leave it. happy holidays. that is terry haines of pangea policy. coming up, john micklethwait's interview with donald trump at the economic club of chicago. that conversation is up next. you are watching "bloomberg surveillance." ♪

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scarlet: this is "bloomberg surveillance." annmarie, jonathan and lisa have the day off. u.s. index futures have moved from positive to unchanged to slightly positive. looking at a positive open. i feel like this is the santa claus rally. katie: i feel like it is supposed to kick in right now. classically it is supposed to start christmas through january. santa claus is real. we have green on the screen.

big tech boosting the markets in the final days of the year. scarlet: thank you to dan curtis who says the average move is about 1.4%. we see our rally three quarters of the time -- a rally three quarters of the time. we get a five-year option at 11:30. katie: pretty solid. that is the word from bloomberg news. you see a pretty fine demand in the last days of 2020 four. scarlet: 10-year just under 4.6%, the highest since may. the recent theme has been a steepening in the yield curve. that does not look like to be stopping. the yen is the currency to watch with the finance minister hinting at intervention. katie: absolutely. i feel like we have two big events for japan's monetary

outlook this week. scarlet: the boj governors speak tomorrow, christmas day. on friday, there is a summary of opinions where they decided to not do anything. they would rather see what happens with donald trump taking office and waiting for some of his plan policies. katie: we heard from the finance minister saying "i'm deeply concerned about currency moves, and those driven by speculators and the government will take appropriate action against excessive fx moves." we are back on intervention watch, which i find interesting. we at this bloomberg news article. this lowly liquidity when it comes to u.s. equity markets, if you intervene in low liquidity currency markets you could have a bigger effect. scarlet: that is true. maybe it is wise to do something in the waning days of 2024 during the christmas break when there's a lot of thin trading.

during u.s. hours to be the thinnest conditions. that is the first story we are focusing on. the other story that's interesting is china considering $411 billion of special bonds. it will sell a record 3 trillion yuan, an increase from one trillion in 2020 for. the context 20 -- 2024. the context is china trying to fix its economy. katie: this is interesting. we are talking about special sovereign bonds. they are issued for specific purposes and not counted towards the headline budget deficit, which is maybe good news. the budget deficit, china plans to set the headline budget deficit as 4% of gdp. that is without the issuance. an increase of 3%. china putting a lot of firepower

behind the stimulus plans. the intent is clear. scarlet: that is why chinese stocks jumped on the news. chinese government bonds did extend their losses. another story is british airways owner iag in talks with starlink to provide service on the jet fleet. the company has not made a final decision. it is weighing options with multiple providers. it's also amazon as well. when i go on the airplane and i'm trying to connect to wi-fi it is spotty at best. katie: i don't even try because i have not had a great experience with it. i'm happy we are talking about elon musk. i'm surprised. it took 34 minutes to get there. you think about the certification process versus the u.s. we have some of these agreements with starlink when it comes to the u.s. u.s. airlines can switch it on more easily. it is already certified by the faa. not necessarily the case when

you talk about other markets. the certification process can get a little onerous. scarlet: united signed a deal with starlink. now we are talking about potentially iag, which also owns iberian and aer lingus. giving them an internet experience similar to the ground. katie: i look forward to that future of stream more easily on the airplane. speaking of elon musk, let's talk about donald trump. president-elect trump said to return to the white house for the second term in office. before he was elected, he made his case to bloomberg editor-in-chief john micklethwait as to why he was a better choice than vice president kamala harris. president-elect trump: we are about growth. she has no growth whatsoever and we are all about growth. bringing companies back to our country. you look even today i see these empty, old, beautiful steel

mills and factories that are empty and falling down. some have been converted to senior citizens homes but that will not do the trick. we will bring the companies back, lower taxes for companies that are going to make their product in the usa. we are going to protect those companies with strong tariffs. i am a believer in tariffs. i'm not sure you are. i congratulate you and your career. [laughter] the most pitiful word in the dictionary is tariff. it is my favorite word. [applause] it needs a public relations firm to help it. john: do you think that will bring in the revenues? they say it will only bring in $200 billion. that is barely the cost of two of your promises. president-elect trump: for what company are you talking about? i prodded with tariffs -- i was just getting started. covid came.

i did a very good job with covid. i call it the china virus because i like being more accurate. we had hundreds of billions of dollars just from china alone. i had not even started yet. tariffs are two things. number one, protection of the companies we have here and new companies that will move in. we will have thousands of companies coming into this country. we will grow it like it's never grown before. we will protect them when they come. we will not have 70 undercut them. -- somebody undercut them. katie: the famous soundbite, the most beautiful word is tariffs. scarlet: this is something that will likely be a priority. we don't know if it is the first priority when he takes office. he has to figure out the sequencing of tax cuts, tariffs or immigration or deregulation. my guess is the answer is all

three. katie: inauguration day quickly approaching. let's keep watching. john micklethwait continued the conversation, pushing back on past policies and future economic promises. president-elect trump: i had for years, no inflation. four -- four years, no inflation. it is better than that. biden, who has no idea where the hell he is, he went two years with no inflation because he inherited it from me. then they started spending money like drunken sailors. they spent so much money. it was ridiculous, the money they were spending. the green new scam. the green new deal. it was conceived of by aoc plus three. she never studied the environment in college. went to a nice college. she just said the green new scam. she named all these things. john: the issue is the markets

are looking at the fact you are making all these promises. the latest was car loans. you are flooding the thing with giveaways. i was quite kind. i used $7 trillion. the upper estimate is $15 trillion. the wall street journal, who was hardly a commonest organization, they have criticized you on this as well. president-elect trump: i meeting with him tomorrow. they have been wrong about everything. so have you, by the way. john: you are trying to turn this into debate. there are business people -- president-elect trump: you have been wrong all your life on this stuff. let me tell you about currency. you jump to a lot of different subjects. the reserve currency. that is where you started. the reserve currency is under threat from iran, russia, china.

china is the one you have to worry about. they want to have the yuan be the thing of power. here's what i'm doing. i hate to go back to it. if somebody says -- i know countries want to get out because they don't respect our leadership. she is worse than him. i never thought i would say this. she is not as smart as biden, if you can believe it. we had four years of this lunacy. we can't have any more. we won't have a country left. currency. very important. [laughter] [applause] if you want to go to third world status, lose your reserve currency. we cannot lose it. you will go to third world status in this country because you look at the way things are running, if a country tells me, sir, we like you but we will no longer adhere to being in the reserve currency. we will not salute the dollar anymore. i will say that's ok.

you will pay a 100% tariff on everything you sell into the united states. we love your product. i hope you sell a lot of it into the united states but you will pay 100% tariffs. he will then follow it up by saying, sir, it would be an honor to stay with your reserve currency. that will be -- that is not even chess. that is checkers. katie: that was donald trump with john micklethwait back in october, a wide-ranging conversation to say the least. let's get an update on stories elsewhere with dani burger. dani: suspected unitedhealth group ceo shooter luigi mangione pled not guilty. the 26-year-old was arraigned. he faced multiple counts of first and second degree murder, criminal possession of a weapon and possession of a forged driver's license. his lawyer says they will fight the charges and claims he's being treated like a human

ping-pong ball. two top advisers to donald trump are promoting his agenda as president. chrysalis evita was the comanager and tony capr iccio was an advisor. last year, he gave $23.8 million. now the group is airing as to boost president-elect trump's contentious defense secretary nominee pete hegseth. it's an all cash transaction valued at $6.25 billion, including debt. the deal is expected to close in the first half of 2025. the founding family is helping the retail chain will be more successful without the scrutiny and demand of a public market. shares have plunged 40% in the past five years. that is your bloomberg green. katie: thank you. coming up, momentum into 2025.

>> the dollar has behind it as a tailwind the equity market. it has carrie and momentum -- carry and momentum which is more important as we push into the new year. katie: you are watching "bloomberg surveillance." ♪ ♪

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s&p 500 and nasdaq 100. some momentum fading when you look at small caps. scarlet: we're talking about 20% plus gains for the second straight year. the focus is 2025. unlike last year, there seems to be more bullishness. if you are contrarian, that makes you wary. katie: after two years of underestimating the market, strategist are predicting a 6600 handle on the s&p 500, a gain of about 11.5% through the close on friday. they are being measured, just batting for average here. let's talk about the bond market. the epicenter of volatility this year. i would not say it is the epicenter this morning. two-year yield pretty much unchanged. maybe a little bit of a selloff materializing if you look at the curve. 10-year treasury yield up maybe two basis points.

