♪ >> the market i think is more focused on the near term of tariffs. >> the markets will cheer a narrower approach to tariffs. >> the markets have been underestimating how much the trump admission rating likes tariffs more than dealmaking. >> i'm not even sure the ministration knows what the final set of tariffs are going to look like. >> we are still in this waiting game. announcer: this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning for our audience worldwide. coming into tuesday on a two-day winning streak on the s&p 500,

leaving behind a five-day slide, the longest losing streak going all the way back to april of last year. equity futures up by about 1/10 of 1%. the nasdaq 100 up by 0.11. a big day for economic data. a little long we get the jobs opening report. then tomorrow, adp and jobless claims and payrolls just around the corner. the median estimate is about 163. the single name we have to start the program with this morning is tencent. tencent is getting absolutely hammered in today's session, negative by more than 7%. a blacklisting from the united states of america. lisa: designated tencent as a military company, adding to the growing list of other companies. they also had a battery manufacturer that is a component of tesla added to the list. a question year of what this is especially with the tit-for-tat with china, saying that the likes of some of the big u.s.

companies including nvidia also a potentially at risk for them. annmarie: these kinds of designations which actually stems from a list that came out during the trump one 10 administration basically means these companies can't sell to the u.s. military. but then there is a reputational risk on why you would want to get involved, and the concerns about these specific companies what they have to report back to the ccp. my big question is why in the final days of the biden administration are they going after these top two companies? >> the sitting president is determined to remind everyone he is still a sitting president because they have been incredibly busy over the last few weeks. lisa: incredibly busy when it comes to things like oil and gas. we are still waiting and it should be in the next few days in terms of more sanctions on russian oil and gas. there is going to be a number of measures that biden is going to take on the final days out of office. >> as we close out his final days and anticipate the first

days of the dollar trump presidency which most people assume started in early november and yesterday with the first classic day of getting a report from the washington post. we said wait until you hear from the incoming president and what to incoming president do? batted it away. lisa: totally inaccurate, i'm not wandering anything down. what i thought was interesting was the moves to the markets. maybe you could learn more about what the market out and maybe with the headlines are at this point. the fact that a lot of those moves stuck, that dollar weakness stock and that the move was significant in terms of dollar weakness, euro strength, mexican peso strength. yes, it retraced after donald trump's rebuttal of the washington post report, but not completely. that shows how offsides this market has gotten with how much has to happen to really undo that. annmarie: when it comes to the trump world and how they operate, terry haynes also talked about a cabinet of

rivals. we are going to see the sausage making in real-time more than i think the market has been used to. jonathan: whipsaw from one report to the next. the euro stronger for a third consecutive session. coming up, we will catch up with julian emanuel of evercore calling 2025 and inflection year for ai. eric nelson of wells fargo as canada searches for a new prime minister, and kirsten's lock of apollo. stocks looking for a third straight day of gains. nvidia unveiling new products and renewing optimism over ai demand. julian emanuel writing with consumers enthusiastic on ai adoption and sentiment in corporate america relatively muted, 2025 the critical ai adoption inflection year. julian, good morning. happy new good to see you. >> there's a statute of limitations there. jonathan: we are getting close to mine, friday.

6800 base case for you on the s&p 500. middle of this year? >> bets are year-end. jonathan: we had a couple of guests say that the men of the year is not going to be donald trump, it's not going to be jay powell, it could well be jensen huang. >> he made a pretty good case last night for that in the case. you go back to the start of this bull market, october of 2022, ai has been literally the one constant theme. a month later, chatgpt was unveiled to the world and you've had this incredible and -- enthusiasm building. we all use it in our daily lives and what we've seen is that corporate america has been slow and cautious in rolling it out. and the work we did a year and a half ago basically pointed looking at past adoption curves as 2025 being the big year, and

basically what you heard last night, it's that there are lots of reasons in terms of how the technology has evolved to believe this is going to be the inflection. jonathan: you alluded to it, the big tech firms have certainly not been slow and steady about investing. adoption i think that key point here. how close are we to us sitting here around a table and me reading out headlight after headline of job cuts after job cuts because these companies are adopting this technology and they no longer need the staff? julian: that's been part of why it has been cautious and steady but not explosive yet, because there is a sensitivity around this idea of job cuts and frankly when you think about it, the economy, as strong as it is in the u.s. is actually going to set the backdrop for that transition to occur more seamlessly than it might otherwise be if we were growing

sub 1%. >> if this adoption does start to happen, are the big tech players like nvidia the ones that are going to start the benefit most? >> in general you have the biggest names in these kinds of technological revolutions. it is not winner take all, but it is winner take most. i think part of the misunderstanding was a year ago or a year-and-a-half ago when we all thought well, there are fewer barriers to entry to using ai simply because you don't need desktop, you don't need the cable like you did for the internet revolution. well you do need people to deploy, you do need people to supervise. understand how the data gets work and that leads into the bigger names with more capital and more budget being able to really dominate the playing

field. lisa: when you start to talk about big numbers, you were mentioning how much capital some of these big tech companies are putting into it. microsoft announced another $80 billion into their buildout. who would that benefit, nvidia. it raises that question which is big tech continuing to dominate everything and almost masking weakness and concern that you are seeing under the hood with other potential names. is that going to be the contour of 2025? julian: if you think about it, the deregulation backdrop that we are about to have this profound. but if you think about the capital market cycle, what may be different this time is in thinking about the rest of the world, we think there's going to be more activity in small and mid-cap names simply because those kind of companies don't have as much exposure to europe

and to china, and so the regulators there won't be as much of an issue to getting deals done. annmarie: why haven't we seen more of that now already pricing in? you think we've seen enough? julian: look at the writ in the regional banks if nothing else. there's a lot of that excitement priced in, and it is just a question of time in our view before the deals start to happen, because it does make sense. annmarie: if you are focused on jensen huang being the most important person of 2025, can we talk about the second most important, the incoming president? what does that tell you about what they should be paying attention to in terms of the whipsaw we saw between headlines and how they reacted? julian: i think we can all be forgiven for not believing or thinking that this new year,

this 2025, not 2018. 2018 was really the year where all of the policy initiatives got unschooled and literally you would have, we would write our research reports friday afternoon, and then you would hear a tweet. we would writ up for a sunday publication. but the cadence of the market being three steps forward and two steps back does not mean that we are not still in the bull market. it just means it is more volatile, which it should be with volatile -- where they are. jonathan: i remember a lunch together we had where you about low volatility going into 2018. do you think this is a 2017 set up for a 2018 set up? how do you feel about the kind of year we are getting into? julian: our base case is for episodic volatility. we saw that number, 2.5% core

pce hit the screen on december 18 and then we had a massive volatility spike. we go back to august, there were a couple of memes. but we are still in a booming market but that is the world we are living in. jonathan: this takes us to bond yields. are we at the mercy of the bond market still in this equity market? julian: i wouldn't say at the mercy, but it is much more important than it has been in the past. because it is going to be part of what guides the ability of the incoming trump administration to achieve what it is trying to do. the feedback might be well, some of the policies are perhaps more inflationary and yes we got to figure out what to do with the debt ceiling that for equity investors at these valuations, you have to be sensitive to bond yields. annmarie:annmarie: which raises

the question of whether the most important economic point is going to be jolts for the 10 year option. a time when you are seeing an increase in longer-term yields vs. shorter ones. is this a good sign or a bad sign? julian: this speaks again to how data is now different in this post-pandemic environment. if you look at the last 50 years going from inverted to steeper usually means a recession is right around the corner. it doesn't mean that at this point. the economy remains very solid from our point of view and recession risks in the coming years, the credit markets are telling you that. but it is something that we will have to continue watching simply because the absolute price, the yield price of the 10 year over the cycle, when you've gotten toward 5%, that is when all asset markets run into problems. we think they could be a

possibility at some point this year. jonathan: good to see you, happy. thanks for being with us. the 10 year is up by a single basis point. the very long end of the curve, the 30 year in america, yields we haven't seen going back to 2023. we saw that headline yesterday here stateside. the u.k., levels we haven't seen since 1998. what is behind these moods in the bond market because why and what is more important than the number sometimes. lisa: in the united states there is a two full question about how sticky inflation is and what the deficit is going to look like and the issuance of debt and how much that is going to factor in. in the u.k. you add this sort of stagflationary environment that you see within laois data all across europe performing to the upside, surprising to the upside. that is a negative surprise compared to what people want to see. it just goes to the heart of the existential angst of the moment which is are we under appreciating just how sticky inflation is and how pernicious

they could potentially be accompanied by slower growth? jonathan: let's take the opportunity to get you an update on stories elsewhere this morning. here's dani burger. >> mark carney, the former governor of the bank of canada and bank of england is considering running for prime minister of canada to succeed justin trudeau. he's received support from lawmakers and supporters who want positive change and a winning economic plan. he holds a series of business and philanthropic positions including serving as the chair of bloomberg inc. janet yellen spoke with china's vice premier a week after the u.s. said the chinese state-sponsored hackers had breached about 100 treasury department computers. yellow expressed concerns about malicious cyber activity. the treasury secretary also warned of consequences for chinese companies that support russia's war in ukraine as well as chinese industrial overcapacity which he says is harming u.s. business.

mcdonald's is no longer setting aspirational representational goals, a revamp of its approach to diversity, equity and inclusion policy. the company is retiring as di pledge and renaming its diversity team as a global inclusion team. that donald cited the evolving landscape around di and the u.s. as a factor in its decision. and that is your brief. jonathan: i could talk about this topic all day, i think it is one of the major shift taking place in corporate america at the moment. we have to acknowledge up front there are some potential legal issues that corporate america has to navigate but this was never about values, it was always about selling product and selling services and i think as we've seen over the last decade, and we talked about this repeatedly, if these companies wanted to sell to a progressive consumer and insulate themselves from the regular tree impulse of the left, is why they took on all these values to begin with, we've never seen a major shift. they've got to worry about a conservative consumer and they need to be concerned about

something they haven't thought about for the best part of a couple of decades which is the regulatory impulse of the right, the republicans. lisa: how much of this is catering to consumer preferences or consumer pushback vs. the political shifting winds, and how much do those things intertwine? that is the question as we see an increasing number of companies shift away from dei. jonathan: we will talk about meta-a little bit later. up next, tariffs confusion. >> there's a question of what can actually be implemented with executive authority. i think it's very possible that a lot of these are going to go on is a very aggressive tariffs on china. the limitation will kind of ramp-up over time. jonathan: live from new york city this morning, good morning. ♪

