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tv   Bloomberg Surveillance  Bloomberg  January 16, 2025 6:00am-9:00am EST

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>> the economy does not feel that strong yet the fed seems to be responding to that. >> everywhere i look i see more inflation not less. >> economic paralysis is not our outlook. we think we are going in with significant momentum. >> the economy has been resilient and demonstrates it might continue to grow through the end of the decade. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, good morning, good morning. "bloomberg surveillance" starts
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now, coming into thursday on a three-day winning streak following the best day for equities on the s&p since november 6. futures up one third of 1% on the s&p 500, up .4% on the nasdaq. the next stop is earnings from bank of america, next hour from morgan stanley. after that the data at 8:30 eastern. at 10:30 perhaps a policy preview. scott bessent treasury secretary going on capitol hill. annmarie: this will be interesting because i think we will get more details on what the economic policies will be for trump to point out. he is expected to say we must secure supply chains. we must carefully deploy sanctions as part of the whole of government approach to address national security requirements. that sounds like that would get a lot of bipartisan support. he says the u.s. daughter must remain the world's reserve currency.
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we have heard this from president trump. in an reviewing this is saying "it will likely sound reassuring but the bigger question on whether scott bessent matters entree tax policy or any policy." a single social media post can change market expectations. jonathan: amazing how much hinges on the incoming administration. check out this report from our team in bloomberg out of japan. boj officials see a good chance of an interest rate hike at the next meeting so long as the arrival of donald trump does not trigger too many negative surprises. dani: you want to talk about reactive central bank policy, this is it. we have a boj decision next week. they may not have in hand what they are going to do until wednesday or thursday. what we get on monday might not be the final product. i don't know how you price and what tariffs will look like and
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the consequences of tariffs for these markets then for central bankers. jonathan: we said yesterday there are three big stories this month. payrolls was one piece, cpi was another, the biggest data point of the month comes on monday. annmarie: last night mike walls was asked by bret baier on fox news about how many executive orders there will be and he laughed. he said there will be a lot, donald trump sand will start to hurt, there is a lot to roll back. you can expect executive orders on immigration, potentially one on tiktok to save the deal. energy. where he comes down on tariffs we still do not know because there two competing factions. jonathan: the mood has improved. we had solid earnings from the banks. then we had a downside surprise on cpi. we also had a better outlook from tsmc which is given equities a left. dani: it shows how ai is a tide
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that lifts everything. even if apple sales are declining. even if mobile is so big with tsmc, because we are all using so much more ai it can save their earnings. how much of that matters when it is the macro rally carrying everything? even into today this is the thing that matters. it is a tennis match where their narrative keeps going back and forth. we have to wait until next month. jonathan: stocks positive this morning. coming up this hour we catch up with cameron dawson of new age wealth is equities erase their losses for 2025. stephen cook as israel and hamas reach a cease-fire deal and chris marinette on bank earnings. we begin with stocks looking for a fourth straight day of gains following their best cpi day since 2023. cameron dawson writing the
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market reaction shows how much pent-up concern there had been about a hot economy. this print supports a hold by the fed and reduces the risk of rate hikes. cameron joins us for more. are we relieved we are not getting rate hikes anytime soon or encouraged by the prospect of rate cuts because there is a difference? cameron: there is a difference. teddy -- taking rate hikes off the table helps. the current fed funds rate is at 4.5%. taking that off the table helps. then adding in some cuts does help at the margin but we think this recalibration period of fed policy is likely over. this idea of the cuts we have done has been because we can. the next round of cuts will need to come because they should, meaning you need to see weaker economic data, you need to see an uptick in unemployment likely to get more than just one or two more cuts.
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jonathan: another read on the economic data at 8:30. the big read is monday. what are your working assumptions on what we will get in the first few weeks from the incoming administration? cameron: probably the better the stock market does the more we get of those negative things that could shake us. the more resilient we are going into this the more emboldened they feel they could deliver more aggressive tariff policy, which continues to be the wild-card. we know people are anticipating tariffs going into this year. we see it in some of the buying behavior, we see it in surveys, people saying it is a good time to buy durable goods because they're trying to pull forward that demand. it is a question of how much we are already seeing the potential for that distort the data. annmarie: how resilient -- dani: how resilient do you expect the markets to be? cameron: with credit spreads at twenty-year tights in the s&p
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500 trading in almost 22 times earnings there is not a lot of cushion to absorb bad news, which is one of the reasons we think as we go through 2025 will have this choppy range. if you are trading at low valuations you can absorb a lot of negative news but when you are all in in positioning and valuations are high it means there is a lot less cushioning. dani: there was a point yesterday i thought was fascinating. we are .002% away from a core cpi in-line. in other words we were .002% away from an unchanged today on the s&p 500. that is six extreme sensitivity. -- that is extreme sensitivity. cameron: it could have emboldened the idea that inflation is not moderating and could have emboldened fed policy makers talk about potentially not having tightness on the table but not delivering those cuts. we are at the razor thin margin but because you are pricing in
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probability of hikes into the short end of the curve we think that is why you saw such a powerful reaction. annmarie: does the market too resilient that if we do not get some of these policy promises from the trump administration we will see moves to the downside? cameron: we think that is a risk. the title of our 2025 outlook is great expectations. one of the components this week that the market is pricing in just the right stuff out of d.c.. we get all the things that are good for us, we get tax cuts and regulation changes, but we do not get the things that could be disruptive. we think tariffs and immigration policy are potentially disruptive. one of the things that lead to such strong growth in 2023 and 2024 was an influx of low cost labor. labor supply going up was great because you are able to bring down wage growth without seeing layoffs. if that changes where you see the source of low cost labor supply because of migration, you could start to see wage growth
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pick back up that could be a source of inflation. that is a wildcard risk. annmarie: t cja is already priced in or the extension. you think we could get a lower corporate tax rate? cameron: that is not in our base case. the house majority is so slim and you have this funding challenge. you cannot forget that scott bessent is going into this with the big bills problem. over 20% of the existing treasuries is in bills. we've already had the reverse repo drawdown. what does that mean for how they will fund these big deficits? that is a huge question for bessent that remains unanswered. jonathan: do you think they can turn out the debt? cameron: i would think the third quarter of 2024 would suggest they could not. look at what happened when janet yellen increase the coupon issuance and we saw 100 basis point move to 5% in the 10-year
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treasury yield. today if besson were to say we would increase coupon bond issuance i do not think the treasury market would like it. jonathan: a bigger question is whether you believe the fixed income market will constrain the ambitions of the policymakers in washington? cameron: it is a possibility. we think it is less of a possibility in the u.s. because we are the world's reserve currency. as yields move higher you get natural buyers that step in. we think it is a very real possibility that the long end of the curve becomes untethered from what the fed is doing, meaning it is a big surprise you've seen this 100 basis point moved in the long end of the curve despite the 100 basis point cuts in the fed and we think that is reflecting fiscal fears. if the treasury were to come out and say we want to term amped at , that could increase the on tethering. dani: is there not some of this that has happened already? there is the expectation scott
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bessent likes long-term interest. cameron: he said that when yields were lower and when he did not have the job. i think when you looking at this challenge of saying we do not have reverse repo as a tailwind, we possibly will not have the fed being willing to buy up these bonds through quantitative easing, we think that is a big wildcard of how with the fed interact with this. there is this challenge that he does not have a lot of wiggle room so what is stopping bills as a percentage of treasuries going up to 25%? jonathan: bond yields down. yesterday up by not even a basis point. cameron will be sticking with us. up next will be talking about tariffs and we will look for scott bessent's views on that coming up. let's get your update on stories elsewhere. yahaira: israel and hamas have agreed to a six week cease fire starting sunday a day before donald trump's inauguration.
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under the terms hamas would release 33 hostages taken on october 27 while israel pulls out popular areas and the gaza strip and releases hundreds of palestinian prisoners. before the deals implement and pry mr. benjamin netanyahu's office is accusing the iran back group of reneging on the agreement and says the cabinet will not meet until hamas accepts all points of the deal. some respite in los angeles. the low humidity and dry wines that have fueled the wildfires are forecast to end by midday today. a lack of rain and another round of wind are forecast for next week. the two largest fires, the eaton and palisades, have become among the most destructive in california history, leaving 25 people dead and scorching thousands of acres. bank of japan officials think it is likely they will raise rates at their next meeting. sources telling bloomberg think is likely the central bank will hike rates 25 basis points
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unless donald trump ruffles markets or changes expectations at the start of his presidency. jonathan: thank you. dollar-yen 155.78. coming up, scott bessent heading to capitol hill. >> i think everyone is on board with a forward guided or a phased-in tariff. if you bring down your tariffs we will bring down hours. everything i see assumes there is a jump on day one which will not happen. jonathan: will it happen? that conversation is up next. live from new york city, the morning. -- good morning. ♪ where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's
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on the s&p 500. equity futures so sare so good on the s&p. earnings from bank of america -- numbers from morgan stanley before we get data. retail sales and jobless claims at 8:30 eastern climb -- eastern time. under surveillance, scott bessent heading to capitol hill. >> i think everyone is on board with a forward guidance corp. phased-in tariff. president xi, here is 60%, might be 2.5% a month, tell us when you've had enough. if we bring down -- if you bring down your tariff we will break down hours. everything i've seen assumes there is a jump on day one which will not happen. jonathan: scott bessent facing his confirmation hearing on capitol hill, writing and prepared remarks "we must secure supply chains vulnerable strategic competitors and deploy sanctions as part of the whole of government approach to address our national security requirements.
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and critically we must ensure the u.s. dollar remains the world's reserve currency." bloomberg's mike sheppard joins us for more. what questions do you have you would like to be aimed at the treasury secretary designate later on today? michael: he has talked about tariffs in relation to china and signaling there could be a gradual approach. that is something he said in august. it aligns more recently with a great scoop from our colleagues earlier this week saying a gradual approach could be something that his advisers have on the table. i am curious about what he says about the tariffs donald trump has threatened against u.s. trading partners mexico and canada. we have talked about that a lot on this program and what that could mean for relations between the closest two u.s. neighbors in the largest trading partners. trump has threatened those over border policy issues, not so much economic issues.
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we are already seeing a candidate exploring a list of countermeasures it would deploy of trump unveiled those tariffs. what would he have to say about that? cameron also talked about bill management. that would be an interesting question for lawmakers to bring up. also tax cuts. how does he see that getting through it will he make the call for cutting corporate rates all the way down to 15% as we heard from put forward during the campaign? annmarie: this is a hedge fund investor so when he talks about tariffs he knows the implications for the s&p 500 and what that could be but he also knows he has may be audience of one, the incoming president donald trump. how does he walk that fine line? mike: that is a great question. this is what got scott bessent the job. he is the point person for trump's america first agenda on the economy and he was able during the transition and even before that to demonstrate to
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trump's diehard maga allies and to wall street that he is the best person for the job and he has donald trump seer and can get the president to may be move off course if needed. donald trump is someone who likes to stay his own course when he sees something he wants. that'll be a tricky task for him. we did see his predecessor steven mnuchin last four years by successfully navigating all of those pressures from outside the and ministration and within, especially from the boss. dani: another part of this job is engagement abroad. janet yellen frequently speaking to counterparts in china and elsewhere. how do we expect the questioning to evolve and answers we might get from scott bessent as we know trump has been very vocal about adversaries and allies as well. mike: we did get an early taste
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of how he views economic diplomacy. he talked in the prepared statement we referred to at the top of the discussion where he sees the importance of maintaining a strong and robust sanctions regime but one that is perhaps a little bit more coordinated and he is also emphasizing that he would want to see the dollar preserved as the world's reserve currency. it has come under pressure thanks to those sanctions programs which have called into question for allies and adversaries alike the value of the dollar given there are so many political pressures in washington and geopolitical pressures generated by those sanctions programs. this will be another line of questioning we will want to see unfold and learn a little bit about in terms of his ability to carry out economic diplomacy for the incoming trump team. jonathan: appreciate your time. bloomberg's mike sheppard on the latest as we look for that curing with the treasury secretary designate scott
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bessent. one of his biggest positions in the hedge fund was gold and why? the way they have manage the sanctions issue. this is a guy who has the levers of government. annmarie: he has the levers of government and put on two of the most historic trades in the financial community, one of them breaking the bank of england when he worked for george soros. he had that gold position. we talked about this with mohamed el-erian. it was this idea of the depreciation of the dollar on the margins because of how many sanctions are levied against the world right now. what a lot of people tell me is sanctions do not work, they just create new markets. jonathan: cameron dawson of new age wealth is still with us. let's talk about tariffs. scott bessent said in august everything i've seen assumes a jump on day one which will not happen. how much capacity do we have to absorb bad news if it does happen? cameron: given where valuations are in earnings expectations,
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there's not a lot of capacity, meaning if you were to get a big jump on day one, what would that do to the dollar? we have seen a strong dollar in the face of tariffs because it reduces export trade activity. if you see the dollar spike further that could be bad for u.s. corporate earnings. we have heard from european luxury guys and their earnings were great. they are enjoying a strong dollar and a week currency. if we hear from u.s. companies, they are likely to talk a lot less nicely about a strong dollar. if you see a big uplift in tariffs that would be the risk to u.s. corporate earnings. jonathan: we expect that to be a theme for the earnings season? cameron: it is a good scapegoat for potentially talking about numbers. we have heard from banks who do not have the same currency dynamics. once we start getting into the consumer companies, the manufacturing companies, it is likely they use the dollar as an
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excuse to say this is why we might have seeing softer sales as a of top-down guidance. maybe that is an opportunity to jump through a lower bar but we think that will be the scapegoat. dani: we are price to perfection. what about europe that has been lagging behind the u.s. where the bar for good news is lower? cameron: valuation is not a catalyst and sometimes value traps exist in europe has been a value trap for the last 14 years. it has been persistently underperforming the u.s. and we think it is less about valuation and more about earnings dynamics and the fact that european indices tend to lean more towards old economy. they do not have the same kind of tech dynamism that has driven u.s. earnings. and still we start seeing an inflection in those old economy earnings that relies on a weaker dollar and likely a commodity cycle. without those things, hard to be structurally bullish. dani: one thing that surprised me yesterday was the dax hitting a new record.
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there have been pockets doing well in europe. are you looking for any of those pockets or is it a market you do not want to touch? cameron: we think selectivity works well in international markets because it is less concentrated. it is hard to beat the russell 1000 growth index when the top names are 60% of the index. when you have something like international markets when there's a bigger difference between winners and losers, selectivity sets you up for better outperformance. annmarie: last night we have reporting from our colleagues in canada that they are drawing up a list of what will be retaliatory measures. the fact that if we have a tit-for-tat between united states canada, china, europe, how much is that going to dim economic growth? cameron: it is a big risk because we did see that. if you look at the data in industrial activity out of the tariffs and 2018 and 2019, it dipped down. we do not know what would've done in 2020 because we had
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covid. we did see this industrial recession or a slowdown in the face of tariffs. there also this notion that tariffs are not inflationary, but for those areas that did have tariffs applied prices did go up. it was massed by deflationary moves -- it was masked by things like oil prices at the time. jonathan: you mentioned mohamed el-erian. he has talked about. there are people who think we get this one off price shock. he has made the point that companies will not wait around and they will pass on the price increases. dani: you can argue they are already not waiting around, they're starting to pull forward imports. beyond tariffs a lot of these companies are expecting demand to be lifted by the animal spirits. the nf fi small business survey showed they expect sales to pick up dramatically. you might be seeing all of these companies bringing what they think will be effects of trump
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this year forward. jonathan: in paris, france we are higher 2%. expectations and europe are rock-bottom. on the little bit needs to go right to engineer big moves. reach mont up close to 17%. lvmh is up. luxury players are ripping. dani: we talk a lot about the valuation difference between the u.s. and europe but if you take the top winners in europe exposed to the u.s. the valuation different shrinks a lot. jonathan: big-time. equity futures up a little bit into submitting bank earnings later this hour. special thanks to cameron dawson of new age wealth. up next, stephen cook on the gaza cease-fire deal. from new york, this is bloomberg. ♪
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jonathan: equity futures up again by .2%. on the nasdaq up close to .5%. a three-day winning streak on the s&p. let's see if we can make it to four. yesterday the biggest one-day did gain since november 6. remember the postelection day trump bump? it was that big yesterday and due to this move in the bond market. double decline on the 10 year yield. the 10 year 4.6593. that move could lock-in dollar weakness. check out dollar-yen.
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we are negative .4%. that is a stronger japanese yen and more rumors suggesting the boj is about the hike again. dani: if they get what they need to from donald trump and that is no disruption to financial markets. it shows how everything hinges on the u.s., not just the economic data but also the government. until 8:30 yesterday the narrative was the u.s. cutting cycle was over and that would hamstring our international partners. that is change rapidly and underscores it could change rapidly again. jonathan: it changed monday morning when we started to get executive orders. it could change this morning at eight: 30 with retail sales and jobless claims. tsmc predicting better-than-expected quarterly sales, expecting to spend about $40 billion on technology and capacity this year come up to
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19% more than analysts had anticipated. that stock is up 5% and other stocks are up in sympathy. dani: it shows how big ai is at them -- at the moment. the ceo said smartphone unit growth would be in the low single digits. all of these phones are incorporating ai into their phones which means more chips. want to be on the leading edge of technology which means selling more chips. advancements are happening so fast that presumably the turnover cycle is quicker. that plus restrictions on china from the u.s. is not hurting. jonathan: another reason the mood is lifting. i talked about the data. 8:30 eastern time. another one to watch, donald trump's pick for treasury secretary scott bessent heading to capitol hill, his confirmation hearing kicking off at 10:30. he is widely expected to win confirmation but we are all
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looking for clues on trade and all of these things and more. annmarie: also taxes and this will be a big one for democrats who want to talk about revenue raising and want to stop an extension of tcj. he will frame this that americans will face the tax increase in history if nothing at all is done with tcja. he will also be asked about the nuances we have been discussing. will they lower the corporate tax rate? a slew of policies. interesting between him and senator elizabeth warren. there'll be a lot of back-and-forth. likely this is an individual that will get senate confirmed. dani: must watch tv. for the bond market is anything he says about debt issuance. the other point you raised are extremely important, taxes and tariffs. scott bessent has more control and more influence is whether he terms out the debt.
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maybe you're already seeing some of that being built in. for a bond market participant i do not know if we would get questions or answers about it. that will be what matters. jonathan: over the weekend we heard from vice president elect jd vance and he brought it up in an interview totally unprompted focused on the bond market. i want to point out this name. stephen merritt who co-authored the piece with nouriel roubini under the treasury secretary janet yellen. that is one to watch as well. annmarie: they are focused on this. scott bessent has been critical of janet yellen and he was advisor to president-elect trump before the election. i was taken about how many times jd vance brought it up in a general interview. he was so concerned that the interest payment on our debt is rising so much. 2025 it will be more than $1 trillion. how do you do that and try to be fiscally bang responsible?
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jonathan: let's get to the latest on geopolitics. doubts emerging about the gaza cease-fire agreement. benjamin netanyahu accusing hamas of reneging on the deal. now the office saying new demands are an effort to extort last-minute concessions. you broke this story at bloomberg in the last one he for hours. what are you hearing? annmarie: there is going to be issues that arise. this is very difficult ready or dealing with israel and hamas which is a designated terrorist organization. i have been told they are resolving this last-minute issue. i would not say all this will be smooth sailing and crystal clear because of how tenuous and difficult it was to get to this point. what we know is the deal is in place and we should be seeing hostages starting this weekend come out. i have been told 24 of the 33 are alive and this is just the first phase. when they get later into the
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agreement potentially all of those hostages could come out. jonathan: what are you hearing? there have been reports this is close to breaking down already? >> it is a bit of a backtrack versus where we were less than 24 hours ago. to echo what annmarie was saying there appears to be an agreement in place. you would not of heard from the qatar prime minister and he would not have given that press conference if he was not sure all sides would agree. you would not have heard from president biden or president-elect donald trump. it appears to be the case of something going on within the israeli cabinet because they were due to vote on it at 11:00 a.m. local time today. they are postponing the decision , claiming hamas are reneging on elements of the deal. after that hamas put out a statement on telegram saying they are committed to what was
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discussed with the mediators. at this point a bit of -- a bit in flux. to go back to what our reporting suggests, phase one of the deal is still very much going to be effective as of sunday. that would secure the release of those 33 hostages annmarie was just talking about, some of them thought to have died in captivity come in exchange for palestinian prisoners. that is one of the points of contention being raised. there are certain factions within the israeli government not so comfortable seeing the release of some of these prisoners. one was released and went on to be the mind of october 7. another proving to be a sticking point, the gradual withdrawal of idf from the gaza strip, many do not want to see that happen without some certainty about who is going to be governing gaza once the idf withdraws. jonathan: nothing is easy about
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all of this. let's extend the conversation. steven cook warning the war is not opening -- is not over, writing "is a complicated deal that will take months to fulfill it is ever fulfilled and this gives ample opportunity for opponents of the deal to undermine it." welcome to the program. first of all, and i think it is significant, who do you think got this over the line, the sitting president or the incoming president? steven: it is a great question. this is a deal the outline of which we are familiar with since may. president-elect trump played a role by sending his own envoy there and talking tough not just to the israelis but also the qatari's and encouraging everybody to get this over the line. the israelis have become exhausted.
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a recent report suggests hamas is recruiting at a rate that is greater than the number of hamas militants the israelis can kill. hamas wants a deal so it can say it won. there was a confluence of interests here. undoubtedly president trump's suggestion that there would be "hell to pay" concentrated in number of mines in the middle east. annmarie: that is what i've been told by our source in the region that trump was able to set redlines. a lot of people and i've been talking to everyone says everyone deserves some credit in these two teams, whether brent mcgurk, steven witkoff, actually worked together and i've heard a lot of these people give the other side some credit. if steve wycoff and trump was doing the heavy lifting, likely that is to pressure the israelis. what does that say about the trump relationship with benjamin
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netanyahu going forward? steven: the big myth is that benjamin netanyahu and trump have a good relationship. throughout the four years of president trump's first term neither the president trusted netanyahu nor did netanyahu trust the president. they were each expecting to doublecross each other. during the israeli elections that occurred, president trump was rooting for netanyahu's opponent benny gantz. benjamin netanyahu has tried to make up for this by calling the president-elect repeatedly throughout the transition. we know president trump is deeply annoyed with netanyahu when he congratulated president biden in november 2020. there is a lot of work to do between these men. i think the president-elect was most interested in a deal. this was not going to be a headache of his on the first day. annmarie: biden yesterday said that during the next six weeks
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israel will negotiate the necessary arrangements for phase two, a permanent end to the war. you see a permanent end? steven: i don't. as you were remarking this is a long and complicated process. the 16th day of the first 42 do -- of the first 42 day phase will negotiations begin on negotiation of the second phase. then kellogg it is taken us to get to this outline agreement. -- think how long it has taken us to get this outline agreement. there is ample opportunity for opponents to try to undermine at. there is precedent. this happened during the oslo period. there are israelis opposed to it. there are members of many yahoos party that are opposed to the -- of benjamin netanyahu's party that are opposed to this deal. they wrote him a letter say do not put israel's national security at risk. hamas and extremists would like
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nothing more than continue to suck israel into a never-ending conflict in the gaza strip to former delegitimize israel in the eyes of the international community. there are serious questions about implementation of the cease-fire and in broader terms come after the 15 months of brutal warfare, neither side is looking to bring this conflict to a final peaceful resolution. jonathan: appreciate your time. steven cook of cfr. emory, fantastic -- annmarie, fantastic reporting yesterday. it is significant who helped it get over the line because we think how things could change with the incoming president. annmarie: a lot of the adults i have spoken to say everyone gets credit. the premise of the deal was put in place by the biden administration. biden was a lame after the election, regardless of who won.
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benjamin netanyahu was waiting for hua my going to be dealing with? it was trump and his team. trump immediately sent steven witkoff there and put pressure on the israelis to get them over the finish line. there is credit to be given to both but in terms of the heavy lifting i am told it goes to the trump team. jonathan: equity futures are positive. bank of america numbers jump in shortly. let's get you an update on stories elsewhere. yahaira: canada has drawn up an initial list of $100 billion worth of u.s.-made products it would hit with tariffs if donald trump goes ahead with his threat to impose a levy on canadian imports. sources tell us the list is a draft and will come into play if the trump administration moves first. fry mr. justin trudeau and the premiers of canada's provinces met yesterday to plot a strategy for dealing with u.s. protectionism. the tiktok ceo has joined the list of tech moguls attending
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donald trump's inauguration. the new york times is reporting he has been invited to sit on the dais where former presidents and other important guests are seated. the app faces the sunday deadline to find a u.s. buyer to continue operating. politicians are seeking ways to keep tiktok's accessible in the u.s. despite the impending band. shares of target are rising more than 2% in the premarket. the company raised its guidance after holiday sales beat expectations. the positive news comes after target but guidance following the steps on product assignment. that is your bloomberg brief. jonathan: numbers from bank of america, net interest income better-than-expected. investment bank ending revenue better-than-expected. the stock up marginally after all of these banks rallied yesterday. we are higher .4%. up next, searching profits for
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the big banks. >> will markets are not sustainable unless the banks are doing well. they seem to be doing very well. a new administration will be easier on regulations and as result of deregulation the banks will benefit from that. jonathan: it is hard to disagree with that. that conversation is up next. ♪
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on a path to stronger retirement portfolios. principal asset management. actively invested. why choose a sleep number smart bed? princii need help withment. her snoring. sleep number does that. thank you. and now, save 40% on our new special edition smart bed. plus free home delivery with any base. shop a sleep number store near you. jonathan: equities doing ok. s&p futures up another quarter of 1%. under surveillance, searching profits for the big banks. >> i think the banks are very important. usually bull markets are not sustainable unless the financials are doing well and the banks are doing well and
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they seem to be doing very well, the economy is growing and demand is growing. the new administration will be easier on regulations and as result of deregulation the banks will benefit from that. i think the most obvious beneficiaries immediately from the new administration. jonathan: the numbers yesterday were good, the numbers this morning are good. bank of america is up 2%. with the numbers here is manus cranny. manus: a comfortable bead for bank of america. it is about the guidance for this current quarter in q1 you are looking at 14.5% to 14.6% then you accelerate to the fourth quarter of this year. this is a progressive story on building on steeper curves on net interest income. by the fourth quarter you are looking at 14.5% to 15.7%. in terms of the fixed income, we saw a good showing yesterday for the others.
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equities pretty much at the money or a bit lighter. we are not in a hurry for provisions. provisions for credit losses, 1.45%. that is less than expected. you have three legs to the narrative from bank of america which is about steady and growing nii. very functioning and growing investment bank. this low point of where we are in provisioning for a tougher time in the economy, one line is the consumer client spending continued to grow at a moderate pace. jonathan? steven: the stock is up -- jonathan: the stock is up 2.4%. do they look good from where you are sitting? sonali: they look more than good. you are seeing bank of america saying they will not only make
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more net interest income. by the fourth quarter they would be making $1 billion or more. that is how confident they are. this is due to loan growth and better deposit pricing. the securities they held a low interest rates now going to higher interest rates. this was a bank of america sweet spot and they are in with a lot of records that shows they are still competing with the big guys and keeping a handle on risk. the equity markets, you are seeing the banks take on more risk and leave dollars on the table because of the volatility. dani: usually in this earnings season we separate the more consumer focused ones from goldman sachs. is there a clear example -- is there a clear advantage to either business model? sonali: main street businesses are doing well and so are wall street businesses. bank of america is doing both. jonathan: let's head over to chris. we would love your thoughts.
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for the numbers we saw yesterday, how much of this is about a better environment for the banks and how much of this is better execution? chris: the cost of funds coming down will repeat itself in the first quarter we have the full effect of the 100 basis point cut. that is very good for net interest. that is where the guidance comes in for bank of america being positive, not just for now but through the year. the comment about main doing well is 100% collect -- 100% correct. investment banking still has a ways to go in terms of the inflection point to get stronger. that whole diversified model is playing out quite well. the point we also see is the overall credit quality continues to be tame. charge-offs and problem loans are not having any sprite. we are not having any follow-through in real estate problems. the profitability of bank of
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america and all of these big banks is so strong it allows them to solve their own problems internally and we are seeing that coming out. dani: the bank analyst at wells fargo made the comment he has not heard jamie dimon this optimistic in decades. can you speak to the shift in sentiment among the banking executives? christopher: it all goes back to the regulatory shift we are about to see. it will take six months to nine months to have all of these regulatory heads be confirmed and do their work. the outlook is positive. we know the market looks ahead five to six months so that is where the bullishness goes. i think the ceos are part of that. jamie has been unhappy about the regulatory set up for several years and now that that starts to unwind that allows them to do more business. this is true for every bank, not just the big banks. it gives down to midsized community banks. jonathan: that is the good news -- annmarie: that is the good
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news of trump 2.0 for the banks. what about things like tariffs? is this going to become issue for the banks? christopher: we don't know what we don't know about how companies react to the tariffs. that is a risk. we have to be vigilant about seeing banks keep reserve steady. i think commercial industrial loans be something to watch in terms of how credit unfolds and it looks like fourth quarter is more of the same. we have low losses of these big banks and that is where the risk would shift quickly, whether it is tariffs, whether it is immigration or any other parts of the economy that filter back to banks. jonathan: at 7:30 eastern time we will's morgan stanley and see if we get the clean sweep. every bank has delivered a beat. the regional players win to? christopher: i think they do. you will see regional players
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with mmt and tomorrow with truest. next week after the holiday should be more of the same. cost of funds is the big factor of production. because it is coming down in q4 and q1 that does help the margin at the top line revenue of these companies. jonathan: appreciate your time. chris marinac there. sonali basak, give me the final word. sonali: you look through the presentation and you look where the long growth is coming from. this means the readthrough will not be the same across every bank. page eight of the presentation is commercial loans. it is not consumer loans. consumer vehicle lending is up marginally, home equity is flat. residential mortgages are rising. fica scores, i left a look at this in the presentation. for a consumer loan it is 802. for a residential mortgages 7.75%. near-perfect.
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it is telling you not every consumer can get a loan. jonathan: if you are following along, 802 is really good. dani: i will not say what i am matt. i lived out of the country for a while. it speaks to the good credit quality. for all of those people sing the consumer is falling off a cliff, it is not happened. maybe there is some bifurcation. not everybody is getting a loan but there's so much strength in the earnings from investment banking or mainstreet. jonathan: appreciate it. we will see you again in 30 minutes. every bank that has come out with earnings has beaten estimates. it has been a decent 24 hours. bank earnings were decent come equity futures were a little bit firmer. up next, david leibowitz of j.p. morgan asset management, jessica tabor of the cook political report, and frances donald of rbc. from new york, this is
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>> usually bull markets are not sustainable and less financial markets and banks are doing well, and they seem to be doing very well. >> the results speak to the ability to earn into your valuation. >> you will find robust trading results for all of the big banks. >> it will be a great year to be an investment bank because it will increase volatility in bonds and equities.
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>> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, good morning, good morning. equity futures up i .25% on the s&p 500. -- up by .25 percent on the s&p 500. the banks are doing well. we had a eat. let's see if morgan stanley can complete the sweep at 7:30. mastec 100 up .40%. after we get those numbers from morgan stanley, we look ahead to resell's cash to retail. scott bseee -- bessent's hearing kicks off at 10:30. dani: a lot of it is rates coming down in the animal spirit.
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i will be interested to hear from brian moynihan and the team from bank of america how optimistic they are. the ceos and clients are optimistic. they talk about giving loans, and the loan quality is really solid. some of the credit losses they are setting aside are much lower than expected. jonathan: it is all about the incoming administration and the policy changes we might see. you might get some clues. annmarie: when you hear from executives, there is a shift when it comes to deregulation. a moment ago, there was this uncertainty regarding what is trade regulation going to look like? what is that policy going to end up winning out in the oval office and he was going to win? we will potentially get a little more color on how scott bessent will advise the president-elect
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on how he should deal with tariffs and negotiating trade deals, but he needs to be careful. this is a veteran hedge fund guy. who knows if anything he says has the potential to move the market. jonathan: i think he understands the game and we are looking forward to the hearing later. following decent numbers elsewhere, begin by 1.6. we will catch up with j.p. morgan, david leibovitz, jessica taylor of the cook political report, and frances donald of rbc as markets reprice rate cut bets. investors are breathing a sigh of relief as bank earnings came in stronger-than-expected and inflation softer than expected. david liberates writing this -- david lebovitz writing this, as inflation gradually move slower, we expect two risks. the biggest risks are real exhilaration and wage growth or some sort of government policy that re-ignites inflammation.
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how excited i get about the last 24 hours? david: i think it was more the market breathing a sigh of relief as opposed to information that is new. we are making progress on inflation, but it is the services component that is sticky. when you break that down further, where the heat is coming through his shelter and transportation services. it feels like the auto insurance process is running its course. if wage growth begins to accelerate, that shows up in things like food away from home and services more broadly and that is the risk to the fed adopting a more hawkish tone than they had up to this point. jonathan: yesterday, stocks and bonds rallied. would you like to change either? david: the positive correlation thing is tricky. in a perfect world, we would and year with stocks higher and rates lower.
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i think we are definitely leaning more to the risk side of the trade as opposed to the duration side, but with the curve now positively sloping, you are getting carried from being longer. duration does not look as problematic as it happens when the curve was inverted and you basically had to pay to be longer out on the curve. dani: the curve, the shape it is doing, getting more steep, there was commentary with people concerned about fiscal deficit and the economy, but to some degree, this is normal, this is how things work for the gse. is what we are seeing a good thing and a return to normalization and a return to normalization in the yield curve? david: fundamentally having a positive slope yield curve and the base rate that is not zero helps economy more broadly. what is more interesting is the move we have seen is that it is driven by concerns on fiscal policy. if you look at the relationship between the 10 year yield and
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the economic policy and the term premium, all of these are moving higher together. what that says to me is that the bond market is concerned about something more than the expected path the fed policy. if we get one cut this year, 4.65 on the 10 year's very value, we would need to see the fed engaged in hikes or something on the physical front that causes that concern amongst bond investors. dani: some of that is uncertain premium. as we go through that inauguration and you get different executive actions put in place, what is tradable and what leads to more uncertainty? david: it is a question of signal and noise. the order of operations matters. when president trump comes into office next week, the first thing he will do is unwind a lot of things the biden administration had put in place.
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that step one. step two, he pursues his own agenda. we think he will lead with immigration and tariffs, but on immigration, i think it will be more thoughtful than people are currently expecting, and on trade, this is the beginning of a great negotiation. the news that has come out around tariffs, somebody says one thing and it gets walked back, it deals with the evolution of trade going forward. annmarie: so maybe xi jinping actually will not follow through the maximalist approach. david: if you look at where the u.s. gets the majority, half the reason trump is going to be in the white house is because the biden administration saw a time of elevated inflation, so you have the get a sense of i think he's going to shoot it pretty straight down the middle but
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there will be volatility along the way. that is what we are trying to remind our clients. annmarie: the idea keeps coming up that inflation is important for this incoming administration and that is partially why they won the election, but there is potential that some of what trump is talking about is inflationary and you still have pockets priced in for 2025 and the team. how do you weigh both of those? david: it is important not to put the cart before the horse. it was four or five months ago where we trigger -- annmarie: year ago we had six. david: markets are still twitchy. the reality is the broader trend in inflation is lower in the fed clearly views the current level of the fed funds rate as being restricted, so they remain on a path with more easing. how quickly it materializes is the bigger question. people talked about march and june, i think we might see first act and second half done. we will not cross it out until we have information that
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inflation is not coming down the way the fed would like to see. with respect to interaction with policies out of the white house, tariffs are a one-time shift. unless it becomes truly tit-for-tat and something the fed focuses on. immigration could be somewhat inflationary but that takes time to play out. historically, inflation comes in waves. it is a first wave, because, and a second wave. we get much more of a 2026 story than a 2025 when you have tax cuts coming through in progress on deregulation and inflationary policies finally working their way through the system and showing up. jonathan: should the fed's first just be the weight and why would they cut at all given what you've said? david: the reason they should cut is if you look at the real fed funds rate, it is somewhat punitive. when you look at a broad mosaic of labor data, the payroll game we got last week does not
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exactly line up -- jonathan: so you are not buying the 250? david: i'm not buying it, i'm buying that the rate has been stable and relatively low. that tells you everything you need to know because if he cannot walk out toward, get paid 20% more to do the same job, that tells you a lot about the labor market. 4% wage growth, this is good stuff but on the fringes, you see that softening and that causes the fed concern. jonathan: if you had to take a bit and you are thinking about how this labor market right to break, are you betting on the latter rather than the former? david: i think the risk is still to the upside. this is a healthy economy, real income growth remains positive area if we get deregulation and favorable tax treatment, you can see to hire and that is one of the more cyclical -- to hire, that is one of the more cyclical parts of the economy.
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is it going to get turbocharged was to mark that is a risk we cannot dismiss. dani: i find it notable that quits are lower and it is getting harder to find new work and you are seeing wage growth stagnant. if you don't trust headline data, should we continue to look at that and is that the guiding star of the economy? david: that is why i was surprised on friday. wage growth is coming down, doesn't that really matter? it's not the number of jobs you create but what is going into people's pockets. the data that breaks down wage growth showed that those lower income individuals are finally seeing wage growth began to slow, and that is important because those are the individuals with a higher propensity to consume and they spend every dollar that comes into their pocket, so that can cause the delta when it comes to growth and inflation. dani: peter tchir made this point the other day but went on to say that his concern is that the red is paying attention to
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the headline data and reacting to data points that might be skewed. do you share that concern? david: i think the fed does a good job of looking at a broad mosaic with a staff of economists spending time on all of this stuff. they will not fade the 250 number because it could be a signal, but it could also be noise. they will continue to look at the data more broadly and square that with their own forecast and coming up with the appropriate trajectory. dani: should we do it -- annmarie: should we do it mohamed el-erian said ages ago, yesterday we had headlines from meta, southwest, is this idiosyncratic or a trend is to mark david: it is somewhat idiosyncratic. it is a bit of cleaning out the closet if you will, but we need to watch the developments closely. coming back to the quits rate, part of it gives me comfort is that the quits rate is low but the layoff rate is also low and
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if we see that trend higher in a material way, that is are you see the fed express more concern about the gross side of the equation and fade inflationary pressure. jonathan: we will not discuss the return to fiscal policy, don't worry. good to see you. equity futures on the s&p positive by .20%. at 7:30, numbers for morgan stanley. later, we have more data. we will have jobless claims. with an update with your bloomberg brief is to hire hackers -- a higher hackers. yahaira: president biden gave his farewell address last night. he hailed his accomplishments like negotiating a gaza cease-fire deal and sweeping infrastructure package. he also delivered a warning about the upcoming ministrations. >> today, an oligarchy is taking shape in america, extreme growth, power and influence. one that threatens our entire democracy with our basic rights
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and freedoms. yahaira: biotin will it tend trump's inauguration on monday. taiwan semiconductor shares are up in the premarket more than 4% after reporting beat outlook. rejected quarterly sales came in above expectations and they plan to spend more on technology and capacity the current quarter, despite uncertainty between u.s. and china trade relations under the upcoming trump administration and taiwan caught in the crosshairs. meanwhile, shares are soaring after sales jumped 10% over the holiday season. analysts expected gains of less than 1%, largely coming from strong demand for expensive jewelry like cartier and the americas and europe, offsetting watch sales. optimism grows in the worst may be over for luxury. jonathan: big rally for the luxury players in europe and in
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paris, france. trump's picks facing a grilling on capitol hill. >> i will fight every day to restore confidence and integrity to the department of justice. >> we are once again called to create a free world after chaos, and this will not be easy. jonathan: that story next, live from new york city this morning, good morning. ♪
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has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: equities positive by .20%. bank of america numbers for the good. that stock rallying again this morning. numbers dropping at 7:30 eastern, morgan stanley. trump's picks are facing a grilling on capitol hill. >> i will fight every day to restore confidence and integrity
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to the department of justice and each of its components. the partisanship, the weaponization will be gone. >> we are once again called to create a free world out of the chaos, and this will not be easy, and it will be impossible without a strong and confident america that engages in the world, putting our core national interest once again above all else. jonathan: attorney general nominee pam bondi and marco rubio, secretary of state nominee, meeting lawmakers on capitol hill, and today, scott bessent will face the senate finance committee and is expected to talk about "an economic golden age." joining us to discuss is jessica taylor of the cook political report. how easy will he have things later this morning? jessica: i think people face tough questions from democrats, especially about tariffs in the trump tax cut and things.
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probably center on his background of things, but he is not a top pick. he will be easily confirmed, probably with democratic support, but this is not one of the high-profile controversial nominees that trump has made. annmarie: it is high-profile for our viewers to watch and to understand color about the policies we could see from trump 2.0. when it comes to potential fiery exchanges in the hearing, which senators are you going to be looking for? jessica: elizabeth warren's top of the list, given her opposition to trump's view on things. i'm looking to her particularly, but i think republicans are going to have his back certainly, and he has donated to democrats in the past. he has certainly come around to trump's economic worldview but he has not been in trump's inner
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circle either, as well. annmarie: neal dunn a reminded our audiences that this individual has the temperament to work for george soros and donald trump. so let's look at other cabinet picks, who is going to be most difficult to get confirmed? jessica: at this point, tulsi gabbard, but even she looks like she's on the path. at this point, probably all of them have to be favored in that regard. we had pete hegseth's nomination, very contentious, but not as much as expected, on tuesday, and joni ernst came out saying she would vote for him, a senator that we were watching, given her past history and the military and past history of sexual assault, and then notably last night, john curtis, the new senator from utah, also said he would vote for him, so with those key republicans coming out for him, it's hard for me to see
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how he gets four republicans that would oppose him. even tulsi gabbard, now that she switched her position on the surveillance, specifically section 702 and different things you have, particularly langford in ohio saying he would back her, you know, remember how rare it is. we have not seen nominee since john tower and the george h w bush administration that was voted down on the senate floor. typically these nominees, the writing is on the wall and they withdraw the same way matt gaetz did, and it is not uncommon to have a president that withdraws and everybody has someone who they end up withdrawing for various reasons, and it may be that matt gaetz was that one. when you put forward some unlike matt -- pat bondi, she comes across as much more palatable to democrats because they are
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thinking, well, we could have had matt gaetz. annmarie: when it comes to the votes and when they take place, which senators would be the ones that could potentially say, i'm just not going to vote, republicans? jessica: the two key moderates are and lisa murkowski. collins is up for reelection in a state that voted for harris and biden in 2020, and for clinton in 2016. she won reelection in 2020, and republicans -- i mean, democrats are struggling early, but a lot of their key democrats may run for governor are not percent. she is less susceptible to a primary challenge, which is the key motivating factor against someone like joni ernst, or if
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she had voted against him, she's also up in 2026 and had republicans, including conservative leaders in iowa talking about running against her in a primary. lisa murkowski is also a little unencumbered because her state decided to keep ranchos -- keep ranked choice voting, where the top four candidates advance, chosen based on voting, so she is not susceptible. and i'm looking at mitch mcconnell. he does not share trump's worldview particularly on foreign policy and different things, and it is why they expect he will not run for reelection in 2026, so he also does not feel this poll, and as leader, he does not have to have relationships in the same way. john curtis, he's another i've watched, and it was key when he came out for pete hegseth.
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we still have kash patel coming up for the fbi, thai young from indiana who did not endorse trump, he has sort of been more maga skeptic to trump world, and then it comes to rfk at hhs, the chair of the health committee, bill cassidy of louisiana actually voted to convict trump in his second impeachment hearing and he is already eating primary challengers in louisiana. and he was last reelected, louisiana had an all party primary, so he was a little more inoculated than lisa murkowski, but they recently changed their law, so he will have to run in a traditional primary, so he faces a real threat in 2026. dani: we know a lot of the questions will revolve around tariffs. how influential do you think scott bessent's push will be
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when it comes to sitting tariff policy, or will it all be about what trump would like? jessica: trump has surrounded himself with loyalists, and he brings more of a broader worldview in the financial world and donald trump as with the nuts and bolts of the financial world. i think you will be influential in that regard, but i think trump also has picked him because he has this experience, and i think that is probably appealing and reassuring to senators, but he is someone who has come around to trump's view on tariffs, as well. jonathan: good to catch up, jessica taylor of the cook political report. the most influential person in all of this, the treasury market. the bond market will have some things to say potentially, and they will, so long as extent come is announced -- the extent
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of fixed income is announced. dani: he basically wrote that the only thing that could stop donald trump and the exceptionalism of an economy under donald trump's high term yields. he's acutely aware of that and that may color what he says today. annmarie: it is not just scott bessent that is watching. taken aback that jd vance, soon to be vice president, on fox news, and you have to think, this is what they are focused on. jonathan: he would like to see that taken nonmainstream. equity futures right now positive by .10%. next, results from morgan stanley to round out the numbers on wall street
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jonathan: so far, so good for earnings on wall street. it kicked off with j.p. morgan, really good. the outlook even better. fantastic trading figures. for bank of america, looking better than good. from morgan stanley, we get those numbers any second. we will see if we get a clear sweep on wall street. equity futures, positive by little more than by .10% on the s&p, the nasdaq 100 up by .30%, and yesterday on the s&p 500, on the nasdaq and russell, the biggest one-day gain going back
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to the postelection bump november six. here's the bond market picture, on a 10 year treasury yields, yields are up by two pieces points. a little later this morning, we get data. jobless claims and retail sales. the treasury secretary will ask scott bessent big questions about what he will do with the treasury market. dani: it will be very crucial because he has been very critical, along with the likes of others that janet yellen did not turn out the debt and it has been concentrated on t-bills. so they are showing the ability to issue more longer-term debt, but how does he struck the balance and can he issue longer-term debt and keep yields at the ceiling? annmarie: and how does he handle the debt ceiling? this is a massive fight on capitol hill, and it should have
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been dealt with in 2024. it was not. this will be a fight, and they will ask him, do you think we should get rid of the debt ceiling? scott bessent has taken aim on secretary yellen about this. it is easy to criticize from the sidelines but it will be hard when you are in the chair. jonathan: i think a lot of people are taking comfort from the bank earnings we have seen and the inflation figures we saw , the softer cpi print and softer ppi, as well, but that could change monday morning when we get the inauguration and then later in the evening, we see executive orders and the focus shifts quickly. let's turn to foreign exchange. wj now reporting that they are gearing up for a rate hike. dollar-yen down to 156.13, and the question for the bank of japan, it is not even the data coming out of japan but what
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happens next with the policy of the incoming administration. dani: you cannot help but laugh because it is a ridiculous place to find themselves that days before their meeting, they don't know what they are doing until they get executive orders coming down. for all of the criticism that the fed is too reactive, you have a bank of japan that is not even reacting to their own data but american data in u.s. politics. it is a necessity, and you could argue that in america, it is a necessity in the fed needs to understand what fiscal policy will look like before they set their agenda for the year. annmarie: policy and the political economy will be the driving force for markets and central-bank leaders. everyone says the fed is the global central bank for the world and what does that make donald trump? jonathan: the president of the world right now and dictating policies. we look at moments from morgan stanley. when they break, we will bring them to you. under surveillance this morning, the israeli prime minister accuses hamas of walking that
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conditions of a cease-fire. his office says new demands are an effort to extort last-minute concessions. they will not approve the cease-fire until hamas accepts all terms. annmarie: a lot of this is internal politics, and given the fact that the state of israel with hamas, designated a terrorist or in addition and more, you can imagine there will be a lot of starts and stops when it comes to this. right now, the deal is holding and this means 33 hostages, including americans, will be released starting this weekend, and i'm told 24 are alive. jonathan: i mentioned the numbers from morgan stanley, let's turn over to manus cranny for more. manus: wealth management is the core, 7.5 billion, looking for 7.3 billion, fourth-quarter net interest income, 2.55 and again adding to the sweep of beats on
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net interest income and guidance, so 2.5 5 billion, way above the estimates. and compensation expenses to be precise, 5.9 5 billion, below the 6.6 4 billion, and jane fraser had that battle at citi in terms of reorganizing but this is a neat on net interest income, a provision for credit losses slips to $3 million. this is an economy that is strong and on fire. just trying to check for the advisory side of the business, have not quite got those, our first sweep is a comfortable beat on a trifecta of issues for morgan stanley. jonathan: the stock rallied yesterday by almost 5%. the numbers were pretty tremendous. morgan stanley up by 1.4%. did we get our clean sweep on wall street?
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sonali: we got more than a clean sweep. i had to look three times because it is at $3.3 billion. the estimate was for 2.6 billion, so they are coming in almost $1 billion more than expected for you not to mention, they are coming in 1,000,000,003 more than j.p. morgan, so they are just under goldman sachs. this is that heated competition under the surface. so they are showing that on the core wall street businesses, they are slamming through the roof. in addition, the margins for wealth management are also very strong, coming in just about as expected, even a little higher. while keeping compensation expenses under control, making more money and delivering more product back to shareholders. dani: chemical back to another number mentioned, provisions for credit losses for $3 million,
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the estimate was under $74 million, that is less than decided, that speaks to not just credit quality but the risks taken on at the moment. sonali: morgan stanley and bank of america are lending to consumers, their quality will not be as tough as we see in the earnings season. i'm looking out for allied financial and carvana. you have to look at what is happening. jonathan: that feels like a lifetime ago when they came out with a warning. how long ago was that? : sonali last quarter. jonathan: it feels like years ago. it feels like this market and sector. sonali: but there is a bifurcation. do they come up as strong as megabanks? yes, fine, they are making
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attentive money on wall street, businesses treating investment banking, does that look the same ? is loan demand going to be as strong when people are already maxed out on credit cards? dani: maybe you can extrapolate it to regional banks, but for morgan stanley wealth management , we go back to what we talked about yesterday and the fact they are pouring into private credit. as they managed businesses, which model makes sense for morgan stanley? how are they achieving these when everyone is flocking to the area? sonali: this whole thing about how can mo with -- ken -- i did not mean to shady when i said that -- jonathan: is this a permanent occasion? sonali: what people learned is that the capital markets banker, the conception of that is the future of wall street. you can see it, david solomon,
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capital markets. and it is the recognition that the way people raise money are different now, and that private credit players are huge part of that story. by the way, some companies might stay private for longer, think openai and spacex. morgan stanley is working hard to make private markets more liquid. jonathan: can i clarify that i don't take that much vacation. you just miss me when i'm gone. that is what it is about. if you are just joining us, wealth management revenue around 7.5 billion, the estimate was 7.3. we talked about the estimate, 2.63, and an upside surprise of trading that came in for the treating revenue in the fourth quarter. manus cranny still with us. put it together, look ahead to the rest of the year, how much better could it be? manus: there is a story, morgan
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stanley in terms of equity business, but they have that natural flow from the wealth management business into the equity side of the business. that is the paradigm that every ceo would like, they would like to get the synergies, and then they have a better flow. you have to consider a 2025 -- it is a game to put a number on what investment bankers will do or what institutional banking will do or what fcc will do, but you can be sure that capital rules are changing. what to do with the excess capital? is it a better year for buybacks or deployment of capital? in a deregulatory environment and a new push to be top of markets, perhaps you can establish a flaw with which you see 2025, rather than a cap or ceiling for 2025, it is about the floor, and it looks pretty
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solid with an underpinning. morgan stanley leads in terms of the equity market. the advisory side of the banks is going to build up. we know there is a lot of anticipation in terms of the ability to get deals done in the era of the new trump administration. institution securities saw strength against markets. jonathan: morgan stanley up by 1.5 percent. i would like to give sonali the final word, the quarter we are seeing is decent, better than good. sonali: i leave the last word to david solomon, who spent time talking about how they are suing the federal reserve the fight is not over. them and every other large bank are still looking for more transparency, and this is the year they are going to get it. jonathan: great work. appreciate it. sonali basak reviewed on the earnings on wall street. check this out, breaking down a weaker euro, off the back of the
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ecb, some members would like to deepen the debate about a 50 basis point cut. dani: also talking how the euro dropped versus the dollar, it is almost a good thing for them to have a weaker euro. one of the first mistakes i made was calling it minute -- jonathan: they are not minutes. dani: i felt picky. jonathan: they get unhappy about that. i'm not sure why. let's get you an update on stories elsewhere. yahaira: we start with the latest out of southern california, where wind speeds have begun to weaken, bringing much-needed relief as firefighters try to contain fires. the santa ana wind could return next week, which could bring more dangerous conditions. investigators are turning their attention to a ridgeline that overlooks the palisades as the potential source to the fires, including popular hiking trail that was the scene of a small
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fire. days beforethe blazes spread the u.s. department of transportation is suing southwest airlines for what it says are unlawful chronic flight delays. the agency alleges southwest violated rules that required airlines to beat -- meet realistic flight schedules and would seek maximum penalties. the airline said they are disappointed that the dot chose to file a lawsuit over what they say are two flights that occurred over two years ago and southwest said they are open to discussions about reasonable settlement. a group of investors led by lebron james' business partner is aiming to raise money for a new international basketball league. it would comprise six men and women's teams with games played in eight cities around the world, modeled after global rotation. the league aims to rival the nba. jonathan: more and about 30
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minutes. next, the strength of the u.s. economy. >> over role, the economy left to itself is chugging along, steady growth, little over 2% growth, and inflation gradually coming down. the economy itself looks pretty good right now. jonathan: that conversation next live from new york. you are watching bloomberg tv. ♪
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-honey... -but the gains are pumping! better questions. dad, is mommy a "finance bro?" she switched careers to make money for your weddings. oooh the asian market is blowing up! hey who wants shots, huh?! -shots?? -of milk. the right money moves aren't as aggressive as you think. jonathan: equity futures on the s&p positive by .10%. a clean sweep on wall street. decent numbers from another big bank, morgan stanley. the 10 year, 4.6797.
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the strength of the u.s. economy under surveillance this morning. >> the economy left to itself is just chugging along, steady growth, and unemployment very steady and inflation gradually coming down. the economy itself looks pretty good. overall, pretty good. the most important is the labor market. jonathan: u.s. core cpi numbers below expectations the last 24 hours, boosting bets that the fed will cut sooner than anticipated. retail sales data drops to 8:30, and francis mcdonald -- frances donald disagreeing, same rbc economics is no longer calling for anymore rate cuts and the reason is the data want to give the fed enough justification for further easing. did cpi change the story at all yesterday for you? frances: no.
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inflation will move downwards but not below the fed target and more problematically, what is the balance of risk in the later part of the year? everything i heard about, this cpi was marginally below consensus, it is a game changer. first of all, the data was not a massive in changer in and of itself, but if you looked at a more economic cycle, that would be one thing, and we say the economy is behaving mid-cycle, we know that there are these shocks that are going to disrupt the cycle that we are currently in but we don't know the probability or the size, but we know that they are coming, so where we are in december, january or february is far less important to the fed call or longer-term market called than anything we find out next week when president trump takes office and we get more of a sense of the sequence, the size and scope of policies ahead. jonathan: the most important data point this month, perhaps
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this year, is inauguration. when you think about sources of inflation, labor, energy, good services, where we are set up right now, where you think we are when you think of policy changes? frances: goods are no longer going to be deflating. housing a short on supply, so that number is going to keep a floor underneath that, and we got a heck of a ton of fiscal spending that is going to keep services alive. the labor market does not have enough people and will have fewer moving forward, so that is where we are now. the challenge is some policies that we know coming forward are actually this inflationary, like the regulation or any policies that help you increase productivity, but things like tariffs and immigration reform, those policies will increase inflation and it depends on how does the u.s. dollar move and
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other factors surrounding it, so the sequencing effect, when we get the disinflationary ones first or that inflationary ones next, that is important for 2025, but looming over this more normal cycle we are entering for the fed is the threat of disruptors coming through, and on balance, we see the more problematic for upsides and downsides. dani: we know that some number of fed officials take that into account, how willing you think the fed will be to not be reactionary but preemptive when we understand policies coming from donald trump? frances: historically, they tell us that they wait for the actual policy to come through and chair powell has been clear that they would like to see real data. we are still learning and we have a little experience. economists know a lot about washing machines from 2018, and we know that some of the currency can provide the offset and how retaliatory other countries are matters, so there
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are too many factors when it comes to modeling how iteris impacts inflation, but we have already heard them, we have heard them through their risks and their already incorporating that they know the risk of the tariff does not create deflation but inflation. meanwhile, the labor market looks tight, even though there are particular reduce like layoffs are low, and there are interesting things happening there, and this is a fed that will be a rare that the market -- be aware that the market needs to get on this so you don't have a significant increase in the unemployment rate, even though there might be interesting factors under the surface. annmarie: today we will hear from key personnel from the trump administration, scott bessent, what would you like to learn from him as an economist? frances: i would like to understand the magnitude under the themes, so are we talking about 25% across-the-board or
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selective industries? this is important if you are trying to model developments because we are trying to figure out the primary industries and what are the secondary knockoffs? we probably will not get that detailed policy, and this is the core impacts that will weigh on the u.s. the next months. expect a combination of currency slowing decisions but also inventory hoarding. when you expect the price of something to go up or an industry that suspects you are at risk, you could see inventory rise. these are notnts, so your typicl model is not helping you, you are making an excessive amount of assumptions coming through. we have to do some element of that and that is why these base case forecasts that went out of 2025 outlooks, including ours, appropriate forecasts, but to stay wedded to them right now is dangerous. dani: the stickiness that we have seen, a lot of it is
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demand, the labor market is still robust, is that shift? is what you are describing a supply shock? what does that mean for the fed's ability to fight it and our ability to cope with it? frances: a beautiful question. let's put 10 bows on this. the u.s. economy is moving from a demand letter economy, the one we learned about an economic textbooks, the one that created the federal reserve that said inflation is too hot, let's slow the economy to one that is more similar to things we experience during covid, labor market that does not have enough people and the skills qualifications to fill health or the immigration to fuel the retail and accommodation area. this will be important to labor, and on industry and manufacturing, it is not about who we want to have those goods but can we actually access them?
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some lessons with covid are going to be relevant, and what is critical is how does the federal reserve respond in the next three months or six months, but to an economy that is more supply led? dare i say less interest-rate sensitive? we will see as we go along another area of uncertainty, not just with the data desperate how will the fed respond? jonathan: go to think of how they have managed message around incoming administration? frances: well, the challenge when i look at the s&p or understanding the fed's decision making motion which chair powell explained, they are all taking different approaches within the federal reserve, so we don't have a lot of clarity. one of the challenges is they are cleared they are data dependent, and so then you get these huge outsize moves around things like cpi because of a decimal point of month over month, and very get revisions,
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we find out there are seasonality distortions and then we go to january and we have a massive weather event, a horrible tragedy in california that will disrupt january data, so there is danger with the data dependent comments within era where we see low response rates and other problems creating less clarity month-to-month. jonathan: and they are hypersensitive to the incoming information and that is why you see big moves datapoint to datapoint. dani: and it is a criticism mohamed el-erian has levied against the fed, the reason you see volatility in financial markets is because of what the fed is doing, but it goes back to your point, how do you have a longer term outlook when you don't know the consequences? jonathan: richard clarida will join us shortly. tom fitzgerald of td, and a special thank you to frances donald. equity futures on the s&p just
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>> the economy doesn't feel that strong, yet the fed seems to be responding to that.
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bikes everywhere i look i see more inflation. >> we are pricing in a stronger u.s. economy for longer. >> we think we are going in with significant momentum. >> economy has been resilient and demonstrates that might be able to continue to grow right through the decade. announcer: this is "bloomberg surveillance." jonathan: equity futures on the s&p just about unchanged. we are holding onto gains from yesterday. the biggest one-day gain going to the day after i've -- going back to the day after the election result. looking ahead to monday, equity futures on the nasdaq positive 5.1 percent. it is a clean sweep on wall street. every bank has delivered an upside surprise. morgan stanley the latest. up by 1.26%. dani: it probably would have been up if not for yesterday. it is coming from everywhere. it is trading figures blowing it
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out of the water thanks to the volatility in the fourth quarter. it is investment banking with deal activity about to be on -- about to be unleashed. and it is the normal mainstream businesses too. the credit quality is getting better. it is hard to find an area that does not look positive. jonathan: the next stop for this market, is the economic data on a lot of those gains yesterday will not just built on bank earnings. it was built on a downside surprise on cpi. we have retail sales and jobless claims, and then at 10:30 a hearing on have -- hearing on capitol hill with scott bessent. annmarie: this is what a lot of individuals are waiting to hear about whether it is policy priorities, or what is going to be the policy? everyone comes on the program and says, the market is pricing in the good stuff from trump. these are tariffs. are we going to get any sort of clarity today from scott bessent? you know he is going to be asked
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whether or not donald trump is going to go for the blanket tariffs he promised on the campaign trail or take a more gradual approach that has gotten -- that scott bessent was talking about in august. jonathan: later, the treasury market. what are they going to do with this debt? a lot of it is short-term debt, particularly under janet yellen. yields are rising by three basis points already this money. a lot of investors focused on that aspect of things. dani: the -- longer-term is going to be going higher, so now is the time you want to do that. scott bessent, a lot of people criticize janet yellen for concentrating in the people part of the market. it means a lot of dead is coming due in a short maturity. scott bessent said he wants to terminate out, but also not have longer-term yields go up too much. i'm not sure how you can do both, because it is a supply issue. annmarie: he has thrown a lot of
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daggers at secretary yellen, saying they are trying to juice the economy by holding down this long term debt issuance. he will be asked, will you be regular unpredictable in your approach when it comes to debt issuance? jonathan: yields aggressively lower yesterday. up by a couple basis points. in the next 60 minutes, sameer some mono of wells fargo, tom fitzgerald of td callan as southwest faces a lawsuit over flight delays, and richard clarida on the latest economic data. we begin with stocks higher, notching their best close since the post-election day closing rally. sameer samana saying look no further than better cpi to see how sensitive -- we think inflation's rebound will limit the interest rate cuts to just one in 2025. welcome. we cut up with frances donald of rbc, asked her if inflation data
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changed her story at all. she expects no cuts in 2025. how much did that downside surprise change the story for you? sameer: not very much. we came into this year thinking that inflation would probably hang at a level higher than what most market participants expected. we have one more rate cut penciled in this year, but the downside risk is, again, we don't get any this year. what we have been telling clients is, if it is for the right reasons, if it is an economy on otherwise-solid footing, if it is because things are really good from a policy standpoint, then it is not as much of an issue if the fed does not cut further. jonathan: what would you chase, the equity move or the bond market move in yesterday's session? sameer: i think we are on the equity side right now. the target is 6600. if you run the method is kind of in that low to mid teens once you throw in dividend yield.
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on the fixed income side we don't see rates coming down the whole lot. you are kind of in the middle of that range now, and again, if it is for the right reasons we think the economy and markets can handle this high interest rate. dani: how much is because of this volatility? that if the bond market has this volatility you can have cpi that comes in around .002% away from being changed with expectations? how much do you need to demand a higher premium in this bond market for that fact? sameer: you can see it in the term premium. it is finally positive, and positive by a good bit. i think it is interesting to note it is still below its historic average, so you could have a go further. i think it is bond investors waking up. for 30, 40 years they got positive returns as yields continued to grind lower and they have to sharpen their pencils a little bit and consider that now we are in a world where rates could remain
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elevated and you could be in a range as opposed to an uptrend or downtrend. alix: i have heard that before dani:, but the way i usually hear that play out is that it needs the vigilantes are gone. that everybody is an index or in this bond market. all of the excitement has disappeared most of the people that would pressure the government are not existing in that market anymore. what do you make of that argument? sameer: i would say maybe they were dormant. maybe they got complacent, but now i go back a little bit to what you said about angst firing on all cylinders. you have the term premium moving, the inflation premium higher on inflation expectations. you have the real component looking up. you have almost all of the things moving toward higher yields. i think before it was one or two of those different things, but now that you have all three going i think it is time to think about how to position fixed income properly. annmarie: maybe the most
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important data point to this market and investors is going to be the inauguration next week. could you walk us through some of your base case analysis of policies we can expect? sameer: yeah, i mean, i guess let me preface that with, we have always viewed policy as an accelerant or dampener. you are probably going to see something on the tariff side of things. it is fair to say you will see something on the immigration side of things. some could argue that is the more negative policy pieces. again, because taxes and some of those other things will take time to implement. that being said, even those policies if they are announced on day one a could be phased in. could be much lower than markets anticipated. it could be something companies are able to pass along to consumers and it doesn't cause any type of pickup. what we are trying to do is wait for the policy announcements. we do take president elect trump
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history -- seriously. heading into it with a strong economy, with strong earnings growth, again, it could be a dampener. annmarie: you take him seriously, but do you take them literally? say, 60% on china? sameer: clearly that is the one area where both sides of the isle agree on. it even with china it does seem like he is looking for a deal. it doesn't seem that he wants to end the trading relationship. it is possible to face something in with china. the rumor last week was 2.5% to 5% every month. maybe, again, that is how they choose to do it. if the chinese are ok with 60% because they find some work around you could see that level of tariffs. that is not our base case, but it is something that could possibly happen. jonathan: he's not running again. do you think parts of wall street from the conversations
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you are having are underestimating how quickly this administration is going to want to move? sameer: i think so. look, from our standpoint -- and this goes back to almost all of these policies and them being an accelerant or dampener, they are accentuating over what we have seen over the past 3, 5, 10 years. you want to lean into the u.s.. want to fade emerging markets. want to fade defensive. the nice part for investors is they are amplifying what is -- what has already been the positioning or right way to position. i think you are right. that is where the risk is, that the markets are under appreciating how quickly they are going to move, with the fact they have had almost four years to plan for this. dani: where is it showing up? what looks mispriced that is not appreciating the risk of acting quickly? sameer: i think that is what is so fascinating. the market is almost acting exactly as it should. emerging markets have been week.
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eu currencies have been week. if there is a place i think it is going back to the right side. if you have strong growth and an upside skew to inflation i think you could see an over-shoot in interest rates on the long end. jonathan: appreciate your time. sameer of wells fargo focused on a possible overshoot. we are down about 5% from where we were trading. we are up a few basis points on today's session. one of my favorite columnists on bloomberg opinion out with this this morning. watch the house for signs of if and when the next breakout will come. the inflation genie is moving to the white house. price trends -- whether it gets there now depends on trump. rbc is basically on board with that view. dani: also the question you asked, is the market under
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appreciating how fast trump will move? i think there is uber's among investors. we are smart, we understand it is bluster. but is it really? if you are negotiating with europe, negotiating with china you cannot get bluster. you have to be serious. it seems like the point of this market is it saying, we can see through it, but european leaders are not going to be able to see through it. annmarie: tobin just put out expectations you can expect. he says on tariffs, not sure yet if this will be a day one. and the fact that nothing has been presented yet to president-elect donald trump current he says it is still there expectation that for tariffs it is big, but slow. jonathan: monday is meant to be a day off. i'm not sure monday is going to be a day off or anyone on wall street. i think everyone is going to be tuned in and beyond through the next four years. it's get you an update on stories elsewhere this morning. here is yahaira jacquez. >> it was a strong fourth
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quarter for the biggest u.s. bank. if america reporting better-than-expected fourth-quarter results and offering an upbeat forecast. morgan stanley also beating expectations on strong equity and fixed income sales. donald trump's nominee for secretary of state, marco rubio, signaled that the president-elect is likely to put cuba back on the state sponsor of terrorism list. trump gave cupid the designation before the end of his term in 2021, but just this week died and reversed it in the bid to secure release of political prisoners. rubio cited kubo's friendliness toward hamas and hezbollah as reasons for this designation. the biggest names in tech will be among the guests at trump's inauguration monday. tim cook, mark zuckerberg, and of course elon musk are expected in washington. their attendance is seen as an effort to build relationships with the new administration, with tim cook particularly interested in avoiding tariffs
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on iphones and regulatory crack downs on its app store. that is your bloomberg brief. jonathan: everybody wants to carve out, don't they? this really odd tension is going to take place next week -- between the world economic forum and inauguration parent these ceos are placing their bets. they know where they want to be. annmarie: it is in front of the capital and getting trump sworn in, especially when it comes to apple's tim cook, looking for that leverage to get a carve out. how important and critical are tariffs going to be on his bottom line? also add to that list the tiktok ceo will also be in attendance. jonathan: i was doing some phone calls. fantastic lineup. we will reveal it to you at the end of this week. they all said the same thing. they said, it doesn't matter what we have to say right now because on monday we will see what the president has got to say and react to that. annmarie: you need to have the world economic forum maybe d.c.,
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maybe palm beach. better use of their time. jonathan: i think things are going to move around. who knows? up next, the morning calls, plus tom fitzgerald as the department of transportation slapped southwest airlines with a lawsuit. we will get into the details, next. ♪ ♪ does a good investment opportunity look like?
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you know what's brilliant? better questions. boring. think about it. boring makes vacations happen, early retirements possible, and startups start up. that's why pnc bank strives to be boring with your money. the pragmatic, calculated kind of boring. jonathan: stocks just about holding onto yesterday's gains. equity futures on the s&p 500 just about unchanged. we've got some data for you. u.s. retail sales and jobless claims. your 10 year, 4.6817. barclays raising its price
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target on jp morgan, setting its q4 earnings as exceeding expectations. that stock pulling back from yesterday's gains. a second call from bank of america, upgrading ups to buy, setting an end to the freight recession. finally, city downgrading southwest airlines, saying its earnings quality and free cash flow is weaker than pre-pandemic. that stock is negative by 2.1%. let's stick with southwest, the airline under pressure after the department of asportation -- department of transportation filed lawsuit. southwest pushing back, saying the department's claims are not credible. tom fitzgerald joins us now for more. welcome to the program. can we all just see whether they are late or not? tom: these are two flights from 2022, which was a challenging year for the industry. it was the first real reset post-pandemic and you had a massive headwind from all of the senior talent lost in 2020.
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jonathan: not just southwest, right? what is going wrong? tom: it is a challenging operating environment. jetblue, they operate, new york and florida are two of the biggest markets, and those are some of the most chronically-congested places to operate in. i think there is a confluence of factors. dani: what you make of the timing of this lawsuit? the fact that it is in the waning days of the biden administration and the dot has to take this forward? tom: there has been a theme over the past few months of a lot of bark between regulators and industry. i would be surprised if the new administration proceeds with this lawsuit. we are expecting a less-antagonistic relationship moving for. dani: a lighter touch? what difference will that make for their businesses. tom: they will focus on the day-to-day operations. there is going to be a lot less cost associated with compliance. i think it is a positive. annmarie: is it the issue of the
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airlines or the fact that too many people are flying and you say it is so contested -- so congested? tom: you have a less-experienced workforce that is getting better every year. the airspace is more crowded. we have an atc shortage that is acute in places like new york. i don't think you can point to any one issue. the airlines are doing their damnedest to be running on time. annmarie: the jetblue ceo recently said the regulatory environment cannot get any worse after biden leaves office. you expecting him, the industry under tara -- under trump 2.0? we see more consolidation? tom: it is on the table. jetblue has talked about pursuing some partnership in the northeast. a lot of industry folks we talk to their likely is going to be more consolidation among the smaller airlines. jonathan: who is on the playing field? what kind of names are you thinking about? tom: we could be any of the
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small-cap airlines. it could be a front tier-spirit tie up. i think it is hard to say right now and a lot will come down to evaluations and personalities. i would not be shocked if there is more consolidation. jonathan: jetblue has come up a few times. didn't they try to establish a relationship with american airlines? tom: it was later blocked by the biden administration. jonathan: you think they have a second bite at the apple? tom: the judge gave them a template of what they could do. dani: a lot of these models are under stress, the ones that don't have international businesses. bringing it back around to where we started this, southwest is one of these airlines that does not have it. they have tried to make some state -- some changes. they have tried to have more seat assignments. are they on the right track? tom: it's going to be hard. the second half of this year will be a good -- we will get a better idea. that is when the extra-legroom seats will go on sale. a lot of the changes this year
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are more incremental. adding redeye flying. they're going to launch a partnership with iceland air. i think the second half of this year we will have a better idea, but management is going to be in the hot seat. dani: for those of smaller ones that don't have international or the luxury offering, can they do it on their own? can they transform on their own or do we need to see m&a in order for them to survive? tom: i think there is a lot of players m&a could make sense for. we tell clients either go big or go niche. there are airlines i think have attractive niche is, like a sky west. it is a reversal of the prior two decades, where legacies blood low cost lead. annmarie: we have seen post having covered this insatiable demand, especially in services, people wanting to travel. do you see that holding? tom: i think so. the upper cohorts are doing well right now. i think that plays well with the secular theme of spending on travel and experiences and
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services. jonathan: just to build on the question around premium and these other airlines, can budget airlines do premium successfully? i think back to easyjet. i remember when mike ullman made it easy for business travelers and the share did enormously well. could we see something similar happened with some of these players? tom: i'm a little more skeptical. i think it works well in bigger corporate markets. if you are carrying more toward price-sensitive leisure i'm not sure how big the market is for that, but happy to be proven wrong. jonathan: those names, some of them are spending a lot of money to push into premium. you are suggesting they might fail? tom: i don't know if it is failure. profitability challenges versus bankruptcy. we have more holes. some of these names are volatile and you have short interest approaching 20%. if things get a little bit better this stocks can start to work quickly. jonathan: favorite stock right now? tom: united airlines.
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they had a wonderful year. jonathan: why do you think that can continue? tom: there were only trading at 3.5 ups. i think they are going to be growing well above the s&p 500 for years to come. jonathan: just down to compete? tom: absolutely. jonathan: can they still add the lounge? just make it choir. -- quiet. tom: you've got to get the delta one tickets. annmarie: for the credit card, right? jonathan: does he get you in, still? tom: it depends on the card you have. jonathan: tom fitzgerald there of td on the airlines. that place gets packed at jfk. dani: i've tried to get in the delta 170 times, i go, i have a delta flight, i have a card, any chance? annmarie: i had a first-class seat but not the credit card, so they said i could not get in. because it was a first-class seat domestic. dani: at least five hours long.
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he needs to be some sort of overnight flight. i've done the same thing. your flight is an hour, you cannot get in. annmarie: they will charge you a premium if you want to sit in the lounge. jonathan: i think this is ridiculous. a flight to hawaii takes 9, 10 hours, and they said it was domestic and they turned me away from the lounge. dani: that sounds like a personal thing. i don't think that is the policy. it may be looked at you and said, i don't know about this. jonathan: they have to fix these things, tom. in a moment we will get retail sales and catch up with the former fit vice chair richard clarida and get comments from collin martin of charles schwab. questions about cpi. much does that downside surprise on inflation yesterday change the story for the federal reserve? frances donald earlier making the case that it will not. the most important thing that is about to take place is not the economic data, it is the inauguration of president-elect donald trump and the policy changes you could see in the
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days after that. futures at the moment positive .1%. in the bond market yesterday a tremendous rally off of that cpi. tracing just a little bit of it. yields are up by three basis points on a 10 year. in europe they have their own problems. the ecb in the last hour or so, a discussion about deeper rate cuts. some officials wanting a bigger debate on a 50 basis point reduction. that unlocks just a bit of your weakness. euro-dollar down by .2%. up next, the economic data from new york city. this is bloomberg. ♪
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jonathan: the next stop for this market, the economic data is moments away. u.s. retail sales and jobless claims as well. here are the scores. equity futures on the s&p just about unchanged. with your economic data, let's get to michael mckee. mike: looks like we had a good retail month, but not a great one. month
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a very strong retails number. x autos and gas .3%. there is a very big gasoline component. the retail sales control group does save the holiday season up .7% compared with .4% and .4% estimate. the stuff that goes into gdp is the stuff that did well. we will get that data in a second. import prices were up .10% and x petroleum up point 2%. buried in there somewhere is international airfares. those are something that contributes to the pce. we saw a big rise in airfares. this will show us whether or not the pce comes in softer or harder. finally the philadelphia fed comes in at 44.3 after a -16.4,
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net -- a major turnaround in the philadelphia and new jersey area. the prices paid index at 31.9 which comes up from 26.6. you had an inflation signal that you can make that what you want. and while you talk to the doctor, i will look up whether the retail sales numbers were good and bad -- good or bad. jonathan: the jobless claims came in. 2.17 still historically low. the estimate was to 10. headline and retail sales was a little bit of a downside surprise about .4%. the one that matters is the control group coming in at .7. the bond may start -- market gets whipsawed all over the place. yields are higher at the front end by three basis points. as you were on a 10 as well.
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the euro-dollar dancing around a little bit but that changed into the prints. equity futures just about positive down on the s&p 500. lisa: this is not a huge catalyst because the numbers were as expected, but if you trade that is could get whipsawed yet again when we hear from scott bessent in his confirmation hearing and then again on monday. it is a very cautious time if you are a trader trading on economic data. jonathan: let us talk -- talk to the former fed chair. let us start with the fed data over the last one he for hours, doesn't change much for you? richard: we have had some negative prints and it is not a positive, inflation is running hot, that the fed will be looking for a return to get on the road to 2%. jonathan: do you think the trend is uncomfortable or are you
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comfortable? richard: i am a little bit novus, the fed put -- nervous, the fed put on a lot of weight on seasonals. the last few months the data was not going in the right direction. we are on a path to 2% but the road might be bumpier than a few months ago. dani: it has been this narrative whipsaw back and forth we are either scared it will be a recession or the economy is running too hot. do you believe that the economic data is that uneven that we could have different turns one month apart or is something else going on? richard: both. we have been through an unusual period with a lot of aftershocks from the pandemic including inflation and a lot of good news in the u.s., strong productivity growth, a big increase in wealth, and the fed is happy that inflation has come down. there is sensitivity and a little bit of what to expect about fiscal policy and how to
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react. dani: should we be looking at this data as a starting point of what we might get from policy that might add to inflation or change growth dynamics? is that the right lens? richard: initial conditions are important. getting the year the economy is growing above trend and 3%. and so i think that putting policy uncertainty in the context of where the economy is is where the markets need to be. dani: should it be what the fed is doing? richard: of course, everywhere and always. dani: how forthcoming should they be, that they are looking at the current data and understanding where it is what they need to preempt where it is going because of fiscal policy? richard: great question and i think that jay powell made the case in november that they are not inclined to get too far ahead. there is a lot of uncertainty on the details. and i think that we are at a
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delicate point for the fed because the minutes revealed that they incorporated some views on that. but i do not think they will get to preemptive. i do not think that would be worthwhile. annmarie: powell said we do not assume, speculate or guess but then in december members did. how are we supposed understand this? richard: the minutes were very revealing and more so than usual because if you read carefully, and i am sure you did, not only did participants pencil in some views and the staff briefings looked at scenarios for policy and incorporated some of that into the baseline. they are trying to factor that into the forecast. but i think with a great deal of humility. annmarie: you talk about how uncertainty is the only thing certain. what are you the most uncertain about in trump 2.0. richard: if you look at the three priorities, what are the
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details on tariffs, is it a bargaining chip or a battering ram, immigration policy. bipartisan support we need to fix the immigration system and the details will be important. and on the budget, obviously. everyone agrees that the 2017 tax cuts will be extended, but will be other be additional tax cuts and how much will the biden agenda will be reversed. i think you need to look at all three of those. jonathan: you are in the perfect seat in the question is whether the bond market will constrain the ambitions of washington, d.c.. are you thinking about those forces? richard: it was very important. we were thinking about the bond market vigilantes, like washington is running and your special -- irresponsible policy you push operates in term premium and that is an important part of the calculation. bond yields can go out not just because a budgets but of strong
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growth and optimism about productivity. the fed will have to do signal extraction. importantly if yield selloff because washington is running irresponsible fiscal policy, that is part of the way the economy needs to adjust. jonathan: what do you think it has been about, data or incoming administration? richard: i will be the proverbial two-handed economist. i think there is an element of both and optimism about growth and deregulation. there is certainly an element of a. and there are concerns of fiscal policy. we saw that a year ago and we could be seeing some of that right now. dani: you have been writing that bonds are better positioned than other asset classes. does that mean that run-up reverses and will there be a catalyst to bring us closer to the ground? richard: our thinking is that bond yields have been in a range that has been fluctuating, but we saw bond yields reach 5% 14
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months ago and then traced down. we do think that there is an enormous global appetite for treasuries and a certain level of yields the last time it was around 5% where you get a lot of foreign demand. one of the reasons that we are bullish on bonds is that starting yields are historically the best single predictor of return on a quality bond portfolio. starting yields are attractive and obviously have room to adjust lower under the right circumstances. annmarie: we have been talking about how it is getting the notice of not only individuals of the economic policy team. jd vance talked about the 10-year yields twice in an interview that was not even supposed to be financially focused. is there a level that you think, and you know donald trump, that starts to unnerve him? richard: i would not speculate on that. i would say that markets would
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be focused on the peak in 10-year yield so far in this cycle has been 4.99% and for a minute we got above 5%. if the 10 year yield broke and stayed above five that would get a lot of attention around the globe, in the white house and that the fed and in markets. jonathan: can you help me with something because i have a dilemma. you ran the federal reserve back in the early 20's. 2021, i have minutes in front of me and the sep. december 21 the outlook and the meeting for 22 was 0.9. and you ended up hiking interest rates all the way up to 4%. and this was after president biden had already unleashed stimulus into a supply constraint can economy and even inflation was climbing up to 5%. the fed stood there and said maybe rates get to 1%. and look at the range of
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estimates, it is really narrow anywhere from 4.4 to .1. it was like there was an outlier pricing in a policy change. why does it feel different this time with trump coming back into power? why was this federal reserve and some officials more willing to adjust their outlook and policy changes for donald trump when they were unwilling to change even though they had seen what was coming for biden? what explains that? richard: in my own writings and on the show they talked about at least what i was thinking in real time and certainly by that point in 2021 the fed had ealized that it needed to be end to end qe. i think there was also an assessment as well about on the committee and a range of views on the committee and i will leave it at that about how transitory inflation would turn out to be. there is no doubt that in retrospect the fed would be better off hiking rates in the
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fall of 2021. i think what you need to look at is september versus march of 2022. you need to look at the result and a well anchored expectation. it was a tough time for the fed and central banks around the world. the pandemic shocks and policy response was difficult to navigate. jonathan: we want to be sure that it was just an analytical mistake and not a consequence of political bias. richard: not in my judgment a consequence of political bias. jonathan: it is odd that in november the chairman says one thing in december he has to say another. i am struggling to explain to people just what changed. richard: it is a rapidly evolving -- evolving situation in terms of the data and assessment of the economy. you know, the fed only meets eight times a year so a lot of things happen in between meetings as well. jonathan: always fantastic to catch up. the former fed vice chair.
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equity futures just about unchanged and on top of the economic data retail sales and jobless claims out. you got a second look, what did you see? mike: we saw a rise in motor vehicle sales and a fall in building materials. gasoline prices were up and you have to take those out to get to that control group. in the control group everything was up. we saw a big rise in grocery store sales and general knowledge -- merchandise sales and sporting goods. the only thing that was down was health and personal care, i guess you skipped your haircut during the month. and then when you looked at jobless claims i know that people will be looking to see what the california impact is. california reported 13,000 extra over last week jobless claims during the week, and that is on a not so easily adjusted basis. that is one reason we saw the number go up because this was --
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there were more jobless claims expected that the seasonal factors figured. one last thing, the air passenger fares up 10.6%, which will add to pce. overall. a lot of details under the hood. in general, a good day. jonathan: appreciate it. the yields are higher on two basis points and the 10-year yield up by a basin -- basis points or two. a question we have lent on, does the cpi really change the story for you? collin: it does not and i have heard a lot of the speakers where we are in the same camp. it is a step in the right direction but it does not change our outlook. it is one report and that does not indicate a trend. if we look at yesterday it was good news. one thing we are focusing on is the core cpi monthly print at .2%. that was a nice improvement
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after .3%. that does not change anything or the fed's view. we will need to see multiple reports like that before the fed believes that this inflationary trend has resumed. once we get to that point we are already into the second quarter most likely when you look at fed expectations the second half of the year that does not change the timing much. as it stands we are looking at anywhere from zero to two cuts and the first cut in the second half of the year seems likely. dani: does that mean a 14 basis point fall yesterday, is that something you are pushing against at this moment? collin: we would not be pushing against it. what was interesting about the drop in treasury yields we did not see that much of a change in the implied futures market rate. i think we will just see a lot of volatility. we are in a sensitive period of time with the sticky inflation coupled with the policies from
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the trump administration that throw so much uncertainty. the market is walking on pins and needles and every good or bad report is likely to send yields in one direction or not. we think that we will likely see a 10-year treasury yield trade in some sort of range which is four point five to 5% and there is upside from there. we would not be changing our view on a 15 basis point move. dani: we have been talking about the volatility to economic data and the sensitivity to it. something is different in 2025. we are not just talking about the sensitivity of the economic data but to policy, fiscal policy. what implication does that have, not just for the bond market but if it is placed in a portfolio asset class that is supposed to be a haven in an otherwise risky portfolio if you have equities and credit? collin: it makes it a bit more
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challenging to invest and given the volatility we have seen. and we talk about our guidance especially with all of the uncertainty, and that is a term that a lot of the guests have been looking. are you looking to invest from a tactical or strategic standpoint? from a tactical standpoint it is difficult to get too excited about yawn -- long-term bond yields. we think the 10-year treasury yield will touch 5%. that will be driven by a combination of expectations for the path to fed policy and also the term premium given where it is at close to 70 basis points. from a strategic standpoint and i want to spigot back on something that richard talked about, the starting yield matters. the thing that we were talking about is the income payments that you can earn. we know that the yields are attractive to help a lot of investors reach their goals. there is upside and i want to
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make that clear and we favor a benchmark or below average duration. because of that potential upside we do not want to scare investors away right now. annmarie: you think we will get clarity on treasury issuance and where this administration has a line in the sand with treasury yields today with scott bessent? collin: i do not think we will get clarity. treasury issuance will be a challenge. there is a whole issue about shifting the maturity makeup but that could have implications. if you want to issue more long-term debt in anticipation of higher yields you need to have an end and that poses a risk. and then piggybacking on the discussion earlier, we know that trump likes lower interest rates so how does that play into the path of policies and the magnitude of implementation? there is more uncertainty and i would not expect clarity. annmarie: donald trump wants
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lower interest rates but everybody says the policies he is talking about might mean that the fed has to remain on pause. do you think that the fact that he has lower interest rates and that becomes the northstar that he will want to frontload certainty? collin: who knows. there are -- there is so much uncertainty and i do not mean that to be a combative answer. he has campaigned on this set of proposed policies. and anyway you slice it, it tends to have an inflationary tilt depending on the timing and magnitude. so, how does he square that with the potential rise in yields which we know that he does not like with policies that his camp -- that he has campaigned hard for and even in the weeks that has followed he has doubled down and said this is what i want to do. if anything, that leads to more uncertainty and volatility. we talk about the term premium
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which is meant to compensate for uncertainty and that is something that could pull yields higher. jonathan: we appreciate it. thank you. i think that has to be the point of tension, some of these policies will lead to the kind of things that scott bessent might complain about. annmarie: when it comes to things like issuance and things like remember, donald trump has a real estate background. this is a guy from new york who wants low interest rates. how any times was he jawboning jay powell. you need certainty if you want the fed to move on where the economy is. but the fed might stay on pause because they aren't certain about his policies. dani: i remember month -- jonathan: i remember months ago scott bessent's challenge will not be managing mark -- policy change but managing the market after fallout. dani: when it comes to issuance it needs to be regular and
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reliable because part of the problem at this moment one way to think about things is that we know a change will happen we have a change in the administration in different policy and we know it will have an effect but we do not know exactly what it will be or what the effect will be. that means you have to price in a higher premium. if there is more volatility you need a higher premium. i do not know how scott bessent gives us that certainty when it is donald trump who will have the final say. jonathan: the bond yields are up. with an update, here are the stories from elsewhere. >> retail sales slightly missed during the holiday shopping season rising .4%. the economists were expecting a .6%. initial jobless claims coming at 270,000 -- 217,000. israel and hamas have agreed to a six week cease fire starting this sunday under the terms that
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hamas would release 33 hostages and israel would pull out of populated areas and the gaza strip and release hundreds of palestinian prisoners. but prime is -- prime minister benjamin netanyahu's office is accusing them of reneging on parts of the agreement and saying that his cabinet will not meet until maas accepts all points of the deal. some respite for los angeles. low humidity for -- and a lull in the winds might end the wildfires. strong winds are in the forecast for next week and no chance for rainfall. the eaton and palisades fire's have become among the most destructive in california history leaving 25 people dead and scorching 37,000 acres. jonathan: up next, we will bring you the calendar for the day ahead and the week ahead. ♪
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where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management
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jonathan: a three day winning streak on the s&p. let us see if we can make it four. the trading diary looks at this. 10:30 eastern scott bessent on capitol hill. friday, housing starts and building permits. monday, trump's inauguration and the world economic forum begins on tuesday and economic data and netflix earnings on tuesday. annmarie: this hearing is like going up to the dentist. what i will say is this is someone who has the backing of the maga core and yet financial industry titans, i think you will be able to handle this. we need to hear about policy. jonathan: let us hope that it is not too painful. reacting to all of this, jim karen of morgan stanley, steven reed judo and phil campanelli of jp morgan. thank you for choosing the --
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thank you for choosing bloomberg tv. ♪
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matt: futures up again after a big rally. 30 minutes of the start of cash katie: trading. i matt miller. katie:bloomberg open interest starts right now. ♪ >> investors trying to keep fed rate cut bets alive. investors are digesting a fresh batch of retail data the still signals the consumer grade >> the beat goes on, bank of america and morgan stanley add to wall street wins while hsbc strikes out cutting

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