30-year yield up two basis points as well. let's get to currencies. really interesting conversation. the dollar has been unstoppable this year. we are up about .1% on the dollar index. the euro-usd d down just a little bit. that is going to be one of the most important conversations next year. where does the dollar go? scarlet: there's a lot of consensus around dollar strength continuing in the first half of the year before perhaps speaking by the middle of the year once the tears take effect or get announced. the timing is really the issue. we know it is the most beautiful word in the language according to the president-elect. he has the rest of the republican establishment on his side. katie: under surveillance, momentum into 2025. >> the dollar has behind it as a

tailwind the equity market. it has carry. it has momentum. the terms of trade. it also has growth. the one thing that's a little challenging his markets have been focused on positioning, short-term valuation models. they have worked all year. what we are starting to see is momentum is a factor this becoming increasingly more important pushing into the new year. katie: here is the latest. the dollar strengthening into the final full week of the year as fx traders way the outlook for u.s. monetary policy and 2025 -- weigh the outlook for u.s. monetary policy in 2025. "will trump provide the catalyst for a macro breakout? we expect maximum pain in q1 to then fade into dollar strength in q2." jordan joins us now.

there's a lot to dig into. i want to start with 2023 and 2024 had been mean reversion in your view. looking at the charts, looks like strength. what is the defining quality of 2025? jordan: merry christmas to you. 2025 will be a big year about what donald trump does with tariffs. for now, corporates have to head for the tariff risk. on the 20th of january, he's likely to do a list of executive orders. i will be looking at the list of day one policies. during the campaign trail he promised too many day one policies. how much she can achieve in the first day is difficult to say. if i see an executive order saying in consultation into tariffs and investigation of sorts, that's a big negative for markets. especially on certain countries

that have been flying under the radar. the first one are mexico, canada and china. india has started the future recently. that is the big event risk of january. what tends to happen is all the market moves we had in december get unwound. it is one of my favorite seasonality supply. whatever the consensus is in december, do the opposite in january and it works pretty well. the reason is a lot of people sit back down, look at where positioning is and try to squeeze the market. and that little clip, momentum is on the $. the tariffs -- the dollar side. it's been mean reverting. these are the levels where people take the other side. i think the tariffs mean we should have momentum to break out towards 101. maybe even parity with euro. katie: i want to look to

history. you look at this quarter up almost 7%. the last time we saw a quarter of this magnitude of dollar strength was the last quarter of 2016. after donald trump was elected the first time. within i want to five straight quarters of losses. do you think we could see something similar play out this time around or are the circumstances too different? jordan: history often rhymes. tala got hawkish in 2018. -- powell got hawkish in 2018 and then reversed. that is the template we could be looking at. the stock market has been more behaved. just a 3% drawdown compared to december of 2018. the 2016-2017 period was about trump and the physical plans. this time we know -- fiscal plans. this time we know he has

surrounded himself with loyalist from the maga camp. it took him ages to get cabinet appointments dumb and the fiscal was not announced until december of 2017. in europe, we had a big positive story with macron elected in france and the curve was allowed to steepen. we had a proper reason from dollar weakness and europe strengthening from the politics and the ecb. i think from q2 this year, if europe does get tariffed, they could trigger the reform needed to get a positive momentum story in europe. i'm hopeful that draghi plan gets implement it in some ways. there are positive tariffs to keep in mind. we are used to sluggish reform. if donald trump does go for europe, it could lead to something of a plan. scarlet: you mentioned how

euro-dollar might hit parity. that is something people have been looking up as the euro has consistently lost around versus the dollar. with president-elect trump squaring europe in his sights, talking about tariffs on european goods if europe does not buy more u.s. oil are natural gas, how does this play out compared to 2018? jordan: in 2018, he was surrounded by in-house republicans. mike pence basically chose the cabinet. it was a big task for donald trump. if you go back to his 1980's interviews, he talks about tariffs on japanese cars. this is something i don't think he's going soft on and he surrounded himself with people who will largely say the word yes. it's different because in 2018, donald trump started negotiations with both china and europe. europe was a bit of a charade. what they did not do was a trade deal.

just a memorandum of understanding to buy more energy. while europe did, half of european energy comes from america. the u.s. lng is at its maximum capacity for export. the good news for europe is that they can buy more next year because we are getting around 3.7 billion cubic feet per day,a significant increase on the energy export capacity of the u.s. it's a big negative for chair powell and the fomc. look at natural gas prices. they are at the highest of the month and rising. we could see lng exports significantly increase next year. that could lead to higher inflation on energy services for u.s. cpi. another dollar story. it leads to higher inflation momentum in q1 and q2 and for europe buying more u.s. goods. it is a dollar positive story from both angles. katie: really appreciate you

taking the time. jordan rochester of mizuho. some good news from american airlines experiencing a technical issue with all flights. that's according to a post from the airlines on x. it does not have an estimated timeframe frame but is trying to fix the issue in the shortest possible time. not what you want to be hearing on december 24. scarlet: i feel for the people who have to be at the airport this morning and are looking at this tweet or post. contending with what might be a very long day. there's at least in the new york area snow forecast as well. it just adds to the mix. katie: a 40% chance of snow. coming up in the next hour, we are joined by stuart kaiser of citi, stew leonard and rj gallo. you are watching "bloomberg surveillance." ♪ ♪ i can't believe you corporate types are still at it.

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>> there's a lot of optimism built into the market. if there is a bump in the road when you're priced to perfection, it can be pretty painful. >> you may interpret that data differently. >> the market is still not completely out of the woods. >> we are looking at the one thing we want to be confident, wages are going to grow high enough that consumers can keep spending. >> you have to see all the data that will come in and determine

what we will see over the course of the year. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and henry ford earned. katie: from new york city for our audience worldwide, good morning. this is "bloomberg surveillance ." alongside scarlet fu, i'm katie greifeld. it is just the two of us. scarlet: we are holding down the fort and keeping things moving. there is drama nonetheless. american airlines having technical issues. our thoughts going out to people catching a plane this morning. katie: some bad vibes at the airports right now. american airlines working on getting that fixed. not much to talk about in the premarket action. the scope of the past year against what wall street was saying this time last year, looking yet another year of 20% plus gains. the big question is the tug-of-war between the fiscal and monetary in 2025 and whether or not the bull market has much

steam left. scarlet: a lot of strategists think so. they are looking at their forecasts and predicting more big gains after a 20% plus gain in 2023 and 2024. katie: i'm excited to see how the bond market factors into that. kind of a basket case. it is safe to say you think about the 10-year yield, we entered the year below 4% on the benchmark 10-year yield. we are trading with a 460 handle right now. close to 5% a couple of months ago. maybe that is in the offing as well. scarlet: a lot of people are thinking 5%, maybe 6% if you are t. rowe price. that would make things really interesting. katie: i don't think the s&p 500 is priced for that but we will discuss that with more with our great lineup. we have stuart kaiser of citi. stocks on track for 20% plus

gains. we will be joined by stew leonard junior on the cost of your holiday meal. a lot of interesting conversations. the price of eggs, for example. rj gallo on his 2025 outlook for the treasury market. that's an important conversation as we watched the long end of the yield curve march higher and higher. we begin with stocks trading, higher on track -- trading higher, on track for the second straight year of gains. stuart kaiser writing, "our preferred vehicles are large-cap tech, quality and growth given the higher for longer nature of the s&p forecast. looking further ahead payrolls are a major catalyst given last month's data, the sep update on the market is pricing just two cuts in 2025 and a 10% chance of a 25 basis point cut in january." stuart joins us now.

great to see you in person. i want to talk about higher for longer traits. we are back to top -- trades. we are back to talking about that after powell's performance. stuart: it is the right conversation if you believe the fed. you are probably worried about the unemployment rate rising little bit. inflation is stickier than we would like but it will come down. they will do a couple of insurance cuts next year. it sounds like the front half of 2024. large-cap tech and growth did well. the prescription would be to be in those stocks. the risk to the market is questioning the idea the rate will be as friendly as that is. katie: the sep, the dot plot, was equity positive at its core. the market reaction was not positive. walk us through that a little bit more. if rate cuts in 2025 may be good news for risk assets.