♪ jonathan: live from new york city, welcome to the program. equity futures with a lift again. check out bond yields up again just by a single basis point. lisa will tell you there is an important option a little bit later. she will tell you more about that later on. this morning, tariffs confusion. >> the problem is that there are principles that the president-elect has put out there in terms of wanting to make sure that the u.s. and trade partners are more equal footing from tariffs perspective that then there is the question of what can actually be implemented with executive authority vs. congressional authority. i think it's very plausible that a lot of these go on including some very aggressive ones on china but the implementation would ramp-up over time. jonathan: markets absolutely whipsawed by conflicting reports. the washington post suggesting

from aids are looking into tariff that only apply to critical and forth. the president-elect quickly -- quickly pushing back saying the story incorrectly states that his tariff policy will be parent back. that is wrong. tyler, i guess the first question for you, what is going on? >> president-elect trump quick to dispute that washington has reporting. not at as result universe tariffs remains to be seen that it is clear that he is pushing for universal applications. i took a look at his truth social pants and a quarter of his post mentioned the word tariff, whether he is talking about canada, nippon steel or using tariffs as a potential revenue raiser for his proposed reconciliation package. that could be needed to court republicans who have told us time and time again that they are concerned about pay force for a potential trump agenda and expected tax cuts. of course none of these posts are concerns about any potential

visionary or retaliatory impacts which is actually why i'm watching this month's consumer sentiment reading from the university of michigan which is a little more sensitive to politics and how americans are starting to internalize these potential economic impacts as we get closer and then ultimately start the trump presidency this month. annmarie: we are seeing the sausage making play out in real time. it's clear he wants optionality. yesterday he talked about the fact that maybe he would even be open to two reconciliation bills. and he's potentially going to be meeting with republican senators. what is the big debate right now that is still brewing between the house and senate over how they pass this agenda? >> i was actually talking to one republican strategist yesterday who's advocating for that two bill approach to separate out the priorities when it comes to immigration and energy and then see the tax overhaul for later down the road to republicans could get some early wins. we know that senate majority

leader john thune is more inclined that approach because when you look at the sausage making getting done, it is difficult to see how everything could be folded in to one build and there is so much disagreement, so maybe separate out some of these priorities were received little bit more widespread support, but this time next week we should have a clear picture of that because as you mentioned we are expecting trump to meet with senate republicans, but this weekend he has invited a whole different cohort of house republicans to mar-a-lago who all have different fights in this reconciliation package, whether that is the house freedom caucus or members that represent districts impacted by the salt deduction so they can start to hash out their differences. annmarie: who wins in this fight when it comes to how they decide they're going to with him agenda? >> i think at the end of the day, president-elect trump just wants an early win and ultimately he's going to go with the path that will get him that.

he signaled he is opening the door to a potential to path track if that is ultimately what it takes to get his agenda accomplished. we know he wants to come out of the gate with some early wins and then put forward some of perhaps these other policies that we are talking about when it comes to tariffs, but it is clear that he wants some of these tangible deliverables on the table first. lisa: yesterday michael barr said that he was going to step down effective february 28 from his position, really overseeing the bain capital rules. is this an early win for donald trump? >> michael barr has long been a target of senate republicans. we know that incoming senate banking chair tim scott yesterday put out a statement absolutely blasting him, blaming him for the 2023 regional bank prices and also the capital rule requirements to the endgame proposals. and it was clear that he's been a target since he was appointed by president biden in 2022 and i can tell you i was in the room when jerome powell said that

trump did not have the authority to fire a fed governor. and you could hear a pin drop in that room it was so resounding. but it appears that barb is looking to avoid that potential fight but important to note he stepped down as vice chair which limits the options to replace them, particularly as trump now has to look at the fed governors to instead fill that role. lisa: the question you are tripping over, whether he was up for a fight or whether that fight might not be good for the fed, i actually don't blame you at all because this is a key question for people, do people think that this undermines the fed, or does it actually support it by allowing one of the current fed governors to step in? how is it being perceived in washington? >> we've been watching closely even on the campaign trail have president-elect trump was dealing with the fed and this idea of fed independence after he previously said that he felt that the executives should

actually have a role in these monetary policy decisions and we've even heard floated this idea of a potential shadow fed chair is a potential policy that could be implemented under an incoming trump administration. ultimately when it comes down to it, senate republicans have all applauded this decision as widespread and you mentioned michelle bowman being floated to potentially fill the spot. she has long been considered a potential ally when it comes to this republican nominee appointed during the first trump administration. jonathan: good to catch up. we will catch up with french hill of arkansas later on this morning, the house finance committee chair had this to say following that resignation. i was pleased to learn that michael barr is stepping down. a lot of republicans share that view. lisa: in 2023 he with the person who put forth a series of capital rules that elicited a ton of pushback from the financial industry saying this would cripple the banks, reduce lending. is stepping down comes ahead of an administration that is absolutely going to wage war on the regulation of banks to try to deregulate the banking

sector. it just goes to show that there is a very narrow line about whether there is a negative issue tied to fighting this president when it comes to fed independence or whether it is the appropriate thing. and it is unclear how it is perceived. jonathan: congressman hill joining us at about 50 minutes. do not miss that conversation. who remembers the family photo at the g7 in the summer? annmarie was down there and she said how many of these people are going to be left in six months? we will count up next on the program. eric nelson of wells fargo. ♪

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jonathan: two day winning streak leaving by that five day losing streak to close out and begin 2025. on the nasdaq,. up by 1/10 of 1%. we can start with 30's and work our way in. up a single basis point. closeness levels we have not seen since late 2023. in the u.k., close to the late 1990's. starting to look a little painful in british markets. lisa: especially when not accompanied by the growth people

expect in the united states. it produces a quagmire that the bank of england and ecb are inflation -- are facing. inflation is proving to be sticky and can limit how much they can cut rates. jonathan: cable, the pound, a better against the u.s. dollar. in the last 24 hours everything was doing better against the u.s. dollar after that report suggesting donald trump suggesting watering down a universal tariff. donald trump pushing back quickly. euro-dollar at 104. positioning and how low the boat was to one side on that release. lisa: as we talked about, we will get a whipsaw. that headline says this over truth posting that says it's not true. the point is there is a lot of hope we can unlock a dollar weakness and strength elsewhere.

you see that in the equity indexes in europe. the hope that maybe the pessimism has been priced in and how little it will take. jonathan: not much needs to go right to trigger a big move in the opposite direction where positioning is lopsided like it has been building over the last month. euro-dollar at 104.08. nvidia's ceo unveiling new products at the ces trade show. the lineup includes graphic cards for gaming pcs and software to help come needs develop autonomous driving nai. -- and ai. lisa: a future of a billion robots in 10 million factories that are automated. the idea of humanoid but not quite human future. and includes $1.5 billion of self driving cars and trucks. the idea over the application will go and the hope it will happen soon and name dropping specific car companies who

quickly got a boost in their equity shares. a question if you can come through with this and whether nvidia is just showing why it will be the biggest winner of the transformation. annmarie: they have the software component and ship component. now it feels like they will be pervasive everywhere. this is an inflection point this year for ai and adoption and how we see it circulate across consumers and everything consumers use. jonathan: we have that conversation coming up on bloomberg tv. 1130 eastern time -- 11:30 eastern time, ed ludlow sits down with jen-hsun huang live. the u.s. blacklisting tencent for links to the chinese military. both companies say they have no ties to the military and is threatening to disrupt the global eb market with those dependent on -- ev market.

tencent said we have no relationship whatsoever. annmarie: if you are a chinese company, u.s. officials tell you they have an obligation if there is national security concern and the ccp says we need to know about this, they have an obligation to share the information with the ccp. incoming secretary of state marco rubio talked about catl in august, the fact this is a vital supplier to pla and he wanted it put on a black list. you will see a lot of this, the list designates from trump 1.0. my question is if the biden administration waited two weeks to put the names on a list. lisa: hundreds of officials have been hacked into. people are trying to avoid ccp oversight in the united states. there's question about this is

a tit-for-tat or broader recognition and a decoupling of tech in the united states and china. annmarie: we talked about how we all read this detailed report over the weekend. the first line talks about chinese hackers shutting down thousands of u.s. ports and power grids and infrastructure targets. jake sullivan told executives at a secret meeting in the white house in the fall of 2023, more than a year ago. jonathan: shocking when you think about the policy towards china. you have to go back a couple of years. they were considering taking tariffs off china because of the inflation fight, which is amazing given everything that's happened since then over the past years. annmarie: they were looking at any lever they can pulled get inflation down. this was the biggest issue joe biden had domestically. one was going to be potentially,

a big treasury versus national security concern debate for months, and in the end joe biden said we will keep the tariffs on. it is something they were looking at doing for months. jonathan: meta with three new directors to the board, including ultimate fighting championship ceo dana white, a vocal supporter of donald trump. lisa: another one of the big tech companies that are adding more conservative members to their boards. this comes after mark zuckerberg has a relationship with dana white going back. it is not completely out of the blue. it kind of speaks to the point we were making about companies are adjusting and adapting to the new political regime and at a very quick pace. annmarie: the election showed this is a center-right country. it is not just dana white. i just remember trump being at the rnc talking about he decided to leave his vacation early to

come here personally to introduce trump, not melania trump, dana white introducing trump at the rnc. you do think of the trump world. nick clegg is out. joel kaplan now has to deal policy. jonathan: the winds of change. we will see a lot more this. prime minister justin trudeau resigning as head of the liberal party after more than nine years in power. >> i have always been driven by my love for canada and canadians deserve a real choice in the next election. it has become obvious to me with the internal battles that i cannot be the one to carry the liberal standard into the next election. jonathan: 20 points behind the conservatives. that choice might turn out to be a big change. there's been a major change.

go back to the g7 photo in the south of italy eight months ago. annmarie, you were there. how much has changed in the last six months? annmarie: i was reporting live from bari. this was a lame-duck lineup except for giorgia meloni, who basically greeted everyone. it felt like they were going there to kiss the ring of this new leader of europe. emmanuel macron is there but he's been dealt a huge blow domestically. she's the only one left in the list of leaders. jonathan: governor carney might be interested in throwing his hat in the ring. you were 20 points behind the conservative. why would you want to get in now? just wait, have the election, watch it fail and then jump in. lisa: it shows how much the u.s. is a template and what you should and should not do. maybe trudeau is trying to avoid

a kamala harris situation. you don't give as much time to a potential candidate. how much big of a gap can you close when you have momentum on such a level on the conservative side? jonathan: erik nelson joins us now. welcome to the program. there has been a clear and obvious shift against the comforts and towards conservative leaders. what are the consequences going to be? erik: who would have guessed it would be the bastion of political stability, the g7? not expected. a lot of forces domestically in these countries driving that. it depends on the country. in germany, there's positive forces and catalysts could come out of the election in february. changes in the debt break. germany has been beleaguered for several years now. underperforming most of the europe -- most of europe. there could be some positive catalysts.

