>> this looks like a time of both opportunity. >> the context in which the economy is set up for 2025 under trump presidency is beneficial for small, medium, and larger size companies. >> the tech sector is going to continue to perform well. >> i think those companies are performing well for reason. >> another strong year, just at the same extent of 2023 or 2024. >> this is "bloomberg surveillance." jonathan: good morning, good morning for our audience worldwide.

coming into friday on a five day slide on the s&p 500 come the longest losing streak going back to april of last year. equity futures attempt to bounce back. the headlines of the last 24 hours in foreign exchange, check out these two currency pairs. euro-dollar breaking down to 1.02 for the first time since 2022. china dollar. lisa: what is the future both of them? a strong dollar. that continues to be the story of this year as people start to wonder how much there are over apprising rate cuts in -- pricing rate cuts. jonathan: how much of this will china tolerate or how much will china embrace? i will pull up the quote from a few weeks ago. china's top leaders and policymakers considering allowing you want to we can 2025 as they brace for how u.s. trade tariffs as donald returns to the

white house. annmarie: there a theory that a weaker currency is the best thing for increasing exports. overcapacity issue, overproducing and now they want to support their economy by making sure people buy those goods. a weaker dollar benefits that which is the reason why when you look at all of the reporting on the yuan we can income it is china letting this happening because it is a completely managed currency. this might be something not only did they just tolerate but they embrace. jonathan: chinese yields have fallen off a cliff the last few months compared to u.s. yields which remain pretty elevated. looking at growth expectations. they have opened up in a major way. how and if that spread reconciles over the next several months is going to be critical to a number of asset classes. lisa: there are two aspects. europe has seen weed growth

--weak growth. there's a question of expectations and how low they are. this is the key question to me. how low have expectations gotten an has that created a bar so low that essentially europe is going to look attractive even if it just as i fall off a cliff. jonathan: how little needs to go right to turn the story run on the street -- around on the street. one stuck to watch this morning for u.s. steel. negative in the premarket by close to 9%. lisa: even though advisers are encouraging president biden to say yes. everyone is probably sick of this story because we talk about it every single day. now we have the sense that maybe today is going to be the day we finally end the discussion. it sets an interesting tone going forward about the u.s. allies are and what is

considered national security at a time were deal making will be coming back. ostensibly foreign investment will be welcome back from where? jonathan: a big conversation on that later this morning. coming up the next 60 minutes, priya misra singh rates near their peak -- saying rates near their peak. jamil jaffer. and we will catch up with dean struyven. higher bond is begin to constrain risk assets. priya misra writing rates have risen a lot and it will be a problem for risk if their tenure gets closer to 5%. this has been a real rate lead move which is a problem. i think we are near the peak. good morning. happy new year. let's start with the real rate move. what do you mean by that and why is that so important? >> i think it is useful to decompose the tenure. if i'm getting paid more, i get

paid more for things. i can pay a higher mortgage rate. if real rates go up, that is when we talk about his monetary policy restrictive. i look at real rates. this entire move has been a real rate driven move. since the fed started to cut rates or since last year, real rates have risen by almost 100 basis points. 10-year treasury yield is up. that just tells you if they're trying to reduce the restrictiveness, they did not succeed on that front. maybe the economy does not need -- i do think equilibrium high rate is -- it is not here. the economy which is slowing, we think we are in a soft landing. the market has repriced this sort of policy risk coming from the administration of a one-sided meaning it is all positive growth, positive inflation. you can have the negative growth in the disinflation aspect.

certain aspects of the policy. i think on the growth and inflation front, i shall interest rates have priced meaning we have priced out the fed significantly and now risk assets are looking at that real rate and saying, ok, whichever sectors were constrained by interest rates, that constrain is back. i think that is why risk assets will start -- i think they are already paying attention to rates. jonathan: self-limiting because of this. you see significant evidence of that does that we are already at that point where the selloff hasn't gotten to that point in the bond market or we are not there yet? >> i think we are getting there. housing, you can see it. is that enough to spill over into the broader economy? i think we're are getting there. it is hard for me to say the peak. i struggled with five. we got close to five when fed funds was at 5.5. we are right now for the first

time in many years at upwards looking yield curve. the front end is anchored. if you think the fed is done, which i don't think the neutral rate is 4%. if there front end is 4%, how high can that premium go before everyone that -- the large part of the economy starts to say no. that is where he started to see the effect. lisa: last year i was thinking about what was the biggest mistake? people were too bearish on risk assets, particularly big tech and two bullish on the idea of rate cuts. are you saying essentially good turn that on the head this year? that people are to bullish on risk assets and to bearish on the prospect of rate cuts at a time where people are assuming the neutral rate is significantly higher than where you see it? >> great point. i think we have come into this year with no body growth. if you find one, i would love to hear. i'm the one arguing maybe you're

the peak. i'm not even saying rates are going to go down significantly. last year was a little different meaning people were thinking the fed is going to cut historical cutting cycles, 200, 300 basis points. we did not get that. the fed is saying the first 100 was easy. i think the issue is we are district -- debating structural issues. is inflation going to continue down to 2%? we are also debating cyclical issues. what are we going to get from the new administration? there are so many policy risks out there. we are debating structural cyclical, in the fed say we are not in any urgency, we can stop. that is why the market narrative shifts from one end to the other. all of the positive news is priced in. this is this is is higher for longer narrative. but there is a self-limiting aspect in terms of expectations and all the markets have to make sense in equilibrium. lisa: we spoke to citigroup yesterday and he said the biggest risk for risk assets

would be if you got a huge rally and treasuries. you simply had yields going to 3% because that would indicate something so negative is happening in the economy that it could not support this american exceptionalism story. do you disagree? do you think is right because could be considered a positive if they are accompanied with the ongoing soft landing and disinflation that some were talking about last year? >> i'm not sure. 3% is a long way from here. that is 150 basis point drop in rate's. i don't know how that happens without the economy really slowing down. i would not disagree if you get 150 basis decline, we have a bad payroll report, may be going from soft landing into weaker. maybe at that point it is a problem for risk assets. i don't think the first of the next 50 basis points is a problem. i think that would be embraced by every market because how do you get that? you get that if inflation continues to head slowly --

slowly but surely, it is headed to 2%. you look at the underlying of inflation. it is housing inflation that is motivating, insurance. these are lagging indicators. if inflation starts heading low, you know we said we would cut two times, here's a cut in march which has been taken off the table, or there is a cut in april coming in the markets says, ok, we don't have to priced in a 5% 10 year, can go back to 4%, 4.5%, maybe 3.50 percent. i think that is a sweet spot for risk assets, allows us off planning to go on. it allows monetary policy do take the edge off the sectors for whom interest rates matter. jonathan: still jittery. you are looking for bond bulls. treasury bills. - bulls. how powerful is that as an

argument and? does it seduce you >> very powerful argument. i will just look at all in yield. i will also look at credit fundamentals, corporate fundamentals. they are very strong. those spreads you reference historically they are tight. they are tight for good reason. look at high-yield, including the restructuring we have seen 1.5%. the high-yield market i think is much stronger. i do think in -- we can debate this. it is higher than zero. would cost of capital is high, dispersion is going to be much higher. you have to do the work. you have to be diversified. you have to make sure you know the companies are buying. we don't like some of the distressed high-yield sector. high grade corporates where the company fundamentals are solid, we are seeing continued inflows. i think people are rebalancing, realizing their two-year is back

to back 25% equity returns. he had to say, ok, maybe this is going to slow down and that is when the -- if you're getting 6%, 7% in bonds, and an uncertain environment, that is a pretty compelling argument. lisa: do you think this is going to bid the year public credit outperforms private credit given how much enthusiasm there has been around private credit, how much money has flowed in, and how much loosening we started to see? >> the issue is with private credit, do you have enough transparency? i do think if rates stay high, yes, i would argue that credit can at least catch up to private credit. whether we know where the restructuring on the demons are in private credit, i think that is another question. i do think public credit, there is value in it. the interest rate move has created the value, not spreads, but just where we are in terms of all in yield -- they cover

the volatility is. this is attractive. jonathan: priya misra, thank you for being here. equity futures declining from the highs, still positive on the session. we have an update on stories elsewhere this morning with your bloomberg brief. dani: sources tell us president biden will walk -- block the sale of u.s. tilde japanese owned the pond still today. shares down 8.5% premarket. the ceo of u.s. steel recently argued the merger would help combat china's global grip on the steel industry. the companies say they plan to pursue legal action if biden does formally block the deal. u.s. investigators say there is no evidence linking the deadly attacks in new orleans and las vegas on new year's day. there were similarities in both. suspects were u.s. army veterans who used the same app to rent electric vehicles. the man who drove into a crowd

in new orleans killing 14 people had claimed to have joined the islamic state and an official says there's no evidence that the jihadist group coordinated the attack. apple is offering discounted smartphones in china. reuters reporting the discounts will run from january 4-seven and will knock money off the pro and promax. apple shares fell 2.5% following that report which is a fourth straight day of losses. that is your bloomberg brief. jonathan: more in about 30 minutes time. next, the end of the u.s. steel saga. pres. biden: iconic american company for more than a century. it should remain. that is going to happen. jonathan: we are getting closer. that conversation is just around the corner. live from new york, good morning. ♪

♪♪ ♪ three little birds ♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪ ♪♪

jonathan: looking to snap a five day losing streak on the s&p 500, just about positive. in the bond market, really strong. we give a lot of that up. 10 year yield this morning, just south of 4.55. the end of the u.s. steel saga. pres. biden: u.s. steel has been an iconic american company for more than a century and it should remain a totally american company. that is going to happen. pres. trump: i will not let u.s. steel be sold to japan. jonathan: present by looking to block the sale after more than a year of opposition to the deal. the white house set to announce a decision later on today with

questions mounting on what is ahead for both companies. michael shepard joins us. how close are we to close an book on this whole story? >> it could be a matter of hours, at least from the administration's point of view. we are expecting president biden to put out his announcement of a decision to block the deal. he had not said outright, neither had the white house, that he would actually do this but for months -- and we saw in that clip going back to april -- he has signaled his opposition to this deal, which was announced more than a year ago. the opposition that the administration has signed it is rooted in not only national security grounds, but political grounds. he is surrounded by steelworkers and that clip. this was very much an issue that was sensitive for this prolabor president. also has roots in pennsylvania, where u.s. steel is headquartered. lisa: what happens to u.s. steel

if this is over? >> that is a great question because they're going to have to go back to the drawing board quickly. they had made clear from the start when the deal was announced back in december of 2023 that they needed this investment, this partnership with nippon to help preserve jobs here, to upgrade, improve manufacturing capacity. and to companies argue this as a way to counter china's growing dominance in the area of steelmaking. not only will they have to go back to the drawing board, they will have to think about whether they need to engage in some asset sales, whether they need to look for another possible merger partner. in the past, cleveland cliffs has expressed interest in acquiring at least some if not all of u.s. steel. but what we know now -- we don't know now is that interest in acquiring any of u.s. steel assets remains on their part.