stuart: the market will come back to that view. what happened last week was the market was coalescing around the idea of a growth and permit. the fed added in a little bit of additional cpi risk. the market traded that negatively last year and the fed seemed concerned about the pace with which cpi was coming down. they went with a very strong equity momentum. very long positioning. what you got is the core of the statement and the sep positive but the new information was not super friendly, got a pullback. our view is simple. if your pricing up growth because of inflation and deficit risk, that will be negative. maybe the market interpreted that on the negative side of the ledger. scarlet: whatever the catalyst is, if yields on the 10-year get

to 5% or maybe 6%, how will that impact equities? stuart: if you get the 5% you can come up with a good reason why the 10-year would get the 5%. tax cuts, deregulation, positive growth impulse. if you're talking to 6%, i don't see it getting to there for good reasons. i think equity markets are fine with it. we are concerned with the long end of the curve. it is hard to come up with a positive story by the 30-year yield could get to 6%. it is a long end of the yield curve that is probably the bigger risk. it is the why that matters and we will stick to that for now. scarlet: it's been a fairly placid move up 424, at least in aggregate -- for 2024. and fight volatility has gone from cheap to rich in one week. what is that signal in terms of

where we stand versus other asset classes? stuart: u.s. equity markets because of the rally and that view the fed coming, volatility came down substantially. when the fed surprised moving to the negative side, you got the impulse reversed itself. we think that will calm down. it is hard to keep u.s. equity implied volatility at elevated levels when the markets rally the way it is. the interesting thing with volatility is the correlation between the volatilities has broken down. this been more idiosyncratic risk out there. whether that is policy headlines in brazil, korea, china, european elections, u.s. elections. volatility is a little all over the place. our recommendation is if you are using volatility to hedge your portfolio, hedge at home. don't try to get creative and say i will hedge u.s. equity risk with china volatility. that is not working right now.

you need to be conservative about how you approach that at the moment. katie: interesting to see the vix more elevated than the move index. have not seen that too often in the past year. i want to keep going between the bond market in the equity market. it feels like the magnificent seven can handle anything except nvidia missing earnings expectations. when it comes to other areas, the small caps in particular, that's an area that it feels like you really need rates to come down. do you agree? stuart: if you look at last week, small-cap underperformed the s&p by about 300 basis points. the higher credit risk stocks will be more sensitive to the move in yields. high yield spreads also rose about 20 basis points last week. small caps suffered from higher yields and wider credit spreads. there are pockets that will be much more sensitive. the mag7 large-cap tech are mostly negative net debt stocks

anyway. it is not really applicable to microsoft. our view is that it's a tricky trade for the last six months. for that trade to work you need a soft landing narrative to play out. higher for longer is a headwind because of higher yields. if the economy slows meaningfully, the negative growth impulse is horrible for small caps. you were threading a needle. you need to soft landing growth narrative. katie: i like you brought up the big tech stocks, the net debt is extremely low. this is not new but it feels like that subverts the textbook explanation. if you see higher yields and tech stocks, growth stocks growing out the window -- going out the window because of longer duration debt. it feels like you can't really apply that logic. stuart: you can apply the logic, just not to the mag7. mid tech stocks who have the longer duration, yes. the rates can negatively impact them. if you're looking at large-cap

tech, huge free cash flow, paid dividends, buying back stocks. you are not relying on the long-term saw earnings forecast. i argue the duration of the mag7 is much shorter today than it was in the past. they are less rate sensitive. i think there is still a lot of sensitivity there. scarlet: how do you think about the strong dollar and what it means for u.s. companies and relying on overseas gets with president-elect trump putting tariffs on goods? a strong dollar says one thing about our energy companies versus consumer companies. stuart: the strong dollar is a tricky one. is it strong because of u.s. exceptionalism or because some of the tariff risks? you generally need a pretty big move to be fairly sustainable for it to start to get into u.s. equities. scarlet: a 7% move in 2024 was

pretty sizable. stuart: if you broke down foreign versus domestic revenue stocks, the trade performed quite well since the election. i'm not sure it will impact the s&p at the top level. if you isolate the stocks either from a supply chain perspective or revenue perspective over exposed to it, you are seeing that because he saw a big move. the move has not been large enough to disrupt an excel performance at this point. scarlet: we have seen pressure because of policy concerns. anyone with a pharmacy index manager in the bullseye of president-elect trump. how do you think about this sector? there was excitement about his ability to leverage technology going forward. the fundamental grow story behind health care expenses. that changes now with the policy angle a health and human services secretary rfk junior would bring.

stuart: our view is banks is the clean trade. energy and health care are more nuanced. let's have the democrats win, you get broad-based health care spending. that might be positive for parts of the sector but they also want to negotiate drug prices. jc the trump election win and you -- now you can see the trump election win and you're getting mixed signals. maybe he's a headwind for the pharmacy benefit managers. a lot of people are hiding out in medical technology. that is still an active theme. the sector itself is a little discombobulated. we are seeing a similar thing on the energy side. those two sectors are very complex. different level two industry groups are being impacted much differently by the election outcome. katie: it is great to see you. happy holidays to you. that is stuart kaiser of citi.

an update on stories elsewhere with dani burger. dani: bad news for those trying to get home for the holidays. american airlines has grounded all flights nationwide. the company posting they are expanding a technical issue. the airline said it doesn't have an estimated time frame but is trying to fix the issue in the shortest possible time. american air shares down 4% in the premarket trade. toyota report of the plans to build a factory in shanghai to produce luxury lexus ev's for the chinese market. toyota will build his first independently operated plant in china to get more control of its businesses in the region. toyota is planning to open the factory around 2027. bitcoin's momentum is losing steam into the final stretch of its record year. the currency -- cryptocurrency dropped to just above $94,000.

even still, it has rallied 125% this year, easily exceeding returns for global equities. that is your brief. katie: thank you. the cost of your holiday dinner. >> about 85% of food pricing comes beyond the farms. only 15% at the farm level. katie: that is next. you are watching "bloomberg surveillance." ♪

scarlet: let's look where things stand on this christmas eve. we have a shortened session in the u.s. 1:00 p.m. close for equities, 2:00 p.m. for the bond market with an option of five-year

notes. we are looking at a slightly higher open but i think about yesterday and futures were indicated to open lower. look what happened. katie: a huge load liquidity rally led by big tech. we have seen a lot of big moves in the chip names outside of just nvidia. scarlet: nvidia is still the tail that wags the dog. euro-dollar under pressure. that has been a consistent theme. crude just below $70 a barrel. under surveillance this morning, the cost of your holiday dinner. >> about 85% of food rising comes beyond the farms. only 15% at farm level. that's according to the usda dollar analysis. it's about the labor. we have seen transportation costs come down with diesel pricing and competition. scarlet: here's the latest.

shoppers looking to find deals at the grocery store this holiday season. stew leonard writing, "inflation has cooled and the holiday meal cost about the same this year as last. egg prices remain a sticking point due to avian flu but customers are not sacrificing quality or convenience as they shop." stew joins us now. great to speak with you once again. we did this back at thanksgiving. stew: calorie? -- how are you? scarlet: it will be a busy day. you were saying the holiday meal would be lower than in previous years because of lower cost of turkey. this time when you look at holiday dinners and there's a lot of baking going on, you are focused on the price of eggs because of avian flu. can you tell us about how that has impacted egg prices? stew: we were to dollars $.99 last year -- $2.99 last year.

this year they are $4.99. i'm not making more money on this, believe me. i had to eat a little bit of that. it has to do with the supply and demand. there are fewer eggs out there. whenever that happens, the prices are going to go up. that is the only little hiccup. look at this. this is restaurant quality tenderloin right here. this is prime. customers are actually going for more of the steakhouse quality that they want to have for the meal with their family. scarlet: what is the most popular meal for christmas eve for christmas? thanksgiving is about turkey. for the 24th and 25th? stew: that is it right there. your filet mignon tenderloin. you pop that in the oven for 45

minutes at about 425 and you are done. that is the rock of the table right there that you have. you have all the sides, a little similar to thanksgiving. we are seeing a lot of platters going out. shrimp, fruit, vegetable, cheese. those entertaining boards. customers -- we are noticing from the people they are buying quality. it is like let's have the haagen-dazs ice cream for our christmas meal. katie: i am specifically about the cheese platters. i want to go back to eggs. when you see high prices in other types of foods, the proteins, you see consumers switch around. maybe they will buy more chicken when beef is too expensive and vice versa. when it comes to eggs, this

inflation and prices, is there any substitute or do you just have to buy it? stew: that's a good question. what do you serve? you are baking. we see cream and butters up. sugar is up. people are baking cookies and so forth. there is no substitute for eggs. if you look at the entire table, eggs are up a couple of bucks for a dozen. it is not going to alter your entire meal. you are probably spending 200 and $300 on the whole -- $200 to $300 on the whole dinner table. i don't know if eggs are going to alter peoples' behavior too much. katie: we have been talking about avian flu for a couple of years. higher egg prices will

socialized at this point. stew: what is interesting on the egg, what i was showing you here , what we are noticing is customers are going for quality. they went pasture raised rather than cage-free or conventional. we are seeing even though the egg prices have gone up, they want the best eggs for their families. katie: it is vital farms advertise the square footage each chicken gets. people care about chickens' qualities of life. stew: it is the same with farm raised salmon. we want to make sure that our 60 cubic square feet of water around these so they are free to swim and so forth. same with the eggs. you want to take care of the hands. -- hens.