france, maybe a little less so. there is still consternation. it could be messy if there is another election the summer. canada, this is about tariffs. domestic policy is not moving the currency markets that much. how fast does boyette coming to power and get into the tariff negotiations? trudeau sent positive signals after his visit to mar-a-lago last year. i think canada can avoid the worst of the tariff issues and implementation but it will be a rough ride for the next few months. lisa: i want to underscore something you said. it does not matter who comes or goes, the leadership of any of these countries, what matters is tariffs in terms of where the currency is. that has been the reason you had the strife in the last couple of days. is that correct? erik: in the case of canada, absolutely. i don't see material change in

domestic economic policy. maybe slight fiscal tightening from the conservatives if they coming to power. germany is a different story. tariffs matters hugely, but so too does domestic policy. they need to outperform and unlock some of that fiscal spending. mers can deliver that. does he have the backing? does he have the super majority in the bundestag? that is what we have to find out at the end of february. lisa: there's a question around europe. how do you pair tariffs with the idea that inflation is sticky at how much might limit the ecb can cut rates? how do you juggle those ideas? erik: i think tariffs themselves are probably not inflationary to the extent they will move the needle on ecb policy. they are probably demanded negative. germany is manufacturing export dependent. in the last few weeks the

inflation prints have been harder. ecb excitation figures are pretty strong. german inflation numbers also on the hot side. we are coming in with a little fresh momentum and european inflation. -- in european inflation. one reason we think front end --short and rates ever to recover alongside the euro. annmarie: what did you make of the whiplash with the washington post story talking about how this might be a more narrow targeted approach on critical imports into the u.s. and donald trump walking that completely back? when you see that episode, one of the first big trading days people are back on the holidays, what did you learn from that to look out for for the rest of 2025? erik: we saw this time and time again in 2017 and 2018. there is some kernel of truth to the story. there probably is an initiative being worked on by best sen --

bessent on this initiative. there is still the u.s.-china peace, its own track for tariffs that was not mentioned as part of the story. i suspect that is something being worked on in parallel. there is a lot of section 232, section 301, it will be a mult -- multifaceted approach. trump's denial is not that surprising. you don't want to signal all the tough talk on the campaign was really just bluster. you don't want to send that message. there is a kernel of truth to this. i think our baseline is we will not get 20% tariffs on all countries on all goods. i don't see that happening. it reveals -- you were talking about this. it's positioning. you need one headline to get a little relief in the dollar strength straight. it will be a back-and-forth year for the dollar. we are still bullish but short term you can see more

consolidation and some dollar weakness in the next few weeks. annmarie: coming back to canada, if it was to be critical imports, what would that mean for canada? erik: canada is a big exporter of iron and steals the u.s. if this is -- steel to the u.s. if it is a national security route, candidate will be in the crosshairs. energy is really what canada tends to export to the u.s. primarily. as long as that is not included, candidate will avoid the worst of this. there are some off ramps, some side letters and the usmca agreement that allows for some delay in tariff limitation between the u.s. and canada. -- implementation between the u.s. and canada. they could allay some of the biggest concerns from the u.s. putting tariffs on canada. jonathan: good to see you. erik nelson on the latest in the

changing face of the g7. let's catch up another stories with dani burger. dani: sticking with donald trump, he's looking to keep his special counsel's report against him from becoming public. 's lawyers argue the report should not be released citing jack smith's political motivation and desire to undermine the transition. smith had dropped his case against trump after the election citing long-standing doj policy against prosecuting sitting presidents. getty images and shutterstock have announced they will combine in and equals transaction merger. the company will have an enterprise value of about $3.7 billion. once the merger is finished, the company will be named getty images holdings and continue to trade under the ticker gety. shares of both are higher in the premarket. home prices in the u.k. have dropped for the first time in nine months .2% in december to

just over 370,000 u.s. dollars. they had climbed to record high last summer. the drop is attributed to a stuttering economic growth and mortgage rates that are expected to continue to pressure the housing market. that is your brief. jonathan: more from dani and about 30 minutes. up next, the fed's fight against inflation. >> the biggest risk is re-acceleration of the economy. this is suggesting that the acceleration story will be the bigger issue. jonathan: torsten slok is up next. ♪ ♪

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jonathan: two-day rally on the s&p 500. can we make it day three? under surveillance this morning,

the fed's fight against inflation. >> the biggest risk is reacceleration. adding to that the inflation rate is not getting to 2%. there's an argument that it is stalling at around the high two's if you measure by cpi. we are at the same level seven months ago. this is suggesting that the acceleration story will be the bigger issue. jonathan: the u.s. 30-year bond yield climbing to its highest level in more than a year. investors remain concerned after a potential reacceleration of inflation. torsten slok noted the impact of the fed cutting 100 basis points. "the fed cuts and associated developments will boost gdp over the coming quarters by one percentage point and boost inflation by .5 percentage points." good morning. happy new year. you wrote they cut 100 basis

points in september and the u.s. moved 100 basis points in the other direction. torsten: that is really unusual. normally the textbook would say if you cut interest rates, long rates should be going down. why is it when they have cut 100 basis points that we have now seen long rates go up 100 basis points? that has opened up a lot of conversations about is it because fed cuts were not warranted? is because of fiscal policy? is it because of less demand from abroad? that's an important quantification debate about what long rates are going up. the term premium has gone up 80 basis points according to the new york fed. 80% of the increase in long rates since september has been driven by worries about fiscal policy. issues that are not explained by fed expectations. lisa: which of the three points you are making do you lean on as the reason? torsten: when you do these

compositions to quantify the sources of why long rates are going up, you don't know the onyx lane factor in the term premium that is driving that. is that because of fiscal worries? some people say it is technical issues with the yield curve steepening. it tells you there is something else going on. if you look at the chart, it's unusual that long rates are going up. if it is because the market is worried about fiscal issues market is worried about fiscal issues, what are the consequences and the next several weeks? lisa: you have a new positive

yield curve. the steepest going back to 2022. do you think it is a positive development or negative development? >> the excitation was -- the fed will cut more relative to price at the moment. markets are pricing the rights to stay higher for longer and you will not get all these cuts. well, is that good or bad news? the backdrop is the economy is still strong. the bad news is that higher for longer will continue to weigh on balance sheets that are weaker. companies with low coverage ratios will get hit by rates higher for longer. it has a number of consequences that bring back memories of 2022 when rates were going up and stocks going down. annmarie: yields higher since the fed has been cutting and you are saying some is driven by fiscal. we have not gotten the fiscal package yet. "administration made it clear they want to see something, whether it is one reconciliation bill or two. is that saying to the fed you are on pause until we get to see what comes out of this proposal? torsten: two-year important point, these bills would be two separate bills.

one with border and security and then later we will deal with the tax front. combining all this raises the risk of a bloomberg having saying a significant number in terms of what the deficit impact is. if you have a bigger risk of higher headline numbers, it raises the probability we will get some potential liz truss moment where we could see the never coming out and instead of giving it dripwise, having a big number where market say there is qt going on. t-bills need to be rolled over. we have a 6% or 7% budget deficit. annmarie: what does that liz truss moment look like in the u.s.? torsten: if there is still significant budget deficits and we have significant issues with t-bills outstanding and short dated and need to be rolled over, we still have qt, and on

top of that if we have new fiscal deficit spending at a number bigger than with the market is expecting, it raises the plitye might have some situation with the markets say that a lot of treasury issues. we have had discussions every day when we have a treasury auction around the metrics on the auctions and what are the numbers tell you in terms of the overall fiscal sustainability? jay powell keeps pointing that out that it is unsustainable. jonathan: you wrote about a closing out 2024. the risk of a 2022 repeat, how great is that risk? torsten: much higher than what the probability is signed by the market. the 60/40 portfolio underperformed. rates went up and inflation was going up and at the same time stocks went down. now the nike solution -- swoosh

has been flattened out. we have a few cuts priced in. imagine this expectation start to go up. maybe we will get another hike. a lot of equity investors will say in that case, we have the trailing pe on tesla at almost 200. that is why some stocks are incredibly expensive. maybe the fed has to do something more to hike rates again. i think more sensitive names will certainly see a bigger hit. given all the stocks driven by a handful of stocks, i think that makes it much more sensitive to the nike swoosh going up. jonathan: good to see you, sir. torsten slok of apollo. the second hour of "bloomberg surveillance" around the corner. we will catch up with keith lerner, french hill, jason thomas and charles evans. this is bloomberg. ♪

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>> we ended on a bumpy note. we started the year on a bumpy note. we need more clarity, more answers. >> one of my core beliefs, whatever it is, you have to go through temporary repricings. >> we are at levels that are problematic for the stock market. >> we expect another strong year, just not the same extent as 2023 or 2024. >> we are seeing more equity -- opportunities in the equity markets. >> this is "bloomberg surveillance."

jonathan: bouncing back from the longest losing run since april. the second hour of "bloomberg surveillance" starts with equity futures up by a 10th of 1% on the s&p. about unchanged on the nasdaq 100. loads of economic data this week including payrolls on friday. job openings, adp and claims report tomorrow. jobless claims usually come on thursday but we have jimmy carter's funeral on thursday. claims are brought forward. keep an eye on the debt auctions coming up later. lisa focused on this. 10-year notes later on and 30-year bonds tomorrow. lisa: yesterday, three-year auction did not go phenomenally. if you're having your eyes glazed over as you listen to this, this is incredibly important at a time when the yields on the login have backed up dramatically.

pc that much higher than the ones on the short end. it has a huge impact on all financial estimates. annmarie: garfield reynolds was talking about how bond and phasers may face a lose dynamic coming out of washington. i'm looking forward to the reporting that president-elect trump will sit down with republican senators. we just talked about this with torsten slok about how there may be one huge reconciliation package. the bond market might find that uneasy and unnerve them. potentially the senators could sway him. jonathan: what happens will put the fiscal suites on -- squeeze on everyone abroad. we have a u.k. 30-year yield at a height we have not seen since the late 1990's. that was your point in the last hour. lisa: it's about that auctions in the u.k.. it's about u.s. rates and the fact that inflation has remained stickier across europe, across

the u.s. are we in a secular inflationary environment that is going to make it difficult to see rates come down to levels a lot of countries need an order to get the growth they want? that is the reason why people are trying to answer the question that torsten slok was asking. why the incredible rise and how sticky is this? jonathan: they have lost fiscal space in the u.k. and france. what is it mean for markets? torsten slok made the case maybe it's a big repeat of 2022. bad for bonds, bad for stocks. bad for both. lisa: that is why people wonder what regime we are in. 2017 or 2018. if you have a situation with another fed rate hike on the table, how could that torpedoing elevated equity valuations at a time when people still have not wrapped around their heads the

idea of higher for longer for risk assets? annmarie: trump is not going to accept a market that is bad for bonds and of market bad for stocks, which may mean the ultimate check on what he does in power. jonathan: equity futures. s&p 500 was negative to start the hour. on the nasdaq 100, just about unchanged. lisa: can i add some positivity? maybe growth is going to do really well and we will get the efficiency from the godfather of ai, jen-hsun huang and his rockstar jacket. people transform the way we live. jonathan: a bullish story to help do you sleep at night. up next, keith lerner. congressman french hill on donald trump's agenda and former chicago fed president charles evans.