the two companies, u.s. steel and nippon, have signaled they intend to take this decision the court once it comes out. we will have to see whether the courts can provide any relief and maybe perhaps reverse this decision. but that is an uphill struggle given that national security implications are being invoked. jonathan: appreciate your time, michael shepard. u.s. steel is down by 8.5% in the premarket, speaks to what you're talking about. what is the future of this company without the deal? lisa: a lot of people rejecting cleveland cliffs deal because it was not a positive but at the same time if you can't have a foreign buyer come in, who is a likely suitor at the time they fall into the 27th biggest producer of steel in the world? jonathan: let's continue this with jamil jaffer. welcome to the program and happy new year. this country faces a lot of national security issues across several dimensions. where does nippon steel taking over u.s. steel right? >> it goes to foreign investment

in the u.s., probably top three or four issues addressed by the u.s. government currently. you have the effort to ban tiktok going on. that is a huge issue. u.s. steel is right up there with that. the number three u.s. steel producer, top 30 in the world, being taken over by one of the top five still companies or in attempt to take over, big issue. a big issue for unions, labor jobs for president who lost an election. but facing the same problems with incoming president donald trump. jonathan: and to take care of some of this for us. do you think it blurred the lines between politics and national security? is that problematic? >> the challenge is it has been a political debate as well. the national security concerns always weighed in. in this case, the committee decided not to make a

recommendation one way or another, leaving it to the president to make the call. we have known about it from a political perspective for a long time. the decision has been laid out a national security terms because it is the third-largest u.s. steelmaker. the question is, can they find a you a substitute for a different purchaser? that is going to be a hard one. there is a bidding war. nippon won the bid. lisa: there's a question about who the allies of the united states are and is it important to solidify some of those bonds. i was reading about a japan economy minister who basically said if this deal is rejected, it was in a stark message that investment from japan is not welcome in the u.s. how concerned are you about the u.s. efforts to fortify its connections with allies at a time or threads elsewhere, as we have just seen, are still dominant? >> this is a great point. the challenges we are facing a

decade level threat and china both economically, politically, militarily. the u.s. government point made repeatedly is this is an opportunity to work closely with our allies. we have to work with allies to be successful in a long-term battle both politically, militarily, and economically with china. the rejection of a major deal with a critical american ally, the japanese come as a hard one. president trump has welcomed a large investment with artificial intelligence and other areas. the question is, not wanting to lose the iconic american steel company because of labor concerns, how do this way yen? what does that say to our allies not just in japan but other parts of asia and europe as well as they all look to see will the u.s. be a good ally and economic partner or should they turn to face china? u.s. continues to make that point that allies are important.

lisa: talking about the national security concerns and i think about the attacks we saw both in new orleans as well as las vegas. i wonder given we have 17 days until the inauguration of president-elect donald trump, how much do you think there is sort of renewed fragility? are you sensing an increase in threats? fragility in addressing some of that in the united states? >> there's no doubt u.s. is beset by threats all over -- all around the globe. we are in a situation today where we have wars raging in the middle east, europe, potential threat of a conflict with china in the south china sea and the taiwan straits. we have got the threat back on our shores in a horrific fashion with 14 dead in new orleans, seven injured in las vegas, and the potential threat ongoing. the threat level has always been high for the last few years and will continue to remain high. do we want to be a global

leader? do we want to fight our battles overseas or are we willing to step back as both president biden and president have indicated with this. if we step back those threats might end up on our shores? we have seen the story before. we leaned forward, strong allies and friends overseas and not here at home. jonathan: appreciate your time. no doubt we will catch up again soon. jamil jaffer of the national security institute. we talked about this the last couple of days. we face several threats, one is physical -- the tragic events over the weekend coming into the new year. the other is cyber. we have seen the cyberattacks allegedly coming from china toward the treasury. lisa: more details coming out about that in terms of nonconfidential documents that scientists in the treasury department had. a key question is who is overseeing all of this? who is strong the connections? who is in charge, local municipalities, federal level?

jamil was talking about how much do you want to commit to overseas conflicts versus domestic ones in the intersection of those come the sharing of information, etc. that is something the new president will have to deal with as well as president biden and his remaining 17 days. jonathan: the to do list for the incoming administration is getting longer. coming up next, we will catch up on the outlook for commodities in the big call on gold and waggled his head back toward 3000. that conversation just around the corner. equity futures on the s&p just about positive. ♪

jonathan: five-day slide on the s&p 500. the longest since april of last year and we are looking to bounce. nasdaq up .4%. the bounce yesterday quickly faded. lisa: interesting aspect. it was not because that was terrible earnings. although it was disappointing from tesla. yields started to creep higher. jobless claims at the lowest point in six months. the same story that led to the losses at the end of last year regurgitated themselves once again to start 2025.

jonathan: close to 455 on a 10-year. 10-year down a basis point to 454.51. we are in a danger zone and this is where you see risk assets get hurt. we heard a similar thing from priya misra. this is the point the bond market selloff begins to become self-limiting because of the damage it causes elsewhere. lisa: this is the same conversation we had about real money accounts waking up to four point 5% 10-year yields and saying it is time to be bullish. that is what you are hearing on the margins. this is not including foreign buyers. if this becomes an alternative, does that suck oxygen out of the trade where everyone is bullish on u.s. equity assets? jonathan: check out the fx screen. some major moves in the last 24 hours. euro-dollar breaking down to 102

yesterday for the first time since 2022. dollar-china breaking through to 7.3 for the first time since 2023. lisa: it is all, a dollar strength story with the european story -- dollar strength story. with the european story, there is stagflationary pressures. china is very much flat on its back. you have a housing market that's imploded and they are trying to boost consumption and exports. a weak currency would be positive for that type of engagement. you have to wonder how much -- we talked about this is welcomed. jonathan: they might embrace it. bond yields speak to this. bond yields in china are collapsing. the world needs to watch what is going on. that economy is not in a good place. that is captured by the bond

market. lisa: i can't get over the fact the losses tied to the housing declines supersede what we saw in the 2008 crisis in the u.s. it is a huge loss of wealth. you have china potentially using those low yields to issue bonds to offer up some stimulus. how far can they go with that? jonathan: we will get back to what it means to the commodity market in a moment. the fbi says the deadly attack in new orleans and las vegas don't appear to be linked. law enforcement investigating both incidents as terror attacks with officials determining the suspect in new orleans acted alone. lisa: this is a strange incident, tragic incident but some similarities were hard to ignore. they both served in the army. they both served in afghanistan at the same time in similar units, not necessarily together. they rented cars from turo.

you put this together and you start to wonder is there something more here. that is why they are still investigating. jonathan: any information on the stories and we will share with you. president biden planning to block the sale of u.s. steel to nippon steel. the move puts an and potentially to the 14 billion of deal that is faced months of opposition. lisa: i was looking at the sify is really and why they -- sifuis ruling. they talk about u.s. steel reducing output and that could reduce its role in the international steel exports. this could be a concerted effort to reduce their dominance. at the same time you have japan saying, really? you will not sign off on a deal with us, your friends? that raises questions about how close the alliances.

jonathan: under this administration everything has become a national security issue. it is difficult to draw a distinction between the things that are seriously national security issues and the ones that aren't. lisa: this is important if deals come back. how do you evaluate what comes under national security if there is not a consistent standard? jonathan: we have talked about china already. expanding subsidies to cover smartphones and promote domestic spending. a national trade-in program that applies to home appliances and cars will broaden to include personal devices like phones, tablets and smart watches. this is the problem with consumption in china right now. lisa: there is a question. if they offer it, will they come? are they going to trade in the goods? at the same time it is giving hope to some people who are waiting for the offerings, the

chips the chinese authorities have in putting out that maybe it is coming. people wonder if they are waiting to shock the market and get some flows back. jonathan: very incremental so far. gold closing out his strongest year since 2010. goldman sachs looking for prices to rally to $3000 per ounce. recent consolidation provides an attractive entry point for a high conviction long gold view, with structured support from central bank goal demand." daan struyven is here. tariff escalation by gold. geopolitics, buy gold. how much of this has been frontloaded already? daan: we like golden our base case because of the structural boost to central bank. purchases have increased by a factor of five. on the cyclical side, we expect

325 base cuts to boost etf holdings and supply support. if you look at the main risks the economy has laid out, it is tariff escalation and what did we see in 2018, gold etf holdings and spec holdings surged. the second-best rest to the u.s. economic outlook is the market starts to worry about a sovereign debt sustainability issue. that's an environment typically were gold tends to go up. jonathan: are you finding a peculiar we are seeing these moves in gold when the dollar is so strong against other currencies? does that add up to you? daan: rates are significantly more important than the dollar for etf holdings. the big puzzle of the last few

years has been the disconnect between strong gold prices and relatively high rates. the main reason for this decoupling in level terms is structurally stronger central bank buying. if you look at changes, the relationship is intact. our forecast for fed cuts helps explain why we expect prices to rise. on the dollar itself, we think that central banks who typically buy gold with dollar holdings are not going to be deterred by a stronger dollar. we find once you control the level of rates, the dollar does not really matter for etf holdings. if you are and a strong dollar environment because of concerns about downside risks and tariffs, both the dollar and gold tend to benefit from safe havens. lisa: people were excited about

gold as a possible inflation hedge. they were worried about upside inflation risk and piling into the precious metal. do you think we have established gold as a better hedge against inflation than even oil? daan: it depends what drives the inflation stock. if you saw a negative energy supply shock, whether it is in europe on the gas side or we see fewer arrows out of the middle east because of iran, energy is still your place to go. if inflation is driven by markets, about the credibility of the central bank, gold tends to really rally. it depends on what is driving the source of inflation. we see a role for both energy and gold as inflation hedges in portfolios. if the base case for energy prices is quite flat. lisa: as a commodity strategist you are increasingly touching all the different aspects,

whether it is global growth or the idea of the dollar and some of the geopolitics with respect to looking for some new currency. when it comes to economic trends, how much we have baked in with china to oil prices given the fact that has been a known story. we have been talking about the pessimism baked in but not any optimism of a revival. daan: what is striking about oil prices in 2024 was it came down in the second half. even if inventory levels edged down. in the first half we thought gold prices were too high given the fundamentals. in the second half of last year it flipped. the market became focused on downside risk to china demand. the fear of an oil glut.