katie: you mentioned you are eating the increase. what is your decision tree looking like for more typical products? how do you make the decision of passing along price increases versus having it eat into your own margins? stew: that is a tough one. we have had to eat -- we are a family business. i don't have to report to anybody at the end of the quarter except for my brother and sisters. the next generation is all in their 30's. it is almost like a little bit of a feel of a dartboard. what you notice is if you go over -- if i'm $4.99 on these pasteurized eggs, if i go up to $5.29 or $5.49, sales go down. i have to make a decision. do i hold at the $4.99 and make

less margin, ok, but sales will go up and you make more gross profit dollars. it's always a touching point when you get up to that or you have to change over from four dollars $.99 to $5.99, for something it $9.99. sales go down. scarlet: people don't like to see the double digit before the decimal point ever. i have to ask about tabs. if we get tariffs on european goods, that would affect french wines. if you have been to stew leonard 's, you can get your holiday drinks, alcohol, wine, beer from the aisles. i'm curious what your thinking is in terms of price increases, passing along the price increases to the consumer on french wine, champagne, or whether you see people substituting that drink for american-made products. stew: tequila is another thing.

look, tequila is a big thing. we fired from mexico. you won't be able to buy it from anywhere else in the world. same with french champagne. the interest with french champagne, if you look at this right here at of napa valley, this is from the same family that makes french champagne and france. -- in france. even though french champagne might go up with a 25% tariff, even though champagne prices can go up, people can switch over to a sparkling wine from california and it taste just as good. -- tastes just as good. maybe an aficionado can tell the difference, but for most of us it is basically the same. tequila will be a problem. corona out of mexico.

what we are doing is stocking up on the stuff. i don't want to say we are panic buying but i want to make sure i have enough tequila in-house, enough corona, enough french champagne. we have three containers of champagne we have ordered that are on their way over. scarlet: got it. really appreciate you joining us. stew leonard junior of stew leonard's. i did not realize there was a hierarchy to eggs. katie: it is three great. you have tiers when it comes to your egg quality. coming up, olivier bron. ♪ 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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katie: welcome back to "bloomberg surveillance" on this christmas eve. we start with futures little changed but a little higher. s&p 500 in premarket tgoing to n today. for now we are seeing the arrows pointing up. s&p 500 up about .1% after a big rally yesterday led by tech. the nasdaq 100 up about .2%. the russell 2000 deciding what to do. small caps have been under pressure to say the least. scarlet: yesterday was the first two-day rally in about three weeks.

the market has seen some better breath over the past two days with half the members gaining. let's see how much damage or benefit can be done in the shortened trading session. katie: we will see if the rotation trade gains momentum in 2025. in the bond market we do still have auctions on the schedule. two-year auction yesterday was pretty solid. it is quite in the bond market right now on the short end. things a little dicier if you go to the 10-year and 30-year yield. the levels are pretty shocking right now. 10-year treasury yield trading for 460. we will see a 5% is in the offing for 2025. a look at the currency market. the dollar's story, the strength of the dollar has been one of the defining characteristics of 2024, particularly the latter half. dollar-yen well-behaved.

high levels overall. 157 on dollar-yen. that brings us to under surveillance this morning, president biden deciding the fate of the u.s.-nippon steel deal after a national security panel deadlocked. fighting indicated he is opposed to the deal. he has 15 days to announce his decision. we were talking about this just a little while ago. he has not outright said he will kill the deal. indications point to maybe he will. scarlet: if he is consistent with what he is saying, he will kill the deal. the incoming president said he would block the deal but this will be resolved before january 20 given biden has the 15-day window. both companies have said they plan to challenge any refusal in court. this story will not end anytime soon. katie: it is wild to think it was announced for a year --

december of 2024. we have been talking about this for a year. let's talk about ai. shares of tsmc touching a record high yesterday after a rally in u.s. chip stocks, including nvidia. tsmc is on course to not it's best annual stock performance since 1999 with shares up 82% this year i made ai enthusiasm. this is something -- amid ai enthusiasm. this is something broadening. still contained in the chip sector but we are talking about tsmc and broadcom also seeing a lot of love recently. scarlet: tsmc is the key. for nvidia to meet the demand from all the hyperscalers it relies on tsmc to get production done. the biggest foundry chipmaker in the world. analysts like tsmc because it's

a way to play the ai theme without having to pick one specific winner or technology. it's a fairly reasonable valuation. the taiwan shares, pd ratio of 27. nvidia at 57 times earnings, i believe. it gives you a sense of scale. katie: it gets silly. in any other industry, 27 would be pretty eye-popping. if you talk about the chips sector, not as much. nvidia is a very important customer of tsmc. they all just spending money on each other. let's talk about department stores. the north some family taking its department store private. the company is joining forces with a mexican retailer in an all cash transaction that would add about $6.25 billion. the deal is expected to close in the first half of 2025. you think about the year-to-date performance of nordstrom. it's up 31%. a lot has been speculation about

ideal over the past four years shares down 40% or so. scarlet: a lot of issues come down to the department store business model. we have seen macy's struggle as well. the real estate tends to catch cif a lot of activist investors. by taking the company private they can fend off potential challenges from activist investors. nordstrom has been relying on nordstrom rack, the off-price retailer. i don't say it's an outlet but it's kind of like overflow from nordstrom regular. that business, i wonder whether it cannibalize is the main nordstrom -- cannibalizes then main nordstrom business. katie: the hope among the sell side community was that nordstrom rack would offset some of the weakness you see a nordstrom proper. maybe it is just taking away some of its share. scarlet: it can get better deals. i don't even bother going to the main nordstrom. last month, romaine bostick and

i sat down with the ceo of bloomingdale's, olivier bron. we discussed the company's strategy moving forward in the u.s.. olivier: the u.s. market is the biggest and most intense market for department stores. it is very exciting for us. i'm so thrilled to be here. i think we can do things a bit different in the future. reinforcing the experience. there is room for improvement for the future. we have been working on a new strategy. scarlet: you are in europe and asia. a lot of experience overseas. what is different or perhaps unique about the u.s. consumer and the way they shop and buy versus those in europe and asia? rj: -- olivier: they are used to going to department stores. the importance is still very strong. when you compare that to asia and europe, interest here is

very strong. the relationship with the department store and with retail is transactional. you have to bring back more balance from brand partners to the customer. this is all we are working on now in a perfect demonstration of what we are talking about. remain -- romaine: you need to give people a reason to spend however much money on shoes or whatever. telling a story. how do you do that in a concept and a day and age where people are much more transactional? olivier: when you are buying a bag, you are not just buying a bag. you are buying a story, a social marker. something special that is more than just a product. we have to make sure the store experience we are bringing that to the customer. it's about activation in the

stores. not only coming to the store to buy, but because you can meet people you like, see something different, to leave with an exciting's periods. this is what we are -- exciting experience. that is what we are working on now. romaine: how transferable is at the other locations? this is your flagship location. when you go to texas or california, can you replicate this? olivier: that's a good question. it's about bloomingdale's and being a chain is we want to be the local leader, the local destination. we have to cascade that to every store and customer. the teams are working on it. of course it will be different. romaine: are there plans for any international expansion for bloomingdale's? olivier: i don't think so.

we have a partner. bloomingdale's in the middle east is a strong platform but not a priority. we have a lot of opportunities in all domestic markets. we think we can have strong rules in the future in the u.s. a new platform and any region is very challenging. i had a chance to experience that in the past. starting from scratch. when you have mature department store branding in the regions it is very challenging. romaine: what about the med of sales from brick-and-mortar locations and the amount of sales from digital and online sales? olivier: we are in line with our peers right now. i think the market is around 30% of the sales. for the last for years we are not jeopardizing store sales are now.