we begin with stocks higher. s&p 500 and nasdaq seeing back-to-back gains as investors begin to pile back into big tech. keith lerner cautiously optimistic. "driven by resilient economy, supporting solid earnings growth near 10% in 2025. investors should anticipate a bumpier path relative to last year." welcome to the program. why a bumpier path compared to 2024? keith: great to be with you. the outlook theme is a bull in a china shop. the primary trend is up but it will be delicate. some things are likely broken. the december pullback is a microcosm of what to expect. one thing as a starting point as far as why it might be a bumpier right is expectations are much higher this year and markets are all about how things come and relative to expectations. coming in the last year

consensus was looking for gdp growth in the economy around 1%. it looks like there will be around 2.5% for 2024. into this year we have expectation numbers showing higher. the battle we all know between the good and potential bad of trump's policies. jonathan: why should have a little allocation to gold in the portfolio. why does that make sense this time around? keith: somewhat of a portfolio diversifier and the geopolitical uncertainty we are seeing. central banks are continuing to buy gold. we saw a headline from bloomberg about china continuing to start buying gold again. we think that is a good hedge relative to the stock and bond portfolio. lisa: the fact that you want to hedge is interesting, especially in light of our conversation moments ago with torsten slok of apollo. maybe we could see a repeat of 2022 in both bonds and stocks

doing poorly because you might have some sort of reemergence of inflation that could prompt the fed to hike rates. is that on your bingo card 425? -- for 2025? keith: if you look back over the last 18 months, we have seen rates move above 4% and move adequate velocity. that had -- at a quick velocity. it is the pace we have moved. if you look at the bond market, the main reason for the recent move up is the term premium, the uncertainty factor start to rise at a more rapid pace. i think that is the risk. it has the reset on how people think about investing and part of the reason back to attack is because if you think -- tech is because if you think about small caps, they are back where they were pre-election. interest rates are somewhat higher.

if they are higher for longer, it will be hard for small caps to outperform. we have been bullish tech and communications and still bullish now. interesting tidbit. not a recommendation but nvidia peaked in june of last year. it was flat or slightly negative from mid june to the end of last year. semiconductors are about 7% or 8% below july. we still think there is room to go intact. -- in tech. lisa: we have seen an effort to have stocks climb out of a hole but it's only been big tech. you have seen underperformance of equal weight and small caps. is that basically the roadmap for the year ahead with people betting on a billion humanoid robots from jen-hsun huang? keith: i would stick with tech

as the primary theme. every bull market has a theme. this one is ai. if you look back at the late 1990's, tech lead until the end. the 2000s were about global industrialization. if you believe the bull market is intact, it is more likely that ai and technology will continue to lead. when that stops it probably means we are at the end of the bull market. we are giving it the benefit of the doubt. you are looking at only about 25% of stocks on the s&p above the 50-day moving average. that goes to your point about its more tech. we like large caps the most. then mid-caps and small caps in the u.s. it continues to support our bias for the u.s. which has more tech and the large-cap index will step annmarie: you talk about how international markets

underperform in extreme. we saw positioning yesterday and the tariff headlines. you can take advantage of it. are there areas we should be looking out for that the market could take advantage of? keith: we have been on the u.s. side for years. it's a big consensus heading into this year. where can the consensus get tripped up? it is extreme. we had the worst performance in international relative two the u.s. since 1997. 2016 was a little bit of a roadmap. in 2017, for a couple of months they are performed. you can see a cervical rebound, may be a short-term rebound but the fundamentals favor the u.s.. unless you are nimble you want to stick with the primary outperformance of the u.s. we expect it to continue. if you expect tech to outperform, stay with the u.s. and large caps because of the

waiting in the indices -- weighting in the indices. jonathan: good catch up. meta. nick clegg taking over as chief of global affairs. here are some of the headlines for you. starting in the united states, we are ending our third party fact checking program and moving to a community notes model that will allow more speech by lifting restrictions on some topics that are part of mainstream discourse and focusing enforcement on a legal and high severity file nations. -- violations. people who want to see more of it in their feeds can. lisa: this is a huge reversal from some moderation they had in prior election cycles and prior years. this is according to mark zuckerberg. some believe giving more people a voice is driving division rather than bringing us together. more belief achieving the political outcomes they think matter is more important than every person having a voice.

i think that is dangerous. the potential of catering to the new administration or adopting what has been the shifting sands remains the debate. annmarie: it feels like jo coughlan and dana white are in the driver seat when it comes to meta. we went to return to the fundamental expression of freeze fresh and. -- free expression. jonathan: stories elsewhere with dani burger. dani: the biden administration is in negotiations with the taliban to swap americans detained in afghanistan for one prisoner, and alleged osama bin laden associate in guantanamo bay. president biden has reportedly not made a decision on the proposal yet. hedge fund bridgewater

associates has laid off about 7% of its workforce, affecting 90 employees. a spokesperson said the layouts are meant to keep the organization nimble and flexible. the cuts bring the firm's headcount back to where it was in 2013. other hedge funds also cut about 10% of their staff last year. a patient in louisiana who tested positive for bird flu has died in the first confirmed death linked to the respiratory virus in the u.s. the patient was over the age of 66 and had underlying medical conditions. louisiana's department of health said they were no additional cases found. the cdc says they are currently 66 confirmed cases of bird flu in the country. that is your brief. jonathan: thank you. more in about 30 minutes. up next, trump returning to washington. >> if i'm chief of staff, why do i care if it is one bill or two? how do i get what i want?

how do we get my agenda approved? jonathan: we will talk about that next with congressman french hill. ♪

jonathan: welcome to the program. stocks are positive on the s&p 500 to kick off tuesday morning. under surveillance, trump returning to washington. >> if i'm donald trump, if i'm chief of staff, why do i care if it is one bill or two? how do i get what i want? how do we get my agenda approved? if i have a better chance of doing that with one bill, let's do one bill. if it has to be 16 different bills, i will do that. historically, the reason you get these massive bills and everybody says they hate is that is what passes. jonathan: donald trump heading

to capitol hill tomorrow as the president-elect pushes republicans to pass a single massive bill containing his priorities. looking to secure a house vote on immigration, energy and extension of the trump tax cuts by april. republican congressman french hill joins us now. good to catch up with you. we love your opinion on the best way to pursue the president's agenda. is it going after one big bill? rep. hill: great to be with you. i do support one bill because it's the easiest way to get the votes for the president's priorities in the house, which include energy, permitting, reform, securing the border, and debating the extension of the trump tax cuts of 2017. lisa: we have been debating how much the 10-year yield has a seat at the table when deciding

how big of abilities when congress meets and possibly passes this as soon as april. how much of a veto power does the bond market have? rep. hill: lisa, i don't think it makes any difference on that point whether it is one bill or three bills to the point of your previous commentator. what is concerning to me is i wish we had finished fy 25 spending in the last congress. instead, we will do both. we will complete fiscal 2025 spending and try to do budget reconciliation with the house and senate before early april. that is a big lift. dave may demonstrate a little uncertainty on the part of the bond market. the real issue is let's get spending under control through budget reconciliation. that is the purpose of budget reconciliation. it is a procedure by which you can do big things in congress using 51% vote margins in the house and senate.

president obama created obamacare. president trump and his first term used that to reform the tax code. republicans in the house and senate this year want to use budget reconciliation to get federal spending under control while we also extend progrowth features of the trump tax cuts. lisa: one concern from a lot of fixed income strategist on the show is they are not seeing where the cuts will come in the place in this reconciliation bill. where are they going to come? rep. hill: we had a meeting all weekend where we worked with our committees and jurisdictions on determining cuts and spending across the board, with the exception of what president trump has taken off the board, medicare and social security benefit areas. the rest of it is on track. you know how much spending has gone up and just since the pandemic. we are running a $2 trillion deficit per year. 7% of gdp.

that is the part that is unsustainable. everyone knows that. we have got to get our spending on a more sustainable front. that would benefit the bond market if they saw that kind of work on the part of congress. annmarie: we have the cbo talking about one point about one big beautiful reconciliation bill which would extend tcjawou. the president-elect talks about no tax on tips. how much can get through this congress? rep. hill: look, annmarie, cbo also said the tax cuts and jobs act would not produce increased revenues over a 10-year budget window. you have seen record revenue pour into the country. people bringing taxable income

back, gdp growth, job growth, wage growth all up in those years following the tax cuts and jobs act and before the impact of the pandemic. i don't believe house republicans are governed completely by the opinions of cbo exclusively, even though it's an incredibly important component. we have seen how in error estimates are from the joint tax committee and from cbo, not recently but for the past 50 years. annmarie: you are now the chair of a powerful committee, the house financial services committee. we see a number of representatives going to mar-a-lago this upcoming weekend. will you be there and what do you plan to discuss with president-elect trump? rep. hill: president trump has invited the committee chairs to a dinner and we will be talking about our priorities we have for the first few months of his administration and getting his views on those. annmarie: what are your priorities specifically for the

financial services committee? rep. hill: we have talked about that many times. i have three. i want to right size the regulatory system for community banks. i think that's an important feature that has gotten off track in the biden-harris administration. we want to make to the sec is focused on capital formation and investor protection in orderly markets and not a political agenda that soon-to-be former terror -- chairman gary gensler had. people can use blockchain and digital currencies and digital assets to advance their business mission and make sure the u.s. is a leader in this new web 3 technology. annmarie: michael barr stepping down, you welcomed that. the wall street journal talked about maybe a replacement for michael bar is governor bowman. would you welcome that? rep. hill: mickey bowman has

done an outstanding job as a governor on the federal reserve. she comes to the federal reserve with practical experience both as a bank commissioner and a family connected to community banking business in the heartland. she's been a great voice for common sense and tailoring regulation. i think she will be a good one. jonathan: we are seeing big shifts in corporate america. we would love your thoughts on what we just heard from meta. it only broke about 15 minutes ago. this came from meta. starting in the united states, they will be ending their third-party fact checking program and moved to a community notes model. we are seeing some big shifts around corporate america. taking note of more conservative voices in the last few months, particularly after the election in november. that is notable for corporate

america. i wonder how you are responding to things. what do you think of that shift? rep. hill: over the decade i have been in congress, basically three decades before that i was in corporate america both with public and private companies. i have never been a big fan for bringing politics, partisanship and social policy fads and to corporate boardroom. i think business should be in the business of delivering a product that meets the needs of the consumers. all consumers, no matter what their walk in life is. that is why i think it is good that is this appears to be getting back focused on conducting their mission and leave the politics at home or out with her friends. jonathan: french hill, appreciate your time. congressman french hill of arkansas in washington, d.c. lisa: a question about what kind of role they are taking and how much this is shifting to

conservative versus just simply exiting the stage left. i want to make a note on the announcement from meta. they talk specifically about efforts in 2016 to have third-party moderators and why it failed was because those independent moderators were no longer independent and had their own views and biases. it was all most a walking back of what happened following the 2016 election. annmarie: it is not a surprise given postelection these executives that have been going down the mar-a-lago and speaking to president-elect trump and the list of the shift. mcdonald's yesterday, meta, walmart, tractor supply, john deere, caterpillar, boeing and the list will continue. jonathan: everyone wants politics out of corporate america. all we really taking politics out or just repressing it with a different kind of politics? there's a difference. the way that congressman french hill was talking about, getting

politics out of the boardroom and out of corporate america, out of human resource departments, i'm on board with that. most people are. are we just replacing it with a different kind of politics? lisa: honestly, we don't know the answer. how do you define what politics is a lot of it has to come down the policies that go to the heart of how business operates? it is a very narrow line. jonathan: five huge story for corporate america and will be for several years. coming up, jason thomas on the fed's definition of restrictive monetary policy. this is bloomberg. ♪

jonathan: equity futures on the s&p are positive, up close to 11%. two hours away to the cash open. here's manus cranny. manas: las vegas had something for everybody, from the jacket that jensen wore to the sprinkling around the companies he's doing business with. the stock was up aggressively so far this year, up 11% at the scale of adoption of blackrock and blackwell. pc gamers, developers, creative's, talking about a robot. hard work, $3000 hard work, pc for ai developers.

