>> as far as the stock market, i would say it is reasonably priced for another decent year. >> volatility is all over the >> place. in january come all the market moves in december get unwound. >> quicker -- we are going to a higher nominal gdp. >> we look at every type of indicator. >> good morning. welcome to bloomberg surveillance. jonathan and lisa are off and enjoying the holidays.

i am annmarie hordern. thank you for joining me. happy holidays. do you think we are going to get the santa rally at the moment? we went into christmas a little higher. peter: i think we are actually going to get off to a sloppy january. yields keep drifting higher. i am not sure what poles yields it back. you are seeing cryptocurrency move around and the realization is d.c. will have a lot of issues and it is very unclear how it will work out. annmarie: and also very low volume. peter: we have had some big up days and down days. the traders allow the leveraged etf's to take over and you get bigger swings than you would

otherwise. we will get the truth sentiment until january. annmarie: let's check and see what markets are doing. merry christmas and happy holidays to you. sb futures down .4%. we will be talking about all that happened in 2024. nasdaq softer alongside the russell 2000. we do have euro-dollar around 1.04. it came in at 1.10. yields are taking a higher. the 10 year yield at 4.6 percent. coming up, wendy schiller of brown university on president elect trump's few in the outlet for the u.s.-china relations.

and my interview with the lead mayors all in the summer. futures unchanged following a christmas eve rally. investors hoping the so-called "santa claus rally" will continue for the last four trading days of the year. since 1950, the s&p 500 has generated average and median returns of 1.3% during the santa claus period, why the outpacing seven-day gain of .3%. this comes from lpl financial. if you are willing to be in the markets around the holidays, good for you. peter: normally it has been but this year everyone is looking for the opportunity to buy. we had the dip post fomc and i think we have had a lot of santa rally and the stuff that went on with the budget. people have to digest what does it look like in the new year with president trump and musk and how is the economy going to shake out and that is maybe we get the santa rally but come

early january will get a lot of volatility. annmarie: so you think the market has baked up the good stuff with trump. peter: you go back to post election everyone was worried about taro's but then the consensus came it is just a negotiation point. he tends to like volatility and chaos and so the more it gets complacent the more he will up the ante. annmarie: what to think about sequencing. peter: as a get out there, he is going to be looking at what can be done. anything that can be done executive order, look for it to be done and then we are already seeing progress in terms of immigration. he has already started work with the new york city at mayor eric adams. when he doesn't get those winds you'll see it more chaotic. annmarie: what the market is really looking for a tax bill. when you start baking in the fact that this could actually become legislation? peter: you have to wait until

you see what people come back acting like. the budget was weird. there is clearly some element even in the republican party that they don't want to grow the deficit. you are seeing yields inch higher every day at least for the past few weeks. we have $12 trillion of debt that we have to refinance. you need the demand to be there but rolling into higher yields, that will have problems to the budget deficit. i think the budget deficit will take front and center and it will be more difficult than we would like to get the policies through. annmarie: nothing tells us in the last few days there won't be a lot of spending and that it will be altered. you are talking about what happened in terms of the debt ceiling debacle which sort of went silence once they pass the kleenex cr. peter: interest expense is a bit

-- big part of the deficit and it is growing and the bond market is very wary, how are we going to pay for all of these things. they are still looking at the oge -- at d oge and if they can get efficiency maybe we don't see the deficit balloon but everything else is telling us it is going higher and that is problematic. annmarie: do you see any fiscal hawks in washington, d.c.? peter: maybe the republicans who voted against the cr. it is all a matter of where they spend the tax cuts. doge seems to be where they eek out some of the deficit but i don't see it happening cleanly or quickly. annmarie: you also say there is hope of discipline but "the swamp seems well entrenched so i see upward pressure on bond yields." t. rowe price was talking about maybe 5% and some people are

talking about 6% on the 10 year yield. peter: 6% might be high. we would have to see some policies get implemented but 5% is realistic. we also might see inflation pressure come back again. when people were buying goods head of the potential tariffs you are seeing that in the economy going along reasonably well. it has been an artificial bias to the data pushing things higher than they really are in terms of jobs in inflation in january and february and that could spook the market. 6% seems high unless we get aggressive policy. annmarie: what do you think if we get 5% 10 year yields and the idea of u.s. exceptionalism? peter: the economy will struggle at that level. you are seeing small business default picking up. when you went to q2 you are job losses and rather than job gains in q2.

i'm not sure where we are managing to but i think the fed will be more cautious on rate cuts. we are susceptible to a yield to -- yield driven slowdown. annmarie: what does that mean for the equity market? peter: we could see pressure on the highest flyers. you now have single stock leveraged etf's. i don't know why they have been approved and you are seeing a lot of hype around that and a lot of hype around bitcoins that got 200,000 a couple of times in a back to 95. the froth in the market is where the liquidity will be taken out of and it will be aggressive and quick when it happens. annmarie: do you think there is a chance in 2020 five for broadening out or will the concentration remain in the mag seven. peter: it is going to how many fights does trump pick and who do we pitch with an array of winning them and what policy do we get.

with higher yields that will make it more and more difficult for it to broaden out. annmarie: when you say you think globally we could see pickups, where exactly? peter: i still wouldn't touch europe. i still think that is a disaster. so it is hard and what scares me about europe is germany has been the jargon and holding europe together but they are doing poorly now. i think sentiment has become so bad over there and excessive over here that you get the reversal. annmarie: because it is so low the entry point? peter: once everyone has given up on something, that tends to be where it doesn't take much to push that around and everyone is still focused mag seven over here that every time we try to rally small caps it has failed and i think everyone is looking for the small cap rally and may be the surprise will be europe

or some and does better but that could be the trade of the year were all of a sudden people say, let's give the world a chance. annmarie: the dax is up double digits and jonathan brings the point up all of the time in at the german economy is on its back. peter: most of the companies are big and global. i think that the s&p 500 a lot of it comes from overseas. mercedes is not really a german company per se and are dependent on global. it is hard and we look at these things and nationalize them when some of the big companies are global and why would they trade lower and some of it makes sense, telco and banks that don't have that potential but there is the opportunity for growth. annmarie: china overnight is apparently giving local officials leeway and how they

invest government bonds and we see them coming out and trying to stimulate the economy. is it enough for you to go there? peter: don't mind china as an investment. but i do think this is almost an existential movement for he and the communist party and i am a big believer that the whole strategy that they are taking brands and trying to solemn globally and get their brands out there and i think chinese companies might do well. sentiment has been awful since the brief flurry that everyone said we had to buy china and it just kind of reversed again. i think there is opportunity but i still think it is a trade and not investment. annmarie: let's get an update on stories we are watching. yahaira: alibaba agreeing to

merge itself with an e-commerce platform as it seeks to better compete in the online retail sector. the new entity could be valued at $4 billion and comes as alibaba has been seeking to expand the international footprint to make up for slower growth in chinese e-commerce. elon musk's deputy is going to be working for dolch in addition to davis' president of elon musk start out. he has helped elon musk with spacex. cleanup is underway under a crash site in kazakhstan. the aircraft was carrying 62

passengers to russia when it changed course to make an emergency landing in kazakhstan. that is your bloomberg brief. annmarie: up next, trump's feud over the panama canal continues. >> the fees being charged by panama are ridiculous, highly unfair, especially knowing the extraordinary generosity that has been bestowed it to panama. annmarie: the grievance list continues. that is coming up next. you are watching bloomberg surveillance. ♪ rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar.

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annmarie: good morning. welcome to bloomberg surveillance. merry christmas, happy holidays. we are seeing a little bit of a pullback on equity futures after the market going into christmas

on a higher note. euro-dollar 1.04. peter and i were talking about how the year at the start of 2024 was at 1.10. the 10 year yield, climbing to basis points, four point 6%. the trump feud over the panama canal continues. >> the fees being charged by panama are ridiculous, highly unfair, especially knowing the extraordinary generosity that has been bestowed to panama. i say very foolishly by the united states. this is a complete ripoff of our country and will immediately stop. it is going to stop. annmarie: president-elect trump naming kevin moreno cabrera as his pick for invest a lot of panama after he pushed the idea last week that the u.s. should control the panama canal. wendy schiller of the taubman

centers for american politics at brown university joins us. think you for joining us. happy holidays to you. we have a long list of grievances coming from president-elect trump before he gets into office. whether or not it is canada, mexico, china, greenland, and other panama canal. what do you make of all this? wendy: he did successfully renegotiate nafta in his eyes and the eyes of a lot of people trying to secure better terms for the united states in terms of trade and this is something presidents can do with executive order. to have a trade representative and have a lot of leeway in determining what our economic relationships are in terms of trade and user fees with foreign nations. there is a long history with the panama canal and so i am not sure how much the president will

look for victories and victories he can demonstrate using executive power and pretty much and running congress because he was president for four years and understands that even with the republican trifecta you will not always get the victories quickly or easily through congress so you will look to other venues and uses of presidential power to achieve quick victories. annmarie: china doesn't control the canal but has two of the main five ports adjacent to the canal. is that really what he is getting after? wendy: observers would like to believe that the president wants to strengthen the united states position vis-a-vis china and different ways. we know that china is investing in south america and africa and using its resources to gain leverage in those areas. that has been happening for a long time and the united states hasn't confronted it head on and these are many ways in which the trump administration looks to

conquer china beyond terrace in the places that china is trying to get a foothold. peter: what do you think are the top two or three days he could to on day one to set the agenda and get the tone going? wendy: issue some executive orders and could certainly raise tariffs under sort of national security and do those sorts of things and could certainly try to block issuance of visas or travel like he did with the muslim ban. a number of things presidents can do with executive orders on day one but it cannot get the ambassador cleared right away and that is up to the senate and it seems under john thune to want to observe the privilege and examine nominees. that may take a day or day and a half but they will still go through the process. all the ambassadors at cabinet levels have to go through the senate and that will take a while. so how much that frustrates president trump we will see. annmarie: what is the democrat

strategy for next year? wendy: that is a question i think the democrats are looking themselves for. it depends on which faction is the chief spokesperson against the incoming trump administration. we saw playbook on the budget will come not referring to president musk or quote president musk and they have concerns about non-elected presence on trump. with trump there is a little bit of a playbook but new actors with this kind of influence presents a challenge for the democrats and they are trying to drive a wedge between those influences, particularly between musk and the president. with musk it is much more out of their control. annmarie: we have a sitting president, joe biden but when it came to the potential debt

ceiling debacle of last week, he pretty much gave the spotlight to president trump. are you surprised by how much power joe biden is seating -- ceding? wendy: they do wantto set this up as a relationship between president trump and eight republican controlled house and senate. maybe things will settle down and the economy stays salad and maybe not. they want nothing to do with that. they want to start their campaign now against the trifecta. it is not a bad thing for president biden to sort of not to be involved. he is also doing things with executive power, things like clemency and trying to do all he can unilaterally and somewhat quietly before the new president takes over. right now the strategy is to say it is the republicans' government to run and to succeed

or fail. peter: what do you think the rest of the world will do in response to these? what will the world do to push back or will they do anything? wendy: you have to think about economic markets and military security and the security of europe. with the german government and france government shaky and even great britain's government shaky you start to have concerns about military incursion. you think about putin and ukraine and the instability in europe economically and militarily, that is a challenge that is unclear the trump administration is prepared for and we don't know what will they will make to steady the ship. the global economy will depend on setting that ship. those are the unforeseen external shocks that could come early in the trump administration. annmarie: trump definitely takes

a more bilateral view of the world where the biden administration had taken a multilaterally. if he used it bilaterally, who do you think will be his best partner in europe? wendy: that is an interesting question. i don't see any inclination from the prior trump administration of the rhetoric now that he is looking for a partner. he sort of wants putin to stay in his corner and maybe resolve ukraine. trump is trump and as we see in domestic and international politics, he is a loner and wants to insert influence where he can and be successful but not interesting -- interested in giving things to a partner. that is something different than we have seen from former president's. annmarie: when it comes to the sequencing of things like tax cuts, immigration policy, as well as tariffs, how do you expect all of this to play out in washington?

wendy: as you know, there is a difference between johnson & johnson noon on getting reconciliation going and getting an early version of the tax cut on the table and under consideration in both the house and senate. an early victory to extend the trump tax cuts, that would give the president a lot of momentum to focus on other things like border security. so border security he can do to some extent. if he invokes the military and trying to do border security that could create controversy and up and others like the tax bill. one thing the trump administration doesn't get yet is that these things are interrelated. if you ask somebody to make a politically difficult decision on one issue it will affect whether they will help you on another and that is something the republican leaders will however to management unclear how well trump will manage it. annmarie: best of the holidays to you. thank you for joining us.

peter, what do you make of that what the markets are picking up on? peter: yes, as she and you pointed out, everything has to be bilateral. there is a history in countries don't forget what you said six months or a year ago. a lot of that will go through. one thing i will say is we are looking at poland being one of the big beneficiaries. what they have done in terms of aid for you kane -- ukraine, that will be a key component of what develops with nato. poland will be a great growth opportunity for next year. annmarie: when it comes to panama canal and greenland, what are the general's telling you about what these mean in terms of china's influence? peter: you go back to greenland, and the original trump administration, he got in trouble for saying he should just buy greenland and then the panama canal fits into the broader story where we are increasingly worried about shipping and advising clients

that they want to think about shipping and have multiple shipping routes. we are highly susceptible. you have seen the panama canal have trouble because of water levels but also increasingly paying close attention. china has invested so much in the belt and rode into and have so much equipment in these various ports, people have to rethink shipping and take a serious look and not be comfortable that it will be there the way it is today in five years. annmarie: we look at another hot spot in ukraine. my interview with volodymyr zelenskyy over the summer. you are watching bloomberg surveillance. ♪ ♪ (♪♪)

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he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people.

annmarie: good morning. welcome to bloomberg surveillance on this day after christmas. happy holidays. we have equity markets pulling back, a touch softer when it comes to the s&p 500 futures and nasdaq features, down nearly .4% for the russell 2000 down. we should say it has been a bright spot for stocks this year. the s&p 500 closed more than 1% on tuesday going into christmas and extending this year's advance to 27%. most of europe was closed today for boxing day.

let's take a look at what is going on across assets. you have the bond board. yields rising, now the 10 year yield at three basis points, at 4.6 1% who we should note, we have jobless claims out in our survey has 200 23,000 claims penciled in. we also have an auction today. they are auctioning off $44 billion of seven-year notes. in the currency market, euro-dollar today around 1.04. i keep talking about how we entered 2024 with euro-dollar around 1.10. europe has been under pressure, ending the year with two political crises in the main economies. and the u.s. dollar it has been on an absolute tear. netflix christmas nfl debut went

off without a hitch. the streaming giant hosted two primetime games yesterday as well as a halftime show featuring beyonce. she rode in on a white horse and played music from her country album. i don't know if you watched any of this, but netflix has had a stunning year. it is up 90% on the stock, breathtaking in terms of how much it is growing but now getting into live events. the first one had a few glitches but this one seemed to didn't do well. peter: seemed to go well. i think everyone was watching and it seemed to go smoothly. i think it shows some potential. it is getting harder and harder to try to figure out how to watch an nfl game. annmarie: true, and i believe

netflix also has one next year and the following year. peter: the nfl has been expanding and it plays now thursday, friday, saturday, sunday, all over the networks. it feels like it is getting harder for a normal fan. it used to be easy. i don't know. i don't love it, to be honest. annmarie: it will be interesting to see from netflix how many signed up so that they could just watch the game or perhaps if they were interested in beyonce and they heard she was performing. also under surveillance, president elect donald trump doubling down the desire to purchase greenland. he wrote, merry christmas to the people of greenland which is needed by the united states for national security purposes and what the u.s. to be there, and

we will. the prime minister of women said they are not for sale and will never be for sale. you brought up a great point earlier. this is not just something the united states is trying to do. china has been trying to do this. peter: the airport has been underdeveloped. a lot of the natural resources are underdeveloped. it could be a great source of geothermal energy, sustainable energy and has been kind of ignored. we all fly over it going to europe and no one talks about it or does much about it. i think it should be developed and people have to figure out. denmark has been supported but very little in the way of support. china was trying to do more and they were involved in the airport and the marine area and energy. i think it is a huge opportunity. annmarie: this feels like vintage trump. he tried to do this once before. peter: i wish you would say invest in or cooperate rather than buy or take over. i think the same thing with canada and calling trudeau the governor. i think there are better ways to

do this. the principles are right and a lot of it makes sense and we should be doing this and beat much more developed and it can help in terms of progress for sustainable resources but we have to phrase it better possibly to get it done. annmarie: the russia missile attack against ukraine's power infrastructure sparked condemnation from world leaders. russia today is rebuffing president-elect trump of austria's call for an immediate cease-fire but said it is ready to have negotiations on a long-lasting peace deal. over the summer i met with president zelenskyy for an exclusive sit down where he detailed the state of the cease-fire talks that have remained elusive so far. president zelenskyy: about a cease-fire between ukraine and russia has been only if it is on some international forum and in

the president's of different country leaders -- presence of different country leaders. we all have to be on the state side and trust each other. trust is very important. it has been shown that we can follow this plan and today we are talking about nuclear and energy security and there will be a clear plan. so the cease-fire is a plan and we must understand that russia will not be using cease-fire to simply accumulate equipment on the territory they have occupied because we will not be striking them. they can use that to create and they will accuse of of breaking

the cease-fire and start another invasion. it is really complicated for us and would be a significant loss for us if they invade again as in the beginning of 2022 months and i reach the capital city and accumulated a lot of equipment on the territory of belarus and belarus cap saying it was just training and military games. that is very important. i really don't want to have this big trouble for my country because we are already giving the advantage to russia now and it is impossible. we need to be smart and it is important who will be responsible for this besides the ukrainians paying with their lives. which country will be responsible. it is easy to talk about a

cease-fire but very difficult to enforce it and keep it. it is very difficult to find those who will respond by the cease-fire. annmarie: we are going to see more calls for cease-fire as the work is potentially moving to the right in the united states could you have said the war is dependent on u.s. aid. did you watch the presidential debate between joe biden and former president donald trump? president zelenskyy: first and foremost the cease-fire is an important element in any plan to finish the war. so cease-fire is not finishing the war. we have been there, it would just be a frozen conflict and will be frozen on our territory and our people would be under the occupation and this gives a clear advantage to one side.

it is easy to offer different proposals of cease-fires. but what is important, it is important to find an answer of what would come after. it is a matter of not just the victory. there people talking about the cease-fire. but what is the next step? what is the third step. what could be the step in after the cease-fire. will they pull out troops and who guarantees who will pull troops out of the occupied territories. and there is silence. he has the answer. i am not accusing but i just want to explain.

annmarie: because the answer of how this might all unravel will depend on who is at the table for the united states. president zelenskyy: it might depend on who is the president of the u.s., yes, that is a fact because the united states of america today are probably the most powerful player. so the matter whether the united states will be the major international player and whether they want to focus more on their internal politics. i cannot say. it doesn't depend on me. annmarie: did you watch the debate? president zelenskyy: yes, i watched the debates. i would say, maybe out of tune to what we have seen in the u.s. media.

i watch but we are not electing the president of the u.s. so i didn't look at the incumbent president and former president. i looked at them in terms of ukraine. annmarie: president trump said he will end the war before he is elected. what do you make of that? president zelenskyy: let me be frank, for example, the decision is on the u.s. public but let me just tell some reasoning. let us imagine that the winner might be trump in november. and he knows how to end the war and has a plan. me as the president, i would like to be prepared.

we are a big country and we depend on the aid from the world and we depend on the age and position and the stance of the u.s.. i would like to understand what would it mean to finish the work fast. do we want the war to be over tomorrow? it is proven who started it. but if trump knows how to end this war, he should tell us today because if there are risks to ukraine's independence and risks that we will lose the statehood, we want to be prepared for this and want to understand whether in november we will have the powerful support of the u.s. or be all alone. annmarie: that was part of my interview with volodymyr zelenskyy over the summer. what do you make of the fact

that this is a hot conflict that will be passed on from the biden administration to the trump administration. and trump said he would end the war before he takes office and that is not going to happen but what are you thinking about? peter: i think trump doesn't necessarily back either side. i think he wants to find some sort of a deal. i think he views themselves -- himself as the teacher coming to the schoolyard. i think he will use a carrot and stick argument. there will be threats and cajoling. i think the fact that we have the russian frozen reserves and that will be part of his negotiation. i think that until the truths of for peace occurs, you will see an escalation in the conflict because most -- both sides are trying to negotiate the borders. the sad part of this is that is

why you are seeing the violence increase. annmarie: it is an escalate to de-escalate, potentially? peter: they want to lock in as they can going into this and both sides realize that ukraine, when we go through this from a military standpoint, it is difficult for ukraine to win and push the russians out permanently and on the other hand it is quite clear it is difficult for russia to take over and accomplish everything they wanted. at some point both of them must be looking for some way to claim victory and move on. annmarie: that is one story we will be watching deeply in 2025. let's get an update on stories elsewhere. yahaira: china's finance of the workforce is shrink for the first time in recent years for the financial sector lost 30 2% of staff while developers saw a 27% drop according -- lost 32%

of staff while developers saw a 27% drop. developers being pushed into default. showing willingness to hold talks on a long lasting peace. sergei lavrov said a cease-fire is a road to nowhere. trump had suggested he is open to meeting the russian counterpart to discuss ending the war. uber class just can -- planted by a chinese company it was ended. they said they were disappointed but plans to invest in taiwan is one of the world's fastest growing food delivery markets. the deal would have given uber and food panda a combined market share of over 90%. uber is not mentioned any plans to appeal the decision. japan airlines was forced to halt ticket sales earlier today and delay fights -- flights a cyberattack. ticket sales back up and running

after being halted as a result of the incident. the company said systems have been restored without any age of customer data and no damage, after american airlines suffered a technical glitch christmas eve. that is your bloomberg brief. annmarie: up next, a new chapter for the u.s. and china. >> if china or any other country makes us pay a 100% or 200 percent, we will make them pay it reciprocal. china thinks we are a stupid country. they can't believe that somebody finally got wise to them. annmarie: that is coming up next. you are watching bloomberg surveillance. ♪

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annmarie: good morning. thank you for joining us.

when it comes to santa claus rally, we are seeing a pullback with the s&p futures and nasdaq could you can see the s&p 500 futures are down .4%. we are seeing yields climb higher today on the 10 year yield. it is up three basis points. 4.62%. it seeing a little march higher on the yields into year end. a new chapter for the u.s. and china. >> if china or any other country makes us pay a 100% or 200% tariff or tax will make them pay a reciprocal of 100% for 200%. we will do tariffs and be reciprocal. china thinks we are a stupid

country, a very stupid country. they can't believe somebody finally got wise to them. annmarie: investor is bracing for a u.s.-china trade war with trump imposing tariffs beginning as early as inauguration day. one said the effect may not be so immediate writing trump can be convinced by has cabinet principles and musk to re-consider tariff agenda and the tier four isn't something investors will truly have to deal with to more or less early 2026. thank you so much for spending the morning with us. tell us why we have potentially an entire year before we have to take about tariffs. >> this is the market consensus and it is important to point out that investors have decided they don't have to worry about tariffs and a trade war until

2026. and i would caution that is not going to be the case. you have a team being assembled as we speak, the economic team being assembled and is still very much going to be making sure the president has what he needs in order to make big and bold pronouncements and threats and maybe even an ounce decisions as soon essie gets into office. markets are going to be rattled by the terror threat and the announcement of tariffs at least by the president himself earlier than they currently anticipate. annmarie: what kind of fiscal firepower do they had to retaliate against what trump plans on doing? shehza: they are trying to conserve as much dry powder as they can. the reality is if they want to double down and support the industrial sector, which is what they are gearing towards doing, the latest announcement about bond sales, one third of that

going directly toward supporting the manufacturing sector. they have quite a bit of capacity to continue doing so in making sure the chinese factories are able to produce and supply products on the global markets at very competitive prices, even after you account for tariffs. china is already low priced right now. peter: they seem to be addressing the production side but what are they doing to address the demand side? is that something they will have to do? shehza: the second developing consensus right now is there is going to be this big direct housing focused stimulus we will get in 2025. i remain quite skeptical of that. they are not as yet focusing on sustainably stimulating consumer demand. they have announced more subsidy plans and you can pull growth forward and get a boost but i think as we are seeing right

now, it is very limited and not sustained. the reality is we haven't heard anything at least as of yet from the chinese communist party about housing and consumer demand. it seems like the supply side is where their mind is at. peter: if the economy continues to remain weak and struggle, does this represent a threat to the president of china? shehza: they understand the chinese economy is slowing regardless of what is happening and will grow below 5%, even at years they will claim it will be 5%. it is not the growth slowdown that scares them as much as they want to make sure they make china a global manufacturing or rather industrial superpower and

they want to dominate high-tech manufacturing and they need to figure out a way to employ their people to make sure they are more concerned about the top rate growth. a lot of that is quite frankly the obsession about wall street more than xi. annmarie: can you give us an idea of how strong or weak the chinese consumer is right now? shehza: what we have seen happen this year is the chinese consumer has been performing better than expected and even at times we have seen a split between the spending on experiences or goods. what we are not getting is consumers just spending on everything. and the large scheme of things, consumer spending has been weak but it is not catastrophically so and certainly not a major crisis situation.

i think credit could have been given to chinese consumers more than they got. annmarie: thank you for your time. coming up next, sarah hunt of alpine sex and woods. and the former state spokesperson. peter, thank you for joining me. what is your advice? peter: every time you get complacent, look for the rogue pull. this is bloomberg. ♪

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>> as far as the stock market, i would say it's reasonably priced for another decent year. >> volatility is a little all over the place. >> what tends to happen in january as all of the market moves we have in december get completely unwound. >> we are going from a nominal regime shift to a higher position. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. annmarie: from new york city for

our audience worldwide, this is bloomberg surveillance. jon and lisa are off today. annmarie hordern, holding down the fort for you today. thank you, sarah, for joining me. merry christmas and happy holidays to you and your family. the rally having a little bit of a halt. not actually going on the day after christmas. the s&p 500 futures are down more than .3%. how difficult is this moment to price equity markets between christmas and new year's? sara: it is difficult but you have ansell or information that we got from the fed meeting and from the cr fight, which is how fast are we going to get some of the things we thought we were going to get into 2025? that took some wind out of the sails. the fed being more hawkish and concern over things can get done. that is going to be a challenging year to parse anyway more challenging.

annmarie: you think about how people were thinking about 2024 and how the year shaped out when you think about things like fed rate cuts. it didn't exactly pan out how investors were looking. sarah: people are expecting far more rate cuts at the beginning of the year. dana made people realize the rate cuts may not come as fast. the expectations haven't been correct. people worry about changing expectations, in the end, they have been wrong for the last two years. i think we are going to have to see, really, we got good pce data after the fed meeting that was slightly on the weaker side. i think that helps. it is going to be a scrutiny of each data point as they come out and people are going to be looking to how that works with what the fed's mindset is. annmarie: we get one data set at 8:30 a.m. eastern.

23,000 claims are penciled in, claims data does fluctuate around the holidays. as we've been saying, the santa rally isn't so much, not so mary this morning. s&p futures climbed back some gains that we made on tuesday, down .3%. the s&p 500 closed higher which extended this year's rally to 27%. euro-dollar, bang on, 1.04. we started the are around one point 10. the dollar has been on a tear and think seven difficult in the euro zone. we have yields climbing this morning, up 3.4 basis points. a 10 year yield of 4.62%. crude is a little firmer at $70 for new york crude. coming up, the former state department spokesperson with tensions in the middle east continuing through the holidays. jason of citi on the netflix first foray into football and highlights from the interview with janet yellen. we begin with stocks on track for the third straight year of gains even though we have futures clawing back a little

bit. sarah hunt says we expect potential volatility at the start of the year but a reasonably good trajectory for the economy and earnings in the united states. some of the measures discussed such as tariffs and deportations have an inflationary effect? it's possible, but the timing is not clear. the underlying strength and spending can be maintained and earnings can grow as projected, it may not be a lump of coal delivered in 2025. sarah is with us for the entire hour. how difficult at this moment is it to think about 2025? sarah: you have a lot of uncertainty. despite the fact that we have a new administration and they knew congress, their questions about what parts of the agenda will be implemented when, what are the abilities for some good things that markets and investors are expecting to happen, the timing on those. i think it's going to be a challenge as we get to the beginning of it to see where things are going to shake out and when.

the good news on equity markets as you have the quantum computing story to add to the ai story. that added a layer of story and equity markets like stories. especially in the u.s. that is good news, but you will have to see earnings come through. we are not trading on a low level or low pe multiple. if you don't see the earnings growth coming through, i think that will cause markets to struggle a little. but we expect to see some earnings growth come through. annmarie: our markets potentially pulling back now because of all of the questions going into 2025? the good stuff you mentioned about trump is already baked in. sarah: things got very lofty. you look at the chart and you see that there were strong moves. even if multiples come down for a lot of stocks they will still be expensive. it was a combination of, maybe we aren't going to get what we want as quick as we want it, but we had quite a big move towards the end of the year in november.

december got pulled forward into november, some of the movement higher in the market in november is leaving december a little slower. annmarie: everyone was talking about the end of 2025 broadening out around the trump trade. you think in 2025 we could see a broadening out? sarah: the economy has to do well. interest rates are part of that come the expectation on interest rates are part of that, but the truth is you need to see decent economic statistics for that to broaden out. it means the mid-cap and small-cap stocks are doing better and not just the big tech stocks doing well. it is pretty benign at the moment. if it stays that way i could i think you will see growth, but you have to see that from smaller stocks for that to work. annmarie: how much of an uphill climb is that when you have yields rising? even yields of this morning are on the rise. sarah: it depends. this comes back to balance sheets. if i think about what broadening out means, it also means for

smaller cap stocks with cash flow, if you don't have that rates are an issue. we've had rates at higher levels for a couple of years and it hasn't shaken out as much as people may have expected it to. it depends on where you sit, how your balance sheet looks. if you have a decent balance sheet, you should be able to see some growth and higher yields are less of an issue for you. annmarie: you mention things like quantum computing and ai. is one piece of advice to investors ignore d.c. and focus on these two stories? can you make money doing that? sarah: so far you been able to make money doing that, but there has been a lot of volatility, too. part of the volatility will continue in that group as it lacks is and wanes. the upside on the ai trade is other companies besides technology companies are talking about how they are benefiting. had that not been the case, i think you would've seen more

volatility this year. that gives you an earnings push for other companies outside the technology space and it means the adoption will continue and spending will continue. that is what drives a lot of this. you can ignore some of the things, but from a sector perspective, there will be other parts of what happens in washington is going to make a difference. now, the technology sector is in its own world. that is driving a positive effect for the equity market. annmarie: a sector that you've liked this year that is going to take cues from washington, d.c. is energy. you still like the energy space? sarah: i think what people are starting to realize is it hasn't necessarily come through in a lot of stocks, though you see the pipeline move higher. the legacy hydrocarbon usage isn't going to go away as fast as people expected, therefore you are going to see more investment in that industry where people thought that it was a dying industry. i don't think that's the case. the question is, how well can companies benefit from that? those are assets that are difficult to replicate, but you will see as natural gas prices

rise in europe, the lng trade and other parts do well in the u.s. i think that will become more interesting. also get decent yields in the multiples aren't as challenging. annmarie: do you think that an ushering in of the trump administration means more deregulation, means that there's room for these companies to grow and expand? sarah: i think it's less likely they will face problems that they would have potentially faced otherwise. whether or not that can be pulled out to a longer, better trajectory remains to be seen, but certainly some of the challenges are going to be less problematic. i think this is an administration that feels more strongly about the older energy situation than others. annmarie: what other sectors do you like going into next year? sarah: some of the industrials look good, but there are expensive stocks in that sector as well. i think you're looking at some of the areas that we didn't -- that aren't participating.

staples have come down a lot. that is an area that could be interesting because the cash flows are there but the growth is an enormous. some of the consumer stuff could be under pressure this year. we will see what happens with wages and employment.a lot of the questions on the economy will be, where do people spend? there is a lot of spending in experiences. that area is still doing well. looking at some of the travel companies, though stocks are doing well. there are areas we think will continue. you have to be careful and consumer discretionary. there are opportunities in places that are under-loved, like energy and materials, that are looking like they won't grow a son was the other sectors -- won't grow as some of the other sectors. i think the question is, is it going to be a bludgeon? is it going to be a soft tap? we don't know what will start from the beginning. we've heard a lot of things bandied about in terms of levels and everything else, but i think that it matters how high the levels are. if they are punitive, you will

see trouble in the spending, but if it is more of a stick and not a carrot that is less of a problem. it depends on how fast they are implemented, levels they are implemented at, and trade-offs to get them reduced if it comes in at a high level. people think that it will be high and stay there, it could be problematic for spending. annmarie: thank you for joining us. let's get an update on stories elsewhere. here is your bloomberg brief. yahaira: china's parliament ousted two military lawmakers without explanation, citing suspected violations of law and discipline. the move is seen as part of an ongoing anticorruption campaign in the military, which has been in full effect since last summer. president xi has focused efforts on consolidating his power over the military which included a reorganization of the armed forces and replacement of senior officials. huber's plan was rejected by the company's antitrust regulator.

uber is disappointed but plans to continue to invest in taiwan is one of the world's fastest-growing food delivery markets. the deal would have given them a combined market share of over 90%. uber hasn't mentioned plans to appeal the decision. a dead body was found in the wheel well of a united airlines aircraft according to the new york times. the death is under investigation and the person hasn't been identified according to local police department. the flight departed chicago on tuesday morning and landed in maui, hawaii in the afternoon local time. annmarie: the outlook for the middle east. >> i am optimistic that there are more to improve the middle east with the collapse of the axis of resistance. we need a strong team in the united states to provide assistance and guidance. annmarie: a lot of red

lines. that conversation is up next. you are watching bloomberg surveillance. ♪

annmarie: good morning, thank you. if you are joining us this morning. the santa rally is halted. the s&p 500 futures are little lower today. alongside as well the 10-year treasury yield climbing. it is up four basis points, 4.63%. euro-dollar now dipping below 1.04. we have seen the dollar on a tear in the euro crumble throughout this year. it started 2024 hovering at 1.10 and now it is at 1.0395.

a touch firmer on crude. the outlook for the middle east. >> i am optimistic that there are more opportunities for regional players to improve the middle east with iran, the collapse of iran's axis of resistance. at the same time, this requires an international effort to support those players. we need a strong team in the united states to provide assistance and guidance without pulling ourselves into this mess. annmarie: uncertainty in the middle east adding to uncertain geopolitical unrest alongside the israel-palestinian conflict, iranian proxies, and russia in the region. "president trump will deliver peace once again in the middle east, because he knows how to use both carrots and sticks to achieve outcomes."

morgan, happy holidays to you and your family. thank you for joining us. i want to pick up on what is going on in israel. we had benjamin netanyahu's office saying that hamas is backtracking on promises they agreed to as they try to have the cease-fire/hostage agreement. the two sides are talking and we had representatives from israel and qatar. you think we will see an agreement before president trump's inauguration on january 20? morgan: we need to. i think president and president-elect trump, both teams are working pretty aggressively on this happening. you've seen president trump make statements that the hostages better be returned or else. that goes back to his convention speech when he brought up the hostages. the middle east read large, there is almost always geopolitical risk there.

anytime i'm doing geopolitical conversations, i never skip over the middle east. you have to factor that in. whether you're looking to a possible peace agreement between saudi and israel or how in the world the u.s. helps influence syria, none of these pieces on the chess table move until, i think, you get the hostages home and a cease-fire in gaza. that is the catalyst for anything else happening. annmarie: we have seen steven witkoff, who trump named as one of his envoys coming in, go into the region. do you see a peaceful transfer in terms of relationships between the biden administration? and incoming trump officials? i do morgan:. i have known brett morgan: since my iraq days and 2007. brett actually worked in the first trump administration. when you look at jake sullivan and brett mcgurk and michael waltz and steve wood --

steven witkoff, it looks like they are coordinating together. nothing is or important to either administration then getting these three remaining americans who we believed still be alive, getting them home. you want the bodies of americans as well. that is one of the areas that you can see a bipartisan consensus and you can see people working together. of course, i also think that saudi and israel, its a high priority for both administrations to get some recognition and to get a peace deal. i think the reason it's so important, as we have seen iran's proxy empire falling apart across the middle east, there will be vacuums. we see turkey trying to fill the vacuum in syria, for example. as iran's proxy empire decreases come you need saudi arabia and israel to fill in that vacuum. sarah: it was going to be a question that i had. there is an opportunity but also concern that it could get worse

instead of better or worse before it gets better. how do we know who the players are and who the real power is behind the curtain at the moment because there's so much chaos in front of the curtain? do you feel there is a strong ability to understand who the better outcomes might be? morgan: it is always hard, right? you make such a great point. we all cheered whenever assad escaped into russia and his regime fell because of the civil war and hundreds of thousands of his own people that he massacred. as true with the middle east, the minute assad is gone you look at hts and others and think, maybe we didn't want former al qaeda elements governing the country as well. one thing we have to keep our eye on the ball, the one piece of iran's proxy empire that remains vigilant and active is the houthis in yemen. in the trump administration we

designated them a foreign terrorist organization. that was removed and a lesser designation was given by the biden regime. when you look at the houthis they have disrupted commercial and international trade in the region. we have seen them directly go after u.s. navy ships using ballistic missiles and advanced drones. we have seen some of them go all the way from yemen to israel, where they tried to hit u.s. diplomatic facilities and israel, and they continue to try to attack israel as well. to me, that is one thing that i think, when you look at action in the region, what is most immanent is between israel and the united states and the larger free world, you can't have a terrorist organization that shoots ballistic missiles, drones, and sophisticated weapons, and completely disrupts international trade. it is untenable that it's gone on since october 7 and must be

stopped. you are seeing more israel and u.s. strikes. i think that will have to be ramped up. it is the second obama administration we took them to take their foot off the gas when it related to the houthis because they have developed into one of the more sophisticated proxies that iran possesses. annmarie: you think trump is willing to do a deal with iran or is it going to back to an immediate maximum pressure campaign? morgan: great question. president trump said unequivocably in his first term that iran would not obtain a nuclear weapon on his watch. he will have to clarify if that is still his policy for his second term. i assume it will be. it is in a different place than it was four years ago. four years ago the regime of starved of cash. we know because of a lax enforcement of sanctions, the sanctions are still on the books but they haven't been enforced. i think coming back into the new

term, the trump team can go back into -- it's not actually even going back into max pressure because the sanctions are still there, it is just enforcing sanctions on the books. that is putting a genie back in the bottle. this is a massive diplomatic effort for us in the first term to get china, india, japan, you can go around the world, to get these countries to stop buying iranian oil. enforcing those sanctions is a lot of heavy diplomatic work.i think the trump administration will likely enforce the sanctions that are on the books. president trump have to look at a very difficult situation where iran -- they are basically a breakout now. by the way, the jcpoa is essentially expiring in 2025. this is a deal, we have the collective republicans and democrats in washington, have been arguing about for a decade now since president obama worked on this. most of the sunset provisions are there. at the u.n., there are

mechanisms that the u.n. and britain, germany, france, the united states can work on together relating to iranian sanctions. 2025 will be a difficult year for the iran portfolio because of the major provisions sunsetting in the jcpoa. what comes next is the million-dollar question, or maybe the billion dollar question. sarah: that goes to the problem of the who these -- of the houthis. if you can stop the funding or cut off the funding, how many assets do they have and what is the timeframe in between? if we get stronger sanctions, is there too much money there and that continues to let them be problematic? i think that is an issue not just for the u.s. but for everyone, because that trade and we will route is important for the entire world.

that might get others on board but it's hard to tell because there's so much going on. morgan: when you look at the effectiveness of sanctions, and this is an argument you've had many times on your show -- i started a treasury in 2008 working on sanctions. we know that sanctions are never meant to be the whole pie, just a piece. when you look at the houthis, if we implement sanctions on iran that are on the books, will that help us be able to decimate or downgrade part of iran's ability to fund these terror organizations? we have the shieh organizations in iraq as well. now the houthis in many ways have a vast network. we don't really have a u.s. diplomatic presence there. the west military would like to focus on china. you look at the incoming undersecretary for policy.

colby has been yelling for four years on twitter that we need to reprioritize and focus on asia. if you have a terrorist group shooting ballistic missiles at your u.s. navy ships, that means we are constantly using other resources to try to degrade the houthis. that means you are sending more of our supply, things we would theoretically be using in a china fight. it isn't going to be easy to downgrade the houthis. we will have to work with regional partners, and that probably means getting the gulf countries to deal with the houthis in addition to the israelis. annmarie: we will have to leave it there. thank you for joining us. morgan ortagus. this is surveillance. ♪ if your business needs a new application, then developers will have to write code.

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annmarie: welcome to bloomberg surveillance, the day after christmas. if your rights in that instead of the santa claus rally it is the santa pause rally, hahaha. the volumes you have to imagine our light -- are light. most people are at home enjoying holidays with their families, like jon and lisa, unlike me who is dedicated to their job meant here at the office. yields are climbing this morning, actually. we have the 10-year yield up more than three basis points, 4.62%.

you have a lot of big calls for next year when it comes to what is going on in the treasury market. everyone says yields potentially higher for longer when it comes to the fed, but also potentially we could see a 10-year yield according to t. rowe price as high as 5%, even 6%. and at some point, does that start to push back on some of these potential whole full trump policies of the incoming administration wanting to enact? a note for your calendar in your diary, jobless claims will be coming out at 8:30. our survey has 283,000 claims penciled in. data around the holiday tends to fluctuate. what is going on in terms of the currency space? the euro-dollar, it is getting cheaper to go to europe these days if you are an american. just below 1.04 this morning. coming into the year this currency pair was around 1.10. it has been tougher the euro zone and maybe it will get

rougher. kevin marino cabrera named esther u.s. ambassador to panama. he serves as the strict commissioner as miami-dade county and worked for the trump campaign in 2020. the announcement calling for the u.s. to regain control of the panama canal. he keeps coming out with these grievances.i think president trump thanks that it is festivus. grievances with panama, greenland, canada, china. these have a theme, china and their growing influence, especially in a place like panama. what matters in terms of policy for 2025? sarah: if you go back to his first term, there are things that have been brought up originally then as well. what it says is more of an outward-looking u.s. looking at areas that could be influenced and saying we don't want that influence there. if that is helpful or hurtful

remains to be seen. does that drive people form the u.s. -- from the u.s. or say the u.s. is paying attention and we have to coexist in a more friendly way? we don't know the answers yet, and that will depend on a variety of things. even talking about the strategic usefulness of some of those areas is different than what we have been living with for four years. those differences are going to have to eventually square themselves. we don't know yet. now, it is a lot of discussion. annmarie: one area that is preparing for the walls to go up with tariffs is the auto sector. according to estimates, china' a selector vehicle sales are expected to exceed traditional car sales in the country for the first time next year. sales of internal combustion engine cars are expected to fall by more than 10%. we are lucky to have sarah this morning because you just got back from china and you saw them everywhere, pervasive in the chinese economy. sarah: you have different colored license plates for ev

cars, green versus blue. i saw a lot of green license plates. a lot of them were on byd cars, which stands for build your dreams, which i didn't know until i went to china. they are encouraging ev purchases. you can drive more regularly. you have to drive every other day as opposed to driving every day. the cost of tax for your car are more expensive. an ev you can get a tag. if it is a non-ev, it is expensive to get attacked. there are incentives pushing towards the ev side. it's unclear where everyone is charging the cars. the cities are densely built. apparently there are a lot of basement charging stations. that is one issue for such a big place. how am i going to charge these cars? there's definitely incentives pushing people into electric cars. annmarie: how much faster is china moving? ev sales set to overtake traditional cars years ahead of what the united states, europe,

the west is trying to achieve. sarah: you look at an accelerated buildout like their highway system and people owning automobiles -- look at the history. the auto sales have been much higher than the last decade or two then historically. i think that you are in a position where you accelerated a lot of that. if you're going to incentivize to the extent that they are incentivizing it to own an ev, there's the question of, what is the level of sales versus the level of sales in the last few years? it's not a surprise because the incentives are so strong. annmarie: a byd strong is as low as $10,000. japan airlines was forced to halt ticket sales and delay flights due to a cyberattack this morning. ticket sales are up and running after being halted as a result of the incident. the company said that systems have been restored without any leakage of customer data and there is no virus damage. of course, this comes after

american airlines experienced a brief ground. on christmas eve due to a technical issue that it blamed on a third-party vendor. i think we need to get more used to this. sarah: unfortunately. it's one of the reasons the people had been going into and continuing to stay and -- stay in security stocks. there are vulnerabilities because a lot of systems are older and in many cases systems are working together for larger airlines. i think that the vulnerability is becoming more clear when things like this happen. as soon as i heard japan airlines i thought of the american airlines issue the other day. we heard about that because it was such a big travel day. there is definitely a need for people to be looking at this on a more regular basis. annmarie: nothing says christmas like flight delays. the ukraine war against russia shows no sign of stopping anytime soon. with russia launching a large-scale missile attack on ukraine's energy infrastructure yesterday. david gura sat down with janet yellen earlihiand

asked about the future of u.s. sanctions >> we have never prevd sanctions and we have been tightening sanctions on russia. our overall aim is to impair russia's ability to continue conducting this brutal war, to try to deny it the military equipment that it needs to be able to do that, and we have taken a variety of steps to do it. we have been focused since the outset on russian oil revenue. it is a critical component of the russian budget. we have been looking for creative ways to try to reduce russia's revenue. one of the most creative policy-making things i have been involved in during my career occurred here in treasury when

we were able to devise a way and convince our allies to join us in imposing a price cap on russian oil, which was a way of avoiding price spikes when the war started for oil and succeeded in keeping russian oil flowing into the market. we continue to of course look over time, will the sanctions have been effective? russia has invested a lot of its own fleet of ships to carry its own oil. we cut it off from allied ships. it is costly to russia to have to make those investments. what is unusual about this moment is that the oil market seems to be well-supplied.

prices are relatively low. global demand is down. there has been an increase in supply. american firms have stepped up. we have vastly expanded oil production. opec countries, like saudi arabia, have excess capacity at this time. the global oil market is softer. that creates possibly an opportunity to take some further action. david: you talked about creative policymaking and visa the ukraine. there is a moment when you disburse $20 billion to ukraine alone to be paid for with interest on frozen russian assets. another creative piece of policymaking you been involved in. we are at the moment where there is a lot of questions about what policies can remain in place. when you look at that in particular, are you confident that under a new administration that program can continue in

perpetuity? sec. yellen: well, if you're talking about the so-called e.r.a. loans, an extraordinary acceleration loans, we have now transferred $20 billion, which is the united states' contribution to this loan package to the world bank, to a financial intermediary fund that was set up to channel these moneys over time in coordination with our allies to ukraine as needed. as you mentioned, importantly, this isn't using u.s. taxpayer resources. these loans will be paid off over time and play the windfall revenues that are being earned in europe on the russian assets

that are being frozen there. russia is really helping with this to pay ukraine to, you know, help it fight the war. i feel confident that this is something that can stay in place. what we are really trying to do is strengthen ukraine's situation, ability to defend itself, and hopefully at some point to come to the table to bargain with russia for a just peace. we want to strengthen its ability to have the equipment it needs, to have the money it needs to continue to finance schooling and emergency services to its people, and to put it in the best possible situation to support a lasting and just

peace. annmarie: david gura speaking with sec. janet yellen. part of the conversation was about maybe more sanctions on russian crude. i and some colleagues in d.c. had reporting that before biden leaves office they may go after russian crude outright. could this be a premium added to the oil prices? sarah: anything where people talk about getting more serious can have a short-term effect. what we found collectively as the oil is a fundable good. intends to move anyway because it is a high-value cargo. if there is a stricter regime you may see a move in the price in the short-term, but you have opec basically holding back oil production because there hasn't been that much of a shortage that people were looking for because of the combination of sanctions and people thought the

demand would be higher. there is a little tension going on. i think you need a higher demand picture before that happens. annmarie: saudi arabia, uae would be excited to fill some of those gaps. let's get an update on stories we are watching elsewhere. here is your bloomberg brief. yahaira: turkey is lowering interest rates for the first time in almost two years by 250 basis points after consumer inflation showed some signs of easing. the central bank's decision was unexpected by some analysts who were divided on the size of the cut or didn't expect one until next year. the median forecast in a bloomberg survey of analysts saw a cut of 175 basis points. shares of toyota rallied for their biggest to-day advance since august. analysts expect the carmaker to promote a higher return on equity following reports the firm is planning to double its target. 6% in tokyo after a double-digit two-day climb. kansas city celebrating

christmas by locking up the afc top playoff seed, star quarterback patrick mahomes threw three touchdown passes to score a 29-10 victory over the steelers. coach reed stunned the locker room with a santa outfit to celebrate their christmas win. annmarie: you and i should have celebrated surveillance this morning with santa claus outfits. when it comes to the nfl and netflix, the atlantic just put out that after netflix agreed to pay 150 million dollars to broadcast two nfl games on christmas, $50 million more than producing a season of game of thrones for two games. that is what we will talk about next. netflix's push for streaming dominance. >> looking into 2025, we are feeling good about the business. we had a plan to re-accelerate growth and delivered on that plan. annmarie: that is next.

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annmarie: good morning, welcome to bloomberg surveillance on this holiday week. i am annmarie hordern. jon and lisa are still off. futures are softer. the santa pause rally. not the santa claus rally. although, we still have a few days left for the end of the year, so potentially it can turn around. the s&p 500 is up more than 20% on the year. euro-dollar one point 03. yields are climbing, of four basis points. the 10 year yield 1.62% new york crude firmer, $70.52. netflix's push for streaming dominance. >> let's start with looking into

2025. we are feeling good about the business. we had a plan to reaccelerate growth and delivered on that plan. you can see that in our 2024 financials. expected to deliver 15% revenue growth and 6% operating margin improvement.engagement , which we view as our best proxy for membership happiness, because when people watch more they stick around longer, that's retention. annmarie: netflix's christmas day nfl debut going off without a hitch highlighted by a beyonce halftime performance. a mutual rating on netflix noting, ad tier optimism seems priced in. they did well when it comes to the nfl yesterday, no massive glitches even though that i heard the games were not that excited. beyonce got everyone excited. do you think that we will see more of this style from netflix, diving deeper into live events?

jason: 100%. i will give you simple metrics to frame it. netflix, the consumer pays half a cent a minute today. on the linear side you pay about one penny a minute. advertising revenue netflix will generate off of these games is probably one penny a minute. if i go to the super bowl, two cents per minute of ad revenue. they are moving up the value chain in where consumers derive more utility. they will keep moving in this direction. annmarie: why do you have a neutral rating? jason: my gosh, this stock is up almost 100% this year. 90%. i can explain half of it. they had upwards earnings revisions worth about 20% this year. this rolled forward estimates worth another 25%.

the balance at another 40-ish percent i can't explain. there is nothing fundamental and the results that transpire that warrant that sort of multiple expansion. the street, if you talk to the buy side they were penciling in 25 times eps and now are at 30 times. could the multiple go to 35 times, it could, but we aren't seeing anything that is fundamentally that different that would warrant a higher multiple other than market euphoria. sarah: is this one of the situations where the aspect of what netflix does as in we are dominant in this space, people are paying for the exclusivity that netflix is? you look at multiples across a variety of areas and you think there is real strength. even if they came down a few terms, they wouldn't be cheap.as

some of the giant tech guys get bigger, they become, i am the one in the space. you see it with amazon. is it, i am paying for that exclusivity and make a tech is winning versus there something specific going on with netflix and their cash narrative when they work for a long time and there is growth there? it seems outsized relative to the actual fundamentals. jason: yeah, the buy side has a winner takes most and most of these names. that is affecting netflix's multiple. the thing that is strange to me is that was true in 2021, 2020 2, 2020 3, 2024, and will be true still in 20 25, but nothing fundamentally widened the gap between netflix as the leader and the rest of the industry. i would argue that a lot of their streaming peers have begun to turn the corner and generate profits. not the quantum that netflix has, but if anything the gap has tightened a bit. sarah: when you see youtube raising prices in areas where it

is becoming more expensive, we will liberate ourselves from cable and will be cheaper, and now all of the individual pieces are getting expensive again. does that put netflix in a better space because people start to pare things down it's not necessarily going to be the first thing to go? and watching rivals up prices dramatically, does that help them when they are upping their prices as they go along? this which is different and the password sharing deletions were different, and none have other areas where they can raise prices. jason: if you talk to the bulls they would say that netflix is still cheap relative to linear. that is undeniably true. the bulls also say, look at the other streamers. they raised prices. netflix raised prices as well. if you ask management about either of those prongs, they shake their head and say that's not how we look at it. netflix looks at it in

engagement. if engagement is up, they feel they've earned the right to raise prices. that is why they are pushing into sports. their engagement levels, their share of streaming has been flat over 18 months even as the quantum of content continues to go up. what is sports designed to do? pursue a different vector where the content cost per hour is more expensive, but the consumer response in terms of engagement will be deeper. annmarie: it is more expensive. the athletic posted that netflix agreed to pay 150 million dollars to broadcast two nfl games on christmas, $50 million more than producing a season of game of thrones. for just two games. is it worth the money? jason: it is because consumers value sports more than scripted content. i used to go on tv years ago when pay-tv bills were rising

and the narrative was it is sports, espn's fault. i would say, you have it backwards. the thing that is underpriced was sports. sports was not expensive enough. sports caused consumers to pay hundreds of dollars a month for pay-tv, not the other stuff. our preferred way to think about netflix's push into sports is isn't to buy netflix, it is the sports leagues. that is where the value will accrue. rights will. continue togo up . annmarie: merry christmas to you and your family. a stunning year when it comes to netflix, sarah. i am struck by this factoid we could have produced another season of game of thrones and have money left over. as we end the hour i would love to get your thoughts for a piece of advice going into 2025.

sarah: be braced for volatility and understand you had two great years of equity performance and are going to see some volatility and that's not the end of the world. we need a little of some moderation on the valuation front before people get really excited, but at the same time they are still good growth and real performance to be had in equities eventually, but don't be afraid if you see a little bit of walking th -- wonki ness. annmarie: sounds like glass half full. you are watching bloomberg surveillance on this shortened holiday week. thank you for spending your morning with us. one more hour of bloomberg surveillance, including jobless claims, coming up at 8:30. ♪

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

>> as far as the stock market, i would say that it's reasonably priced. >> there has been a lot of video -- of idiosyncratic risk.

volatility is all over the place. >> a lot of the market moves for december could be completely unwound. >> we're going to a higher nominal gdp condition. >> we look at a broad measure of every type of indicator. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. annmarie: good morning, welcome to bloomberg surveillance, the final week of 2024, the day after christmas. thank you for spending it with me, annmarie hordern. jon and lisa are still off. joining me is jay polonsky. you have been with us on big moments of 2024. as we round out this year, what you make of it all? jay: it has been a great year for an investor. the s&p up 28%. who can complain? now, we are changing governments, we are starting to look abroad. our view is we are early in what we call the long cycle. you have a global bull market in

equities, global growth cycle, they are complementary and reinforce each other through the earning cycle. for us, we are looking at opportunities outside of the u.s. we think we will shift, the equity market will broaden out, global growth will broaden out and the opportunity set is more attractive, more attractively valued, under-owned, up cycle in growth, in earnings, in non-us markets. we are thinking of shifting from u.s., which has been the leader, to non-us markets. annmarie: hold those thoughts. the s&p 500 has had a fantastic year come up more than 25%. futures this morning on this thursday morning are pulling back. we are seeing red across the future screen. s&p 500 futures down .3%. euro-dollar and 1.04. i keep coming back that we started the year with euro-dollar around 1.10. you've seen the u.s. dollar on

an absolute terror, but also a lot of problems happening now in europe. yields climbing up more than three basis points. t. rowe price is looking for something like five, even 6% in 2025. new york crude is firmer more than $70 a barrel on nymex crude. coming up, andrew ovin on the outlook for industrials, reacting to the final jobless claims data of the year coming up in 30 minutes, and redfin economics on the state of the housing market going into next year. we begin with stocks on track for their second straight year of 20% plus gains. jay polonsky is bullish going into the new year's saying, we continue to expect a single digit-type upside for u.s. equities next year, but we think that there is a reasonable chance that at the same time investor concerns of a likely

policy chaos in d.c. could lead to investor outflows from heavily over-owned u.s. assets is altering an u.s. weakness which would further support commodities and em assets. jay will join us for the next 60 minutes. it sounds like what you are saying is almost 2024 was the peak when it comes to u.s. exceptionalism? jay: it could be. the u.s. has led. one of them was election night when we talked about the great economic story of the biden administration didn't translate politically. clearly come the u.s. is the global growth leader, best performer on inflation. yet, we are looking at a situation where we think that there is uncertainty in the u.s. with the new administration. the rest of the world is responding. we are in, we touched at the top of the long cycle, it is being driven by competition within our try polar world thesis of

regional competition between asia, europe, the americas in the three areas of climate, ai, and defense. that requires a new industrial policy. we are talking about the marriage of fiscal and monetary policy. it has to be done well. you have to start putting a premium on policymakers and their ability to be in alignment with public and private sector. we see that in china. you were talking earlier about ev's. china led the way in the climate space and now dominate the entire space. now, the fight is in ai and people are throwing money at this. every government, every company in the world needs to compete in ai. these investments are too big for anyone company which is why governments have to be involved, why we have fiscal spending. you have to do it well. if you don't, the markets rebel, as we see in brazil. the currency collapsing, the rates skyrocketing, equities

underperforming. really, there is a competition. we think that we are shifting now where the rest of the world has to respond. you have deflation in china, stagnation in europe, and so we are seeing policy mixes responding to those issues and we see president-elect trump as an accelerator. he is threatening tariffs on everybody, china in particular. if they don't start to drive domestic consumption, they are more at risk to being held hostage by the u.s. so, they are responding. one of the great unknowns, talking about the u.s. and the s&p, china is outperforming the u.s. fxi is up 29% year-to-date, outperforming the s&p. nobody talks about that. that is the reality. it is already starting to happen. our view is that year three in a bull market, which is what we are in in the u.s. and globally,

tends to be a rest. single-digit returns are average. as we see global growth picking up outside of the u.s., we think that we will see earnings do better outside the u.s. than in the u.s. that is new, particularly in emerging markets. investors can take profits in the u.s., particularly if there is uncertainty with the trump administration, and allocate to non-us markets, which are completely under-owned at 50-year lows in relative valuation, starting to pick up earnings growth, starting to do the right policy mix. that is the opportunity. take money off the table in the u.s., move it into non-us markets, and commodities as well. there is the pause. single-digit earnings wrote this what we are driving with single-digit return expectation. non-us markets can go up 15%, 18%. earnings growth, economic

growth, investor start allocate, there you go. annmarie: let's look at china. the equity market is doing well, but the economy is still struggling, don't you think? jay: 5% growth. annmarie: non-consumer demand isn't really there. do you think at some point china will come out with the bigger bazooka when it comes to fiscal demand? jay: what is in a price? the china stimulus, they are taking out the left tail risk. they told you months ago that they aren't going to let the equity market go down. guess what. they have the ability to do that, so they are doing it. as an investor, single-digit pe, what china trades on, when you look at the government saying we are going to stimulate the economy, when you look at the tech stuff -- the u.s. is trying to freeze china out of high-end tech so that it can lead in ai.

that is the game. we look at that as an opportunity to abide china tech which is going to dominate the china e-commerce market, which is much bigger than the u.s. and is growing much faster than the u.s. the companies that dominate them are trading at like a 60% discount to the u.s. peer group. we are long china tech, because we think that is where the opportunity is. as we said before, china knows that it has to act because it is struggling with deflation. the property sector has been a big problem. it is bottoming. the data is finally starting to show that property is picking up a little and china. now we have a situation where they are threatened by president trump exports. they are an export-let economy. they need to switch that to domestic demand focus. stimulus, stimulus, stimulus. not a huge bazooka. we don't expect that.

but, stimulus, stimulus stimulus. more stimulus in the spring. growing at 5%. earnings growth needs to pick up. earnings growth has been disappointing in china, but we think it will pick up. as it does, stocks are completely under-owned. nobody owns china. i can't remember which firm, but i think there was a list of 15 major banks and not a single one thought that china growth would be better in 2025 than 2024. i love that. when everyone is thinking one thing, we like to go the other way. annmarie: we talked about china. you have the idea that they will have domestic consumption boosted. at the same time, many say with the walls going up around the united states, they dumped more on europe. can europe handle that?

jay: europe is a challenge. they have china leading because they are best at marrying industrial policy, fiscal and monetary, public and private. they have shown that with the climate space. the u.s. responds with the chip act, infrastructure act, i all right act, and now we are in the game with the best growth in the g7. where is europe? europe has to respond. they know it. there is report after report. they know what they have to do. it is a matter of political will. i think you will see that political logjam break this spring in germany. germany is the engine in europe and it has been going nowhere for years. in part because germany has not gone down the fiscal stimulus route that pretty much every other major economy has. they have the famous debt rate. very strict on how much debt they can issue. guess what. they now understand that they have to fudge at a little bit and stimulate to get their economy to pick up.

they like china are very export dependent. there export dependency is on china, so china's weak consumption hurts germany. we expect in the upcoming election, the government has failed, we wrote a piece last week called vote of no-confidence, because there are so many no-confidence votes. germany had one. government expected in the spring to be led by the more conservative side of the german political space. we think that they are going to lead the talk about easing on the debt break. we expect fiscal stimulus in germany next year and europe more broadly. we think that that is going to help attract capital. annmarie: help -- how behind with a potentially be? donald trump would be inaugurated on january 20 and he has a different view on europe than the biden administration. jay: i think that the tariffs are overstated. let's go back to germany.

the auto companies. that is the leading edge of european manufacturing. they are getting their heads handed to them around the world, but especially in china. they understand that they have to act and are going to act. on the tariff side, i think that the markets are telling you that for the most part it is already in the price. trump came out 25% on mexico and canada. annmarie: he already negotiated. jay: here is the thing. it isn't the news, it is the reaction to the news that counts. you look at the reaction to the markets, there is no reaction. the peso is higher, china stocks are higher, europe, no action. i think that the tariffs for the most part are in the price. annmarie: you will be sticking with us for the next 60 minutes. jay. let's get your stories on bloomberg brief. yahaira: president-elect donald

trump has tapped miami-dade county commissioner kevin moreno cabrera as the ambassador to panama. he worked for the trump 2020 presidential election and won trump's endorsement when he ran for vice-chairman of the republican party in january. he has his work cut out for him as trump calls for the u.s. to regain control over the panama canal. bitcoin reversing earlier gains though it is up on the month after the digital asset microstrategy announced plans to issue more shares in a move that would allow it to buy more tokens. but microstrategy raised some eyebrows earlier in the week when it announced that it purchased more bitcoin but it was its smallest purchase to date at a high price, which is unusual for the company known to strategically buy the token on the dip. elon musk's deputy is helping recruit staff for president-elect's doge, in

addition to his job as the president of the musk tunneling company. he helped musk cut costs at spacex and x. annmarie: next, sticking with president-elect trump and preparing for trump's tariffs. >> what you see is a pull forward. people are getting goods in before a potential strike or tariffs. annmarie: that conversation is next. you are watching bloomberg surveillance. ♪

annmarie: good morning, welcome to bloomberg surveillance, the final week of 2024. we are seeing markets pull back slightly, softer on s&p 500 futures, but an incredible year with the s&p 500 up more than 25% this year.

your-dollar around 1.04. yields climbing of more than four basis points on the 10-year. or .62%. under surveillance this morning, preparing for trump's tariffs. >> what you are seeing is a pull forwards, taking share from the future that people are trying to get in goods before a potential strike or tariffs, if you are concerned about those things, which you should be. if you have the option and flexibility in your supply chain you want to get goods in as soon as possible to avoid disruption. the uncertainty is what is going to hit, how is it going to hit, when is it going to hit? annmarie: proposing tariffs on canada, mexico, and the european union resulting in more questions than answers about how his administration will implement them and how fast. "overall, tariffs are likely manageable for

multi-industrials. tht si we believe tariffs would be a negative headline for our stocks and there is a potential for a price/cost air pocket." thank you, andrew, for joining us. andrew: roughly 20% of cogs for industrials are imported goods. as you start putting in tariffs, you have to price for them. how long does it take for the pricing to go through? last time was interesting. stocks actually went down on negative headlines in 18 and 19, but those were china-oriented. another 10% on 300 billion in 2019. if you track the stock reactions on that day, if you traded that basket, i think the accumulated basis stocks underperformed on the days that the tariffs had been announced. this time, it doesn't seem like the market cares too much. annmarie: why is the market brushing it off?

andrew: i think it is complacency. i think that longer-term what people saw last time is that the companies were able to implement price increases to offset that. if you think about 20% of cogs takes 1.3 percentage points of price to offset that and 1.6 percentage point of price for you do not see it in the margin , what we learned is inflationary companies are better at inputting pricing. people think that companies have developed a pricing muscle to put that in. jay: is there one part of the world that is better positioned to deal with tariffs? is china or europe better prepared? do you think that everyone is equally unprepared? andrew: it is more about investors. you sort of think that tariffs don't matter. you talk to them, and they source trucks from mexico and

canada. this is like real, operational stuff. they have no clue what will happen the day that the tariffs ago in. the market is missing the actual disruption when that happens. yes, they will put in pricing, but you talk to the executives and they are at a loss as to what is going to happen the day of the tariffs. they have to manage in the real world. for these numbers to show up, for the pricing to show up, that quarter, quarter later, actions have to be taken. then there are supply chain disruptions. it is the nuts and bolts of tackling whatever disruptions there are if there are in fact tariffs put in place. jay: i expressed a view that i think that markets have priced in the tariffs. i am on a different wavelength. your view was interesting. andrew: we surveyed investor sentiment and nobody cares about tariffs. i think that it's very fair.

investors are very complacent about tariffs. that's part of the concern. i think that they are manageable. i think you'll take one to two quarters to fully offset tariffs with pricing.we are in an inflationary environment. companies have gotten better at putting in pricing. what happens when you miss numbers on tariffs? jay: you talked about your basket and what happens, the underperformed if you bought that day. i'm curious, if you did work on 3, 6, nine months later, was not a buying opportunity? -- was that a buying opportunity? andrew: the background is we have the best capex cycle probably in 20 years. tariffs is part of the policy. we finally have an industrial policy. we are not going to de -industrialize.

from that perspective, it is fair that investors are taking the view, this is part of this much broader thesis. if you look between 2007-2019, u.s. capex has grown 3%. part of it is inflation, but obviously we report numbers, earnings with inflation, so that matters. we probably will end 2024 with 9% capex growth and 2025 will be a number year i single-digit growth. tariffs are disruptive, but they are driving this massive structural change in capex in north america driven by semis. what is interesting is it is dragging along with it a huge part of the supply chain. annmarie: do have a timeframe on when we could see the sanctions, the tariffs? andrew: i honestly don't. you don't know what will happen

after january 20. annmarie: companies are struggling to prepare? andrew: it is exactly right. going back to the example of the distributor, they source trucks from mexico and canada, what happens the day of? they have to go to their customers because they have agreements signed. they have to go to their customers and explain what happens. i think that management's are more ready. we had it in tree with the ceo and asked, how long will it take you to put on tariffs? he said i will put in pricing on day one to fully offset and i won't apologize. we are coming off of this highly inflationary environment where companies have developed this pricing muscle which was not there in 2018-2019 at the end of the big deflationary cycle. annmarie: 2024 talking about secular themes like electrical, data centers, grid. what do you expect going into

2025? andrew: pmi's have been down for two years. there are technical and definitional reasons why they have been down. it doesn't reflect how weak the industrial economy is but if you have pmi over 50 if we do not have a recession and pmi goes over 50, since the 1960's the average outperformance has been 9%, outperformance has been 20% plus. investors are waiting for the pmi to turn over 50. i think that that's probably the biggest theme into 2025. we expect that to happen sometime in april. having said that i would say that the grid story is probably the biggest -- having said that, the grid story is probably the biggest over the next decade. decades of underinvestment in the confluence of shorting and tariffs. you have electrification, you

have ev's, you have data centers. all of this comes together. to us, the grid epitomizes the confluence of all of these mega trends that you talk about and you have visibility for the next decade. the last time that we invested in the grid was in the 1960's and 1970's. it is falling apart. annmarie: thank you for your time. interesting stuff. saying that investors may be complacent when it comes to the upcoming potential tariffs. next, the final u.s. jobless claims print of the year. and breaking down data for us. you are watching bloomberg surveillance. ♪ as energy demand continues to rise, we're harnessing breakthrough innovations to increase production in the u.s. gulf of mexico. our latest deepwater development, anchor, produces previously inaccessible oil and natural gas, allowing us to deliver the energy we all need today

so everyone can follow their own road. that's energy in progress. ♪ ♪ ♪ something has changed within me ♪

♪ it's time to try defying gravity ♪ ♪ ♪

>> good morning and welcome to bloomberg surveillance. about 20 seconds away from the final u.s. jobless claims data of the year. we are softer on the day. last week of trading for 2024. sue went christmas with a high, s&p 500 at more than 1%. now we are pulling back 3/10 of 1%. not a ton of drama as jonathan ferro would say on this thursday morning. what we are seeing across yields, yields are climbing this morning. 4.6% on the 10 year yield, up more than three basis points,

and we are seeing softer weakness on the euro-dollar. absolute insatiable demand for the u.s. dollar. we had claims data job, initial jobless claims coming at 219k. the survery was for 223 so this is coming in later than expected. the prior month was 220k. we should remind you claims data does tend to fluctuate especially around the holidays and you do csv futures still negative around three tens of percent. joining us now is the chief economist at rsm. joe, your first reaction to initial jobless claims, the final print for jobless claims of the year coming in at 219,000. joe: good morning and happy holidays, everybody.

what we are seeing is a continuation of holiday noise. this time of the year what i tends to do is look at the average with just about 220. my sense is that the u.s. economy continues to do well and firms carefully manage their labor force because heading into next year, we do have not risk to the downside. we don't think there is much risk of recession, we actually think the economy can outperform again, leaving acceleration higher. we expect more of the same entering 2025. annmarie: when you look at the labor market, do you think the leverage is with the employer or the employee? joe: i think it is pretty balanced right now. it is no longer heavily tilted in favor of the we like during the pandemic or in the initial recovery phase. my sense is that those days of

very heavy wage increases are behind us. we are really going to see 3.5-4% on a sustained basis. if you're managing a firm out there in the real economy, do you expect wage gains to reset to a three pandemic level? i suggest you might want to revisit those assumptions that i just don't think that is where we are going to be for seal of future. >> you talk about 3% growth which is well above potential. are you worried about inflation next year? >> are baseline the 65% of the economy at 2.5%. we are thinking about that alternative baseline at 3% or your pace. at that point, i would be concerned about acceleration in lesion, not just because of the underlying fundamentals but because of the policy adjustment that is going to go on in

washington that is going to be some of the mean variables for next year. >> thinking about that, do you have a 10 year yield forecast? i'm curious what you think about the rates if you do get that inflation. joe: for 2024 the forecast was or .2 on average. just before the show i look at the average of 4.19. we are very competent in the forecast for 2025. we thought we would average 4.5% with risk 5% or higher. without the 10 yearly trade somewhere between 4.3 and 4.7. we are tentatively moving toward conditions and the fixed income market. thin holiday trading conditions tend to cause things to melt up and we've seen stockmarket melts over the past couple weeks and we've seen yields melt up. i don't necessarily think that is sustainable.

i understand there is considerable uncertainty ever have fish and talking about uncertainty tax on income. you're going to see that for -- 4.5% more or less next year. he opened the door, i've got to walk through. should move to 5% or higher? around are very optimistic forecast on growth, we do think that there's going to be some problems. she deals on the 10-year move above 5% specifically and local and regional banks are holding a disproportionate percentage around 70%, some of those are simply just not performing right now. that's going to be one of the issues. and remember, the last time we were above 4% the fed had to step in and set up a liquidity

facility. it would be better if we didn't have that. annmarie: do you think the 10 year yield, if it wants to trade me that 5% level yet again, will that be the ultimate check on some of the fiscal policies coming out of washington? joe: that is certainly going to be the discussion, that the bond market in the last check on expansionary fiscal policy. one of the things that has not yet been fully talked about to my satisfaction is the internal contradictions inside economic populist practiced here in washington. we are going to see tax cuts. we are likely to see increase in government spending. most of it is government-financed. so you are going to see increased spending, you're going to see the stronger dollar is going to attract capital. but that is not going to rebalance the economy. the bond market will make a reassessment of the administration once we get that

first set of concrete policy proposals. we are all basically inking about this, but until you can see the whites of the eyes of the policy, it's going to be difficult to make a real hard-core assessment of where yields should be, where the dollar should. annmarie: it's an interesting point because we do have some members of the fomc actually trying to make assumptions about what policy will look like next year. what did you make of that, some members of the fomc starting to pencil in what trump policies might mean for 2025? joe: i think it's appropriate that they begin to think about it. i'd necessarily see it embedded in the forecast, but i think it is good that they begin to talk about it. when it comes down to what the fed is going to do, i will listen to austan goolsbee, as of course, jay powell. and powell was very clear, yes, we are thinking about it. we have not altered the forecast

based on what is likely to happen. from my point of view i think the only thing that we can take as certain is that there are going to be tax cuts. the question is are they going to be partially paid for or are they going to be 100% financed? it is one of the topics around the dinner table. my sense is that the majority next year will lean toward financing that, and that will point yields in a higher direction. >> so joe, what does that do for the dollar? you had a great call on the 10 year, i imagine you have a great view. joe: we had a much stronger dollar for the first six months of the year. you are going to continue to seek growth differentials and interest rate differentials drive value of the greenback. the question is not within the dollar is strong, but will they get in a situation with the fundamental underlying strength of the u.s. economy with that new policy piled on top of it turns this into a situation where the dollar stores.

the reason i point that out, if you listen to what the incoming treasury secretary has said over the past number of years, he clearly thinks that the dollar is overvalued. so we will have to wait and see. and of course, the ultimate decider, president-elect trump, he doesn't want to see dollar value increase. so you're going to see which one wins out. but i would expect the dollar to gain against the euro, the yen, the peso, as well as a number of other currencies. the main one you want to watch, the indian rupee is at near all-time lows as that economy decelerates to somewhere probably closer to 5%. that is indicative of what is going on in the emerging markets where we could have a shakeout. one of the interesting things for midyear, interest rate and

growth differentials, particularly an interesting situation were capital flows in the united states are larger than the past 12 economies combined. that is not sustainable and will create issues for emerging-market as we all adjust the new policy environment in 2025. annmarie: thank you so much for your time this morning and spending your day after christmas with us. since get you an update on other stories you need to be watching out for this morning. here's your bloomberg green. yahaira: russia launched a large-scale missile attack on ukraine's energy infrastructure yesterday. the assault prompted the local power grid operator to limit supplies, leaving 500,000 people without heat among the bitter cold. the attack included 70 missiles in more than 100 attack drones according to ukrainian president vladimir zelenskyy. u.s. president joe biden called russia's christmas day attack outrageous and vowed continued u.s. weapons deliveries.

meanwhile the u.s. will bring back family detention centers when president-elect donald trump returns to the office according to the incoming white house borders are. in an interview with the washington post he said u.s. immigration authorities will look to put families with children in tents and will not hesitate to deport parents born in the country illegally. and the baltimore ravens with a decisive victory over the houston texans in the second nfl game on christmas day. houston was no match for baltimore's running game with eric henry topping 140 yards on the ground and scoring a touchdown. leeann bp lamar jackson added 87 rushing yards and a touchdown of his own and became the nfl all-time leading russian quarterback, topping the previous record holder, michael think. baltimore now moves closer to locking down the division title after pittsburgh's loss to kansas city. that's your bloomberg green.

annmarie: her 2025 outlook, the housing market. that is coming up next right here on "bloomberg serveillanc " jericho -- bloomberg surveillance."

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♪ annmarie: good morning and welcome "bloomberg serveillanc " ." we did get initial jobless claims come through, softer than with the market was expecting. we are in the red, s&p 500 futures down nearly 4/10 of 1% this morning. yields, that is where the action is this morning, climbing on the 10 year up more than four basis points. 4.60%. turning now to the housing market, chen south noting the fed's less dovish stance noting "this hawkish stance from the fed will keep mortgage rates

high until there is data showing a weaker economy for the incoming administration dials back their plans for policy changes especially on tariffs." when you look at the mortgage rates, they are basically the same from the january 2024 to december 2024. is there any glimmer of hope for those trying to buy a house in 2025? chen: thanks so much for having me. so you are absolutely right, mortgage rates for really the last couple of years have bounced around a lot, but they generally state the high, and we are ending the year with pre-mortgage rate. as we are looking 2025, was the are expecting is mortgage rates are probably going to a little similar to what we've seen, but that they are probably also going to remain behind. we don't really see a lot of room for rates to fall. we heard from the fed very recently, and they are not expecting to cut their policy rate very much, and even if they

do, there's already one or two cuts priced in, and long-term rates like mortgage rates are influenced by a lot of other factors beyond the fed policy. annmarie: what about actual house pricing? if you cannot get a deal when it comes to mortgage rates, is there a potential move or negotiation when it comes to the cost of housing? chen: inventory is still constrained and that is really what has been keeping home prices high. we expect home prices will continue to rise in 2025 around the same rate that they are rising right now, which is 4%-5%. we might get a little bit of a slower home price increase into next year, and that might be because we get a little more inventory. as time goes on we do expect that existing homeowners will become sellers as life circumstances force them to really move. i think that is a little bit of a glimmer of hope for buyers in the sense that hopefully next year there is a little bit more

selection. even as prices continue to be high and mortgage rates are likely to be high as well. >> what are you looking for in terms of new home construction, are you constructive on increasing the number of new homes built next year? chen: we do think that is possible. we think that in the short term you might see a little bit of an increase, but also in the more medium to long run, if the new administration does bring about more deregulation and lowers the cost of increased -- sorry, of constructing new homes, you could definitely see more home construction in the longer-term. however, that is going to take longer to play out in terms of affordability relief for homebuyers. >> so we look at construction and employment as kind of a leading indicator traditionally to a weak labor market. sounds like you are not

expecting problems in the construction site in terms of employment. chen: i think there's a lot of uncertainty right now as we are rounding the band into a new administration. the labor market certainly remains strong, however the construction industry does rely heavily on immigrant labor, so depending on how the new administration chooses to carry out plans around immigration, think that could certainly have an effect on the housing market. annmarie: you also think that 2025 will be a renters market. is that because owning a home becomes so elusive for so many people? chen: yes. i think we're starting to see that the wedge in affordability between buying a home and renting is really increasing. we expect that to continue in 2025. after the pandemic. during the pandemic, rent rose a lot but home prices rose a lot.

but after the pandemic we also had mortgage rates shoot up. that has brought the for sale market in terms of affordability really to the sort of off the charts numbers, and it's been a real challenge for homebuyers, especially first-time homebuyers who have not benefited from equity good -- equity gains. but on the rental side, what we've seen is that a lot of the boom in multifamily construction , that has really picked up for renters in the sense that rent has stayed pretty flat for the last couple of years. in our redfin data on the rental market what we've seen is that right now, rent is probably around the same level as two years ago, and we expect that to continue into 2025 as there is still more supply coming onto the market. so that is why we are seeing 2025 as a renters market. annmarie: prediction number 10 on your list is gen z will

rewrite the american dream. what do you mean? chen: the american dream has historically always included buying your first home. however, as the wedge between affordability and the housing market and the rental market continues to increase, what we think will happen is that for a lot of the younger generation, they will continue to rent for longer. but that doesn't necessarily mean that they can't build wealth. they can still continue to build wealth in other ways. but it just won't necessarily be through the housing market as much as for previous generations. >> quick question on rates. is there a mortgage rate level that you think really freezes the market? chen: so what we're seeing right now at the end of 2024 is that mortgage rates are right around 7%. we seen a real pickup in activity. they just released the november

existing home sales and that increased above 4 million for the first time since the spring time. our redfin pending sales data is up about 4%-5% year-over-year. we are also seeing increased demand for tors from our agents since the november election, so it does seem like the same pattern that we've seen between mortgage rates and housing market activity is changing a little bit now since we've had higher rates for so long. however, i do think that if rates go much higher above where they are right now, closer to 7.5%, that would really put a freeze on the housing market. >> you talked about labor as being an issue with the incoming administration immigration policy. is there also a concern about tariffs on places like canada in terms of timber and wood?

do we import a lot of wood from canada they could have a major tariff strapped on it? chen: yes. with the incoming administration there is a bag of different policy ideas that they are talking about. there are some things that will definitely be a tailwind for the housing market in terms of deregulating and lowering the cost for construction. however, you could potentially also see some headwinds coming in the form of any restrictions on immigration, for as you point out, tariff that would increase the prices for building materials. so anything that really increases the cost for building housing, that would definitely put a damper on the housing market. not having enough housing is really kind of the root cause of a lot of the problems that we have in the housing market.

annmarie: just briefly, what are the hottest free housing markets right now in the united states? chen: where we are seeing the most activity is in a lot of affordable markets. the builders are going to be in the midwest or the northeast where you still had a lot of demand and demographic tailwinds, but there hasn't been a lot of new construction, which is what you've seen for example in the sunbelt, where you see a lot of cooler housing markets. annmarie: thank you so much for joining us this morning. for course, and a lot of people are looking for places where they can actually get on the housing market. you look at these mortgage rates, they are basically the same coming into 24 for as leading 2024. thank you for joining us for 60 minutes. as we look ahead to 2025, what is your top p7 vice, what are you focused on? >> we had a great year. we are getting ready for q4

earnings. earnings have been the support for equities particularly in the u.s., also globally. we are fully watching four indicators right now. one is the china long bond with a huge rally. we need that rally to reverse to show that the stimulus that china is putting into place is actually starting to bite. so we want rates going up in china. we want to see the commodities sector get back above the 200 day resistance. commodities will suggest that the global growth picture that we think is pretty constructive is in fact correct. so we want to watch commodities. then we want to watch emerging markets. we think emerging markets could be the place to be next year, and right now we look at china. china outperform the u.s., china leading e.m. we want to see e.m. get above their technical levels. and the other thing is the dollar. how does all this play out in the dollar?

right now the dollar is kind of pressing up against important technical levels, which if it breaks through 109, that means it is going higher and that is a problem for our mix on e.m. and west markets. annmarie: so you are looking to see 2024 being peak u.s. dollar. >> peak exceptionalism. u.s.'s price for exceptionalism. are we going to be exceptional relative to the rest of the world? we think that balance is going to tilt more toward the rest of the world. annmarie: thank you so much for ending 2024 the and for joining us this past hour. coming up tomorrow, i will be back in the studio. marvin loh will be joining us along with dan ives, dan greenhaus and anna rathbun. this was "bloomberg serveillance." you are seeing futures pullback today. not exactly the santa claus rally that everyone was hoping today still a few days left for 2024. s&p 500 futures down tens of 1%.

this is "bloomberg.

>> all right. thursday morning. paul