we are seeing our number one for new customers. we have the ability to transfer the online customers off-line. you have returns. you want to see what you're going to buy off-line online to that's a great extremes. customers don't care whether they are shopping online or off-line. they want to see a product, experience bloomingdale's, whatever the platform. we are talking about online-off-line. it's about engaging. scarlet: if you take a step back and in contrast to europe and asia the department for model has been struggling for years now. why is that model not doing as well in the u.s. as it could be in asia or europe? olivier: the models in asia and europe are now are flagship focused. i think the flagships will have

a bright future and the next 10, 20 years. it is not a problem at all. the problem is managing such a large footprint. that can be a challenge sometimes. as bloomingdale's we have a chance to be in pride locations. we have more potency than threats in the future. the department store model has a bright future but it has to reinvent itself from the perspective of the customer but also from brand partners. we have to be relevant for brand partners and rethink the model. scarlet: how about the broader retail landscape overall? are there too many stores in the u.s. several? olivier: the overall market is slightly growing. the penetration of online is going up. the square feet overall in the u.s. is slightly decreasing. yes, there will be some losers. that is why you have to

challenge yourself and reinvent your model to stay relevant for your customers and also for your partners. romaine: when you look at other retailers, not necessarily a direct competitor, who do you envy most when you walk into the ir stores? olivier: first, i think bloomingdale's is doing that right. i'm sorry to say but it will not be my only answer. i was surprised. there's a lot of engagement of the customer. the relationship we are building with our customers and partners is good and we can do better in the future. there are sources of inspiration from other models right now, whether in terms of service, in terms of brand mix, events and activations, there are a lot of inspirations in retail and beyond retail. i don't want to give any names but i have a lot of inspiration

in the u.s. and abroad. we should not be too domestic focused. there are good trends happening in other parts of the world. romaine: maybe other approaches for retail overall, you think that will be palatable to u.s. audience? olivier: i am convinced about that. we have to bring the best of both worlds. that is where we can bring something different for customers. the customer is ready for something different, more inspiring. we can get it from some of the countries or other models in the world. scarlet: that was the ceo bloomingdale's speaking with romaine bostick and me on the close ahead of the holiday season. he brings with him his experience in southeast asia and france as well. let's go to dani burger to get you an update on the stories elsewhere this morning. dani: south korea's main opposition party is looking to impeach the active president over his refusal to approve

special counsel bills to investigate the president and his first lady. it seeks to investigate insurrection charges against the impeached president. the party plans to wait until thursday to submit an impeachment motion. british airways owner iag is in talks with starlink. it is the latest major carrier to consider using the online service. according to the head of innovation, the company has not made a final decision and is weighing options including amazon. semiconductors have been the gift that keeps given for equity traders -- giving for equity traders, quite literally. asml is sharing lego replicas. it's only available to asml employees. they are calling the company to make them more widely available. rochus will set employees back

$216 each. that is your brief. scarlet: we are both gawking at that lego set. katie: if it's only available to employees, i thought they would get it for free. maybe i am being greedy. scarlet: it does cost money to make that. coming up next, pricing in a less dovish fed. >> the way the economy is going, you should see a moderation in growth and a moderation and employment and in inflation. the market is very efficiently priced in for a benign policy pack. scarlet: what it means for the bond market. that is next. you are watching "bloomberg surveillance." ♪

katie: welcome back to "bloomberg surveillance." katie greifeld here with scarlet fu. everyone off today except the two of us and we are bringing you the premarket action. not too much to speak of but exciting nonetheless. s&p 500 a little higher. we have been camped out at these levels all morning. maybe we will see the shock and awe we got yesterday. the market closes at 1:00 p.m. people need to hop to it. the bond market closes at 2 p.m. -- 2:00 p.m. they can't just close at the same time. scarlet: there's also a five-year bond auction today at 11:30 a.m. last year -- yesterday's two-year auction was pretty solid. there is plenty of demand at the short end at the belly of the curve. less knowing is the long end of the yield curve. katie: i will sign back on to

see the results of that five-year auction. you take a look at where we are on the treasury curve. a little better behaved when it comes to the short end. you are looking at the 10-year yield levels just amazing. 460. it has been a roller coaster year. we will see how we close. we entered 2024 below 4%. an incredible ride. u.s.-euro. oil up about .8%. >> you should see a moderation in growth. a moderation in employment. in inflation. under the circumstances the fed might deliver a forecast. as a rate strategist, my bias is a deliver less cuts so the market is very priced in for a

benign policy pack. if they deliver four cuts, the two-year could end next year up half a percent. katie: traders pricing and fewer rate cuts next year and concerns mount about the u.s. fiscal trajectory. rj gallo writes, "with the debt to gdp nearing 100%, the highest since the aftermath of world war ii, a much wider deficit could awaken the bond vigilantes." rj joins us now. i thought they all retired. are we talking about a new generation here? rj: it is not that hard for current market professionals to breed the history in case they did not live it. i think ultimately as 2022 clearly illustrated, inflation still matters a lot to bond investors. when the fed had to raise rates

drastically in that year, driving double-digit losses we had a whiff of bond vigilante is him. did -- vigilantism. it did not last because the fed started to ease. there was hope the economy would hit a soft landing. in fact, we are there. the reason it is a risk going forward is because we have been through now well over a decade were neither party is that focused on fiscal prudence. the consequences, get to gdp of nearly 100%. you don't have to go back that far too when it was 50. it is more than doubled. that is why we are getting to a point where is there a breaking point? is there a point where credit risk and market access via auctions become a risk to treasury yields in the united states? that is where we might go if we keep cutting taxes, don't cut spending in an offsetting manner and the deficit keeps growing

and debt to gdp gives rising. katie: with all that being said, and i hear what you are saying, we saw shades of vigilantism that was not sustainable. maybe one reason was because he had this buy -- you had this buy the dip impulse in the market. if we got back to 5% on the 10-year treasury yield, to some investors that is just irresistible. rj: that's a great point. speaking of irresistible, it felt for a while after the 10-year had sold off drastically that we were shaping up for maybe a pretty strong run of solid mid-single digit total returns in fixed income. we did not get that. the aggregate index is up about 1%. you have had price loss offsetting much of you yield. going forward, there is

something about the allure of big round numbers of four percent or 5% 10-year. the proof is in the pudding. do you get the total return to justify the additional investment? what is important right now is you do have yield in your fixed income portfolio. for a while income had all but disappeared with the 10-year treasury yield below 1%. that is no longer true. what's important is the risk of your fixed income investment, the long end of the curve is higher now because of the fiscal situation and the inflation volatility we are experiencing. if that is the case, the risk premium should be higher. the yield curve for probably steepen. that is one thing that has worked well despite low single digit total returns on the ag or universal index. the steepening has been a key variable we have been able to

play in our portfolios. it allowed us to have access return in a low risk environment. scarlet: i want to go back to the new generation of bond vigilantes. who are they? what kind of investors are most likely to want to make their voice heard about the growing debt levels? pension funds, hedge funds, traders, short-term traders, central banks? rj: it is unlikely to be an entity like a pension fund or insurance company. many of them have very long term perspectives. often have long liabilities. i think prices are always set on the margin. the marginal trader, if it is fast money, hedge fund-like, total return managers like ourselves managing neutral funds, and active etf or open and fund, we are in the business

not to generate. we are to generate total return. bond vigilantes are a risk and they then get disciplined by low total returns, the allocation becomes different as you look going forward. bond vigilantism is an experience. if you make an investment and the experience your wealth declining because of the investment, you will think twice about the proper evaluation to attract the incremental investment going forward. katie: that's a great place to leave it. that is rj gallo of federated hermes. breaking news on the american airlines situation. the nationwide ground stop canceled. american airlines going green in the premarket. coming up, the third hour of "bloomberg surveillance" on this christmas eve.

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>> there is a lot of optimism built into the market. if there is a bump in the road when you are priced for perfection it can be painful.

>> whether you are a glass half full, you might interpret the data differently. >> the labor market is not completely out of the woods. >> we are looking at the one thing that we want to be confident in is that wages will grow enough so that consumers can keep spending. >> all of the data will come into determine what we will see over the course of the year. >> this is bloomberg's or fara -- surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. scarlet: good morning, this is bloomberg surveillance alongside katie greifeld. they are offer the day, and happy christmas eve. anne-marie will be back tomorrow and the other two next week. katie greifeld, a very festive on this christmas eve. katie: i do love any theme and holiday is easy to dress around. scarlet has on a black shirt and i have on black pants and you have on red pants.

scarlet: it is like we planned it. katie: we are on the save -- the same wavelength and that is good because we have been together for three hours, somehow. and we have been making a lot of hay out of a boring market. scarlet: we are looking at a muted open for u.s. equities for the holiday short trading session. yesterday we saw a muted opening futures and we got a rally. i do not know if that is any indication of what we might say if so that is a three-day rally. we have not had a big two day rally in about two weeks. katie: that is interesting. it is kind of surprising because it has been such a good year for the equity market but in the last two weeks we have had two down weeks in a row and you have seen some of the momentum we have been getting used to in 2020 tour -- 2024 start to pray. in the last trading day is a little bit of emphasis. scarlet: the momentum in the bond market has been lower prices and higher yields and

that is consistent and we see that with the 10-year yield around seven month highest, the highest since late may. 4.60%. new york crude elevated, or at least about .8%. 69.76. a lot of supply. katie: the bond market i am so thrilled. i anchor open interest so let us plug our shows. we do not talk about the bond market too much and i imagine you talk about the bond market often on the close e.u.. scarlet: it has been hard not to talk about it when it comes to the relationship with equities because this up and to the right movement that you see the s&p 500 doing feels like it has ignored the volatility. katie: it feels like it is divorced for sure. scarlet: bond market investors worry about that and equity investors seem not to be as worried. katie: nvidia is doing fine. scarlet: the narrative work so