this is about encroaching more into robotics and sprinkling a dust for everybody. huber got a bit of a halo effect. yesterday i was talking about the upbeat guidance from them along with a buyback. nvidia, uber, the data from uber will lock into nvidia and give you the road forward, supercharging the timeline for safe and scalable autonomous driving. it was a drop the mic moment for a number of different companies. rounding it off with tesla, they are on the back foot this morning. downgrading the stock. why? valuation and execution. they shift to the price target to $490, genuflecting valuation with robotaxi counting for 50% of the applied valuation in the stock. therein lies the point. how much of tesla is about the cars.

we talked about this with dan ives. the rest is on autonomous trying to in the ai trade. for now they take 2% out of tesla in the first wave this morning. jonathan? jonathan: we will touch base again in about 60 minutes. u.s. east coast dock workers union meeting today trying to negotiate a new labor deal in if they don't come to agreement, i january 15 strike would shuttle -- shutter gulf ports almost certain. lisa: you could have 40,000 workers striking as soon as next week. interesting, though. early october, the international longshoreman association got backing at the end of last year in december from donald trump and he was almost taking their side when it came to automation. at the end of the day, that's what the fight is about. lisa: that's what i want to build on, the use of semi automated cranes, saying that if you use them, you have to have

extra dockworkers on hands and dockworkers are saying that you cannot tie our hands in terms of efficiency before we even get started in understanding what the technology is. this fight will be increasingly difficult for leadership to weigh in on given the economic hope for much more productivity. jonathan: and it's about where the tech is coming from as well. that's a major issue. janet yellen telling the chinese vice premier that recent hacks of the treasury department have raised serious concern about malicious cyber activity, warning of consequences for chinese companies who support the russian invasion of ukraine. annmarie: we have heard this before and the sources in that journal story showed how the telecom companies were told of chinese -- china lingering and hacking. what was so interesting yesterday in the press release was that it was the last line,

the last line. after everything we have learned about what china is doing, pervasiveness across u.s. industries, hacking her and her colleagues emails, listening in on conversations of president-elect trump, you have to think why did they lead with this? lisa: she's been a huge proponent of bilateral conversations and maintaining communications as a way to avoid serious altercation. this is probably her last communication with her counterpart in china, raising the question -- has it been effective when we talk about these malicious acts still unfolding? jonathan: pretty shocking reports. finishing on this story, meta-revamping their approach to free speech, dropping third-party fact checking and moving to community mode, lifting restrictions on more personalized approaches towards political content. annmarie: this feels like yet

another company shifting to the right, reading the tone of the room of the electorate of the united states. many people saying that they feel like over in america has gone too much to the left. nick clegg is out. joel kaplan will be running the scene and adding data really tells you the tone and the tenor that we could see. lisa: there's also the larger question about where the liability lies, they don't want the liability of a news organization, they want to step away from that. number two, what is the role of the social media companies and whether this is just removing politics or just injecting a new form of politics on different types of businesses. that remains to be seen. social media needs to be worked out in terms of the main way a lot of people get news and frankly the kinds of people that filter. we hope it is a town square where people can honestly voice opinions and let's hope this moves us more towards that. jonathan: meta is down, not a

big move. plenty more updates on that story a bit wet -- a bit later. more fed speak this week, jason thomas saying that policymakers keep saying restrictive but it may not mean what they think it means and it may be time for the fed to leave well enough alone and retire the presumption that the economy cannot withstand rates at these levels. jason joins us with more. let's talk about the word restrictive. what guides your view about how restrictive we actually are? >> looking at the last 18 months, the real fed funds rate has been in excess of 2%. you know, that should be very restrictive. over the same horizon we have had real gdp growth averaging nearly 3%, twice the level most forecasters had for the potential growth in the u.s. with productivity growth exceeding 2% on an annual basis for the last five quarters and we are of course left with core

cpi still above 3%. adding in measures of financial conditions like stock valuation ratios and credit spreads at 17 your tights, i don't see restrictiveness anywhere you look in the data. i think it is time to retire this language, because in many ways it has created some damage, creating expectations among market participants and investors, management teams, that they should delay transactions, delay sensitive purchases by six months, 12 months, 18 months into the future, when rates are lower. abandoning this language, changing the rhetoric, excepting that we are more or less or less at neutral today, what i think be quite helpful in terms of coming, many of the elements of the economy coming to terms with rates likely persisting near these levels. annmarie: what do you see the

message is at the long end of the yield curve? it has risen by 100 basis points. >> i think it is the market repricing neutral. the term premium is estimated, right? the 10 year relation to expectations for short-term rates over 10 years. what are those expectations? right now i think it's not so unreasonable to think 4.25 is going to be where the fed to fund average is over 10 years. if so, 10-year yield's at 460 are not much of a term premium. at least historically. the term premium of the 90's was 150 basis points. i think that we have been so use to, during the qe and large reserve accumulations of china and other central banks, we became accustomed to term premiums that were zero or negative.

term premiums that are modestly positive, people thinking it's a sign of concerns over fiscal outlook or just the sheer volume of bond offerings, a much simpler explanation is that the neutral rate has just been repriced by markets and moved into the 4.25 range. lisa: you just put out a paper talking about some of the big questions for the year ahead, but looking at where the market is setting up, it seems to be positioned for u.s. exceptionalism, tariff sitting the rest of the world and not the u.s. in a negative way, and the idea that we will get a soft landing with a few fed rate cuts at the same time as technology increases efficiency across the sphere. where would you push back against that positioning? >> first, we have to wait and see what europe is going to do in response to the u.s. election results. 14 months before the u.s.

election, the european commission president commissioned a report from the ecb president. we will see if they act on it. people talk about europe's security dependence on the u.s., but over the last few years there has been increased economic dependence. european exports are up 52% since 2001 and over the same amount of time exports to china have basically flatlined largely because of the sudden emergence of the chinese auto sector. i would pay very close attention to changes in europe. it is priced at a 40% discount to the united states. market participants are not especially optimistic about those likely changes, but it provides a pretty significant risk calculation for investors. secondly, i think that most people are focused on nvidia and ai and we should be focusing on their customers. the four largest customers in the united states, they have capital budgets that roughly

doubled from 2023 relative to intended investment in 2025. data center investment is up eight fold over this time we will see how productive these "ai factories" are. i think that this is going to have a big impact. the valuations of these companies imply that the return on this capital is going to be in the 25% to 30% range and, you know, we are waiting for the proof in the pudding. we don't yet see clear evidence of downstream revenues and applications that are necessary to justify that. lisa: are you basically saying that you are bullish on europe right now and getting more bearish on u.s. big tech? >> i think that in the past, big tech in the united states had an price-to-book ratios, the valuations. you know, you don't value a

money printing machine based on the costs of the paper or the printing press. these were rich, intangible assets. over the last few years you have seen effectively a change in strategy with a move to a much more asset heavy business model. looking again at the top for customers at nvidia, their capital budgets have gone from .1% of u.s. gdp to over .7% of u.s. gdp, this is a phenomenal increase in spending. the valuations of actually increased over that time. price-to-book ratios have gone up as they moved to the asset heavy or business model. again, this is interesting and it is certainly curious. when you look out at what is cheap and what is not at risk of valuation decline related to rates being higher for longer or just a revision to growth

expectations, much of the rest of the world, especially europe, you are getting pretty well compensated. i would also say that the euro, it's reasonable to expect that it will break through parity by june. you know, by the second or third quarter of this year, you could have, if you are a u.s. dollar investor, you could be looking at a european market that looks exceptionally cheap in terms of valuations and on a currency adjusted basis. annmarie: are you almost saying that at the end of the day europe could be forced to find its own growth and be a great place for investment under the antagonistic trump administration? >> and we will see what they do, but the issue in europe is not the lack of tools, the lack of resources. europe saves more than the united states in terms of raw financial resources. they have more than the front -- the united states. it has been a lack of political

will. mario draghi calls this out in his report, this in action is the only way to improve consensus but that is deepening political divides in europe. so, we will see. we of course have a german federal election in february and we will see what that signals about their appetite for change. more importantly, it could signal to policymakers the sorts of changes that could be in store if they don't reform. yes, i think that the trump election victory to be an important impetus for changes that are in many ways long overdue. jonathan: thoughtful stuff, jason, really appreciate your time. especially that bit on europe in the end. europe's issues are so deeply cultural, it will take them a lot to get out of this hole. lisa: does it take that much, though? if it's just a slight upside surprise? his point was that it doesn't take much based on where it's

priced. jonathan: we've seen evidence of that a few times on the show. euro-dollar, updating stories elsewhere this morning with your bird brief, dani burger. >> mehta is revamping their approach to free speech. mark zuckerberg said that they would drop a third-party fact checking and moved to community notes. >> after trump was elected in 2016, legacy media wrote nonstop about how misinformation was a threat to democracy. in good faith we try to address those concerns without becoming arbiters of truth. fact checkers have been politically biased and destroyed more trust than they created in the u.s., so over the next couple of months we will be phasing in a more comprehensive community driven system. >> they will also take a more personalized approach to political content in the u.s. dell is rebranding pc content in

a brand to increase sales, dropping old names in favor of simpler product names. they will be using business chips to upload through their rival intel. donald trump reiterating his ambition to purchase greenland, promising to make a great again after news of his sons visit there. writing on truth so show that it's an incredible place and the people would benefit tremendously if and when it became a part of the nation, we would protect it and cherish it from a vicious outside world. that is your bloomberg brief, john. jonathan: thank you. watch this space. up next, higher for longer. >> inflation is still a bit sticky, the economy is doing ok. it makes sense to wait. going from little uncertainty to higher uncertainty, priced in

the markets. jonathan: up next, we catch up with charles evans. from new york, you are watching bloomberg tv. ♪