it is the sixth consecutive weeks for u.s. inventories group. -- grew. that is what we look for brent in the mid-70's. jonathan: we mentioned chinese bond yields rolling over. they are fears about where growth is in that country right now. where is the demand for commodities in china? daan: it is very divergent across commodities. what is quite striking is that if you look at the increases in demand for aluminum or silver, it is driven by solar installations. if you look at ferris demand, iron ore, steel, is quite weak. on the energy side there is a lot of divergence. lng was formally supported by strong exports. oil demand contracting slightly

last year because of the quick transition to ev's and elegy powered trucks. it depends on what commodity you look at. you need to be differentiated in your investment approach. jonathan: doesn't that give me the better cult cyclical read on thing? daan: they give you a good read on the property sector. you are seeing pockets of strength. you mentioned the trade up program for consumers. we see a strong appliance sales, strong ev sales. that is positive for the base fundamentals. lisa: we talk about the transition to green energy and why there hasn't been as much demand for oil as he saw the u.s. increase electric vehicle usage, etc. is that a case to be made when people are saying the big challenge with the ai transition is there is not enough energy sources and you need to start burning coal again because you have to basically fortified the energy demands? daan: we think global energy demand will continue to rise

significantly because the middle class in emerging markets will require more energy. there's a new source of energy, which is a i. -- ai. we are bullish on power demand for the u.s. power demand coming from ai. the big challenges with all -- a lot of editions coming from renewables, and intermittent sources of life, how are we going to serve the excess power demand with the site is not shining or the wind is not blowing? lisa: are way underestimating how much demand there will be for oil and gasoline went potentially you cannot get enough power. that has been the discussion we have had with every technology analyst who has come on the show. daan: i think the world needs to invest more in the power sector and the grid. i spent my vacation puerto rico.

we had power outages after we left just a few days ago. we had a significant power outage last year in india where power demand is growing at almost 10% over an annualized rate. it is one of the major challenges. jonathan: daan, thank you for being with us. daan struyven on the commodity market. gold getting back towards $3000. goal just about unchanged at $2658. let's crossover to dani burger. dani: political instability and south korea continues. investigators tried and failed to arrest impeached president yoon suk-yeol. they wanted to arrest him after his martial law declaration in december. opposition politicians are urging the anticorruption officials to try to rearrest yoon immediately. his representative called the attempt illegal. u.s. bank reserves have fallen

below $3 trillion, the lowest since october of 2020. a report states reserves fell by about $326 billion in the week through january 1, the largest weekly slide into .5 years. the decline -- in 2.5 years. the fed's continued removal of excess cash is raising concerns about reserve scarcity. meta replaced its head of global affairs. kaplan has been advocating for allowing morse each from across the political spectrum on the platforms. meta has been working to repair his relationship with donald trump who accused it of censoring conservative speech. jonathan: absolutely fascinating story in the last 24 hours. a real sense of shifting towards preferred

speech and liberal voices determine who could and could not speak. there's another data point in the last 24 hours that the wind is changing big-time. lisa: the liberal democrat for the united kingdom replaced by the republican advisor to george w. bush. a real question about what that means going forward. jonathan: wykle pick up on that story in about 45 minutes. up next, the strength of the american labor market. >> if the unappointed rate flattens out at 4.2%, the fed will feel very confident about the labor market. it might be difficult for them to cut it. jonathan: that is up next. you are watching bloomberg tv. ♪ ♪

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five days of losses on the s&p 500. so far, positive by .2%. the strength of the american labor market. >> we are seeing some signs of softness in the labor market. it has been very gradual. as long as it remains gradual, we will avoid a downturn. if we flatten out, if the unemployment rate flattens out a 4.2%, 4.3%, the fed will feel very confident about the labor market and it might be difficult for them to cut further. jonathan: investors looking at key data, starting with the payrolls report, followed by cpi and a fed rate decision at the end of the month. claudia sahm noting, "it is not living at the promises. tension has been building around the sep at the powell fed. the fed has long been data-driven in his decision, but the complexities of the post-pandemic economy have let

it seemingly to rely on data over forecasts." claudia joins us now. i happy new year to you. good to see you again. how is this complicating decision-making on the fomc? claudia: a real theme of the last meeting was how much uncertainty there is about the outlook for 2025. a lot of that comes from policy uncertainty. the fed has increasingly under powell become data-driven. it is hard to believe it but i think we will see a year with the data plays a bigger role. we already know that can create a a lot of unnecessary volatility. it is hard to measure $30 trillion economy in real time with a lot of accuracy. we will see this overreaction. we saw this yesterday with the initial claims for unemployment data to these little scraps of data we get on how strong the labor market is, how hot inflation is, so buckle up. lisa: this is why people like in

the moment we are into a dark room with a blindfold on with lots of furniture and trying not to bump in anything. the data is messy. we talk about distortions. forecasts have been wrong and transitory is a huge scar on the fed. is there a forecast or model they should be following? i'm asking you of the psalm role who talked about had every room has its exceptions and is difficult to come up with these. claudia: the past four years have not been kind of rules or rules of thumb or how it's usually is in the past. we cannot become hamstrung by a mistake or misjudgment made in 2021 about inflation. we have moved forward and there are -- we have seen the economy slowly healed. we have seen patterns that make more sense than they did in the early days of the pandemic recovery.

that's exactly how it feels. a dark room. we know there is furniture. part of the fed's job is to turn the lights on and chart a path. that can be redirecting but to just, well, we do this next year it will be all about the data points. that sets up a lot of unnecessary volatility. the fed is injecting volatility. just follow those data points. we know we get bounced around by them. you need to have a grand plan in terms of how you are working through the year. it is tricky. the uncertainty is real for the fed. i'm not saying i have an easy solution but now was not the time to back away from some of the forward-looking heuristics we have. lisa: mohamed el-erian would agree with you. what patterns are you observing that you think are going to be important and prescriptive for

what is to come in the u.s. economy? claudia: i keep all eyes on the labor market. it's such a linchpin to the resilient economy we've had an ongoing recovery, in addition to millions of lives depending on their paychecks. i worry the fed is somewhat complacent. i think they are being hypervigilant on inflation. most of the officials laid out in the last economic projections are pretty optimistic one on the labor market and saying we are back to normal. we are back. mary daly used the term equilibrium. one vacancy for when unemployed worker. they project that is stay with us. we got back to the place. we will stay there. there are other dimensions you can look at, particularly the differences between hiring and the firing.

when the hiring does not look good, the firing looks great. that is not typical for the labor market in balance, in equilibrium. there are some signs -- the places where it does not make sense. other big pieces. we've had a push from the increasing labor supply, the immigration which has been extort nearly high in recent years -- extraordinarily high in recent years. even if we don't have mass deportations, we will not have a big push from outside immigration. that has been an important dynamic of the labor market. we will watch it on white. i don't think -- unwind. i don't think it is as calm as a lever projections view and we will get that first taste next week with the report. jonathan: payrolls, january 10. -- com eout january 10 -- come

out january 10. claudia: it would be unusual to stabilize and hold for the next three years, which is what the fed is projecting. there is a sense that barring a lot of policy uncertainty this year, 2025 could be -- it was on path to be that we get to a sustainable place and work at the last disruptions. -- work out the last disruptions. jonathan: i hope you're right. claudia sahm, appreciate your time. we all hope that claudia is right. lisa: it is people's lives. it is such a dominate indicator coming next friday. jonathan: the median estimate, 153,000. coming up, emily roland, isaac boltansky, tom narayan and thierry wizman. from new york, this is

bloomberg. ♪

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>> we should be seeing a significant rotation into fixed income this first quarter. >> we are worried about higher yields. >> what do yields reflect? here over inflation. -- fear over inflation. >> they will be more volatility as investors attempt to assess what the fed will be doing next. >> this is "bloomberg surveillance," with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the second hour of "bloomberg surveillance" starts

now with equity futures just about positive by .2% on the s&p 500. on the nasdaq 100, higher by one third of 1% following a five day losing streak on the s&p. looking to snap that this morning. yesterday we were looking to snap it and then we did not thanks to better than a speck the jobless claims data pushing yields a little higher. you had apple down on the session and tesla getting hammered as well. lisa: the mainstays of some of the rally not performing. it shows that yields are becoming more important. when they go higher and suddenly you don't get a bond rally, that will have more in effect on risk assets. it shows a lack of breadth. a couple of big names can drag the index down if they report news that is less than savory. jonathan: some big headlines in the past 20 hours. two currency pairs. euro-dollar and the other is dollar-china. euro-dollar, breakthrough for the first time since 2022.

real your weakness. embracing perhaps some chinese currency weakness by chinese authorities. dollar-china through 7.3 for the first time since 2023. lisa: you have to remember this is a managed currency. they allowed this to happen at a time where they have overcapacity and are looking to export goods. cheaper export rate is probably positive for the chinese authorities. is the u.s. going to be the ones buying? will that be some sort of weaker currency exploited elsewhere around the world? jonathan: a lot to talk about. emily roland of john hancock as stocks look to snap a five-day losing streak. isaac boltansky looking to the house speaker boat. -- vote. tom narayan on disappointing deliveries. looking to snap the lungs losing streak going back to april -- longest losing streak going back

april. heavy is the crown of u.s. large-cap stocks as we kick off 2025. the magnitude of outperformance in 2024 is not likely to be replicated. happy new year. good to see was always. do you believe this move in bond yields, in foreign-exchange is the beginning of hurting risk assets? emily: we do. you look at the leadership we have seen across u.s. assets. the stronger dollar is something that could be a self-limiting dynamic. you look at s&p 500 companies. 40% of the revenue of large-cap companies comes from abroad. you are seeing weaker currencies from other countries making their exports more competitive. higher bond yields are typically associated with the stronger dollar as well. you are seeing borrowing costs elevated. mortgage rates have over 7%. borrowing costs with credit cards are about 20%. probably should not mention that right after the holidays.

borrowing costs for businesses and consumers are elevated here in order for earnings to see the double digit estimates being baked in now. you probably need to see bond yields come down a bit here. you probably need to see the cost of borrowing sort of become a little more mitigated. jonathan: there's is a risk this continues and a risk bonds and stocks continue to get hurt. this is a risk that torsten slok presented. it's a repeat of 2022 with a 60-40 poll portfolio underperforming or bonds and stocks get hurt. are we lining up for more the same? emily: if we see inflation continue to be enemy number one here, we see inflationary pressures pickup towards in of the year. the shelter components, while that came down a bit we saw other elements of inflation actually start to accelerate once again.

that could be a challenge for yields. that could cause a stronger dollar environment when we are just -- we just experiences one of the best wretches for markets in history. the fourth time ever we saw back to back 25 plus percent returns for the s&p 500. if you look back the last time the third year was over 20% was 1999. we are going back to the late 1990's if we want to see a repeat of that. we are looking at valuations quite optimistic here at 22 times foreign earnings. the best we have seen is 24 times. the most elevated is 24. there's another 9% or 10% to goat until we get to those levels. -- to go until we get to those levels. the starting point is tricky into had 2025. -- heading into 22 any five. --2025. lisa: do you see that as a reality?

a question about rates are cheap or whether stocks are expensive. which will break first this year? emily: we are likely to see rates, and lower here -- com e in lower here. there's a big convergence between disappointing economic data coming in and the 10-year treasury yields moving higher. unusual to see a gap this big. the 10-year is probably moving on something other than the economic data right now, whether it is trend following or still animal spirits around this new administration and potential procyclical policies that may be limited. we expect the gap likely closes. we are watching inflation, watching shelter. if you look at mortgage applications, we are seeing weakness with seasonal factors taken into account.

we could see this impact where the 10-year treasury yield does catch down with those disappointing reads on the economic picture. lisa: doesn't this support risk assets when everyone looks at an excuse to buy? emily: equities will respond positively to rates calming down a bit. you may see more of that this morning with rates coming down. we think you could see continued strong returns out of quality stocks in the u.s. we like areas with great balance sheets, lots of cash. quality is mostly seen in the u.s. large-cap space. we like large caps but we want to diversify the valuation risk. the s&p 500 growth index trading at over 50% premium to is 20-year average. we are leveraging u.s. mid-cap stocks that are trading cheap.

they are benefiting from on ensuring activities. you talked about the challenges in china. energy challenges in europe. we see the manufacturing renaissance continuing in the u.s. we like industrials to play that. it is higher quality stocks in the united states but finding the quality at a reasonable price is the name of the game ended 2025. -- into 2025. jonathan: what are the priorities for the incoming administration? emily: not many. there is a lot of conjunction going on. a lot of negotiations are a starting point. we are trying not to overemphasize politics in making investment decisions. a lot has been seen in the sentiment. it is amazing to see what is happening in crypto and crypto related assets. we saw $1.5 trillion in market cap added to crypto markets in 2024.

they are made of crypto coins that are not -- that have a bigger market cap and 40% of stocks in the united states right now. we suggest investors fade the speculative frenzy we have seen in crypto and crypto related assets and redeploy assets at the higher quality stocks. look at the backup and bond yields as an opportunity to take advantage of the income available there as we see a shift. jonathan: any evidence that frenzy extends to traditional equity markets? evaluations of the mag7? emily: we do. the top 10 stocks in the s&p 500 make up 40% of the index. that is a historical high. we want to be thinking about diversifying away from that, looking at value equities. maybe looking at international stocks. we just saw a massive outperformance. the s&p 500 outperformed the

msci by over 20% last year. really remarkable. u.s. large-cap growth outperformed every other style box by more than 10%. diversifying that exposure into next year makes sense. looking at more defensive areas, dividend paying stocks, high-quality bonds. there's an opportunity to see more breadth across market outside of that mag7 into next year. lisa: i love how specific the trade is. take that money out of bitcoin and put it into quality assets. interestingly enough, bitcoin, the etf that blackrock created saw its biggest outflow in his history at $333 million. it does seem like institutions are backing away from that trade. are you saying this is significant? this is more than just speculators shifting away from a hot trade from the end of last year and indicates something that has legs in terms of a risk appetite or lack therein?

emily: we think it is significant given the amount of market cap, not only in crypto markets but all these crypto related assets. there has been so much excitement, so much optimism. we think any time you see something move up in parabolic fashion we think that is really the candidate for some potential selling pressure. that is something that can play out. we want to be exposed to equities but we want to do it anymore risk mitigated fashion into next year. that is where we see that shift across markets playing out. lisa: the heavy crown that big tech wears, are they going to lose that crown this year? emily: we always look at earnings growth estimates. stock prices are going to follow profits. if you look at the technology sector, it's expected to seat when he 3% earnings growth this year -- see 23% earnings growth this year.

we think it is just about looking underneath the hood and choosing which technology companies you like. we prefer the classic s&p 500 technology sector over areas like consumer discretionary where you will find other names that have run quite a bit. i'm trying not to identify individual stocks but it can show fundamental support here. you want to diversify from that and known other pieces of the broader market into next year. jonathan: emily, good to see. plenty of conversations ahead in 2025. emily roland on back to back growth in the s&p hundred. -- 500. with equity futures just about positive by .2%, with an update on stories elsewhere, here is dani burger. dani: israeli prime minister

benjamin netanyahu is sending a delegation to qatar for the gaza cease-fire talks with a mosque. no timing was given. a mosque set the delegation concluded a round of talks with egyptian mediators in cairo yesterday. israel lasted a delegation to qatar last month to real relations with mediators. -- reestablish relations with mediators. citadel has a roughly 50% gain last year but the vast majority opted to keep their money in the multi-strat hedge fund. only about $300 million out of billions of dollars of profits were redeemed. the vast majority of high performing hedge funds are not taking money, causing investors to stay put where they already are. the ap reporting apple pay $95 million to settle a lawsuit accusing siri of these dropping. the suit alleged some recorded conversations were shared with advertisers. the plaintiffs said there mentions of certain sneakers,

restaurants and surgical treatments triggered ads for products. apple is not acknowledging wrongdoing. that is your brief. jonathan: thank you. it is what everyone always thought. your phone was listening to you. all of a sudden he saw a commercial for. lisa: it actually explains why i have been getting 70 advertisements after my kids' discussions about dark chocolate with raspberry and cookies with certain types of marshmallow filling. jonathan: popping up on the phone? is that what happened? claim the kids for that. up next, fighting to keep the speakers gaveled. >> we have to stay unified. we will have one maybe no vote. i think we get it done on the first round. everyone understands the importance of the moment. they will get along. jonathan: that conversation is of next. good morning. -- up next. good morning. ♪

jonathan: you are waking up wondering if it is payrolls friday. it is not. we are easing into 2025. we are here. shouldn't they just drop the number at 8:30 eastern time? lisa: the government decided they would get everyone the day off but not really. you can't discuss payrolls because that is coming out in a week. this is my unpopular decision. they should have it on january 3 of next year, the first friday of the month. jonathan: that feels right. this feels wrong. the previous number was 227,000. s&p attempting to bounce. the move in the bond market muted. up by a single basis point.

yesterday, foreign-exchange. everything against the u.s. dollar cratering. euro-dollar breaking through 103 for the first time since late 2022. we are bouncing back by a third of 1%. fighting to keep the speaker's gavel. >> we have to stay unified. we will have maybe one no vote. i think we get it done in the first round. as we noted, we have to stick together. everybody understands clearly the mandate we have, the importance of the moment. i think they will come along. ima m -- i am a maga conservative and i can get everyone to work together. jonathan: mike johnson hoping to win reelection with just one ballot today. he has president-elect donald trump's endorsement but he faces pushback from hard right republicans that could derail his ability to hold onto the gavel. joining us now is isaac

boltansky. welcome to the program. can we avoid another mass in washington? isaac: it will be nothing but messes. when you have such a thin -- a wafer thin margin in the house, this is the way it is going to be all year. i think mike johnson is going to retain the gavel. it might take two or three ballots today. there is this overarching sense of urgency among the republican caucus. that is what is going to drive them to ultimately give mike johnson the gavel again. there is no viable alternative to mike johnson right now. you will not get someone who is more conservative. they just need someone who can make it so the trains run on time and they can get moving on reconciliation, which is the whole ballgame this year. jonathan: we should point that out. you are going into the end of the year and new year and you are bullish on one large

reconciliation package. given the margins are very small, what can you point to to give you the confidence we can get something big done? isaac: failure is not an option. that's really it. i see it being difficult. legislating is always difficult with these margins. it will be a storyline -- able -- it will die another deaths before we get another package. i believe this congress with republicans controlling both chambers and the white house will be able to extend the trump era tax cuts by and large an ad on a handful of other items -- and add on another handful of items. you have to seize on that when you have the trifecta. lisa: talk about how narrow the margins are. it is 219 in the house versus 215. you look back to 2016, the

republican majority was 241 2025 to 194. how much will that be tested with the rounds of votes you are expecting? isaac: we saw part of this with the government shutdown drama from the end of last month. how much does trump's voice matter here? i think that voice is going to have a say in the caucus. he will be able to get on the phone and get a few of these potential holdouts to vote present or maybe just take a walk so you change the calculus in terms of how many votes you need from mike johnson -- for mike johnson to get the gavel. i don't think mike johnson is going to be the speaker at the end of the year. i think he is going to win this weekend. that will be necessary to certify the election and start moving on reconciliation. i see the debt ceiling coming

back in the middle of the year as being something i believe could ultimately cost him his job. something that i know all of us in the markets are watching even though we have seen that movie time and time again. lisa: that is a bold call that mike johnson will not be speaker at the end of this year. there will be a reconciliation. this is a squared circle. can you put it to understand how this will be an effective congress and effective republican caucus when they are likely to lose their leader by the end of the year over a fight that percolates out? isaac: we will rely a fair about on the senate here. one of my governing frameworks is that what can get through the senate is going to be accepted by the republicans in the house. that is one of the ways we are setting our mental model 425. -- for 2025. that is what i'm looking more

and more for leadership on capitol hill. the senate finance committee will be the most important committee this year for that reason. it is one of the reasons i continue to highlight to clients it will be volatile, iterative, but failure does not seem to be an option here for republicans when it comes to extending the trump era tax cuts. that is what informs the baseline. jonathan: that is $4 trillion to $5 trillion just to extend those tax cuts of 2017-2018. how much bigger is the never going to be? what is the downside for debt? isaac: i am shocked i don't think the market fully has embraced how much deficit spending we are about to do. let's keep in mind the debt ceiling, the most recent government shutdown fight, president trump just wanted to get rid of the debt ceiling altogether. that tells you about how he is thinking about the coming year.

we have the senate finance chair talking about using a baseline where they just assume all the tax cut and jobs act revisions are extended. saying we are not spending money even though they are spending $5 trillion. we will have $6 trillion to $7 trillion deficit finance spending come out of this congress. jonathan: poly underestimating the willingness to use tariffs as we have offsetting some of that spending? isaac: this is something i have heard making rounds on the hill over the last few weeks. i think there will be a lot of talk about tariffs. a lot of counting of future tariffs against this. there will be some gamesmanship. there always is with budgets about how much they are going to "learn" from -- "earn" from tariffs. there is an awareness that they don't want to front of the tariffs because of the economic

impact. is there a way to save maybe we will count expanding tariffs in years three through 10 as a means of being a budgetary offset. we have to keep our head on a swivel. they will be some ridiculous budget gimmickry in the next two months. jonathan: it will be gripping. must watch tv. isaac boltansky, thank you. what year are we going into from a policy perspective? 2017 for markets and low volatility, or 2018? tariffs. fed policy got dicey by the end of that year. lisa: sequencing. what you get in terms of sequencing? as i listen to isaac boltansky speak, maybe this is why real yields are as high as they are. they are sniffing out deficit spending.

the potential volatility that comes with the expectation of tariffs to pay for all sorts of stuff that is getting priced even though tariffs are not coming until 2046. jonathan: these are serious numbers. lisa: i love the gimmickry he was talking about. with the debt ceiling limit, a fantastic article in the wall street journal over the break. i highly recommend people read it. it's about why it is a fallacy. jonathan: equity futures on the s&p up by .2%. tesla and focus up next on the program. we will catch up with tom narayan as sales job for the first time in more than a decade.

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jonathan: equity futures bouncing back from five days of losses on the s&p 500. higher by .2% on the s&p. on the nasdaq 100, up by .3%. two hours until the cash open. let's say good morning to manus cranny. manus: maybe the real money turns up next week. u.s. steel under pressure. what will they become if the neap on -- nippon bid is blocked by the bite administration? what can save u.s. steel? they have 11,400 employees. the company has a strong standalone valuation but they

have to make some very tough decisions. downsizing perhaps the old furnaces, closing plants, moving the headquarters from pittsburgh across to another city. these are issues that will face u.s. steel. no deal and it looks under pressure. stellantis. and europe, car production in italy down by 46%. 46% drop in production there. in the united states, there is a debate over access to those credits for ev's. it will become tougher for hybrids and the access for stellantis and others. it will get tighter. this is about domestic sourcing. next week the rules change. stellantis loses access to the credits. you move to the bigger debate for 2025, the bigger ev credits and who survives. when it comes to dog food in pet food, -- and pet food, it is a tailwagging 2025.

the price target is $42. look after the dog. never mind your health. look after the dog. price target is $42. sales growth is underestimated in the market. i like that. tailwagging 2025. jonathan: where is this going? manus: for a european the people of good. jonathan: your teeth look great. never mind your teeth? lisa: why is it one of the other? jonathan: i'm having a conversation with manus after the show. under surveillance this morning, president brightness at the block neap on steel's takeover -- nippon steel's takeover of u.s. steel. manus went through the stock move, down about 8%. meta global affairs president stepping down and will be replaced by a republican at the

company. he led meta's efforts. lisa: he was a leader of the liberal democratic party over in the united kingdom. he ended up as deputy prime minister under david cameron, a real unity person and who actually probably was tainted because some of the compromises he ended up making. a real shift given the fact that was consider the lobbying effort that was most crucial for meta given some of their challenges and some of the hacks and things that have happened. he was a chief of staff to president george w. bush. raises the question of how much they are putting on the front burner the importance of lobbying donald trump and how much a shift of tone that will be for this company in terms of content and moderation. jonathan: so many different angles to this. our regulatory and consumer angle. for a long time major tech firms

have cloaked themselves in liberal values because they were afraid of the regulatory impulse of the left. they are waking up to reality. they need to be afraid of the ragged hillary impulse of the right -- regulatory impulse of the right. we have seen this at target, budweiser. the important business lesson came from michael jordan. when he turned around and said republicans by sneakers -- buy sneakers too. they have woken up to a more concerted consumer on the last decade catered toward the left. now they have to wake up to that. winds are changing all over the place. lisa: the business of social media is unique in terms of how you create an honest to goodness town square. how do you create real discussion with open conversation where people actually are not just stuck in echo chambers? that will be a challenge for

these potential platform owners given the fact we have seen that time and time again. will it be a pendulum that shifts or do you basically make it a free-for-all? how do you do this is one of the quagmires they have grappled with. jonathan: following the election many were offsides the center of gravity of the country. the ceos find them offside with the center of gravity of the country. maybe even off-site the center of gravity inside their own company. think about initiatives like dei, climate change, you see shifts on those fronts as well. for corporate executives they have to confront the whole range of issues, particularly postelection and beyond. lisa: can they afford to stay out of it? probably not. you have donald trump who wanted to catered to. that is maybe what we see with the latest move from meta. there is a question also about whether individual industries are going to have to face this in a different way, whether it

is moderation or the products you sell in the store. jonathan: tesla's cyber-shot will qualify for up to $7,500 in u.s. tax credits, part of a reshuffling that disqualifies other ev's are federal subsidies. it comes as part of president biden's inflation reduction act. lisa: i'm sure this is incredibly environment police sound. it just highlights this -- environmentally sound. it just highlights the goals of some of these subsidies. this is a subsidy that was meant to produce some support of american vehicle makers and electric vehicle makers. who are the ones that benefit from this? some are getting taken out of the subsidies. you have the cyber truck being granted this. cars from hyundai and kia have the right sources agreements to be eligible for ev credits. what are the actual accomplishments of some of these

programs versus the goals and the discrepancy? jonathan: how environmentally friendly are some of these vehicles? let's stick with tesla. the annual vehicle sales dropping for the first time in more than a decade. the company recording his first dropping annual shipments from the shanghai plant. joining us to discuss is david welch. interesting moment for the company because the endless were caught off guard by the company itself boosting me forecast around auto sales. what went wrong here? david: tesla is hitting a what where the market for selling ev's is very mature. they got a lot of competition. we have seen these meteoric growth rates from tesla. there was good competition in china but it was still ramping up. there was almost no real competition in the west you had ford. gm was not a production in earnest.

pond i and kia were just getting started -- hyundai and kia were just getting started. now you have a pretty good number from korean brands. that is posing real competition for tesla. you mentioned the cyber truck earlier. the tax credits will help but it's a niche product. it's expensive. it's pretty strange looking. not a mass-market vehicle. tesla's lineup had four of the same vehicles going back a decade with the model s that kind of looked the same. debt has not had major overalls and styling. the cabins are not superlight furious or nice. they have not changed. that technology has gotten better with the lineup has not been freshened. you get a leveling off of sales on the competition is tougher. china will be tough for them to get market share.they are not only subsidize but have some great technology and products as

well. it is tough for tesla to continue growth without expanding the lineup. that is what elon musk is talking about. having some cheaper model 2 type vehicle this year. if he's going to get some sales growth, it will be from that model nab discounts on the others. jonathan: david welch, one of the best, pointing out what we talked about quite a few times. this is one of the most competitive industries on the planet. lisa: i thought you were going to point out the somewhat strange look of the cyber truck, which some people say is a feature. part you the one that said it looked like some kid just you a car in first grade? jonathan: a long time ago when the first release pictures of it, yes. i said it looked like what an eight-year-old might have drawn if they were drawing the car the future. then i saw the auto book and the a lot of people that wanted one so i was wrong. they proved the designers right. lisa: simple shapes work.

i saw a lot of them in florida when i was there. jonathan: certainly eye-catching. tom narayan is with us now. an outperform rating on tesla with a $330 price target. what went wrong yesterday? tom: what happens every quarter. we go too into the details on the numbers. they did 496. consensus was 505. buy side was higher at 520. people were looking at monthly data. the first two much of the quarter were strong. europe and china data was not that bad. they don't produce as much in china anymore because of the tariffs. they sell a bunch to europe. in the grand scheme of things, i had a 496. we did not miss my number. the expectations were a little high.

this year -- i keep forgetting it is 2025 -- we will have this new model, whatever they call it. what if it looks like the cyber cab? a lot of people like the aesthetic. i don't need looks anything like a model 3 or the y. as her colleague said, the first time in years you could get something that looks different, that is different and most important link priced different -- importantly, priced different. it is not range anxiety anymore. it is price. they are too expensive. what happens if we get a lower-priced car? i tend to think this is the next vacations miss as opposed to something we should be worried about. lisa: what is the secret to sell at a china weather is increasing divergence for every other company? tom: they have the software. that was the issue german oems had. the number one thing the chinese consumer wants is not speed or

driving performance. it is the software and connectivity. there is a tech halo effect. i talked to a lot of investors in china. they say the german own mediums -- oems lost their luster. it is like my dad's car, but tesla gets the halo effect of being youthful. in china they tend to skew you younger than the u.s. and europe. lisa: there's a real tension now developing. elon musk is such an interesting character because he's a lobbyist to the president of the united states while a major presence in china. how does he become the tim cook, the ultimate diplomat where he maintains his place while there's an increasingly hardline from the trump administration? tom: he has been able to do it.

the german oems had to do it with the chinese players. tesla did not have to do it. they sailed -- they negotiated the cell and produce locally -- sell and produce locally. elon talks about getting approval in europe and china. it is now hands-free in the u.s. if that holds on and we don't have a competition and china for something like that, again, tech. people are going to buy the product if they like the product regardless of the politics. jonathan: is it a winner takes all if waymo comes out of does better? tom: definitely not. it is such a big market. the robotaxi market will be -- i have seen forecasts of $10 trillion potentially at some point. there are so many players in

this. is he going to be a lot of software players? maybe not. maybe only a handful. at the end of the day, as long as you have the service and operation, it is not winner take all with uber and lyft and others. there will be multiple players. the cream definitely will rise to the top. jonathan: questions about how to value the company. it certainly has the multiple of a growth company. that has been true for quite a while. if that was your view for the last 12 months, you lost money and did not make it because you were on the wrong side. of the trade -- wrong side of the trade. yesterday it was vehicle sales. what drives the name and the multiple? tom: this is a narrative stock. it is up 35% since the election. a lot of yesterday's move was taking profits and an excuse to sell. it was not that bad of a number.

i think evaluation is based on narrative. it will be based on the new car we see next year or this year. what if they just cut the price from $50 a month to $100 a month? all of us would buy it. it's an autonomy stock. there are things that can change everything. even though i don't think this should be viewed as a massive catalyst, what if there is regulatory do you read -- dereg of self-driving? you can put a huge valuation on autonomy. it could be something with this new car or fsd take rates increasing. jonathan: tom, it is good to see you. tom narayan. the stock is bouncing back by .1%. dani: the biden administration

is laying rules like a limit or ban chinese drones in the west over national security concerns. the commerce department seeking comments with the march deadline that will leave any final decision to the incoming trump administration. u.s. lawmakers say two chinese firms control 90% of the global drone market. president biden is awarding seven former u.s. army soldiers and eight public safety officers presidential metals. -- medals. members of the nashville police department and two new york city firefighters are among the recipients of the medal of valor for their courage. rolex has raised prices on some models after gold's value surged last year. the most popular models are 8% were compared to last year. the brand typically raises prices on january 1. price changes usually indicate demand, material labor costs and inflation.

jonathan: more from dani in about 30 minutes. up next, the yuan under pressure. >> the path of least resistance is the dollar-yuan moving higher. moving up towards the 750 level. we could see a bigger move lower for the remnant be -- rem nimbi next year. jonathan: you are watching "bloomberg surveillance." ♪

jonathan: equities bouncing back by just .2% on the s&p. lots of attention on foreign exchange. the euro bouncing back to 103. the currency pair up by .3%. the yuan under pressure.

>> they have signal clearly they will be more proactive, both in terms of fiscal policy support this year for growth and at the same time adopting a loose policy status. the path of least resistance so to speak is the dollar-cny to move higher. the forecast is moving towards the 750 level. we could see a bigger move lower for the renminbi this year. jonathan: china allowing the yuan to we can the first time since 2023 -- to weaken past the dollar for the first time since 2023. thierry wizman joins us for more and happy new year. is china embracing the weakness? thierry: i think so and i don't think it was a surprise. they have kept interest rates very low, 1.5%.

unattractive rates for foreign investors and domestic investors. it seemed inevitable they would be upward pressure. eventually they would meld a willingness to allow the yuan to depreciate with their overall economic policy of stimulus. there are three prongs. easy credit. inevitably a weaker currency as well. china has done well to the extent it has with respect to growth in 2024 because it maintained strong manufacturing exports. now there's the threat of losing them because of tariffs and because of the slowdown in europe. it has to defend itself against that. it does somewhat growth the fall below 25% in -- below 5% and 2025 -- in 2025. lisa: will generate enough growth to make the renminbi attractive midyear? thierry: it doesn't really

depend on china and policymakers. it depends on what the trump administration will do with regard to tariffs. u.s. import tariffs imposed on china can blow up whatever policy ambitions they have. this is a precursor, a preemption of what could come down the road with regard to u.s. import tariffs. if they are aggressive enough, this will implode. the other way it can upload their plans is if there is capital flight. if they signal in an untrue way or a decisive way how much they are willing to let the yuan to appreciate. you can see flight out of the yuan. capital flight. it could be real investment plans in china and make the cost of capital higher as a result because they are not getting the capital they want. there is a balance here. you want to allow exports to become more competitive in the

face of u.s. exports but you know what capital to become too expensive. lisa: there's a broader question as we see the dollar appreciate versus everything. it is not just a yuan story. as ever breaking point for the dollar becomes too strong? is there something you're watching to understand whether it is a self-limiting characteristic to some of the rally? thierry: there is not a self-limiting characteristic to the dollar with the possible exception that u.s. export balances, the current account deficit gets too wide and people lose confidence. there are too many -- too much flight out of the dollar. this is a narrative that is going to continue into the early part of this year. the u.s. exceptionalism narrative. it is not just about better growth in the u.s., not just about higher interest rates. it's about the u.s. asserting itself geopolitically and strategically. the trump doctrine or trump

corollary to the monroe doctrine where the u.s. wants to expand its presence in the western hemisphere. the rest of the world sees a reassert of u.s. it sees other countries unable to assert themselves geopolitically. of course this is good for the dollar. people want to be a strong countries, strong political countries as well. jonathan: where does this leave europe and the single currency? thierry: somewhere in between. i don't think the u.s. is trying to dissolve the european union or destroyed europe. the u.s. wants to bring the eu into his political orbit and away from china -- into its political orbit and away from china. that might be a part of the u.s. strategy. it is maybe to weekend europe if only to strengthen it down the road by having europe make that choice. europe is not the only economic sphere that needs to make that choice. there are plenty of emerging

markets that need to make a decision on who they want to align themselves with. mexico, brazil. europe is not the only economic zone in the predicament. jonathan: europe has attempted to sit on the fence for a long time on this issue. lisa: do they have to choose? this goes to the likes of vietnam and thailand. with europe, it is prescient because there is a feeling they have been this close ally with the u.s. if that gets called into question and forcing them to choose a side, how do they do that with a lack of leadership? jonathan: with the incoming president forcing their hand. great to see you. thierry wizman on the fx market. euro-dollar amount 103. coming up, edward yardeni, sheila kahyaoglu, stephanie roth and mark cabana. another hour of "bloomberg surveillance" is up next. ♪

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>> this looks like a time of both opportunity and risk. >> the context in which the economy is set up for 20 25

under a trump presidency is beneficial for small, medium, and larger-sized companies. >> the tech sector is going to perform fairly well. >> i think those companies are performing well for a reason. >> expect another strong year, just not to the extent of 2023 or 2024. >> this is "bloomberg surveillance." jonathan: looking to arrest a five-day slide on the s&p 500, we are bouncing back by .2 per 5 -- .25% on the s&p. adding the ground running as we kick off 2025. we are looking ahead to payrolls friday oh we today. on january 10. on january 15, cpi data. on the 20th, inauguration. at the end of this month an fomc rate decision. if you want a preview of next week, payrolls, 153,000 is our estimate. lisa: incredibly important to see what this looks like him

especially after the allegations of the distortions of the data because of the hurricanes and other ramifications. a real question about whether we have seen a blip for the past five days in terms of a hiccup in risk assets or if this is a forward-looking indicator at a time where so many people are expecting that labor market to hang in there. jonathan: the set up to this year is so different to last her. we came into 2024 looking for four to six interest rate cuts. coming into this year sentiment is skyhigh, investors, businesses, consumers, you have interest rate expectations incredibly low. we are expecting 1, 2 cuts. let's see how things change over the next few weeks. lisa: last year the biggest mistake was that people were too bearish on risk assets and too bullish on the prospects of rate cuts. they overestimated how much higher rates would diminish some

of the momentum in the u.s. economy. in the u.s., could we turn that on the head this year? where people are too bullish on risk assets and bearish on rate cuts? or is he going to be more of the same and people are coming around to the reality that this is an economy that will not be deterred by interest rates? jonathan: coming up this hour, edward yardeni, with stocks on the young -- longest losing streak since april. we will speak to sheila kahyaoglu about whether boeing can stage a turnaround. and stephanie roth, looking ahead to december payrolls. we begin with stocks steady, looking to snap five-day losing streak. edward yardeni of yardeni research, staying bullish. three consecutive years of double-digit gains don't happen often. nevertheless, that is what we are expecting. see the s&p increasing 19% this year, however we think it could be a dumpy or absent than in recent years. ed joins us for more.

happy new year. let's start with that double-digit expectation for 2025. it is different about this year compared to last? edward: i think we are starting off with more uncertainty in monetary and fiscal policy. you don't know how these policies that the trump ministrations will introduce, basically from day one, i'm sure there is going to be some executive orders coming very shortly after the inauguration. the problem is, we don't know how these things intermixed. it is kind of like a doctor prescribing a whole bunch of different medications to you. some of them don't interact too well. we will see what deportation and deregulation and tax cuts and tariff increases and what that implies for the deficit all mixed together, and meanwhile the assumption is that the republicans are in a position to get everything through. maybe that is not croix -- not

quite the case. they have screwed it up before. they could do it again, i suppose. there was a lot of uncertainty on the administration's policies, and then monetary policy is on pause right now. the question is, how long? and i think, for a while. jonathan: what are the assumptions that go into your forecast? edward: i am basically acknowledging that i don't know how it is all going to end up, but my gut feel is when you added up together it will be a positive for the economy. the other thing that is important to recognize, especially after the past three years, is that the economy, as lisa mentioned, has been remarkably resilient at high interest rates. so, the economy is kind of like the rodney dangerfield of all of this. it doesn't get enough respect. it has its own dynamics. it is dependent on what happens in washington, d.c.

i think we are going to see a productivity boom, which has already started. that will keep the economy moving at a faster than expected pace. and that will keep inflation down. lisa: you think that rates are fairly valued? even though some people are saying, actually, maybe they are looking cheap after the recent rise at the end of last year? edward: you are talking about interest rates? on the interest rate front i was not in the camp expecting several rate cut/dear, and then at the end of last year, especially around september, when the fed chair started talking extremely dovish lee i cannot understand that. the economy is doing fine. inflation is pretty close to 2%. so what is the need for lowering interest rates? i think we are at neutral. i think we are where interest rates should be. the economy is doing quite well with it. and there is a lot of consumers, individual households that really enjoy having interest

rates at these levels. a lot better than getting nothing for your money market funds. lisa: which is a reason why so many people have been pounding into cash. if we see a third year of double-digit returns is that going to be concentrated again in the same leadership, given the fact that a lot of the equal-weight, broadening out types of beliefs stemmed from the belief in lower interest rates? edward: i think lower interest rates certainly help mid-caps, the small and mid-cap stocks. we had a couple of instances last year where all of this excitement about rates coming down got them to reasonably well. then it all kind of physical part in -- fizzled apart in december. with the fed is not going to be lowering interest rates as much. ok, everybody piles back into the magnificent seven. i like the s&p 400. they have lag behind.

if you look at an s&p 500 portfolio the way i look at it is, all of those stocks that are technology stocks either make it or use it. if you don't use it you are going to lose it. you are not going to be competitive. we have yet to see companies announce and demonstrate that all of these technologies out there, not just artificial intelligence, but robotics, automation, just thinking about changing your procedures in a way that makes workers more productive, a lot of that is going on and we are seeing it in the data. my projection that we are in a productivity growth boom is really not so much a forecast as it is an extrapolation. we have already seen a significant pickup in productivity. i think it keeps going. jonathan: u.s. steel as well. u.s. steel right negative in the premarket. has been all morning off of the back of news that president biden would block this deal.

biden blocking nippon steel's proposed takeover of u.s. steel. the president saying, need major u.s. companies representing the major share of u.s. steelmaking capacity. that is why i'm taking action to block this deal. he goes on to say u.s. steel will remain a proud american company, american owned, operated by american union steelworkers, the best in the world. lisa: this raises the question of how this will be interpreted. this seems to be in line with what president elect donald trump was talking about. he comes at a time where everyone is expecting a whole bunch of mergers and acquisitions as a result of a loosening in some of those parameters. what is national security? what becomes political? and what will get through at a time when ostensibly this is going to be an administration more amenable to mergers? jonathan: that stock down about 8%. to bring you back into the conversation, what is the signal you take away from this? edward: from this steel

announcement? jonathan: blocking this. what can get done, what can't get done? edward: the biden administration is still in business. they have not closed the shop yet. what it is consistent with what trump has been pushing for, as you have said. it is also consistent with regime change. in the biden years, obama years i think you could combine those years together, we had a lot of globalization. the idea that america's interests were identical to global interest and we all had to work together. kind of a kumbaya-kind of approach. now everybody pursues their national interests and we can talk about it and negotiate and work things out, but we are going to push for our national interest, you push for your national interest. we will use our economic power to get what we want and try to cut back we have to give in

return. it is kind of the environment we are in right now. lisa: but there is a real tension developing. especially at a time when people are talking about foreign investment in the united states. people are talking about mergers and acquisitions, the boom that could lift banks and other financial firms. how do you put that together with a real existential question about, what is national security? what is going to be politically viable? will the trump administration be excited about the idea of tieups, even in the tech space? edward: i think it will be more laissez-faire than we had under the biden administration, certainly. we will have more m&a activity. i think it has been going on quietly in the tech field. it is just not public, because a lot of the deals are microsoft buying, you know, a private company. that is one of the frustrations that small-cap managers have.

they spend all of this time putting together a portfolio of 20 great little companies and they expect that only a few of them will become the next microsoft, and it never happens because microsoft buys them. there is a lot of m&a going on even now. but i don't think the government is going to be as interventionist as we have seen hunter biden. lisa: you expect this to continue to be the roaring 20's. what is the potential risks that you see out there at a time when we are talking to some people about gold, some people about the possible dissolution of m&a for? edward: you did mention that i'm looking for a bumpy year and i would see a lot of those are going to be occurring over the next few months. you certainly have the uncertainty about monetary and fiscal policies. the bond vigilantes are acting up again. the bond yield is around 4.5% and getting a lot of questions. not just, can we go back to 5%,

but could we preach that and go to 6%? i would not be surprised that we saw 5%. that would spook the market, but i think we will find plenty of buyers at 5%, just like we did last time. and of course there is geopolitical concerns. the middle east is still a mess. you know, we have yet to see what israel is going to do next with regards to iran and what iran will do next with regards to israel. that confrontation is still ongoing, as is ukraine and russia. i think you put it altogether and at least for the first few weeks of the year i think there is a potential for the market to weaken, and perhaps even a correction. i would view that as a buying opportunity. jonathan: certainly weaker over the last week. we should do this more often person. edward yardeni of yardeni research. with some breaking news on the lot more, here is dani burger. dani: president biden has

officially blocked nippon steel's proposed takeover of u.s. steel, confirming our earlier reporting. the statement follows. it is my solemn responsibility as president to ensure that now and long into the future of america has a strong domestically-owned and operated steel industry that continues to power our national sources of strength at home and abroad, and it is the fulfillment of that responsibility to block foreign ownership of this vital american cup and a. shares down nearly a percent -- nearly 8%. investigators say there is no evidence inking the attacks in las vegas and new orleans on new year's day. there were some similarities. both suspects were army veterans who used the same app to rent electric vehicles. the man who drove into a crowd in new orleans had claimed to have joined the islamic state. an official says there is no evidence the group coordinated the attack. elon musk gifted 260 8000 shares

of tesla to unnamed charities two days before the new year. the $112 million gift was part of the year end tax planning and went into what is described as "certain charities." mosques -- musk sent over $5 billion to charities in a similar way at the end of 2021. that is your brief, jon. jonathan: that is what i want my year-end tax planning to look like. just give away $100 million. lisa: it is like all of the people that say, i want to grow up and be a philanthropist. jonathan: sheila kahyaoglu of jeffries as investors wait to see whether boeing can stage a 2025 turnaround. a conversation, just around the corner -- the corner. ♪

jonathan: it is official. following our reporting of bloomberg, president biden blocking nippon steel's proposed takeover of u.s. steel. that stock is down by a percent in the premarket. the president saying u.s. steel will remain a proud american company. one that is operated by american union steelworkers. lisa: talking about why this is important for the strength of the country, but also saying for too long u.s. companies have faced unfair trade practices this came even after nippon steel offered to give the government veto power over any potential production cuts coming out of u.s. steel. now the question is, what is next for a company that is going to be seeking some sort of takeover or sale of certain parts? jonathan: we'll head to the nations capital and catch up

with tyler kendall to talk about some of those issues. equity futures elsewhere more broadly attempting to bounce back from a five-day slide. on the s&p, the longest daily losing streak going back to april of last year. on the nasdaq 100 we are higher by .4%. your first call from wells fargo, raising its price target on citi, calling it the dominant pic in almost any scenario in the sector. your second call from wolfe research, raising its price target on meta, citing product catalysts driving upside and a healthy macro act dropped. that stock is up by .5%. your third call, tesla, seen growth opportunities in ev's, autonomy, energy storage, and robotics. let's turn to boeing. the faa saying the playmakers efforts to improve its manufacturing quality are still in early stages.

joining us now, sheila kahyaoglu of jeffries. happy new year to you. is he going to be a happy boeing? sheila: we will see how it works out in 2025. it looks like they are on a better path. you know, barring any production issues. they have completed a strike. they have done a $24 billion equity raise. they are reducing their workforce by 10%. they still have issues. programs that are losing in commercial airspace. defense programs that are losing about $3 billion this year. they are focusing on production and improving their cash flow losses. jonathan: what does output look like now on a monthly basis and how do you see that ramping up? sheila: in 2024 they are losing about $14 billion. they were producing about 18 747s amount. in 2025 they are set to lose $7 billion, coming mostly from defense and concessions they are

giving away on the 737s, given the strike issues and alaska issue last year. but they are improving to 29 a month on production. in 2026, that is when you are making cash. why the max is so important is, it is 50% of boeing's free cash flow, essentially. the remainder comes from their services business. lisa: we don't have a sense of what the main issues were, right? we have a sense of what potential remedies are with new leadership. the wall street journal reporting today that one of the measures they are going to be doing is surprise quality checks in its factories to make sure everything is on the up and up to prevent the kind of jet panel blowout we saw in the alaskan airline flight last year. you feel that is sufficient? has there been enough transparency about what wrong and how they are fixing it to prevent more of the same? sheila: i debate this all the time in my head. it is tough to opine on

somebody's culture we are not part of, but there are fixes that have needed to be done over the last decade. clearly, more focus on moving slowly, doing things better, more open oversight, i think. these checks probably allow that, given they are random and you don't know about them coming. in general it is such a heavily-regulated industry, especially in defense production. what we have seen is the faa has delayed certification of the max seven, and also other aircraft types are having more difficulty entering the market. just given the scrutiny we have seen post-boeing. lisa: what does demand look like in a year were a lot of airlines have postponed purchasing airplanes just because they have not been available? but also because of some of the security concerns? if someone travels and they go into a plane and they know it is old and they are doing extra

checks, is that going to change? sheila: that is where the airlines are ahead. that is why they rallied 45% in q4. you saw capacity cuts out of the market. last year we think we delivered about 1200 aircraft in 2024. we needed 1600 to meet air traffic. air traffic is at 2019 levels last year, which is surprising. it took us so long to get back and we are not at the trendline. every year between 2025 and 2030 we need about 1600 to 2000 planes. boeing has to produce about 700 maxis. billing has to produce 50 and you get 75 from airbus to meet that demand. lisa: at the end of 2025, if you look into your airline creation cristobal do you get the sense that airbus will have gained share because of their ability to produce more than boeing at a time where demand is great? lisa: sheila: in a global

duopoly airbus has won that battle. not so much on wide bodies, but share in nero bodies it is clear boeing has fallen below that 50% mark. that has already manifested itself in the guidelines. i think -- i think the focus for boeing is to produce going from 18 today to 40, to 50. it is the trendline we want to see, and airbus has a path, they are around 50 day, going to 75 in the next two years. jonathan: what was united doing up by more than one hunter percent last year? i was stunned to see this parent united coming in at number five over the last 12 months. sheila: that is what happens when you trade at three times earnings. you get a re-rating any meat numbers. but we saw was capacity come out of the u.s. market. partially because of boeing. partially because of spirit airlines exiting the market. we saw 70% capacity increases

coming into the apparent so, more rationalization in the industry. jonathan: gold is competition on the premium side of things. southwest, jetblue as well. what do you make of that? the push into premium by those players? sheila: everyone sees that the u.s. mainland market has essentially -- is essentially lossmaking to neutral. they want to move into the premium to be profitable. the next step is international. jonathan: can they compete with the major players? sheila: no. we have seen carriers take different approaches to what they want to do with their capital. whether it be buybacks, which we don't recommend, or deleveraging like we have seen from united and delta. they are going down to one times, two times leverage. they want to show investors that they can be consumer staples stocks and they don't need to trade at six times earnings. jonathan: can you get lisa to give up delta one and replace that with something from frontier for the next 12 months? that is the ultimate question.

lisa: really? is that the ultimate question? you think frontier has frontier one? jonathan: i'm not sure they can compete with the lounge at jfk. sheila: for the routes. lisa: or potentially the business accounts. jonathan: sheila, it is good to see you. a big year. sheila: great performance. jonathan: sheila kahyaoglu jeffries. stephanie roth of wolfe research, our cabana as we count you down. next friday, the big one is a week away. ♪

jonathan: the opening bell, 60 minutes away following a five-day slide. the longest daily losing streak owing back to april of last year. can we break that today? equity futures up by .3% on the s&p. some movers going into the opening bell. let's cross back over to manus cranny. >> no deal for nippon steel's bid for u.s. steel has been blocked. the reason, the might take action that threatens to impair the national security of the united states of america. this is the biden administration closing out if tara, and it is

about protectionism. they have a 30 day notice for nippon steel. what does this company become if it remains independent? what do somebody buy it? jp morgan says, strong standalone valuation. tough decisions will need to be made. a number of blast furnaces that may need to be closed. italian car production is down, but the story here is about access to credit here in the united states. not just for stellantis, but vw was well. the biden administration making it harder to the credit. it takes the stock down ever so slightly. we got a reasonable response on qt from wolfe research -- qe from wolfe research. -- chuy from wolfe research. upside, not fully appreciated, according to wolfe research. a quick chat with ai.

it says on average the pet owner in the united states spends between $1500 to $2000 a year on their pet. just make sure it is good quality pet food. jonathan: any evidence they are sacrificing their dental hygiene for their pet? which is what you insinuated earlier this morning. manus: you know what? companies should look after their personal hygiene. everyone. jonathan: thanks. the stock is up by 2.6%. equity futures attempting to bounce back here. we saw this mood yesterday. it did not hold through the rest of the session. lisa: the two-day week so far, this question of, was this the point at which yields start to impede risk assets? that is what we saw yesterday, with yields coming up after seeing some rally. in that leading to some of the selloff we saw more broadly. jonathan: priya ms. remaking

that argument earlier this morning. data picking up next week, ending with december payrolls before we get cpi on january 15. the inauguration on the 20th and a fed decision at the end of the month. stephanie roth of wolfe research, mark cabana of bank of america joining us. good to see you both. stephanie, expectations for the payrolls report? stephanie: we are looking for one hunted 75,000 on payrolls. i think the surprise from the report, given where markets are, or it could come in -- or it could come into the soft side. importantly, we are looking for an employment -- macron unemployment rate that could take up higher. -- ta\ cash -- tick up higher.

a lot of the gains have been driven by health care and government and that is not a sign of a strong labor market. we think the underlying trend is 140,000, but at the margin it is softer than where consensus is at the moment. lisa: we were talking earlier with claudia, and she is talking about how the fed has injected volatility into the market. in particular as a result of its data point dependence. do you expect there to be volatility either way if there is any kind of surprise whatsoever on fridays payrolls? mark: we do. we also think volatility is going to be higher in the rates market this year. simply because the fed is so data-dependent and there is so much we don't know about next year. we do think a very data-dependent fed will keep rates falling a little bit higher. if we get the kind of numbers stephanie was talking about, if we see softnesshe data we think there is potential for

rates to move lower. largely because we think there is so much good news that is priced into the market right now, so much optimism about u.s. growth remaining strong, around elevated risk asset valuations. if you start seeing it wobble in the economy we think there is a fair amount of reassessment that is going to have to happen. lisa: do you think that is the bigger potential surprise? actually some weakness that spurs a rally, based on positioning so far? mark: a rate rally, yes. we generally perceive that optimism in the market is extremely elevated. have seen that over the last few months. there is a great deal of expectation that this is going to be a super growth-file administration and their scorecard is going to be the s&p. that is sentient -- that has essentially driven risk assets to values. we think the outcome next year is wider. we don't know what the policies will be. as a result of that we think there is a little bit of a

mismatch there. elevated optimism versus a very wide range of outcomes. we think that should be supportive for duration. jonathan: stephanie, on policy what assumptions have you made through the next year or so? stephanie: for this year we think it will be mostly deregulation, which is a positive for growth. the tariff thing is one of the biggest questions. we don't think that will happen until later this year, parsley -- partially because they want to tie that to tcga. we think a lot of it is going to be relevant to 2026, but it is not likely to be that stimulative. the tcga is going to be keeping policy as is. there is going to be a couple of things that could at the margin be growth-positive, but then we have tariffs, which are a massive headwind. jonathan: are you saying the objective of tariffs will be revenue-raising? stephanie: i don't know if it is

the primary objective. the primary objective is trump generally -- genuinely believes in tariffs. jonathan: you mentioned this and i think it is important. policy changes are one thing. anticipating the consequences of them are another. it is not clear to me how inflationary or not tariffs would be. it depends on how they are executed, whether you get retaliation. also depends on investment decisions about companies that want to be -- what kind of assumptions can you make on changes and consequences? mark: i think it is challenging. our economists has done a good job trying to dimension to the best of their ability what the key considerations are. but they will be the first to tell you that the range of outcomes is extremely wide and that their confidence around these assumptions they are making is extremely low. you are right, there are so many other things that can impact a potential inflationary concert once of tariffs.

look at cny overnight. you're starting to see the fx markets price some of this in. to have confidence over what the overall outcome will be is, we think, very difficult. some of these policies could be inflationary. they were not terribly inflationary last time. what we think the market should be spending more time on is time to think about, what is the fed's reaction function? last time they are bias was to look through any potentially inflationary impact. this time the macro backdrop is different. core pce is more elevated. will their reaction function be the same? we don't know yet, that is what i'm going to be looking for. to think about what the impact as to the bond market. right now my bias is still to believe that the fed's likely impact will be to look through, to the extent they can.

finally, i think the points stephanie made are good. thing about where the market narrative is. the policies are probably not going to be all that stimulative. impact mostly in 20 clay six. not 2025. where is the market right now? you two talked to a lot of people. i talked to a lot of clients as well. i generally think that clients preferred these policies are going to be impactful near-term and they will be quite stimulative. that is where we think market optimism is. the range of outcomes is a lot wider. i think that probably means lower rates as you see some convergence. lisa: we were just speaking to edward yardeni. it raises this question of, how important is that mix of

policies based on where the economy is right now? stephanie, from your vantage point, arcus talking about how he thinks too much optimism is baked in. is there too much baked in with respect to the data we have gotten, in terms of where we are from and how much inflation is still in the economy and how much momentum there is? stephanie: i think that is totally fair. these things go hand-in-hand. it is baked into the market is the economy is running on all cylinders strong. it is, but it is probably not quite as strong as the outlook suggests. the fomc kind of introduced a little bit of extra optimism about the economy. that's probably going to disappoint to some extent we will probably see payrolls running a little slower. the economy is running just fine, but the expectation is that trump's policies are going to be incredibly growth-positive

and they are going to be happening right now and they are probably not. it is going to take a while for this to play out. lisa: do you agree that the market's bias is going to be to look through any of the effects of the tariffs? stephanie: i think that is what they should be doing. if they don't and start becoming more hawkish that could be a recipe for a recession, in the sense that we are largely at full employment. this could become a real problem. if we start to see the fed reaction function look infant than what it was last time we might have a real problem. in which case, growth is likely to slow down notably. tariffs are stagflationary. lisa: when you look at the fed's reaction function, we were just speaking about that, she was saying they should follow models of it were, and in particular some of what she is seeing in the unemployment market. what would you be following if

you are on the fed as you are -- as your lodestar for whether economy was heading? mark: in periods of elevated uncertainty, which i think we are going to continue to be in, think the most basic monetary policy rules can be instructive. like the taylor rule. any model is only as good as the assumptions you put into that. we think taylor has been a good guide over recent years. the fed should not follow it blindly, use that as a meaningful input. other officials have talked about how they do that. and right now, at least, they have converged to near where taylor suggests they will be. the question is, what does the data imply from here? market thanks the fed will only need to cut 40 basis points more and they will be done. if you use the fed's economic projections in the medians and unemployment rate, as well as on inflation, it suggests they should be cutting something

close to 100 basis points. it really depends upon, again, what are the core economic assumptions you have? i think growth is going to remain strong. the unemployment rate will not rise much above 4.2%. if you see inflation move down or the unemployment rate take up, the fed could be potential he cutting a lot more than what is priced. final point for me. i think about the fed's reaction function more broadly, we generally believe the fed is going to over-weight labor data. the labor market right now is a strong. we think the labor market can best be summarized as one where there is not a lot of firing, but there is an recently slower pace of hiring. it is still a very healthy labor market, but continuing claims, if you look at a four-week living average they continue to edge up initial claims stay

stable. if that continues i think the fed is going to be seeing a labor market that has less breath and more concerned than what the most recent fed meeting [indiscernible] jonathan: i will be the first to acknowledge it will not take much for a downside surprise next week for people to start pricing in more rate cuts. lisa: that is an interesting dynamic that has changed. jonathan: to the two of you, thank you. mark cabana of bank of america, stephanie roth of wolfe research. some days for you. the tent, payrolls, the 20th, of course, for inauguration, and the 29th for federal reserve. moving in the premarket, rivian coming in with deliveries better than expected following the downside surprise from tesla yesterday. rivian coming in at $14,183. lisa: before we draw parallels

rivian had been constrained with production based on component shortages. they said that no longer is it an issue of component shortages, something that is plaguing them. maybe they are releasing some of the production. i remember when there was more on order. they cannot produce them quickly enough, and now there is a question of whether that is normalizing. jonathan: that is a good problem to have. let's get you an up and on stories elsewhere. here is dani burger. dani: bloomberg reporting that president biden is preparing to permanently ban new offshore oil and gas developments in some u.s. coastal waters. it is an effort to lock in protections doing his final weeks in the white house that are difficult to revoke. people familiar say biden is expected to issue the executive order in the coming days. the declaration would not affect drilling or other activity on existing leases. blackrock's bitcoin etf posted a record outflow on thursday. investors pulled $333 million

from the bitcoin trust etf. it is the biggest since its launch. data show that investors pulled the funds for three consecutive days, the longest losing streak so far today. in sports, the fighting irish are the winners of the sugar bowl after upsetting georgia 23-10. notre dame scored 17 points in under a minute and wrote a strong defensive performance for the win. the game was played in the wake of the deadly terror attack in new orleans. the irish will now play penn state in the orange bowl. texas will take on ohio state in the other semifinal match up next week. that is your brief, jon. jonathan: we will set you up for the week ahead and get you the latest news in the nation's capital. from new york, this is bloomberg. ♪

jonathan: the opening bell, about 41 minutes away. with equities higher by .3%. the bond market rally and just a touch. in the fx markets, some stunning moves to kick off 2025. the dollar, absolutely ripping yesterday. the euro getting crushed. just to see -- just to see the euro-dollar breakthrough 10 -- 1.0 three, stunning. it speaks to the diversion so many people have started to expect. lisa: the diversions seems to be edified by economic data. yesterday we got those jobless claims that came out at the lowest level in eight months. it raises the question of what is priced in versus what we can expect in a year full of unknowns. jonathan: a big week ahead for you. before we get to the week end today, ism manufacturing at 10:00 a.m. eastern on monday. durable goods on tuesday.

ism services on wednesday. adp payrolls and federal reserve minutes on thursday. another round of jobless claims, then on friday it is the first big print of 2025. it is the december payrolls report. its head down to the nation's capital to catch up with tyler kendall. good to see you. how close is this one going to be? tyler: it is by no means a done deal for house speaker mike johnson. we know he has been strategizing with donald trump, who has thrown his weight in johnson's did. even going as far as to call out holdout republicans. one of the first things i'm going to be asking undecided republicans is whether or not they received a call from mar-a-lago overnight. i can tell you i spoke to one congressional aide that told me this could come down to a potential deal on spending cuts. that is because if you look at the republicans who have been voicing opposition to speaker

mike johnson's reelection bid, they are the same republicans who have been voicing concerns about what a future potential trump agenda could mean for the fiscal outlook of the country. particularly when it comes to anticipated tax cuts. it is important that when we are talking about a potential trump agenda, if republicans cannot solve this today that could vote badly for the party, considering if we look ahead to january 6 congress is expected to certify the 2024 electoral college votes. party leadership has made it clear they want to see that go off without a hitch. lisa: before we get some of the other developments this morning, we did get a message from donald trump on truth social, saying speaker johnson is very close to having 100% support do we have any backing to understand whether that is the case? tyler: the key thing to remember here is that speaker johnson would need a majority of the votes in order to cleanse the speakership if everybody shows up to vote -- which is not a given -- that magic number he

needs is 218. he is coming into congress with 219 republicans, which means he can only afford to lose one vote, and we know he has. congressman tom massey from kentucky has said he will not be voting for johnson, and there has not been any reporting saying he has changed his mind. and you hear trump saying he could have unanimous support, democrats are by no means going to come to republicans' rescue. we are expecting all democrats to vote in favor of her hakeem jeffries. jonathan: joe biden is coming out and officially locking nippon steel's proposed takeover of u.s. steel. is there anyone in opposition to that decision in washington, d.c.? tyler: this was not necessarily a surprise in washington. biden issuing this statement ahead of a january 7 deadline for him to decide. early harping on this idea that he is trying to protect american

steelworkers. he saw this as a flashpoint in the 20 tour -- 2024 campaign. donald trump also saying he would block the deal. back in may i had caught up with senator jd vance before he was president elect who had an interesting view on this deal. we it -- he is from ohio. he told me at the time he understands japan, of course, is a close ally, but we have to recognize the national security concerns around this. particularly considering how close they are to china. you're going to be checking in with the trump transition team, but that is what we were told at the time. jonathan: great reporting, as always. bloomberg's tyler kendall there with u.s. steel down by something like 8%. the path forward for that company, very much unclear. lisa: it seems like they need to do something. a lot of people were saying that nippon steel was the best potential option for them.

the national security concerns are interesting. the fear is that there could be some sort of flooding of the market of the cheap steel to reduce the value or market share of u.s. steel. that had happened in the past. a question going forward about what this means for international companies investing in the u.s., and which areas are important to preserve national security are up for grabs. jonathan: i wonder if we get a change of mind from the incoming administration? watch this space. who knows? got a change of mind on tiktok, didn't we? lisa: he has already said he would not necessarily -- that he would block the deal. i can't imagine. politically do you think that would be feasible? jonathan: knows? he's not running for election again is he? lisa: heard it here first. jonathan: how do you feel about a two-day week? [laughter] it works for me. i don't know if it works for you.

a fantastic lineup as we had to payrolls friday. we will catch -- we will speak to jane foley during the year already. for foreign exchange, both the euro and chinese currency. apples we have not seen on the euro since 2022. for the chinese currency, since 2023. we will speak to liz young thomas as we start to see this bond market constrain returns in the equity market. and michael gapen, looking ahead to payrolls friday. he estimates something like 150 thousand in our survey. -- one hunter 50,000 in our survey. have a fantastic weekend and happy new year. we can stop saying that about a week from now. this was "bloomberg surveillance." from new york, this is bloomberg. ♪

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matt: five days of losses. i am matt miller. katie: bloomberg open interest starts right now. sonali: coming up -- katie: coming up deal. president biden's blocks nippon steel's deal for -- to buy u.s. steel. matt: car sales get a