let us keep getting mike -- prices higher. coming up we have michael purves with stocks looking at a third day of games plus ryan peterson on the looting -- looming threat of tariffs and the falconx ceo on his outlook for crypto and we have not talked about that one yet. katie: we have barely talked about elon musk. scarlet: i am sure we can find a way to get those two together. let us begin with equities and stocks looking for a third straight day of games into the christmas holiday and the backdrop is the s&p 500 on track for a second year of 20% plus returns. we have talked about this a lot but it bears repeating because it sets us up for the optimism for 2025. michael purves is looking for the s&p to rally another 13% and hit 6500. he joins us now. a lot of folks looking at around 6500 for the s&p 500. what you found interesting in

the last couple of days is what the fed signaled. part of what they signaled is the idea that they are comfortable with higher for longer and they think the economy is as well. michael: one of the most interesting things to come out of the fomc is that the gep and just gdp and unemployment estimates did not change but the is -- the estimates of real interest rates did change materially to the higher. the thing i have been arguing for the last couple of years is that we are doing a nominal regime shift to a higher nominal gdp condition and that is basically a higher low term interest rate and higher long-term real interest rates. the economic data demonstrates the fact that it is sort of revealing itself. the interesting things to consider is that real interest rates, the bigger number with different ways to measure them and maturity is. but 1.5% is supposed to be

restrictive and that was a narrative we heard and yet it really hasn't. if we go back through history, most economic expansions accommodate real interest rates where we are right now. 2011 through 2019 was an ultra low rate environment and there was a sense that in a condition it was so dominated by the fed that any increase in interest rates that was material the economy would fall apart. but, given that there are so many different forces driving the shift, i think what we have learned last week was it was ugly for the markets and i found it constructive. iie of how to think about 2025 and 2026. katie: narratives being debunked, the first one the economy cannot handle higher interest rates and it can and we are seeing evidence of that. what other narratives need to be debugged or challenged? michael: that is certainly an

important one. i think the other thing and you had a guest on earlier talking about the deficits and bond vigilantes coming back. one of the things that has to be considered in that discussion which is really important which let us face it, u.s. government is the anchor tenant. congrats -- contractual payments meaning the social entitlements plus interest payments are 20% of gdp. we have never had that before. we have had a strong economic expansion. if we do slash deficits that is great for the federal balance sheet but how much of a recession does not cause? the folks at mar-a-lago are working through that right now. it is one thing to get productivity gains through federal enterprises and another thing to say let us slash hundreds of thousands of workers and spike the unemployment rate. does trump -- is trump going to want to start his term doing

that? there is a trade-off for what is good for the balance sheet and that u.s. income statement meaning the gdp. and they are tied together. that has to be really sort of considered as you think about that deficits are bad, but they are driven by contractual obligations and we have not seen anyone in d.c. reforming the entitlements which is the element in the room. i am not sure, i think the bond vigilantes will have to -- we will see how much they balk at these structural deficits. they seem inevitable to my mind, and i think we will just have to accommodate them. whether that means a higher premium being priced into the back end of the curve, which to me sounds very logical. i think that has been way too low for a while. that has put those things where we are going to start seeing

more of. it is not necessarily bond vigilante has him but -- vigilantism. but it is a repricing. katie: when it comes to the long end of the treasury curve and yields, how much more of a premium? what would be fair value when it comes to the benchmark treasury yield? michael: people are throwing around the five number all the time and that was a scary number in the past. i would say right now, you're prior guest made this point and i would agree with it. relative to yields around the world, you are getting significant real yield and significant nominal yield. and exposure to the fantastic u.s. economy on a relative basis. i think there will be a bid for that. you see the tension in the auctions occur when or if the 10-year yield is frantically

moving from 4.5 to five and then there is an auction, it will not go right. the narrative has developed and the u.s. will fall apart and we are becoming argentina and all of that stuff. i do not think i by that. those are bond buyers being smart bond buyers and feeling the tension and saying you have to pay me more. does that mean the gold will go to 10,000 and the u.s. dollar will collapse? i do not participate in that. i will say we are in one of those transitional moves coming out of the fed. we have a lot of reasons to think about higher inflation premium. there will be a lot of confusion until we see policies coming out of d.c. with trump. and basically, there is trump uncertainty premium that also has to be factored in. a long way -- in a long-winded

fashion, 5%, people will buy that aggressively. katie: that is the treasury market picture and i want to quickly talk about the bond market because something happened that we had not seen in a while. we saw spreads on high-yield bonds move higher. they had been grinding lower and lower, what is the take away and what does that mean for the equity market? michael: over the last year and a half, bond yields and high yields have led the way down and said no, that is not happening. often you hear the narrative from the treasury market or sometimes from equity analysts. but i would say that the -- with what happened last week with the higher and longer interest rate condition, some of these maturity wall issues might start coming back a little bit. valuation on equities was overextended and valuation over credit was overextended. there is a reason. you are asking the s&p light

coming into the fed meeting that was an awkward meeting at 22.5 times to be perfect for the rest of the year and have that rally. there was a corollary in the high-yield market. the broader context is that broadly speaking, the credit indices should be ok. but i think there is a warning light going on, as they should be any time the valuations get this stretched. scarlet: we really appreciate you stopping by. happy holidays to you and your families. michael purves. let us go over to dani burger and let us get an update on stories elsewhere. some big news for american airlines. dani: good news for those headed to the airport and have an american flight. american airlines canceled the nationwide ground stop. it was experiencing a technical issue and at one point shares fell nearly 4% and the losses are back down to 1%.

the green bay packers trounced the new orleans saints. it was a 34-0 shutout. the packers clinched a playoff berth for a second straight year but christian watson did have to leave due to an injury. the league looks ahead to two christmas day match ups with the steelers and the texans hosting the ravens. the most important thing is that beyonce will do the halftime show. the pittsburgh pirates fans were given an early christmas gift from andrew mccutchen who were assigned -- re-signed the team. he joined on a $5 million contract after hitting 20 homers and 15 rbis. it will mark 20 years since the first -- since the franchise first drafted him. scarlet: thank you. coming up we have ryan peterson on how local supply chains are bracing for an import -- uncertain 2025.

this is surveillance. good morning. ♪

katie: welcome back to bloomberg surveillance on this christmas eve 2024 and let us look at the markets. it is a holiday shortened week and trading day. the s&p 500 is poking higher in the premarket. i stress that these are small moves when it comes to the stock market. s&p 500 up about .1%. we will see if we get a repeat of yesterday when we had a strong finish. if you look at the currency market, euro-dollar trading a

here below 1.04. the bond market is well behaved and the 10-year treasury yield up about two basis points trading at .460. if you look at new york crude we are up about .7% and hanging out below $70 a barrel. we will see if we had to that. let us talk about the tariffs because president-elect donald proposing tariffs on canada, mexico, china and the e.u. resulting in more questions than answers about how his administration will implement them and how fast. ryan peterson writing "we are seeing strong demand for ocean freight driven by a multitude of factors, fear of a potential ial strike and tariff increases. lunar new year plus a strong economy. ryan joins us now. very interesting when you think about the increased demand for ocean freight and you name a number of factors. is that taking share from other methods or is this just a pie

growing bigger? ryan: what you are seeing is taking share as people are. if you are concerned about those things, which you should be. you have the option and taxability. katie: how much should we draw on the experience of the 2016 election when it comes out to mapping out the impacts of some of the terrace we are talking about? ryan: we have seen this movie before in many ways. the tariffs were not as disruptive as people expected them to be. there were tariffs who existed throughout all of human history and that is how governments funded themselves so people were able to adopt. it is a huge shot. the big thing is a uncertainty which is what is it going to hit and when and how. for example, genesis week the

president of mexico actually imposed large tariffs on imports from china. and to everyone's surprise those affected mexican fulfillment centers the e-commerce warehouse who are not shipping it to mexico but import reexport those goods to consumers in the u.s.. that is a huge weighted u.s. e-commerce down in mexico. and this morning the -- late last night the largest fulfillment centers in mexico had to email their customers and cancel contracts. a lot of american businesses are scrambling to find new fulfillment opportunities and ways to serve their customers in the u.s. even though it had nothing to do with the u.s. government. scarlet: that feels like a wild card so when someone throws a deck of cards in the air, how long does it take for a new normal to be ryan: set in place? ryan:the fun part of working in

logistics we find out that there is no such thing as normal. so it is every day a new thing between the strikes in the red sea and tariffs, a drought affecting the panama canal. you have to be nimble and agile. scarlet: going back to the chair -- to the tariffs question. the details are tbd and we do not know when and how much but some form is coming on imported goods into the u.s. and the mechanics are clear in terms of tariffs tend to reduce demands for these imports if you are american. but you point out that we have seen a decrease from china. walking through what that might mean among goods imported from china and how manufacturers think about that? ryan: ocean freight rates have been high, two to three times