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jonathan: stocks up for two straight sessions, up close to .2% on the s&p with bond yields higher as well. some headlines over the past 24 hours, the 30 year yield is the highest since 2023 and in the u.s. and u.k., since 1998. the case for higher for longer in the u.s. this morning. >> the economy is doing ok. inflation is a little bit sticky. it makes sense to wait. they understand there's a lot of uncertainty about policy that's

coming, and when that's uncertain you should slow down. the big disconnect, i think, between markets and the fed is where is the fed heading over the medium to long term? that's what's got to get priced in. jonathan: the fed governors saying that the fomc can proceed cautiously on further rate cuts with pressures remaining and charles evans wrote -- i expect inflation will return to 2% within their current timetable and they don't want to risk cutting the rates and then backtracking higher if inflation rises again. charles, welcome to the program. want to go through a range of comments we have had over the last few days. governor cook called things stickier. daley said we are uncomfortably above the target. why do you suppose with all of that in mind they reduced interest rates at the last meeting? >> well, i think the fed has done a readjustment of the stance on monetary policy to cut

rates by 100 points over the last years in september. the last cut in december was a close call, according to chair powell. i think they are well positioned at this point to deal with the risks they expect to be facing this year and i think there are a lot of risks. inflation has been bumpy and they're focuses is on getting inflation back to 2%. they are looking at a projection of themselves of a core pce at the end of this year of 2.5%, more than uncomfortably above 2% and they don't give any indication that they are sort of willing to say 2.5 is not that far above 2%. with that focus on 2%, i believe the fed policymakers will be patient in adjusting monetary policy and that they will need to see improvements in inflation. lisa: how concerning is it to you the long-term rates have finished up so much since the fed finished cutting last year?

>> you know, there are a lot of things going on. at the same time it is the case that the fed funds rate is lower for sure, but also the case that, you know, their fiscal deficits continue to be high. you know, there's a lot of uncertainty about that. how are investors going to respond to that? it's natural to suspect the funding rates could be higher at the long end. it is also the case that productivity is higher. you know, ai offers a lot of promise. our assessments of long-run trends tend to be about 2%, but if they are higher it would justify higher long-term rates. there are many things at play, including the uncertainty around volatility and tear of commentary. lisa: how concerned are you that the fed hasn't really put out a framework for how they could deal with potential policy changes coming out? this is something that bill

dudley was talking about. do you think there needs to be a better communication of scenario analysis around tariffs and immigration changes? >> fed communications is always difficult. it's difficult for central banks and any institution dealing with uncertainty and talking about what they will be doing over the next six to 18 months. uncertainty is difficult to describe in a way that, you know, many, many readers can fully appreciate. the fed has a number of communications tools. the summary of economic projections is one of them. by their own take they have indicated they thought inflation would be higher for longer than they previously thought and they need to take action. you could go through a few different scenarios where it could be better than that and explain how the fund rate would fall. or you could say it's going to be worse than that. they have internal documents where they go through that.

i'm not convinced the public would be able to digest three scenarios when they have this much difficulty with one. you would be constantly going -- which one of these do you think we should be paying attention to? annmarie: speaker johnson keeps talking about one big reconciliation bill in may. if that's the case, does the fed stay on the sideline to wait for the policy chatter to become legislation? >> well, the typical fed approach, powell has tried to describe this at the last couple of press conferences, is to observe the legislative progress, the process, the language, see when it's about to actually be enacted, see what actually ends up in the bill. a lot of things end up in there at the last minute, or taken out . it's very difficult to have confidence that you know the stance of fiscal policy until you get real language there.

if you just go back, previously when you talked about eliminating the affordable care act, that would have huge implications for the economy and it came down to a single vote. you have to actually go through the process before you can fully appreciate what it will do to the economy. that's a part of the uncertainty i was talking about. until the end it can go either way and have large implications for the path of the economy. jonathan: you have lived it and we appreciate your experience, sir. charles evans, seeming -- discussing a fed that seems to be swinging between two risks, one being too much too soon, the other too restrictive for too long, and i'm not sure they know where they are. lisa: the question is, what does it mean to be patient? jonathan: coming up, we've got investment management guests, including from morgan stanley.

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>> the market i think is more focused on the near-term effects of tariffs. >> markets have been underestimating how much the trump administration likes

tariffs. >> i do not think even the administration knows what the final set of tariffs will look like. >> we are in a waiting game. things are proposals. >> this is bloomberg subvariant -- bloomberg surveillance. jonathan: january 7 and it already feels like things are getting breathless. we have not even have inauguration yet and we have the payrolls report on january 10. we still need to figure out the direction for policy and how big this one big beautiful bill will be and whether it will be one beautiful bill or two. lisa: you said it feels breathless but let us see if anyone can catch their breath. the whipsaw of headlines coming up, paired back tariffs no it is not, what are you talking about. the moves in the market highlight how offside into certain crowded trades art with long u.s. exceptionalism.

and what it takes to disrupt that. annmarie: this is not an administration like watching paint dry. he will want to maneuver and he wants optionality meaning that there will be a lot of whip sawing. to your point about the optionality of one or two bills, potentially by friday we will have two because he is going to washington, d.c. and meet with senate republicans. they won a two path approach, very different than the congressman will meet over the weekend meaning that we will have a different narrative. that is what we have to get used to. lisa: the back -- jonathan: the backdrop of financial markets is amazing. since 23 for the third year in america since 1998. questions about how much physical space that we have in 2025 for various governments at a time where we see big changes to political leadership. these are all things investors must think about. lisa: given that you have a lot

of debt issuance. this is a point of how much physical space with you not -- with united states in the options as the deficit deepens. also in the u.k. and questionably and augie -- arguably they have less space that you are talking about to the highest levels on those heels in the u.k. going back to 1998. whether this is noise or signal for the path ahead. what some people are saying as we heard charlie evans say, inflation is on the path to 2%. jonathan: these -- lisa: these are not just questions for the government but companies worldwide. welcome to the program. 16 minutes ago we heard this from facebook starting in the united states we are ending the third-party fact checking program. we will allow more speech by lifting restrictions on some topics part of the mainstream discourse, the leaders from mark

zuckerberg. annmarie: this comes after a number of personnel changes moving the night whether it is dana white or whether night -- or whether joel kaplan will be the head of global policy. this is an additional company moving away from some of the left approaches we have seen. walmart came out with the end of the year with john deere. you always say this and i thought about this yesterday. what michael jordan would say which is that republicans buy sneakers to. lisa: this is a kowtow to elon musk that we are moving to the same model that elon musk has. you look at the potential people coming into the new administration tied to technology oversight and all of them are friends or connected to elon musk so you have to wonder how much this is an effort on that front. annmarie: it is the pale -- it is the paypal mafia. those are the individuals they

are talking to behind-the-scenes or getting seats behind the table. a lot of people are saying that there has been a shift too much to the left in corporate america. will they make the same mistake and go too far to the right instead of earlier, what french hill said of just getting politics altogether out of the c-suite. lisa: or are we replace -- jonathan: or are we replacing it with a different part of politics. the conversation that we had with mark zuckerberg, emily chang sitting down with zuckerberg. that was the moment around that time where you got a sense that mark zuckerberg had woken up to the reality that we will get a second term from president trump. emily called it one of the badass things that he has ever seen. you have just seen a series of changes. annmarie: he is one of those individuals that had dinner with president trump. jeff bezos, another individual that was seeing the tate -- the

change of tone. he has tweeted three times as entire year and two of them was about trump and one of them was denying a report about his wedding. jonathan: equity futures positive by 0.1%. coming up we will catch up with the short assets management. dan niles as the mag seven returns and dana peterson counting down to payrolls friday. we begin with stocks higher as the ai friend she takes center stage to start the year. omar is looking for regulate -- rotation and the broadening of earnings growth and the potential resurgence of small and mid-cap companies presenting compelling opportunities for investors. welcome back to the program, a lot of people said the same thing and then december happened. what went wrong? omar: good morning and happy new year to everybody. i do not think that anything

went wrong in december. i think it was a very natural reduction of risk and repositioning. we had an amazing 2024 where a lot of things went right. and the investors just took a little breather in preparation for what will be a very interesting 2025. when you think about the level of negative returns that we had relative to the entire year, when you put all the pieces together, the s&p and most of the equity markets ended up having a very consistent performance for 2024. what is interesting is that this rotation that is mostly driven by how momentum is shifting, it is what is compelling and these levels of volatility shows in these early couple of days they are still trying to see which one of these sectors will lead the way is probably the most interesting thing we will see in the first quarter.

jonathan: we know what has led the way, big cap tech. is that going to change in the quarters to come? omar: if you look at the top 20% of the momentum stocks, those have outperformed the market by about 20%. as you said, most of that has been dominated by the top seven or top 10, ai and tech related companies. what we have observed is that top 20% of momentum has started to be a little bit broader where there is financials, media, entertainment and other companies that have inched their way into that top momentum which is consistent with what we have seen in the macro environment. what we have observed is that we are going through the discussion that we had for the entire 2024 about what kind of lending we have -- what kind of landing we will have. that seems to be old news and

now we are going into a process where everything is pointing to recovery. what leads the recovery tends to be cyclical and small-cap and to be part of the process that we have seen at the beginning of the year. jonathan: at the same -- lisa: at the same time you are neutral in duration. you think that this cyclical area rally sent over performs even in a rate situation that does not change much. is that correct? omar: this is interesting. what i was discussing earlier was relative to what i consider a more orderly positioning of equities. i think fixed income in bonds are in a wide range of possible outcomes and we are preparing ourselves for another year of uncertainty and volatility in yields as we go into the year. we are seeing that increase in the long-term yields in the first few sessions of this year. we have seen that the yield curve is clearly steepening and

pretty fast. a lot of that is a result of inflation expectations, and economic growth and the term premium is high. when you put all the pieces together, the potential range of outcomes within fixed income is pretty high. i would probably say that the reason why we continue to emphasize to our clients to try and stay neutral through duration is because it is very unclear where this thing will go. and i think it will take a few more data points and a few more decisions by the fed to figure out where the yield environment will take us. lisa: given that backdrop, there is a concern that we could see a repeat of what happened in 2022 and stocks sold off. in this type of environment, what does diversification look like? omar: it is interesting because that is a discussion that we

have had it not just recently but even in the last quarter of 2024 where the concern is with good performance on equity is and then all of a sudden with the uncertainty of yields is there a possibility that things will need to be different? there are two things. one, the concept of what we have on the short end of the curve, so cash or cash equivalent. that seems to be extremely positive and a very good foundation. so, it is a different environment that we will have in 2022 where the prospect of those short term part of the curve would be was very different than what it is now. we are in the process where we know the potential path for the fed, may be the speed of how many cuts we will have and how fast they will go in 2025 is unclear. we know that the short part of the curve will be contained in a place where it will have a good foundation for the rest of the market.

what we actually see about the correlation and we do a lot of work in the correlation of asset classes, that has been consistent in the way that we have over the entire history where we have the negative correlation with fixed income and equity is seeming to be healthy. in 2022, both equity and fixed income was expensive. what we are seeing right now is the relative evaluation and risk premium seems to be in a place where we still think that equity is will have a little bit of an edge but the correlation seems to be working the way that investors use. that being said, we are always encouraging clients to look for other sources of diversification especially as they look at alternatives and asset classes that can give them a little bit extra. jonathan: that is why bitcoin has done so well. it is good to hear for you. the last on bonds is an export

-- in an important note, the decisive negative correlation between what is happening with bond yields and stocks. on the yields are down. it is why yields are going up, they are starting to get onto people's nerves. mike wilson pointing out that the economic surprise indices have fallen. this is not about economic data and it speaks to deficit concerns on the margin. lisa: this is the dark matter point. the term premium which raises the question is is this about concerns around the deficit or inflation remaining stinky? it does not appear to be stemming from increasing growth expectations. jonathan: let us get you an update on stories elsewhere. this is your bloomberg brief. dani: president joe biden is establishing two new national monuments in california protecting 848,000 acres of land. it is creating the stock while a

national monument and the highlands national monument mark another initiative to establish his legacy. both new monuments only reserve federal territory not state or private lands. mcdonald's is no longer setting aspirational representation goals. a revamp on its diversity, equity and inclusion policy. its retiring its change renaming the glut -- the diversity team is global inclusion. they pointed out the evolving landscape as a factor in its decision. prices for used timepieces valve with the sub dial watch index at the lowest since 2021. popular rolex models dropped 5%. and cartier is the only brand whose individual index has posted gains this january of 2023. jonathan: thank you. up next. the morning calls plus dan niles

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jonathan: the stocks are up again this morning posited by 0.2% and building up two gains -- days of gains. let us give you some morning calls. it is an overlooked winner of 2025 and is going to benefit from research. that is up by 1.3%. the second call downgrading apple to sell, citing antitrust overhang and a weakening

position in china. bank of america downgrading tesla to neutral morning of the -- morning of the risk. that stock is down by 1.7%. meta revamping the company's approach to free speak, the ceo announcing changes including the removal of third-party fact checking and a move to community notes very similar to what we see on x. dan niles knows this better than most. happy new year and welcome to the program. my first question is this about insulating themselves from potential regulation or do you think this moves towards the center and away from liberal policies will actually deliver better growth in numbers and help the stock? dan: i grew up in california and lived there for over 30 years. and the politics have changed over a long period, and meta was

very left-leaning and it gets -- and this gets them closer to the center. i love michael jordan's statement that republicans buy sneakers too, and a lot of companies forgot about this. this moves them towards the center and on the margin that should be helpful because everybody hopefully feels better about the platform. jonathan: when you take a look -- lisa: when you take a look at 2025 performance, how much does regulation play into it when we are increasing national security concerns and the increasing decoupling between the u.s. and china? dan: it is a big deal because in china the government tries to support the biggest companies and they want them to dominate worldwide because china wants to rule the world. in the u.s. we have developed this policy of we need to hamper the big tech companies but if we hamper our companies and other

countries are trying to help theirs to dominate, that puts the u.s. on a national security level in a bad spot. the government should be trying to figure out how do we harness the companies. lisa: a lot of people have been expecting a lot less. this year your outlook seems a little more cloudy. how much did you say they were going to take back a lot of the gains that we had last year with the threat of inflation and promises not coming to fruition? dan: i think you framed it

perfectly. if you look at where inflation is, it has been the biggest driver of stock prices. you had a big surge in 2021. it it -- it was ignored. cpi went from 1.4% to 7%. you have 2020 people say -- says inflation is not transitory and it starts hiking and the market goes down 19% and inflation comes down. two years ago the market goes up over 20%. this year if you look at it, all of the inflation metrics bottomed in june or q3 and the -- and they have been going up. the market ignored that until jerome powell said the inflation forecast has fallen apart in the market went down 3%. and i think that is the risk

because the fed is probably on pause, that is my opinion. you might get rate hikes and that environment of trailing 25 times when historically it is about 19 times when cpi is about 2.5% to 3%, that is potentially a problem and bond yields are about 100 basis points lower than they normally are with cpi between 2.5 to three boys -- 23%. that is why worry about a drawdown this year if inflation doesn't fact looked like it is being sticky or moving up. the three -- the fed has to hike. if we thread the needle and inflation doesn't have a problem you can see inflation over 10%. but, that is why it feel like cash is one of my top five investments for starting. the last time i had that was in 2022 when the market went down 19%.

we will see what happens. lisa: i was looking at your 2025 top-five tics. below cash you talked about cisco. you talked about the big chinese tech companies. are you concerned about what is going on with chinese hackers. cisco was named as a companies that the chinese hackers compromised their large network routers. dan: the chinese companies have compromised cisco and the federal reserve, which you might remember got hacked. it goes back to what we talked about earlier which is you need to support the u.s. companies and what they can do to try to make america's defense is better. i think with cisco it is one of our top five picks. they have some good security products that obviously, all security across all companies even though security software companies have gotten hacked, which you remember. i think that will really help

u.s. networks and it is run of -- one of the reasons we have some of our topics wary we are starting to pull huawei out of a lot of telecom networks and replace them with more friendly country technology. i think that helps one of our top five picks. and as you roll out that technology you pull out huawei out of those networks as well. annmarie: anything that is u.s. tech will dominate because of the political policies or because the companies no longer trust the chinese technology? dan: it has taken a while for europe to get there. the u.s. started got -- started going down that path years ago when we had president trump's first term. europe is catching up to that and that should help u.s. tech companies where we might not have the lowest-cost product but hopefully it is a little more

secure and alignment. lisa: we have a lot to talk -- jonathan: we have a lot to talk about in 2025. we have a lot to talk about a little bit later as well. bloomberg's ed ludlow setting down with jensen huang live. lisa: how many leather jackets do you think he has? jonathan: maybe it is crocodile leather on it and not was glistening in the lights. if you notice that? lisa: i think these are the important questions. you know, i think it sort of is trendsetting. this is what mark zuckerberg is doing with his necklace and t-shirt. jonathan: you can wear whatever you want when the stock is up 300%. you can get away with the -- with anything. things get dicey when that stock is not doing well. remember when he used to go around with a hoodie all the time. that is good when the stock is up and it was not doing so well. annmarie: all of a sudden he got

serious. jonathan: it is up. lisa: i think it is important that he shows how this will go beyond just nvidia. and that is a question. yesterday we heard why it is great for nvidia with the promise of it expanding and a lot of people want to say show me the money. jonathan: the biggest clients spent a lot of money and this is the biggest customers that we been watching for whether it breaks or not. that is one to watch for 2025. we will catch up with dana peterson and brian of morgan stanley. we'll do all of that in a moment. this is bloomberg. ♪ i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools,

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jonathan: checking on the stocks unless you want to talk about that? lisa is googling how many leather jackets he has got. at least seven. lisa: one for each day. jonathan: he has enough money. equities up .1%. with 60 minutes ago until the cash open. manus: let us kick this off with nvidia. there is a whole bunch of notes coming up. the announcements on robotics, automation and going into hardware so they are deepening the moat of real uniqueness

around this spot. but he talks about a 5 trillion market capitalization in the next 12 to eight teen months. that is a staggering uplift from the $4 trillion he had penciled in. what are robots -- what are robots worth? all of the business by this company will be worth $6 million and that personal hardware is not an entry but for those ai supercomputer developers at $3000. this is an evangelist moment but there is a halo effect on to uber. it is essentially what we are hearing. uber will give the data to nvidia and we will have a magical moment in terms of autonomous driving collaboration about leveraging the path. this is the most symbiotic coalescing of two major tech companies and as derek said it will supercharge the timeline

for safe and scalable autonomous. speaking of we know that dan ives has said 15 to 20% of the valuation is a cars and the rest of it is autonomous driving. bank of america takes a pop at this. yes they upgrade to 490 from 400 and they talk about elevating costs. sidebar, the u.s. back -- has blacklisted one of the major suppliers of batteries. jonathan: quite a story overnight. thank you. lots of economic data in the next several days including payrolls on friday. 163 k coming from bnp paribas. i think it is an important question for us going into friday, what would it take for this bed to cut interest rates at the end of the month. we expect that they would require key dimensions so they would be looking for a payroll growth well below 100 k and a jobless rate above 4.3% to get

this fed considering to cut interest rates. lisa: would that be enough for the long end increase. one prints that people would say would be noisy, would that be enough. a lot of people are looking at the internals, what does growth look like and where is the employment coming from? is it mostly government positions? that will go into how it is interpretive. -- interpreted. jonathan: labor data will be the focus for markets and the fed. the fed could be less worried about excesses but should remain concerned about the effect of higher labor costs on inflation. dana joins us with more. we have some numbers in between just to work backwards on wednesday adp and claims and later this morning jobs. what have we seen in the jobs data, opening is ok and hiring has been muted. do you expect to see more of the

same? dana: speaking about the labor market it is like a water bottle. companies had to work hard to fill it back up after the pandemic. the water bottle is full so it is difficult to hire new people if you do not need them. that is why hiring is low. and layoffs are low. when you look at job openings we are normalizing back to what we are. it is a story of normalization and not weakness in the labor market. lisa: if you speak to people about citigroup a lot of the hiring in the past couple of months have come from government positions and other areas that are not necessarily representative of a healthy round up broad-based hiring. how much does this concern you? dana: i like to look at the level of payrolls and it is almost back on the track that we were when the pandemic hit. if you take a straight line and dried up we are almost back that -- draw it up, it is almost back there. there are areas where there are

still a lot of hiring. it is health, yes it is government but these are the areas experiencing massive later shortages because people are retiring or these jobs have a lot of churn, you have to physically show up. those are the areas that are hiring. when you look at the levels, most people who want to work are working. it is more important to look at the levels than deltas. deltas will be smaller because we are at full employment. lisa: do you have a sense of what it would take for you to get truly concerned if things are deteriorating? dana: i like to look at hours worked. certainly hours worked are back to where they were in 2019. when you dig beneath the surface the hours that have fallen off have been in the sectors where there is not much demand anymore, sectors like manufacturing and retail, transportation and warehousing which are linked to goods.