longer than historical averages. this is a market where the supply side and the number of ships at their capacity has ballooned. there has been a huge deployment of new container ships that as the carriers made money during covid, they reinvested that into new ships. one would predict with a huge surge of supply the price will come down. the only reason that has not happened is that the red sea has to absorb capacity. if anything that should be done in allowing container ships to return through the red sea that would instantly bring the price down by two thirds or so is our guess or maybe more. that would probably save companies 4000 to $5,000 per container. that is a big deal. the average value of wholesale in the goods inside is $100,000. if you are talking about 25%

tariffs, that is 25,000. it will not get you back. that is a big blow. katie: as we have been talking about there is a lot of unknown about the levels and the final levels and whether or not we get deals negotiated with trade partners. when it comes to actual tariffs in your notes you write that there are two ways that businesses can deal with new tariffs, absorb the cost themselves or increase the price is. and the businesses that you work with and you speak to, what are you hearing so far about what path they are going to follow? ryan: that is a very simplistic way and i'm am trying to simplify things. if you have goods on the water coming here and not muddled -- much else to do that pay the tariffs and you have to choose to make less money and pass it on. in the medium-term there is a lot of strategies available. you have -- you can make goods in the united states.

you might have the raw materials and not the finished goods. you can make goods in countries that have reached trade agreements with the united states. there is tariff engineering. by understanding and partnering with the customs broker you can understand the raw materials and how those create the duty rate and if you change things you might get a different duty rate. there is a lot of opportunity to reduced -- to reduce tariffs over the medium-term. companies are getting smart about this thanks to the all cycle -- since the last cycle when all of these strategies were deployed. if you did not see it coming at all, people were not sure that trump would be elected. biden has been increasing tariffs as well. people have been preparing for a while and should be in a reasonably ok's to adapt to it. katie: where are we on the near shoring or on showing narrative. that has been a big push especially gaining steam in the

pandemic. you know better than most that supply chains are pretty slow moving animals and take a long time to actually shift and move them. so, where are we? ryan: it depends on the sector. there is a massive amount of re industrialization, but they tend to be higher complexity goods like manufacturing robotics. for low value goods you are seeing that the shift down to countries liket o mexico as well but even cheaper countries like vietnam and cambodia. india is having a boom in exports. so certain things, china is still just a great country at manufacturing and there are certain sectors that with even higher tariffs it makes economic sense to produce their because of the quality and scale of

manufacturing capabilities. and you see it, i was in china not too long ago and the quality of their cars is remarkable. even with high tariffs people will want to import those cars because they are cheaper and better than what is scarlet: produced domestically. scarlet:at affordable prices nonetheless. what is the number one worry that customers have for 2025 beyond tariff? that is a big unknown. ryan: in the short term it is the ila strike on the east coast. we had in october for four or five days and than the biden administration told them knock it off before the election so they got a stay and extension of the contract. that is five days before inauguration and we are very much in crunch time for what happens with those negotiations. my latest understanding was that the two parties were not even

speaking to each other. so the odds of a deal seem kind of low. the demands of the union right now is not just no more automation and higher wages. they already achieve those. the carriers and employers have agreed to that. they are asking to reverse and eliminate the katie: automation that already exists. katie:great to speak to you. that is ryan peterson. when it comes to tariffs and these labor issues more questions than answers. the trump administration inauguration day fast approaching so we will get clarity soon enough. stephanie of wolf research on economic data and the final appearance of 2024. this is bloomberg. ♪

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katie: welcome back. a snowy christmas eve from new york city. katie greifeld alongside scarlet fu. looking at equities in the premarket. green on the screen, very small. the s&p 500 up .5%. the nasdaq 500 up .2%. the small caps are climbing into the green. it has been a rocky couple of weeks for the small companies as rates rise. the russell 2000 for this moment up about .10%. let us look at the bond market

right now. all quiet, i would say. the year is not over yet and we have a bond option and five-year yields? scarlet: after a solid two year old -- year yield option. katie: a little of the selloff materializing down the curve. currently argued by the basis points. maybe three basis points if you round up and then you look at the currency market. a lot of currency action the past couple of months following trump's election and you are looking at the euro-dollar not doing too much trading just low of about 10% on that pair and we will watch this one. let us get you to the airport because we have good news for those traveling by air. the faa says american airlines canceled its nationwide ground stop. that was big news in the past

several hours with some issues at american airlines. let us get the latest from benedict who joins us. what do we know so far. benedict: the good news is that the grounding had been lifted. it lasted an hour and it looked fairly disruptive. all of the domestic flights were canceled in the u.s.. the airline did not tell us what the issue was. they had a technical issue but did not go into the details of the nature of that. some users were speculating it might have to do with software used to calculate the weight and balance of the aircraft which the pilot puts in after the aircraft takes off. that is something we will dig into. thankfully, short-lived which -- because this is a busy travel day and that is the last day you would want to have this disruption. katie: give us the context of

how high the stakes were. southwest having a disaster is holiday season. and that really weighed on the stock for quite a while. benedikt: that was something that cascaded through the company for days if not months. we have seen it with these disruptions sometimes industrywide and we have seen it with the software outage a couple of months ago, the microsoft related one. that had a massive effect. given that this one is short-lived it will not have a material effect on the stock but it dipped briefly and it will probably recover. the question is always how much of a cascading effect does it have and how many planes might be out of position. given that this was short-lived the likelihood of a large-scale is very minimal. they might have dodged a bullet. scarlet: thank you so much for getting us the latest. the good news for those flying

american airlines, the grounding announced in the last hour has been canceled and those flights are back in action. anyway, let us move on to economic data. there is going to be data after the christmas holiday. jobless claims out on thursday, the last jobless claims report of the year. stephanie roth has written " given where expectations are, we think the labor market is a bit softer than many expect." it is great to see you. it is interesting that perhaps the data does not reveal the weakness of the labor market because it has been showing us that the labor market has held on well. the economic surprise index has turned a corner and is showing that economists are more optimistic than what the data has revealed. stephanie: the fed started this narrative that the economy is overheating to some extent and the fed will not be able to cut

and we will take the other side. we think the labor market is fine and we are looking for average trade growth which is around 140,000, slowing down to 130,000. we think the market is fine but expectations have changed notably. so we would just kind of take a step back and assess the labor market and the slowing and is -- it is consistent with the fed cutting. with the market pricing in, we would take the other side. something like two cuts makes a lot of sense. scarlet: you look at the unemployment rate passed one decimal point it shows a little bit of weakness that is not revealed when you round up the number. it has been brought up a couple of times over the last couple of unemployment or jobs reports overall. how are you thinking unemployment rate versus the nonfarm payroll number as a trigger for the fed to consider if the labor market is strong or weakening?

stephanie: it is 4.5% that gets attention. aside from that it is a little bit more from a nuanced perspective. it is a combination of rising unemployment rate plus some of the other variables. the household survey has been underestimating the labor market this year. it has been undercounting or compared to other measures, undercounting the trend in immigration. so, we do think it has not been fully capturing the full labor market so far. katie: i want to build on that because you mentioned immigration. that is a conversation becoming more and more with it becomes to the labor market. you think of some of trump's proposed labor policies and the potential for mass deportation. in the labor market that we currently have maybe we are not counting the impact as well as could be desired.

on the flipside into 2025 and you see mass deportation, what could that mean? stephanie: there is a lot a concern that if trump cracks down it will be inflationary. the view is perhaps not so much because the labor market has rebalance. we do not necessarily need the influx. this will put some pressure on the unemployment rate but not massively so that it would incite a massive amount of inflation. trump does not do mass deportation and that is negative and we think it is similar to what we saw in the first administration where it slows down notably but it is something that puts pressure .1% to .2% from this year. katie: what about wages? how does that factor in? stephanie: downward pressure should put pressure on wages. the one thing is that productivity has picked up so that is helping mitigate the

impact from the unit labor cost perspective. company should be able to do ok because they can get a lot more out of the workers that they have. even though there is wage pressure it should not be significant. the base case is that wages run at 4% which is where they have been and generally speaking the fed will tolerate 4.5% on wages. what that means for inflation because productivity has picked up and they can tolerate slightly higher wages without there being some concern. scarlet: that is the labor market picture and we also have data coming out on inventories. normally i do not pay attention because they do not move markets. with so much discussions about companies ordering more to get ahead of tariffs, will that show up in the november numbers? stephanie: probably not. before the election we did not see a big boost, but we are

starting to hear that since the election companies are ordering in advance. scarlet: it is anecdotal? stephanie: it is. we have spoken to sources on the ground in china and it does seem like there is some ordinate -- ordering from companies on the ground. we anticipate signs of that and you can look at the inventory data and the other thing to track is the imports from china. my anticipation is that you well. if you can the inventories and it is highly likely that the tariff rates will go up. scarlet: what do you see with interest rates and the overall economy and how does that to the scales on what it says about gdp and other measures? stephanie: gdp looks is at -- looks at the change in inventories. if it picks up in a big way it will boost in the near-term creates an air pocket later. what you will likely see is a stronger economy and tariffs happen later in the year so a

stronger economy with inventories being a notable part of that. once the tariffs go into effect if and when they do you could see an air pocket because you have over ordered the inventory and you see a noticeable price pickup. katie: we were talking about the pull forward with ryan peterson on the part of several businesses and we will see what impact that has. i want to take a left turn and talk about quality of data because you think about the bls. they have had some botched releases over the past couple of years when it comes to inflation data and when it comes to the quality that you are looking at to put together the forecast and thinking. is that something that you worry about? stephanie: it is always a challenge and the problem is seasonal factors. it is problem for them to adjust the data post-covid and that is

why we have had seen substantial revisions causing a lot of people to mistrust the data. i would say that we trust the data that we take it with a grain of salt and we look at a broad measure of every type of indicator to get a cleaner read of the big picture. and we take a really close look at what is going on from the seasonal perspective so that has an important impact. inflation in q4 tends to be lower especially core pce. and a boost in q1. we will continue to see that and last week's core pce saw that showing a really weak reading dealing with seasonal factors in november and december. in q1, we will see profit inflation. this will impact the read of the inflation backstrap because the data is really quite volatile. that helps explain why the narrative has been changing every three months because that is when the seasonal factors tend to change and it has been

assuming expectations. katie: i appreciate that and i want to hear more about what data sources that you are looking at outside of headline cpi and the nonfarm payrolls report. it was interesting in a fed minutes release that participants were talking about using more disaggregated data or information provided by business contacts to have a more holistic picture. so, what are your favorite nonconventional sources of data? stephanie: something we have had to look at is the state appointment data. we can look at it in aggregate but there are so many problems and whether so how do you get a clean picture. put out a report digging into the state employment data to assess how much hurricanes had an impact and then smooth through the noise and it told us that the underlying trend is the 140 that i mentioned earlier. and a big reason is that the

hurricanes had a substantial impact. that is one. similar thing looking at claims by state because you get a sense of what is happening from that perspective. i would say that even if you take the government releases and dig one step deeper and try to figure out what are the funky things driving revisions and seasonal factors that will help you get a cleaner read of what is going on in the economy and looking at the inflation data with vehicles because the hurricanes have had an impact. i would say the government data is reliable and you just have to understand the nuances and noise impacting the overall picture. scarlet: what is the number one worry about the economy in 2025? stephanie: tariffs. and that might be an answer that a lot of guests give you what it is fair. it could have a substantial impact on the economy in the base case it is an end of 20 25

thing when trump signs the tax bill because it raises a lot of revenue. but if it happened earlier, our forecast could be wrong. we are looking for above trend growth, inflation that is a little bit sticky but not that high. if we get tariffs in the first part of next year that could throw the forecast for a loop and we would see growth lower and abs -- and inflation higher. scarlet: stephanie roth, we appreciate you joining us. thank you so much. let us get you an update on stories happening elsewhere. we go to the bloomberg brief with dani burger. good morning. dani: semi conductors have been the gift that keeps on giving for equities traders and now they can be taken quite literally. asml is selling lego replica models of its project. it is only available to asml employees. social media is calling on the company to make it more widely available in the company has not budged.

the cuts will setback -- set them back 216 thousand dollars each. a record number of u.s. passengers are set to fly. an all-time high of 54 million people are forecast to fly. that is according to airlines for america. u.s. carriers are offering 140,000 more seats than last year. orlando, las vegas fort lauderdale and honolulu are among the most popular destinations. santa began his journey at 6:00 a.m. eastern time this morning. norad has been tracking him since 1965. they told axios that it does not use ai but relies on radar and military aircraft. it added that santa usually arrives in any given area between 8:00 p.m. and midnight but when children are asleep and those are live pictures of santa and his reindeer and that is a brief. scarlet: thank you very much. happy holidays to you.

dani burger with the bloomberg risk -- bloomberg business brief. before we get there there is a headline katie about amtrak due to mechanical and equipment issues two trains are cancel between washington and boston on the heels of several acela trains that face delays yesterday. it has been a tough week if you are traveling between boston and washington. katie: and by air with the snafu from american airlines but it has been resolved. i here it is snowing outside but we have not been outside in many hours. i imagine that is stalling the trains but what do i know. scarlet: good luck to anyone who has to rebook the train from washington to boston. coming up we set you up for the day ahead, christmas. but days afterwards as well. you are watching surveillance. ♪

katie: welcome back to bloomberg surveillance on this christmas eve. look at the markets with less than an hour to go until markets open. a holiday shortened session that the s&p 500 with a little bit of movement. we have been watching it hover around these levels all morning. but now, i think you can rounded up. scarlet: that is a legitimate .2%. katie: you could call that a bull market in the futures market for the s&p 500. take a look down at the bottom of the screen and fixed income is a little bit quieter especially in the currency

space. euro-dollar unchanged and we dip below 1.04 and then we are trading even. the 10-year treasury yield is up two or three basis points. we are above 4.60 with some bond auction -- bond options to look forward to. new york crude at $70 a barrel, not quite there but about .9% higher. let us talk about bitcoin, the spiritual opposite of the bond market and it is suffering its first weekly decline since donald trump's election win. scarlet: it is still up over 30% since the election with investors anticipating a positive crypto policy overall. "the u.s. regulatory frameworks for crypto have often lag behind those of other regions, we believe bipartisan momentum is building to create hilarity. a regulatory path forward is essential for regulatory firms

and investors to thrive." i hear what you are saying and i get the thesis that you will have clearer and more friendly crypto policy is, but so much good news is priced into bitcoin at the moment. are we setting ourselves up for the sell the news moment in 2025? raghu: thank you for having me. what we are hearing is that some of the momentum is priced in, but if you look at bitcoin, a lot of investors are beginning to view it as against the conventional economic policies and that is quite active and alive. that is one. we also achieved a lot in stablecoins and that helped in cross-border agreements. these things definitely we do have more momentum which is what we are hearing from our customers. katie: let us build on it as a

hedging get -- a hedge against inflation. gold has been hitting records in 2024 in the dollar is not going anywhere. the dollar is looking at its best year in quite a while and at least the best corner. you also have equities at record highs and you could make the case it is not so much of a hedge but correlated to the equity market. raghu: there is definitely correlation and there is no question about it. the thing that draws it differently from the congruent -- from the conventional markets is a notion it is a representation of the economy, which is all of crypto to start with and then eventually bitcoin to ethereum and some of the applications we are excited about. some believe and this is a subjective belief, that ai and tokenization could intersect with bitcoin. the piece is if you look at ai

it is a massively centralizing force and all of bitcoin is a good decentralizing counterpart. so these two economies coming together and technologies coming together could be impossible. i do not expect all of that to pan out in 2025 more in 2026. scarlet: i want to talk about price action of bitcoin. the momentum seems to be fading a bit at the end of the year. there is a lot of questions about what volumes might exist. we know that in equities and bonds there is thin trading. does that exist in crypto given that market and participants have exploded over the past year as bitcoin made new high after new high? raghu: absolutely. over the last six months we have seen the biggest names in finance coming into crypto.

we have done about $1 trillion of customer creating, so the bloomberg index is very strong. over the last weeks we have seen a pullback. it is really important to put this in context. in any bull market in 2017 we have seen at least six times the market pullback by about 10% and that is healthy. 2020 and 2021 it receded about eight times. the pullback of 10% for those people conducting on the first time is common. but, to your point the liquidity is definitely on the lower side given the holidays. if you look at the last two weeks and what we hear from investors is we have not seen much downside hedge, even before the pullback. after pullback what is interesting is that i still do not see downside. for that reason i think that the market itself is set up well.

scarlet: we really appreciate your time. that is the falconx ceo. let us get you to that trading bell -- or the trading diary ahead of the opening bell. it is a shortened holiday session with the u.s. equity market closing at 1:00 p.m. today. the bond market at 2:00 p.m.. tomorrow markets are closed for christmas and thursday it is the final round of u.s. weekly jobless claims for 2024. we have wholesale and retail inventories for november and another bond auction for the seven year. scarlet: the u.s. government needs to raise a lot of money. we have a lot of things to pay for. katie: that money will probably grow. thank you for sticking with me and scarlett. happy when you get there. this is bloomberg. ♪

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>> this is bloomberg surveillance with tom keene and paul sweeney. >> what do you say for people sc