people are done buying tons of goods and no services. when you look at services, they are doing great and rising. even for construction they are rising. there is a lot of health and the labor market because the economy itself is healthy. we need to be careful of what you look at in terms of bellwether for something that is weird. we should monitor the unemployment rate for people who have been unemployed for 27 weeks or more. that is after you are done with unemployment insurance and we see that creep up. it is very low. these are the things i would look out for. annmarie: if you see that number creep out, would that be an unwelcome development? dana: yes, and i would look beneath the surface on why it is rising? is it because you have a bunch of people being let go or new entrants and re-entrance. if you are entering the labor

market at the tail end of the boom, it will be more difficult for you to find a job because all of the positions are full. again, most of the hiring we are seeing are in the industries that need workers. you have to physically show up to work so you also have to raise wages to accommodate that. just looking at wages, wage growth has slowed significantly from the heydays of the great resignation. but the wages are growing at a pace that is much higher than we experienced in the 10 to 15 years before the pandemic. when you look at eci, wages plus benefits are growing at elevated rates. companies are not absorbing that into their bottom lines. they are passing it on through inflation. that is one of the reasons why inflation gauges have been sticky especially services including housing. annmarie: you just said the end of a job boom. what it you describe that as

where we are in the labor market? and then what comes next? dana: we had a huge boom to refill the jobs that were emptied out and vacated. it took several years for us to get back to that level. and when you look at the level, we are much higher than we were at 2019, almost back on the path we were heading to anyway. that tells me that the labor market is doing great. it is really those people who are freshly unemployed and people waiting to jump back in are having difficulty because companies do not necessarily need them. when we talk to the ceos of large firms, they are saying we will hold onto the workers we have or continue to hire. only about 20% are saying we will let people go. that is very low. if 80% say that we like the labor market and we will keep it strong, that is something we should pay attention to. jonathan: even the confidence

numbers we have seen from your company and elsewhere for consumers and businesses, that will -- that will not necessarily lead to a pickup and hiring in the months to come? dana: if you are a company and you need 20 workers and you have 20, you will not hire the 21st. the key thing for consumers is that they are working. most consumers who want to work are working and wages are growing at a faster pace than five years ago. they have income and savings and consumers will continue to have the ability to spend. inflation, the rate of change in prices is lower. the price level is higher at least prices are not rising at a rapid rate. these are components that support consumer spending. as long as most people are working and they have him come

they will spend. jonathan: good to hear from you, the economic data is still to come including payrolls. it of this morning job openings report and services. a lot to look forward to. michael mckee on economics and policy joins us for more. what are you expecting from those numbers later? mike: not a whole lot, the adp numbers are expected to come in later so the jolts will not influence the views of that. at this point it has kinda fallen off the radar for the fed. ism services are interesting because it will be interesting to see what we get on the unemployment side when it comes to friday. when we are talking to data we saw the u.s. trade balance higher than expected at 78.2 billion, which is the highest

since 2022 because of the port strike threat and trump tariffs. we imported a lot of stuff. we are looking at what is going on with china because obviously donald trump is making a big deal out of putting tariffss= back -- tariffs back in china. we imported last. and that is when donald trump put out the tariffs the last time and in the trade balance actually widened. at this point it is hard to know where we will go with all of this. i will predict that the trade balance going forward is going to be one of your new favorite indicators. lisa: we will be watching that closely and we are looking ahead to the friday payroll report. i am wondering what you are looking for in terms of internal metrics which could be important for the fed? mike: it will really be looking at the unemployment rate and they have made that their lone star for where they go. it will be interesting to see

how many jobs are created. there is a wide range of forecasts for jobs from less than 100,000 to almost 300,000. so, if we get a big number than that will suggest to the fed that they could keep cutting rates, but if the unemployment rate goes up they will be talking about maybe we need to keep the pressure up. let's see what happens on friday. it is kind of hard to tell at this time. jonathan: busy. looking forward to your coverage at 10:00 a.m. eastern time for job openings and ism services. joining us is the investment manager from morgan stanley. the 10 year bond yield at 4.63 and you think that is child's play. 525 or 550 is the real test. brian: this is the first time i have been here where we think about the 10-year yield making sense. 2% inflation and some term

premium and we are getting to an area where it is interesting with stocks at the high. we have been here for 6010 year notes. u.k. since 1998 since we have had these rates. that is not where we are yet. we are getting interesting. if we are going to talk about u.s. exceptionalism and growth, i do not think those notes will be the thing that stops us. jonathan: higher yields? brian: we will have two waves. we had a big move and nobody expected it. i do not know where we rallied into the fed, but i think the steeper yield curve makes sense. and denny w -- and any weak data when we rally in june or september is when we test the stock market. to me that rate is .5 -- is 5.25. lisa: buy tactically and then wait? brian: you would buy the front end instead of thinking like a negative payroll where that data

point, unless the stock market crashes. but you can price in the fed eases. the front end i would buy and wait for duration and you could trade that around for me. i think you are at a big -- at the beginning of a fair value but not the end of the story. lisa: i am struck about the potential for some sort of 2022 repeat the idea that bonds and stocks can selloff in tandem and the idea that we could get bond yields that climb and pressure stocks akin to the trends we have been seeing. what kind of likelihood do you give that scenario? brian: very high. if you look at the last three or four years we are at the highest in the yields in the stock market. the correlation is positive. and i think that has to change. it will go back to 2022. i think if interest rates were

5.25 putting real rates at 2.5, you have 2.5% risk free growth. if you get 5.5 risk return from the government you have to question. and yes, i think we are going to the point where the rates are the things that pressure equities. lisa: dan was on earlier and he said the top five allocations was cash. brian: it did what it was supposed to do, it gave you 5% and stocks gave you 25. it did not look as good as you wanted but it is better than zero. i do not think it is my favorite allocation but it is supposed to be a growing part of an allocation when duration is not cheap and stocks are pushing levels where we have not seen valuations like this in a long time. i do not think it should be a number one allocation yet, but as a year goes on cash is something that people will revisit. i think not until stocks -- you

have to have a chance to reflect on all the policy that is coming. this u.s. exceptionalism story the prices will go up in the consumer respond and we heard a good argument for, i think that is relevant. you do not have to rush into cash. annmarie: we talked about how the move in rates has been unusual. he said questioning and fiscal worries and whether the fed cuts are justified. what do you give this reasoning to? brian: i love reading his stuff. i think it is an interesting debate but i do not think it is unusual outcome. the path was strange. when the fed cut rates everyone loved liquidity and everybody remembers the last time they cut rates and the economy fell harder. so you bought duration. people followed the playbook of the last 10 to 12 years. to me this looks like the playbook that came before that

where the fed fund rates were not going to zero. and again, i think the political outcomes were different than expected which also supercharge that selloff. annmarie: we are getting markers in the stand and speaker johnson is talking about april or may to get one of these packages if it is going to be two, out the door. is that for you a -- is that saying right now we can deal with the volatility but at least we have an endgame on what the chatter means for policy? brian: i think it is important to see how many people come along because if you do get the policy that has been promised a lot of that has been priced and a lot of skeptical skepticism as well. we could argue about the textbook implications and what everyone will see is a change in price level higher which will cause people to spend more sooner and make the inflationary pressures more sticky.

if we see a move towards a big bill that will convince the markets that there could be another round of growth in this thing that would be a big deal. lisa: i'm hearing a lot of skepticism but a bearish overtone that is unfortunate because i have not heard this in a very long time. are you going to come out and be bearish? brian: we are coming to a point where a lot of this is in the price. we saw the unification coming and we got notes to 5.5 -- five point 25. i think you will reverse these trends. we will not see another 20 odd percent return in the equity market. it could be a good year for bonds so it might be hard to time that. it is a tale of two years or maybe the first quarter is strong. i do think that we allocate cash and these are things we have not wanted to do. they are coming and i just do not know when. jonathan: if you are bearish on u.s. bonds are you bearish

elsewhere? we question the space in france and the united kingdom. in america you can argue that bond yields are going up for the right reasons and i'm not sure you can abroad? brian: it is messy. look at the euro. going to parity is how it is playing out instead of going to yields because there is not the same growth or inflation story. i do not have a big view but there is a gap between european yields in u.s. yields. eventually you will want to -- you are underweight to europe and u.k. is the hardest one and it always is. the u.k. led in the 90's and 2000 they pushed their long-term investors to own a lot of duration. they were the leaders. and now is changing. i do not have a great feel for where the u.k. long end could go. but, yes, at some point the european story will become more interesting. jonathan: the average maturity

of the u.k. profile is north of the united states. let us get an update on stories elsewhere. here is a bloomberg brief. dani: meta is revamping the approach to free speech. mark zuckerberg says that meta will drop the third-party fact checking and move to community notes. >> after trump first got elected the legacy media wrote nonstop about how misinformation was a threat to democracy. we tried in good faith to address those concerns without becoming the arbiters of truth. the fact checkers have been to politically biased and have destroyed more trust than they have created especially in the u.s.. over the next couple of months we will phase in a more comprehensive community notes system. dani: they will lift restrictions on some topics and take a more personalized approach to political content in the u.s.. bridgewater associates has laid off 7% of its workforce

affecting about 90 employees. a spokesperson said that they are meant to keep the organization nimble and flexible. they bring the headcount back to where it was in 2023. sigma and brevan howard cut 10% of their staff last year. toyota is aiming to open a futuristic city at the base of mount fuji. the first 100 residents of the woven city will move in soon, may -- mainly toyota employees and their families. it aims to test new technologies but the chair says it might never be profitable. jonathan: thank you. i am not sure that i want to be a part of a living lab. the accommodation looks nice. lisa: it is not going to be profitable because you are getting more value. annmarie: and apparently flying calls. -- flying cars. that is what they talked about. jonathan: times of economic data this week kicking off a little

bit later this morning at 10:00 a.m. eastern time. we will run you through that name moment. this is bloomberg.

jonathan: the opening bell is about 35 minutes away. equities are up nicely to build over the past few days. here is the trading diary for the rest the week. jobs data and ism services wednesday. adp private payrolls and fed minutes plus. jobless claims on friday and payrolls friday around the corner. lisa: i have to say about all of the euphoria of american exceptionalism and bullishness and how these are markets that can keep going up and away carried by ai incredible is, we are hearing real bearishness and i want to put a linchpin in that because the day has been about

we could see a repeat of 2022. jonathan: this is based on the guests that we came on -- that we had and we worked on that. lisa: we heard that from a number of guests. i mean this is not just one guest. annmarie: people were baking and policy and that is why am looking forward to tomorrow until we see more breadcrumbs on what the legislation and trump's agenda will look like when they write it down. jonathan: for five minutes lisa was on the edge of bullish. one morning and three guests in the whole thing is gone away. lisa: three makes a trend and that is a new trend. we are new notes a bearishness. jonathan: hyper dependent on the new data point. coming up andrew of city. and greg of ey. thank you for choosing bloomberg tv. this was bloomberg surveillance. ♪

>> could we be in for three days in a row of gains to kick off 2025, 30 minutes to the start of trading. katie: bloomberg open interest starts right now. sonali: coming up, nvidia drops the mic at the cf unveiling new chip software and services. the ceo will speak to ed ludlow later this morning. matt: meta gets rid of fact checkers and elects a trump ally and media executive to its board. katie: