>> the markets are pricing in just the right stuff. >> policy is either an accelerant or a dampener. >> the consumer looks completely fine. will it be turbocharged by these policies? that is a risk we cannot dismiss. >> the markets are walking on pins and needles. >> there are shocks that will disrupt the cycle we are in. we do not know the probability or the size but they are coming.

announcer: this is "bloomberg surveillance" with jonathan ferro, annmarie hordern and lisa abramowicz. jonathan:. good morning. coming into friday poised for the best week of gains since election week. the first week of gains on the s&p of 2025. up one third of 1% on the s&p. on the nasdaq come up by 0.4 percent. encouraged by earnings and the data nervous about what might change on monday. lisa: monday is a whole new world. we are going back to the trump era. we got a hint of what policies might be important. we heard from scott bessent who will likely become the next treasury secretary. he was talking tcja.

measures, trump might leave congress behind and what we are seeing is almost 100 executive orders into the first two days. jonathan: nothing to accept the bond market so far. bond yields are lower. the 10 year is down a basis point of two. we have not seen a three winning streak since early december. governor wallace is super dovish. annmarie: we could possibly get a cut in the first half of the year if the data continues as is. then you get all the commentary. i do not see why both cannot be true. why can he be dovish? in 2023 he was the bellwether. he flipped to dovish and the rest of the central bank followed him. i think it is important to listen to waller. jonathan: he sounds like an outlier. a lot of fed officials are concerned about policy changes. we know the banks think we are getting the rate cuts. deutsche bank, bank of america.

paribas expected no cuts in 2025 based on an inflationary upsurge. dani: then you get someone like kevin warsh writing an op-ed saying that the central bank is being too political and using pa ris as a scapegoat for possible inflation. that is not what the central bank should be doing. you need to be smaller. annmarie: with three days out from trump inauguration, we have a break for the fed chair. if you go back to how this incoming administration might use tariffs, there was something in the op-ed about trump's policy being not just about tariffs. scott said tariffs were to address the unfair trade processes -- practices. basically everything is on the table. jonathan: a lot to talk about

this morning. welcome to the program. equity futures up by zero .3%. we will catch up with christian notling on the challenging start to the year. isaac boltansky and the head of ubs following strong q4 results. christian notling writing the following, expectations and uncertainties about tariff policies drove treasury yields higher from the start of the year. it has been a challenging start into 2025 for equities. welcome to the program. let's forget the data and the earnings will talk about day 1 of the trump presidency. what do you expect to change? christian: if you compared this to eight years ago, the government is nearly almost in place so it is an earlier start

than eight years ago. of course with the discussion on tariffs, the executive orders will come in. to look through this a little bit, some of these policies at the beginning might be de flationary which is why we saw the increase. from that perspective, to come down, we should not forget there are some policies and not only in the u.s.. there is a lot of fiscal policy. we have seen higher yields and less fed cuts from the other central banks. dani: what did you make of scott bessent's hearing? were you trying to understand what trump 2.0 could? look like? christian: from my point of view

, it is how they start. is it high and going lower or is it step-by-step? that is quite interesting. maybe we will know more this monday. from our point of view it is a continuation of policy. there was not so much surprise from the hearing yesterday to the market which is good news. dani: do you think the fed will look at tariffs and think they are a one-off hit to inflation or could they be more substantial? christian: the fed will look into that. they will look at this. of course they need to take into account the inflation expectation and the inflation outlook. i am of the camp that tariffs are inflationary. at least at the beginning until things adjust. they need to figure that in so these things are not a surprise.

annmarie: maybe the market reaction has been logical. a higher yield, stronger dollar. one thing has not been logical, the idea that tariffs enforces american exceptionalism but today we are seeing the dax at a record. what do you make of that? christian: being in germany, maybe the economy might not be the best. if we look at the dax index, 84% is not germany. it is global. the performance is not as stellar as we see here. these companies are global and profit them a little bit from u.s. exceptionalism as well. germany is doing much more than with china that has completely changed. from that point of view we have seen that luxury goods have a boost and that was not coming from china. maybe it was coming from the u.s.. there is a global phenomenon that we should not rule out from

that point of view. it is not only positive for the u.s.. it is also positive globally. dani: can we flip that and say in the s&p 500 41% of the constituents get revenue from europe? should they be under pressure? christian: globally i think you have growth. it is really to the smaller companies and those economies who do not do very well like here in germany at this point in time. that could change but i think the trigger which is necessary is to get some fiscal policy probably over here in europe. as you have had the elections already last november so we have germany going into elections next month, maybe there could be a trigger for some fiscal policy. then i could say, 41% is europe, then maybe you will see more investors if they do see some fiscal policy. i think they want to see that executed and then they could come up from some better performance. there has to be a trigger. jonathan: i am pleased that dan

brought this upi. the euro stoxx 50 is up four straight days. it is the question that she is asking. what needs to go right? you talked about fiscal stimulus. we are sitting outside of germany wondering if the mood is changing around that story. you are inside germany. can you give us the flavor of the conversation? christian: i think it is a political topic. is germany ready to do more? there are elections in 37 days, not far out. the new government, the question is are they ready to do more. they need a majority. there is also discussion about the debt and the majority and we need to see if they are ready to give a majority to the government or can they create the two-thirds majority. i am not talking about the parties in the parliament.

can they be blocked by one set of the very left or the right party? that is the question when you really need to watch. some fiscal policy could be doable. there is some money around to be honest. before the election, i think that will not happen and people will wait and watch. good news for europe. luxury goods did very well. you are seeing some outperformance year to date compared to the s&p 500. if you look at productivity gains, if you look at the investment money, if you look at research development money and absolute and relative terms, i would not change the call at this point. i would like to see some change in europe before we change the call. jonathan: granted it is only january 17. appreciate your time. christian notling of deutsche bank. same story. record highs, a four day winning streak on euro stock 60.

dani: maybe this showed us how low the bar is. it is not only the fiscal developments getting better but maybe it is getting help from macro too and the u.k. finally having cpi come down. we talked about the account yesterday. ecb officials wanting 50 basis points of cuts. when things are so dire, maybe you don't need that much to launch all-time highs. jonathan: equity futures up by 0.1 percent. stories elsewhere, here is your bloomberg brief. israel finalizing an agreement with hamas. suggesting a cease-fire will begin on sunday. the deal includes hamas releasing 33 hostages and freeing around 1000 palestinian prisoners. elsewhere we are learning janet yellen concludes the breach by chinese hackers. sources say fewer than 50 were accessed and nothing classified was taken. finally, firefighters in los

angeles getting a reprieve from the strongest winds today but the national weather service says dangerous conditions are expected again this week. at least 27 people have been killed and 50 square miles have been charred in the wildfires. that is your bloomberg brief. up next, an economic calamity. >> if we do not fix these tax cuts, if we do not renew and extend, then we will be facing an economic calamity. jonathan: the latest on capitol hill up next on the program. live from new york city this morning, good morning. (♪♪)

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check out your. the ftse at a record high. yesterday some decent numbers, a massive rally in luxury brands. u.s. stoxx 50 is up by 4%. dani: i talked about all of the marginally better things happening in europe. we need to acknowledge that the u.s. is helping. cpi is coming in softer, giving central banks and fiscal policy makers more headroom. that is a good thing for the equity market. jonathan: the data is better. the earnings have been decent. we have stressed this. things can change on monday and the following week. this morning, an economic calamity. >> this is pass fail. if we do not fix these tax cuts, if we do not renew and extend, then we will be facing an economic calamity and as always,

with financial instability, that falls on the middle and working-class people. jonathan: the latest this morning, trump treasury pick scott bessent urging congress to extend tax cuts to avoid any kind of crisis. without objection from democrats joining the hearing. joining is now isaac boltanksy of btig. we need to talk to executive order's on trump's day one. how do you think scott bessent did? isaac: it is clear that scott bessent is a mind at work and markets should be heartened by that. all of us would like a steady hand in that role which is his experience in the oval office advising the president. let's not kid ourselves. we are still going to be living and dying day today by whatever donald trump is typing out on his phone's keypad. it is heartening and positive and scott bessent will be easily

confirmed and he will be a stable voice in the treasury department and ultimately in the oval office advising the president. but the president himself is going to decide what tariffs are going to go into place and how those will be communicated to the market. annmarie: we are expecting some hundred executive orders from donald trump. what do they look like? isaac: i think it will be a busy day. there is an enormous amount of anticipation around what we will see on monday. i want our clients in general to be aware that just because it does not come out on monday does not mean it will not happen. from my seat you will see a fair amount of paper focusing on immigration and border security. that is one area where he is consistently saying he wants to focus and i think there is some administrative leverage that he can pull. my cautionary point is i think that will be one area that you will see heavily litigated. that is one area and one dynamic that we are aware of.

i think you will also see a fair amount of orders on the energy front and the healthcare front. those have less risk of litigation generally speaking so we will be keeping an eye on that. of course, there is a lot of signaling. we will have a lot of things that do not actually have teeth. a lot of things relating to culture wars. i don't think the markets will have to worry about that much. annmarie: on the other side of biden is continuing a ton of executive action as staffers are starting to pack up their offices right now. when it comes to tariffs, will we get executive orders next week? isaac: i think we will get a few. my base case is that will be an overarching incrementalism to the tariff policy from the trump administration. i think they are cognizant of the economic impact. ultimately they still want tariffs to be used primarily as a negotiating ship. the way i think about this is

for those negotiating chips to have any value, you have to be willing to prove that you are willing to shoot the hostage. from a framing perspective i think that ultimately they will move quickly on instituting new chinese tariffs likely using section 230 two or section 301 that takes a few months to get there and maybe a few acute areas where they focus on issues where they have a fair amount of political backing, things like going after european autos. i do not expect a broad base universal tariffs to be where we start from. dani: you make a good point that this is year five of trump, not year one. what will be different from 1.0 to 2.0? isaac: i think it is a lot of amplification. we know there will be a the regulatory agenda. we know there will be a focus on tax cuts. there is an implication of those issues. on border security it is not just focusing on the border.

it is also the deportation dynamic that is in play. on the tariffs, i think they have more of an awareness of the different tools which is why you are hearing so much more about the policy that allows the president to impose tariffs on a national emergency. that is something they did not really get their arms around until halfway through the first term. in general, more awareness of the livers of power and also the personnel they have around. you have very well vetted truly loyal folks or the president which should allow them to move more quickly and ultimately avoid some of the potholes that they have fallen into during the first administration. annmarie: to your point, they need to show willingness to shoot the hostage, to do the most of extreme measures in order to use it as a negotiating chip. do you think that is well enough appreciated? is this an administration that would be willing to go to the extreme? isaac: it depends which client i

am talking to but i think there is at least an awareness that the china tariffs are something that he is absolutely serious about. there is a fair amount of debater -- debate in the client community that i speak to that there will be a brand bargain. i think china will be where he moves quickly. panama and mexico is more about a conversation and negotiations. on the european side, i think he is a true believer especially on the auto story. what we have now is we are trying to understand the bridge from rhetoric to reality and trying to get into donald trump's mind and the minds of those running this administration as to what they will really prioritize. they clearly cannot do everything so what is there hierarchy on tariffs. dani: as annmarie start this hour saying scott bessent laid out several different use cases for tariffs. one night seem to keep coming up with this idea as tariffs as national security, that

sanctions pressure the dollar and it makes more sense to use instead of tariffs. when it comes to china, what is the strategy? is it negotiation or is it one of national security and that is why tariffs would be put on? isaac: i think it is a full court press. that's how i think about it. there is more awareness here than there has ever been in terms of we need to have a more holistic approach in terms of our competition with china. you heard it yesterday during the hearing. i think it was noteworthy to hear how much was referenced in terms of our outbound investment screening. would we have screening if foreign entities want to buy interest in the u.s.? we should also have some awareness and some say as to outbound investment and what that means for acute areas of competition. it is one of the few areas of bipartisanship so we have to be aware of how that is playing not just politically but also

operationally in terms of the different lovers of -- levers of government. from the u.s. steel deal to acute areas of legislation like we have seen with the tiktok ban. jonathan: technology has already lost. i wish we were having this conversation 20 years ago but we are not. i am starting to hear things like the tiktok ceo coming to the inauguration. what will be the approach to things like tiktok? is it seriously a national security risk and chinese hackers have infiltrated the treasury? they don't care who is in charge. they can possibly do the same thing in the end, get administration as well. i don't really understand what the holdup is. isaac: i am confused by congress passing a bill saying they want to ban tiktok and now at this 11th hour we are seeing those lawmakers from both sides of the aisle retracting their previous statement saying we would love a reprieve. we would love to find a way to

push this ban out. there are always those political wins that are tough to dissect. by and large, what does this mean for markets and investors? one of the persistent tailwinds that i see from an appropriations area is we will spend a lot more money on cyber security. there will be a whole of government approach to cybersecurity that is frankly 20 years too late. but in terms of areas the clients asked where will we plus up spending? where we spend more no matter who is in charge and overall just defense and national security. jonathan: forgive me for putting you on the spot but what do you think happens to tiktok? isaac: i think we will get the supreme court order today. they have a release this morning. my base case has been that when you can bet on it taking

longer, then it will. i think the supreme court will take longer deliberating on this. there will be a temporary injunction while they do so and then we will get their order ultimately upholding the statute, which is negative for tiktok but we will have to wait for that to come out. jonathan: thank you. isaac boltanksy of btig. some big changes. annmarie: they were saying how we could get the supreme court coming down upholding the law passed by congress but then trump gives the executive order and gives them 90 more days to find an off-ramp where they can be sold. potentially we have the supreme court making this decision. we will wait and see but could uphold the ban. the ceo of tiktok shows up to the inauguration on monday and then tuesday, 90 more days reprieve. jonathan: before monday and tuesday, do we know what happens on sunday? annmarie: tiktok had threatened to shut itself down but biden

made it clear that that will not be the case. i don't know how you read this in any other way than tiktok calling the bluff. they said they would shut down. tiktok is not looking for a buyer but we have that information from china but they basically said we want to continue on. dani: china is using it as leverage and potentially handpicking who they are willing to have this off-ramp given to. jonathan: amazing. coming up next, we will catch up with erika najarian of ubs on a record-breaking year for the big banks on wall street. that conversation is around the corner. equity futures positive. we are almost there to the long weekend. it is friday. good morning.

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♪ >> adding little more weight to the rally, up by 0.4% on the s&p 500. the nasdaq 500 up by 0.5%. three consecutive days of foreign-year-olds -- falling yields. in europe, something we have not seen since december 9. four consecutive days of gains on european stocks. euro stoxx 50 up by three quarters of 1%. the euro, it's too early to get

excited. >> big outperformance. the ftse and dax hitting a new all-time record in the past day. these are two markets where you would say what will happen to them if donald trump is president? the assumption would be they would underperform. that's not what happened. they get a boost because sentiment was so bad. they get a boost from better u.s. economic data. that helps ease the differentials. strong earnings for multinational companies. jonathan: we should stress once again, this can change with a twitter post in the next week or so. xi jinping is not attending president donald trump's inauguration on monday. he's sending the vice premier instead. he said he wants a healthy and sustainable relationship with the united states. >> xi jinping is not coming but he sending the vice president instead. most usually, going back to the

1800s, only ambassadors show up. lower-level dignitaries. so, it is interesting that china is willing to acquiesce to trump's invitation and say well xi jinping can't come and that would be a security nightmare but we will send someone high level. jonathan, you hinted at this earlier. what will be then the path forward to negotiating with china? you're talking about 60% cherubs on chinese imports. at the same time, you are saying we want you to come for this big party. jonathan: they made the point on the executive orders he's expecting next week, he thinks the focus will be on things like immigration. the market might take that as a good sign. the focus won't be on trade. i would stress it is still early days and they are getting their ducks in order. it still has not been agreed what the approach will be. annmarie: some of these proposals have yet to go in front of president elect donald trump. we have to come back to the fact that there is competing differences, competing rivals

within the trump administration of individuals who like scott bessent and think it should be a gradual approach. and there are some who think it should be a blanket approach. peter navarro is critical on china and trade. dani: the market has shown an impressive ability to overlook all of that and hope for the best. the fact we have this rally leading up to monday into the inauguration, some 20 basis points. you don't see that fear in market at this point. maybe this is an event risk. we literally need to get past monday, whatever it may be, then we can be off to the races with the bond markets. jonathan: it's not bad for equities, either when it comes to trade. stocks have moved up and to the right since 2016. even with the pandemic, we are higher than we were back then. they kept these tariffs on china and the economy is doing pretty well. annmarie: what i found interesting is maybe they will

use tariffs with adversaries more so than sanctions. they talk about it can be both. you might use this as a negotiating pool and for some countries it might be a blanket. jonathan: scott bessent signaling full alignment with trump, urging congress to extend 2017 tax cuts and warning expiration would mean economic crisis. we know where his focus will be on day one. annmarie: on tax apology, which -- policy, which will be huge. he said it is the single most important issue, pass fail. it has to be dealt with this year. this is the timeline. jonathan: tiktok facing a deadline to find a new buyer. the supreme court expect to rule on the ban later this morning. dani: it's not even on the trump team. it is also the democrats. something that was bipartisan against tiktok existing. jonathan: i don't get it. dani: it is tiktok calling their

bluff. the amusing thing about chuck schumer was he wasn't saying i backtracked. he said we need to give tiktok more time to find a buyer. they have had since april of last year. tiktok does not want to sell itself to an american buyer. they have put their eggs in one basket to fight this line for now it seems to be working. annmarie: that's the executive order you can almost guarantee. mike walls was talking about the fact that we don't want to get have it but i want to get a deal in place. it was interesting hearing him tone down his national security concerns of tiktok. he says he still has them but they want to find and offer them i find this interesting. this little bit of washington nuance classic d.c. pond and. because the sunday deadline is a holiday, martin with the kings are new day is a federal holiday, that puts the enforcement to be next administration. is that a bit of fudging?

jonathan: there is zero consistency on this issue. dani: biden has shown no reluctance to put in policy in the run up to trump but he has not with this. jonathan: this is the big one, it is tiktok. jp morgan becoming the first bank in u.s. history to top $50 billion in annual profit. jp morgan is a broken record, so to speak but a pro can record that consistently only plays melodies of revenue beats and forward upward revisions on profitability. erika joins us. what stood out to you? >> what encouraged me about the year ahead is we heard a word that is not typically associated with banks, at least not for the past 15 years. the g word, growth. whether it is jp morgan who has been so consistent about this or banc of america, -- bank of

america was playing consistently throughout earnings season. the story on these banks have been valuation, cycle, rates. the fact they are super excited and have the excess capital to go forward in an economy in the capital markets that is the strong. that is really encouraging. dani: one of the things, it was across the board that earnings looked strong. investment banking was no exception in that regard. it was fascinating that wells fargo had such strong investment banking results. they grew to 59% of deals in the fourth quarter. a bank that is traditionally not a big player. what does it tell you that wells fargo is getting into it in that way? erika: it tells you two things, wells fargo is undersold in terms of ability to do that. they are a top three linder to businesses in the united states.

they have all these balance sheet relationships. in the past, they have not taken advantage of it. the second thing this tells you is that charlie scharf is doing the right thing and not only trying to fix the company, but at the same time, trying to invest back into revenue generating businesses. that is good news all around. dani: if this had been a year ago instead of optimism and dealmaking coming back, the buzz word would have been ai. maybe not in the earnings, but david solomon had an interview with ft where he said ai can draft 95% of an s1 ipo perspective in minutes. a job that used to require a six person team multiple weeks. is the ai productivity boom here? erika: i'm not sure if the productivity part is here yet. but the investment part is here. we had a meeting with jamie dimon in november. he has actually set look, ai

will be inflationary for banks as we try to figure out what the best use cases are in our business before it becomes a productivity boom. either way, i think wall street is eyes wide open in terms of what ai can do for the business and how i can eventually make them more productive. >> let's talk about politics. dani mentioned david solomon. how much has all of this bank exuberance and excitement for 2025 down to washington? erika: it's not just policy but supervisory. in terms of what is more difficult to easiest to change, there is legislation, policy and supervisory. what got us kind of excited about near-term changes is, like i was saying on another program while we were wrapping gifts and watching "love actually," on the

23rd and 24th of december. dani: jonathan's favorite movie. erika: mine too. the fed put out a press release on december 23 that they were going to try to make the stress test more transparent in response to be chevron ruling. the day after, the bank sued them in terms of trying to get more transparency for the stress test. i'm telling you, if we redefine excess capital for growth and buybacks, that is a game changer. for large banks especially, i've been on this program a lot talking about consolidation. i think the market was saying it's not going to get worse under trump for large banks. we had not considered things could get better. those were signposts to me that things could get better. annmarie: transfer of power will happen monday in washington, d.c.. you said jp morgan has the best bet in banking -- best bench in

banking. when do you think they will tap that bench? erika: jamie said on wednesday he was going to be around for a couple of years. that is probably the time horizon that we are looking at in termsannmarie: what does a ce mean? what is a couple? erika: who knows? [laughter] jonathan: it's not five years anymore. it's a few. erika: it's not five years anymore. here's my personal thesis. go into 270 park and observe how quickly they are finishing that voting. i'm not sure he will leave until the building is done and he cuts the ribbon. jonathan: cut the ribbon, call it dimon tower. just for the record, hallmark movie kind of guy. single guy from the big city goes into rural america to

restructure a bakery. annmarie: that's why love actually is more your speed. i'm more of a diehard fan. jonathan: next time. dani: i watch more christmas movies. -- i don't watch christmas movies. they are too melancholy for me. jonathan: what she set about wells fargo is important. wells fargo is up by close to 9%. the best week going back to 2023. dani: a 59% increase in dealmaking in the fourth quarter would have caught a lot of people by surprise. erika made a good point, this is the type of restructuring they've been doing. how much of these results are execution versus a rising tide lifting all boats? jonathan: maybe it's not a single campus story anymore and things are changing. let's give you an update on stories elsewhere. here is your bloomberg green. early stage talks about a merger

with glencore as early as last year. any transaction would face multiple hurdles including antitrust scrutiny. nvidia's ceo will not be at donald trump's in operation on monday. there will be plenty of other high profile u.s. tech leaders including tim kerr, jeff bezos -- tim cook, jeff bezos, mark zuckerberg and elon musk. annmarie: they will be in washington, d.c., freezing with me. jonathan: china's economy -- new consumption fallen below pre-pandemic levels and inflation persisting for a second straight year. exports boosting that number big time. this is another story, together with a whole list of stories that, going into 2025, is dependent on policy out of d.c.. >> if it's about exports, tariffs will be a problem.

if it's about exports and tariffs come in, what happens to europe? if they need to continue the story, the goods go somewhere else. in the u.s., a lot of manufacturers there front loaded things as well. it is happening on both sides. jonathan: up next, we talk trade and terror threats boosting the u.s. dollar. >> the american people should think about tariffs in three ways under the trump administration. remedying unfair practices. a more generalized tariff is a revenue raiser. tariffs can be used for negotiation. jonathan: inflation is around the corner. live from new york city, good morning. ♪

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0.4% on the s&p 500. bond yields down again by two basis points. 4.59 off the back of economic data. some dovish speak from the governor. terror threats boosting the u.s. dollar -- u.s. dollar. >> the american people should think about tariffs in three ways. one will be for remedying unfair trade practices. two, for a more generalized tariff, as a revenue raiser for the federal budget. three, sanctions may be driving countries out of the use of the u.s. dollar. so that tariffs can be used for negotiation. jonathan: the dollar, hovering near two-year highs as tariff uncertainty ways on global currencies. trump might be prepared to back down on his previous preference for a weaker u.s. dollar, particularly if you've used that

tariffs can do heavy lifting in addressing the u.s. trade imbalance. jane, it didn't work last time. can it work this time? jane: things are different this time. trump is an experienced politician. he's also i think ready to hit the ground running next week. this time next week, we will be able to answer that question with a lot more clarity. if he comes through very quickly with the executive orders, the market will get a strong flavor as to whether or not what is priced in in terms of tariffs, growth and inflation. is broad-based correct or not? jonathan: what do you think is behind the dollar moves we have seen? is it off the back of superior economic growth and in fear growth abroad or is it about the policy changes from the incoming administration? jane: it's both. if we take a snapshot of the u.s. economy now and compare it with germany, china, what we see

is strength. if we look at the forecast for growth in the u.s. this year, they are averaging around 2%. the consensus is half of that for the euro. china still has great struggles. even though they did hit their target for 2024. with that, there is evidence of sticky inflation in the u.s. that is a snapshot right now. on top of that, we need to layer in the potential inflationary impact of tariffs. and mass deportations for instance, that could certainly create more tightness in the labor market. a significant portion of the work in the u.s. is foreign-born. a lot of those have documentation but even so, we could certainly see some inflation or wage prices coming through in some sectors.

we do anticipate more inflation. the market is anticipating more inflation from trump. that is on top of what is a pretty robust economy already. dani: scott bessent took a run at it yesterday when he said for every 10% increase in tariffs, they would see a 4% move and currency markets. does that math square for you? jane: it is difficult. what are these taps going to be on? what about tit for tat tariffs? there is so much to say. it is difficult to say with certainty that that is the rule of thumb we can follow. one thing i think will be very interesting during this next few years under trump is to what extent tariffs are used for foreign policy.

tariffs could be used for broader reasons. we had trump a week or so is di. it is for those uncertainties that they are leaning toward a hike for the end of next week. until we get trump's inauguration and we get what executive actions he would take, what is the path that he would take that would derail doj from hiking or give them the green light? jane: japan was not in the central site in terms of tariffs. japan was in potentially a strong position.

japan not only is the largest holder of u.s. treasuries, it is also the biggest provider of u.s. fti. over the last -- to 30 years ago, the geopolitics of japan and the u.s. have changed significantly. 30 years ago, the u.s. forced japan to move away from a semi conductor business. they forced japan to move large auto plants into the u.s. now japan sees itself in more certain areas, particularly tech, as more of a collaborator. that relationship could be strengthened in areas as defense going forward. that indication gives japan a little more strength in terms of the hand that it has to play against donald trump. certainly not discernible in terms of trade as perhaps china, maybe not even as vulnerable as germany for instance.

i think that will become a lot clearer over the next few weeks. annmarie: also warming up to be president elect, japan will be sending their foreign minister to inauguration on monday. i'd love to give your thoughts on one thing scott bessent said about sanctions. he said trump thought potentially the u.s. is gone over its skis. do you think sanctions are leading to de-dollarization around the world? jane: there is not that evidence yet. if we look back over the last 20 years, there is evidence of de-dollarization but as bank reserves have moved into other currencies, it has tended to be currencies where perhaps there has been some yield for instance. there is not any firm evidence in the imf date at yet. there appears to be logic behind the fact that if you are going to be impacted by u.s. sanctions, it's in your interest

to stop using the u.s. dollar. china has set up a different payment system for example. it would appear logical that if you were to issue more and more sanctions that you will eventually chase countries away from using the dollar. so, there is i think a logic in that. and then it comes back to how far can tariffs be used as a replacement to this different type of statecraft where foreign policy aims can be used by tariffs potentially. not just economic policy aims. jonathan: before you go, help me out with something before you leave. how do you explain the difference between governor waller and president hammock on the fmc. monetary policies are only moderately restrictive. the governor said he is open to plenty of rate cuts in 2025. what's that about? jane: it is surprising. we have this in the bank of

england and the bank of japan. this is why there is a whole counsel when it comes to making decisions. at the end of the day, it's which way the majority vote will go. it would suggest to me that the majority is a cautious outlook. jonathan: jane, appreciate your time. jane foley. we are poised with another week of dollar weakness and only the second week of dollar weakness we have had in four months. i think we went through q4 with one week of dollar weakness. this will be the second one. dani: a lot of that is due to u.s. data over the past week. how does this set us up for monday? if we get real executive actions, does that mean we will get a pop in the dollar and pop in the yields? jonathan: we will see. it all comes down to next week in many ways for many of you, i know. up next, we will catch up with matt, michael, norman and mark

kelley, next. ♪

>> we are at a delicate point for the fed, but i do nothing they will get too preemptive in this environment. >> without inflation would probably hang a little higher than expected. we have one more rate cut penciled in this year. >> looking at anywhere from zero to two cuts this year, first cut in the second half of the year likely. >> round of cuts will likely need to come because they should.

>> how much lower can we go on rates given where the fed and inflation is? that is the big question. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: earnings from the big banks on wall street were decent , retail sales ok, and governor waller was super dovish. set for the biggest week of gains on the s&p since election week in any november. higher by 0.3% on the s&p. nasdaq 100 up by .3. and moderation on monday. dani: going into the fifth ear of trump, not the first year. there are issues like immigration, energy, deregulation, and tariffs. the issue is we do not know the nuance of some of these policies, and that is what the market is waiting to learn. dani: not clear we will actually

learn that come monday. but if the market does not learn that, that might be a good thing. there is anticipation being built up, especially after the rally of this week, this fear we will get something that sets markets up. if we get past it with no details, could be that the event risk is passed. jonathan: yields down across the curve on the 10-year and 30-year. yields falling. down two or three basis points. a lot of people on the street have closed the door on a potential for a rate cut through 2025. but one person says the door is still open to a march rate cut. and great you have to imagine it is open after governor weller yesterday. just after the rocket priced out the odds of a cut of the first half of the year, he said if the data continues to look like it does, there will be another cut. not improve, just continue. cpi was .002% from being in-line

versus weaker than expected. jonathan: we could have a different conversation going into the weekend. many of you appreciate that. then we get the federal reserve decision wednesday at the end of this month. feels like the last fed decision was only last week. equity futures on the s&p up by .25%. coming up, wall street awaits trump's inauguration. michael townsend of charles schwab looking ahead to his first 100 days in office. and mark kelley looking at a potential rescue for tiktok. bond yields moving lower. president-elect donald trump's first day in office coming up. john hancock saying we might be moving to a new macro ratio here as we have to say goodbye to goldilocks. before the data was not too hot and not too cold which left support for markets. matt, welcome to the program. did this week change things for you in any way?

>> the philly fed index was through the roof. a little too sunny in philadelphia right now, almost seems like -- the nfib survey also. some of these moves in the economic data almost look like meme stocks. when you see this in here fomc members, like waller, saying they will still be cutting, it is hard to put those pieces together. end of the day, you have to position more for re-acceleration of growth. we are looking at mid-cap stocks, industrials, talking about them for a long time, but earnings are looking good, starting to get more appreciation and relative strength. if there is more on shoring, that is our favorite place to be in global equities. jonathan: how further down would you come? talk about the russell comic-con small caps work without interest rates coming down? >> we do not believe so.

that is the big difference about reading this macro regime, almost like the macro regime playbook is missing pages or the pages are so dated, you have to go back and get a new edition. they are different from 10, 20 years ago. in cooling economy, 40% of the companies do not make money now. so we would prefer a zero interest rate regime more than a strong economic regime. mid-cap, on the other hand, 85%, 90%, are industrial. those are higher polity with a higher roe. so if you want quality and value combined, which is our mantra that we would go mid-cap. mid-cap may the new small-cap to implement for the macro regime. dani: can i go back to what you said about data looking like meme stocks.

peter share of academy out the same, but you could have a jobs report that comes in with 74 out of 75 economists with a number and expectation below 200,000, and it surprises to the upside. is there a factor that maybe the data, as hot as it is showing, is just not correct? >> could be. end of the day, these are surveys. surveys have been the hardest thing to read over this whole cycle. since covid, surveys have basically been broken. leading economic indicators, surveys trying to leave the economy, have, frankly, been wrong. they were overly pessimistic over the last couple years as the economy chugged along pretty well. now they have really whip lashed into more positive, kind of more optimist type outlooks. does real gdp improve? does other activity improve? we just have to see. but you have seen such a flip of the switch on survey data. end of the day though, we are

seeing it in markets. just the start of this year, ll cool j may have said it best, do not call it a comeback. we are seeing markets rotate. industrials, financials, materials all starting to be better. tech isn't working. i know this is stunning for markets after two years of just tech domination. but a rotation is happening and they markets, and that is reflecting what is happening in the economy, a better economic outcome. dani: you see that with the s&p decline yesterday, and constituents were up. equal weighted on track for the second best week over the past year, and the only week better was after the inauguration of donald trump. how enduring is a broadening of the market? >> we have been saying it has to be in earnings driven rotation in financials this week. they had low base affects. q4 2023 the sbb payouts happen,

and that really hurt those earnings in 2024 q4. q4 2024 earnings were strong on top of that, but investment banking businesses are starting to come back and get more strength. we are seeing the yield curve steepen. that helps financials. financials are the biggest value sector. it is really tech versus financials if you're trying to make a growth versus value decision. you are going to see that rotation. but the great news of this week was actually the fundamental side, all those beats by big banks. annmarie: what do you make of governor waller yesterday? >> to me, it was an outlier. fomc members are going to be all over the place. if this divergence happens in the next couple must, i do nothing it helps markets, it will just add uncertainty. but if you are data dependent, i

don't get it. you talked about the cpi report beat by 0.002% and trillions of dollars were moved across markets. even in this little bit -- as soon as inflation comes down a little bit, you get this spec into look -- speculative frenzy back in things like crypto, and that will not help the problem, that speculative nature sentiment of markets. jonathan: is he data dependent or fed chair vacant seat depended? >> i think that is the latter. i think there's other motives. end of the day, over the course of the year, you could be right. we're looking at this as a two half story for fed in 2025. first half, i think they have to be hawkish and back off and let the economy settle in, see what happens. then the back half, i think they will be cutting. hard to say right now, look, we're going to get into the

first half. if you are bringing forward inflation or impulse that you really would rather not have upfront here, we're going to reset into the beginning of 2025 a lot of inflation. and commodities are coming back. that makes me nervous on the inflation front, but it helps the cyclical side of equities, that is what we really need, too. annmarie: scott bessent yesterday said any russian officials, they are watching his hearing right now, they should be on guard, the potentially they will go after the biggest russian oil producers. something we saw biden do in the last days of his administration. did you get a sense that we're going to get a very hawkish donald trump administration when it comes to russia and sanctions coming into office very shortly? >> i did not see that on the 2025 bingo card. but you are right, it is interesting to see that the administration really weighted to the end to throw on these sanctions, and that is really where oil prices started to

respond. before the other sanctions or other supply issues, it was just kind of breezed over. wti was more like $70, kind of breaking that. almost looks like it was going to break down further. and it really has a here. if you wanted disinflation, that oil box is not good news. end of the day, commodities work in these kind of short-term spurts. even copper is ripping. i think this also has to do with getting ahead of the tariffs more broadly, just trying to get as much inventory, whether it is supplies, finished goods ahead of this as possible. you have seen it in the china data. china is having this huge export data. they need the commodities to do it. but i do not know if it is sustainable. we believe inflation will come down over the course of the year, think housing prices moderate. so we would use this impulse and lean against it, maybe grab a little bit of duration here. and great it is a lot, and only

the 17th day so far of 2025. you would think people would welcome a long weekend, but people will be glued to their screens waiting to see what happens monday in terms of executive orders. what is your read on how vulnerable the market is to any sort of action from trump fiat immigration or tariffs? >> we are pricing in a lot of good news. sentiment has really skyrocketed to be more positive. more broadly, what we are seeing is the biggest liability to this market is the positive sentiment. one of the best things this markets had going into the last year or so was it was pretty bearish. the new administration has brought a lot of hope and optimism. not necessarily a bad thing. that has probably driven some economic activity and more capex, d regulation on that. but you have to be careful here, looking for everything to go right and thinking it will all be kind of an easy way to navigate this macro backdrop.

there is still policies that could kind of dent some economic growth, policies that could create volatility. end of the day, you still have to think about risk management. again, that would bring us to the bond market. jonathan: matt miskin, appreciated, sir, of john hancock. ll cool j, was not expecting that. ll cool j from matt miskin. and great i mean, it is tgif. jonathan: an update on stories elsewhere this morning with your bloomberg brief. tiktok voice to win a reprieve from u.s. ban. trump's team chinese owner more time. the transition gives trump's administration control over whether a ban is enforced. elsewhere, starbucks china chair resigning january 24, the ceo crediting him with transforming starbucks china into the company's largest international

market. the departure amid a global management reshuffling at the company. finally, a concert to raise money for the los angeles wildfire victims will be january 30, broadcast on multiple streaming services and in amc theaters. billie eilish, lady gaga, red hot chili peppers among those to perform. that is your bloomberg brief. next, markets bracing for day one. elect papa day one, we will begin the largest deportation operation and american history. i will also terminate the biden- harris electric vehicle mended on day one. jonathan: day one around the corner. live from new york city this morning, good morning. ♪

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jonathan: stocks doing ok, positive by .3% on the s&p 500. bond yields down, down by three basis points, 10-year 4.5824. markets bracing for day one this morning. pres.-elect trump: on day one, we will begin the largest deportation operation in american history. i will also terminate the biden- harris electric vehicle mended on day one and save the u.s. oiled industry from destruction. that means two things from day one, right? drill baby drill and close our borders. jonathan: the latest, china is gearing up for trump's return to the white house with major policy changes expected as early as monday. michael townsend of charles schwab sing market volatility may increase around reports of what is or is not included in the executive orders and proposals. a well diversified failure will remain appropriate as a busy year in washington unfolds. michael joins us now. we heard the president elect back in the summer, back in

july, and how different will day one b to what we are seeing on the campaign? >> first of all, i think it will be really cold here for inauguration. so if you're coming to washington, bundle up, the coldest not gratian in 40 years. beyond that, it will be interesting to see how much can get done on day one. because there is an awful long list that was promised on day one. not sure there are enough hours in the day to make that happen. obviously, investors, markets, companies really watching for the details on tariffs and on immigration in particular. i think everyone is kind of on pins and needles to wait and see what the details are and whether they are as extreme as the language has been on the campaign. and great thank you, i will pack my layers, i heard it was going to be cold. appreciate the tip. talk about the tariffs, where the uncertainty is pure what is the scope you think donald trump is willing to go early on when it comes to tariffs on, say, china, europe, canada, mexico? >> i think it has been

interesting. all along in washington, i feel there has been this assumption that we are going to put tariffs on absolutely everything, sort of a rhetorical force, and there will probably be more nuanced would. you talk to people inside the campaign and the transition, they are talking shock and awe on day one. i think there is real uncertainty about how far-reaching they will be. there has been talk about whether there will be scaling up, starting kind of small and then accelerating over time. it is all speculation. we need to see the details. that is why it has been so difficult to plan and think about how they are going to react, until we see the details. annmarie: we know what the future secretary thinks about tariffs, scott bessent. who will be the most hawkish of the administration? the real tariff man, mr. lighthizer, is not joining trump 2.0. >> absolutely right, and i think scott bessent, in his

confirmation hearing, clearly he is planning to pick up the mantle. what i think is really interesting about the administration picks is that the economic team, talking scott bessent at treasury, howard lutnick at commerce, and you can add paul atkins at the sec, these pigs are much more sort of main -- these picks are more mainstream than some of the picks in other areas. i think that is showing how donald trump feels about the economy and markets. the one thing he does not want to happen is anything that damages the economy and damages the markets and since markets down. i think you're in washington and on wall street, there is somewhat comfort in these picks -- annmarie: peter navarro? >> not quite in that same category, but i think, generally, the most extreme picks seem to be in other areas of the government. i think wall street is somewhat

comforted by that. annmarie: let's discuss tax policy, single most important economic issue of the day. this is pass/fail because of a deadline. how do you see the process on capitol hill? >> i think the process will be really complicated. i have been saying to people all along that the thing to watch here is the house of representatives. you have what will effectively be a one-vote majority for republicans. it basically gives every house republican a frito, at least until special elections in april to fill a couple agencies -- it basically gives every house republican a veto. we have seen of the last couple years that house republicans have struggled staying on the same page. all that said, i do think the tax cuts that are expiring get extended by the end of the year. the real question is what else is added to that. in washington, we hearing a lot about the no tax on tip income with momentum. and the other part is how to pay for it all. a lot of folks on the house

republican side really concerned about the debt and deficit. their vote is not guaranteed until the details are finalized. dani: that speaks to the idea that the harder to -- harder thing to work out will be taxes, the thing the market has used to reignite the animal spirits. instead, day one looks like it will be things like immigration and tariffs. conversations with clients, how sanguine are they? are they prepared for that reality that you're describing? >> i think they're prepared first of all, i think there is an assumption that the taxes that are expiring will get extended. but i think there's a lot of uncertainty about how big this gigantic bill can be. if they're going to foot taxes and potentially the debt ceiling and government spending reductions in energy policy and you name it into one gigantic bill come of the rest of that -- the risk of that collapsing is pretty high. i think there will be a lot more twists and turns.

it will not be a straight line to the tax cuts being extended. i also think it will take longer than a lot of people assume. the idea that it will get done here i late spring or something like that, i think that is a real stretch. i think it will be much farther into the year before this gigantic bill comes together. dani: what will be elon musk's role in this? we have seen elon musk, especially during confirmation hearings, saying he will donate to those that are running against people that do not go with trump. do you think that could act as sort of a stick in negotiations as trump tries to coalesce people together around one big beautiful bill? >> no question, what is most important to these guys, getting reelected. so they will always have that in mind. i think it will be really interesting to see how elon musk's role in the new government sort of unfolds over time. there's a lot of ego there and

also would donald trump, those two clashing at some point i think is all but a given. keep in mind that elon musk's role in the department of government efficiency does not have any actual power to do anything. it can only make recommendations. once they get recommendations for cuts, there's 435 members of congress who have things going on in their district that they want to protect, and it gets much more complicated. i think it will be one of the most interesting things of this first year of trump 2.0, to see how the elon musk relationship pans out. dani: i think you are questioning how close they actually are. do you think some distance will be put between trump when he is in the oval office with muska? >> we will have to see, we don't know. i just think these are two incredibly strong personalities, and at some point, president trump may get a little frustrated with elon musk's time in the spotlight. but i do think he sees him as a

partner, sees him as someone who has long business experience, making her decisions, and that is what donald trump thinks is needed to get spending down. i think there is a chance that this works. but i think the chance of a flareup is fairly high. jonathan: michael, appreciate your opinion. michael townsend of charles schwab. i know where you are going, will susie wiles put distance between them? annmarie: i think so. in the new york times, she was talking about basically making sure that there is a process, the staff that are promoted to do their jobs will be the ones carrying out. i think there would be a concern if, dare say, marco rubio and elon musk is talking about german politics or nigel faraj or china or georgia maroney and starlink. they do not want every question at press briefings to be about something musk says, only because he has this proximity to power, which is the president. jonathan: day one, monday.

equity futures positive by 0.4% on the s&p 500, supported by better-than-expected earnings. better-than-expected data, as well. downsize surprise was cpi. dovish fed speak. yields this morning are down another four, down to 4.57% on the 10-year. coming up, norman roule of csas. israel-hamas cease-fire set to begin on monday. from new york city, this is bloomberg. ♪

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jonathan: equity futures adding to the gains, up i .3% on the s&p, .5% on the nasdaq. we take back yesterday's losses already this morning, encouraged by the earnings and economic data and dovish fed speak. two hours until the opening bell. let's get some morning movers. manus: chip sector, berkley's note talking about the sector and broadcom. price targeted at 260, a little bit above, was originally $205. they keep it overweight, like the capital expenditure. when it comes to artificial

intelligence, there will be they have and have-nots. it will be tougher to get positive on cyclical, semiconductors, analog, pc, and handsets. so they are questioning the strength of 2025. to apple, apple was down 4% yesterday. down nearly 9% so far this month. they had a holiday season they would prefer to forget. why focus on the stock barely a .7 percent? because you are almost at a correction in apple. evercore piled onto the technical outperform with a price target of 200 $50 they are leaning into the fact that china remains a wild card. what will the tariffs be? what is your risk? but you have to lean into the iphone 17 as another perhaps better than figured. but it struck me, down nearly 9% so far in january, pretty sizable change in price. a transport company down 9%, jb

h way lighter -- jb hunt. 's kept a that there will be an inflection point. bloomberg intelligence reckon there will be a sequential decline of around 20% to 25%. jonathan: thank you, sir. president-elect donald trump telling senate republicans he will not wait on them to implement policy. wall street journal reporting trump has prepared roughly 100 executive orders as he is ready to press the limits of presidential authority, governing alone on issues like immigration. the reporting from the journal echoing what we have been reporting the past week or so. annmarie: there will be about 100 executive orders the past -- the first few days. i have heard quips at his hands will hurt and he will need a number of sharpie pens to sign with. when it comes to certain policies that he wants to enact, he cannot go it alone, thinking

about the tax policy. tcja was this historic legislation out of trump 1.0. you cannot extend that out of executive order. he will have to play ball with congress. dani: the issue with that, the things that will take more time, taxes and the regulation, or thinks this market wants, things that presumably help lower inflation. you guys have talked about this so much, the idea that secrecy matters. if what we get versus tariffs and immigration, those are more inflationary policies, you do not get the benefit of de regulation until sometime in the future. jonathan: still nervous about what will come next week. talk about the potential for a bid deal. rio tinto and glencoe talking about combining businesses, the largest ever mining deal -- rio tinto and glencore talking about combining. discussions took place as recently as late 2024 but are not currently active.

there is one point on assets and a second on culture. assets, rio tinto has been trying to get out of the likes of coal. glencore has been getting into it, and i believe it took real assets over the last couple years from rio. rio has been built on the construction boom in china, trying to lean into things like copper. i understand that glencore has the copper assets and maybe that is what they're coming for, but then you involve culture. think about a combination, i cannot think of two more different cultures within a sector. dani: their history alone. glencore starts as a squash buckling trading commodity outlet in this wild west. rio tinto was a more classic start. mna is always really difficult -- amanda bank is always really difficult, culture is a problem. this is a class on epic proportions. a lot of people looked at this deal and say it makes since it fell apart because there's not a

lot of logic to it. jonathan: that is before we get into antitrust issues. pretty unremarkable that that deal came back on the table after exploring the same thing about a decade ago. the israeli prime minister singh a cease-fire agreement with hamas is on track to begin on sunday -- saying a cease-fire agreement is on track to begin on sunday. let's find out more from tel aviv from our reporter. what is the latest? reporter: listen, even in the first 24 hours of this deal being announced wednesday night, there were stumbling blocks between the is really -- israeli government and hamas leadership your this morning, it sits with the security cabinet. they have been meeting now over four hours, trying to get approval from the israeli government to put the cease-fire deal into action the difficulty the government will have its benjamin netanyahu's party has been supported by right-wing parties here who at threatened to leave the coalition

government if they pass this deal through because they want to continue to prosecute the war until basically the entire ratification of hamas. seems even if they were going to do that, they could still pass this deal with a minority government. plus, so much will within the israeli population, you get off the plane here, the first thing you see is the posters of hostages, stickers all over town, huge will to get this over the line. if you do get it over the line to the security cabinet and cabinet for later today, you would get the first exchange of hostages, the cease-fire would take place on sunday for six weeks. you would get three female hostages, total at 33 to be distributed over the six weeks. in return, you will begin to have the prisoner release from the israeli side that are held, the palestinians. and you will get a cessation of fighting within gaza and a withdrawal of israeli tripped on the eastern corridor appeared critically, the other elements, more than 45,000 people have been killed so far in the gaza,

the infrastructure is completely shot. this will allow huge volumes of aid to pour back into gaza, which it is desperately needing. annmarie: i'm told 24 of the 33 hostages are alive, and i am told about nine or 10 are either wounded, seriously wounded, or ill. the conditions will come out and it will not be good. at what point can we see all of the hostages be freed from gaza? reporter: listen, let's talk about the sequencing. what we will get in the first wave will be the release of mostly women, elderly, and wounded. it is hard to appraise how many of the hostages are still alive, how many will be corpses returned to israel. sequencing, there are 98 hostages that remain, 33 will be released in this first part of the cease-fire agreement. remember, this agreement has three parts. qatar, the u.s., and egypt brokered the deal.

after the first phase, they would like to go further into the second phase, but that will be basically what biden has called the actual end of this war. as difficult as it has been to get to phase one, we have been in this war more than 400 days, it will actually be probably harder to get past phase one and into phase two, despite the fact that the deal is supposed to be not just a cease-fire for six weeks, it is supposed to be the architecture of the end of the war. but it will open very challenging questions of the heart of this conflict for the last decades, who is going to oversee security over gaza? who will ensure there is a government there that represents the people, the palestinians in the gaza, while preserving the israeli guarantees? that is the heart of the question as to whether or not there will be progress past this first phase. jonathan: appreciate the update from tel aviv. a former u.s. intelligence officials said the execution of the agreement will likely take longer than the four months

described in the deal. with opponents among israelis an palestinians, they must make sure the agreement does not collapse. as always, a great deal of amount of respect for your opinion on the matter. can you share whether you think this agreement will hold, will not collapse? >> good morning. it is very likely to hold and take place. the deal is a cause for celebration by the families of the 24 hostages that will be released and bring some element of closure is the remains of nine other hostages are returned to their families. importantly, the palestinians would see an end to violence. a very long road to reconstruct their lives. so there are drivers on each side for this initial deal to take place. in the longer-term, moving to the second phase, as you have discussed in your previous segment, it is challenging. because all hostage deals come with costs. hamas and hezbollah are no

longer strategic threats. strategic elements remain they can be rebuilt, and iran hopes to do that. israel is about to release hundreds of presenters, many of whom were convicted of serious terrorism crimes -- israel is about to release hundreds of prisoners. also about to release settlers convicted of palestinian violence, and that will create trouble. in many ways, we are watching relief, good first step, the beginning of a very long road, and, importantly, the trump administration played a huge role in the success and they will need an architecture to manage and sustain the momentum. annmarie: the incoming officials were brought in to helping get this deal over the finish line, working alongside the likes of brett mcgurk, who has been camping out in doha working on the framework. who do you think gets the credit for putting this over the finish

line? >> well, everyone does, but there is a formula by which this succeeded. first you had significant work by diplomats on all sides to develop a framework. but that framework was unlikely to have been executed under the biden administration had it not been for israel's destruction of hamas and hezbollah leadership, which the biden often publicly opposed in terms of operations. even then, unlikely this would have happened without president-elect trump's profound heart statements, his involvement in the process, and sit and think steve wood cough, who according to many reports has been masterful in understanding the palestinians and israelis. so there is a formula that required all three pieces to make it a success. annmarie: what about the remaining hostages? not the 33 that will be released starting sunday. do think the incoming trump administration can get those remaining hostages out of gaza?

>> it is a possibility. but again, they are looking at the second phase of this deal, hostage elements and the israeli write. and even if they get to the first phase, they do so only because there is belief the second phase will involve further military operations to destroy hamas. it also involves must not undertaking connecticut operations against israel, and their multiple violent actors within the remaining hamas organization that will likely do so. it will be a challenge and will take a lot longer than some people perceive. it will get -- be critical that we have a system and team to keep this pressure on all sides. dani: even beyond that, there is still no clarity in who runs gaza once we get through these different phases. netanyahu has not presented a plan, clearly no appetite to allow hamas to continue to run the gaza strip. what is a possible alternative for this region? >> no possible alternatives at

this time. the good news is israel is demonstrating it wishes to withdraw from the gaza strip. it does not seek to occupy it permanently. the bad news is hamas fighters remade -- remain in thousands and are disorganized and like leadership, but they have the guns and will want to control the aid and distribution. so who pushes back on the some ice -- these hamas fighters a criminal gangs which have hijacked aid in recent months? it is not only an open question but we have part of the answer, there isn't anyone yet there to do that. that opens the prospect of hamas reconstituting itself, and this process beginning all over again in the long term. dani: is it fair to say then that this conflict is just far from over, years from being over? >> absolutely. ending this conflict will require the israelis agreeing to

a two state solution but also palestinians demonstrating that that will not leave hamas in charge of that state, not only on the borders of israel but on the borders of jordan. the palestinian authority has been relatively sideline element in the negotiating process, and they have not demonstrated to have the capacity yet to provide security and the governance gaza needs. if an election took place today in the west bank and gaza, hamas is likely going to be the winner. jonathan: appreciate your perspective, norman roule of csis. elsewhere, here is your bloomberg brief. yemen signaling a pause in a tax on commercial ships following the cease-fire deal. houthi leader sing they will follow the agreement that leaving the door open for attacks. the new york city mayor meeting with president-elect trump and mar-a-lago today. the mayor expressing support in

deporting violent criminals and cooperating with federal law enforcement. citi cutting more jobs this week. people familiar telling bloomberg managing directors and the wealth business and technology unit are leaving. reductions are part of the ceo's pushed to cut costs. that is your bloomberg brief. over the past week, how much longer can we sit here and say it is idiosyncratic, citi specific, jp morgan specific? and great not just the banking sector. meta, microsoft, number of companies saying they will trim workforce. dani: it is also taking away benefits, lowering 401k, leave getting taken away. not just outright firing people. there was a wall street journal story that pet leave was a thing at some companies and they're

taking it away. and great this is what happens when hr is running companies. jonathan: so i get a dog and i can have a day off? dani: apparently, it was a thing. annmarie: or if your dog or cat or, i don't know, dragon, gets sick, hamster, you can take time off and be there to hold its paw. jonathan: i am getting a pet, hamster, this weekend, and i will take the next three months off. how long do you get off? who is doing this? dani: i don't know, taking care of the puppy is a hard work. good luck with your hamster. jonathan: tiktok's 11th hour, up next. pres.-elect trump: either close up tiktok for security reasons or it will be sold. we had a great response with billions of views and said maybe we should keep this sucker around. jonathan: that conversation

next. live from new york, you're watching "bloomberg surveillance." ♪

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jonathan: live from new york city, welcome to the program. stocks higher by .3% on the s&p 500. upon's railing, yields, 10-year 4.5824. tiktok's 11th hour -- pres.-elect trump: we will either close up tiktok for security regent -- reasons or it will be sold. i have a warm spot in my heart for tiktok. there are those that say tiktok has something to do with the 34 points we did go on tiktok, and we had a great response rate with billions of views. said, we really ought to keep

this sucker around. jonathan: a supreme court ruling expected today on tiktok in the united states, facing a sunday deadline to find a buyer. washington post reporting president-elect trump is considering an executive order to delay the ban. it was written, if the ban is enacted without reversal, we see meta, google, snack as -- snap as the biggest beneficiaries. mark joins us with more. welcome to the program. what is your base case for what happens later today from the supreme court and this sunday? >> thanks for having me. my base case is this gets pushed out again. we are seeing that on both sides of the aisle. senator markey in massachusetts has been trying to push for an extension. now we are seeing it from the biden administration. i think it gets pushed out again, and that is what we have been hearinfr

advertising community. overall, no one was really expecting a ban to take effect. annmarie: when it comes to the supreme court, and you think they will likely uphold the law, do you think it has changed given some of the politics have changed in the last 48 hours? >> honestly, my base case before friday when that tiktok hearing did not go well for tiktok, my base case was the platform would not be banned. i say that because a lot of folks talk about the security threat that tiktok perhaps poses, i would say if it was such a big threat, i do not think -- i would hope our government would not like to talk -- would not let tiktok operate through the election for such a long time. so i wonder where that threat is, not saying it is not a threat, but more clarity would be important. annmarie: what happens now in terms of who could potentially take this company over? what do you make a reporting -- we have had a scoop that chinese officials are looking at

potentially elon musk as being the number one choice to run this company. >> i think what is important with any divestiture is what comes with the tiktok business. bytedance has been clear they will not part ways or give parts of the algorithm so a potential buyer. so what are you buying? 170 million, roughly, u.s. users, the shell of a nap. but -- the shell of an app. but you really do not have the algorithm to power the platform. elon musk does make sense to me given what he has done with twitter and x. if he was the acquirer, i think he is well-equipped to handle whatever situation is thrown at him. dani: part of the reason tiktok will no go -- will not go dark on sunday is because president biden said he will not enforce the ban and will leave it to the

trump administration. but on everything else, when it comes to cuba or russia sanctions, the biden administration has shown a willingness to do things in the final days until president trump takes over. why do you think on this one issue is something that biden has decided to pass along? >> i am not a political analyst, but i do think both sides of the aisle throughout the election cycle, everyone up for reelection had a presence on tiktok while also saying it poses a national security threat. yes, you highlighted that trump did well with younger users, particularly men, on tiktok, but so did the other side of the house. i do think a lot of what we heard on capitol hill is a lot of posturing. last year when they called the tiktok ceo in front of congress a couple times, i think a lot of grandstanding there. end of the day, we all need to know what the national security threat is, if it is an actual security threat.

throughout this process, there has been support and also skepticism. both parties. jonathan: i would love your thoughts on the zuckerberg conversion. taking us to the inauguration, changing the way they censor, stripping out the liberal bias. do you think it will drive engagement? >> if we use the election as a proxy for what the overwhelming majority of folks in this country prefer, i think they would like some unfiltered news. community notes, i have been on x quite a bit, i would say community notes look like they're working pretty well. if it works as well on facebook and instagram, i think that is great. meta is probably -- don't want to say worried, but they want to make sure the advertising environment is a good one where people feel comfortable the

content is not offensive and aligns with your brand. they have a couple third party partners double verify that gives people some of that comfort. there is a product that meta -- it was slated for the end of this year that they brought forward to q1 of this year. that tells me that meta has been contemplating this move, particularly on the content moderation site, for a bit, and brought in those partners early. jonathan: mark kelly of steve, the latest on tiktok. we should hear from the supreme court later on this morning. next, we will catch up with a member of morgan stanley. we will look ahead to netflix results. and a guest on why he takes no rate cuts in 2025. and thoughts from j.p. morgan asset management on the latest on this market. equity futures positive on the

s&p by .3%. from new york, you're watching bloomberg tv. ♪

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>> the market is pricing in just the right stuff coming out of d.c. >> we have viewed policy as an

accelerant or a dampener. by itself it rarely makes trend. >> is the engine of the car going to get turbocharged by these policies? that is a risk we cannot dismiss. >> the markets are walking on pins and needles. >> there are these shocks that will disrupt the cycle we are in. we do not know the probability and the size but we know they are coming. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: technically it is a long weekend state side but on monday a lot of people on wall street will be at work. it is day one of the trump presidency. equity futures positive .4% on the s&p. poised for the first weekly gain of the year so far. on the nasdaq, up .5% come on the rustle up .6%. in the bond market yields down

for the longest streak back to early december, we are down another four on the 10 year and five on 30's. encouraged not just by the economic data but a very dovish governor waller. annmarie: governor waller saying there is a potential to get a cut in the first half of the year. that is quite the lobar. cpi ended up coming in lower than expectations by .002%. the market has taken it in stride even though waller does sound like an outlier and it does sound like he is campaigning for fed chair. i go back to the idea that both can be true. jonathan: if the data allows them. frances donald thinks the date it will not. she thinks the policy changes you are about to see will keep the economy running hot and may be an inflationary impossible keep the federal reserve on the back foot. annmarie: we have seen the market price in trump 2.0 after the election but for some firms that has been before the

election. they thought he was going to win. next week we will see what sticks from the policy proposals we have heard on the campaign trail and that is where we are going to get a slew of executive orders over the first 48 and 72 hours and potentially all of these stories about these competing narratives on tariffs. what gets presented to the president and what gets decided on? jonathan: coming up, jim karen -- jim caron and steve ricchiuto on why he sees no chance of rate cut through 2025. we begin with stocks steady. investors pausing ahead of trump's inauguration. jim caron saying asked not why yields are rising but why the yield curve is steepening. content matters. there is no magic level. but when yield start rising and a level that competes with equity reserves this is substantial but yields need to stop rising first.

are you confident enough we have stopped rising? jim: i am not. i think we will be in a range that is probably 4.25% on the 10 year up to 4.75% and i think we can overshoot to the upside. i don't think 5% is out of the question. the way we start to think about this is the yield curve. the big debate is does the fed cut zero times, one time, or two times but nobody is talking about hikes. if we think the slope between the two your note in the 10 year treasury, if we think that spread is going to be somewhere more normalized, let's say 50 basis points or 75 basis points, if the fed funds rate stops at 4.25% come if you have a normal slope yield curve you could have a 10-year note around 4.75 to 5%. i don't think that is bad news. if it is because the economy is

growing and we have relatively low inflation because we are getting higher productive growth , than the steeper the curve the bond yields are acceptable and manageable by the equity markets. jonathan: hold onto that thought. i wanted to jump in with the breaking news headline. a lot of people anticipating this. the israel security cabinet has approved the gaza cease-fire deal. confirmation the israeli security cabinet has approved the gaza cease-fire deal. we will bring you updates later in the program. you are talking about the slope of the yield curve. the two-year is basically anchored around where the fed fund is at the moment. if you're anticipating the real action from the fed for the next 12 months that makes sense. if you go out another 40 or 50 basis points through the curve you can make the argument for where we are absent fiscal concerns and that is what i wanted to come to you on. is there any evidence the longer end of the curve we have started

to price in some kind of fiscal premium with the incoming administration? jim: we are pricing that in. this is what people refer to as term premia. the incoming trump administration is likely going to run positive fiscal expansionary policies meeting they will likely deregulate and they are looking to cut taxes. both of those things i will call fiscal policy and expansionary. what they are also trying to do is reduce the deficit. can you do all three of those things? that is the key question. trump has put in place the department of government expenses and expenditures and he is looking to reduce some of those government expenses. what we have to remember is inflation is driven by government outlays. government outlays in 2024 was over 10%. that is a big contributor to inflation risk. if that starts to go down as

trump is promising it should and if it does you should have a lower inflation impulse. you can run expansionary fiscal policy and not have to pay the price of higher inflation. that is the trifecta. essentially if the market starts to price this in and it is an out of consensus view, if the market prices it in that is positive or equities and it could be positive for credit spreads and bonds. dani: that makes a lot of sense but how likely are we to get policy from trump given the hints we have gotten going into his inauguration -- it is an unpredictable one with often varying parties jockeying to have the influence of donald trump. does that not in itself argue you will not see that plato in yields equities need, that there will be more volatility which might in turn hurt risk assets? jim: that is exactly right.

effectively what that generates is a higher risk premia were term premia. the market is saying i hear what you are saying and what you are trying to do. we are little bit skeptical that is bringing in that inflation impulse and that is one of the reasons why the yield curve is likely to continue to steepen this year until we see this manifest. it is not a done deal at the moment. tariffs is the other thing being discussed. is that inflationary or are tariffs a tax? does it actually bring down inflation? it depends on how it is enforced and how it is enacted and how targeted it is. the critical element is to see one trump actually does in his first several days, but certainly the first 100 days and this is what the market is wrestling with it has built in more term premia and that has pushed yields higher. dani: what does that mean for

cross asset allocation? in you build a portfolio or bonds can have negative allocations to equities to act as a hedge? jim: this is a point that is near and dear to me. right now bond returns are very high. they are at all-time highs. highly correlated relative to equities. i go back 110 years on this data. it is difficult to build a portfolio that is well diversified, meaning that if i own bonds it is a good hedged equities. if you are passive it will not be. if you actively manage your fixed income and actively miniature equities and be selective about the assets and the broader part of the markets like mid-caps where there can be more earnings potential growth, if you build that into your portfolio, then you can have a diversified portfolio. if you just go passive bonds and passive equities they will be highly correlated and you will not get the diversification benefits.

bonds will not be as good of a hedge. you need to be selective in terms of what you are building in and if you do it is a great opportunity. jonathan: before you go we want thoughts on europe. early days but some outperformance in european equities. we saw that in paris. too early to say whether we are breaking the trend and breaking expectations that we came in at 2025 with? jim: don't look now but europe is outperforming the u.s. and it is important to highlight why that is the case. this is part of our cyclical view. cyclicals doing better in 2025. pmi's have been in a recession for the past three years. europe is very highly levered. there equity market is highly levered to a cyclical recovery in manufacturing because that generates a lot of their gdp. the european markets are picking that up, especially european financials.

we still like that segment of the market. we may expand more into the industrial and manufacturing base. this is still a good opportunity to diversify your portfolio. it is not just about the u.s.. jonathan: jim caron of morgan stanley finishing up on europe. the dax had a great 2024 despite people being very downbeat on europe. it is generally 17th. could this be the surprise of 2025? dani: so may people got down on europe and said u.s. exceptionalism is the only thing you can buy. one note of caution is when you look at things that are performing, it is very global businesses and business is exposed to the u.s. this is where the terror threat comes back into play. monday will also matter for these markets. jonathan: stocks up nicely in europe. up stateside as well. moments ago some breaking news out of israel. let's have a root -- let's head

over to tel aviv and hook up with bloomberg's ali crook. ollie: we just got the approval from the security cabinet they will move forward with the cease-fire agreement. this is where the debate had been stuck at the last four or five hours. this will move onto the next phase of the vote which is the full cabinet approval. we got the statement from the prime minister's office that says after examining all political, security, and humanitarian aspects and with the understanding the proposed deal supports the achievements of the war's goal they have approved it. that is a very important line because there has been a lot of debate within this government, particularly from the light -- from the right wing who do not want to enter a cease-fire agreement saying this will only allow hamas to regroup saying they want to pursue this war -- this leaves the door open very clearly, and this has been something that has been won by the far right to continue to re-prosecute this more after the

six week period. this will be the intense debate within israeli politics. under the pressure we have had on the streets there been protests against the government saying you need to bring these hostages back. under that pressure this has been approved by the security cabinet. now goes to the cabinet and we can expect the cease-fire to be put into force. annmarie: under the pressure of donald trump and steven witkoff that is what rock -- that is what brought parties to the table. it is steven witkoff that did a lot of the heavy lifting. when will the first hostage be released and what is that process going to look like? oliver: i can give you a little bit of the mechanics of what that will look like. what we understand is this will be done in several phases. the first phase will be three female hostages on sunday. in exchange palestinian prisoners will be released by the israelis.

over the ensuing three or four days, every three or four days will have three or four hostages released in the same thing on the others from palestinian prisoners. we understand there will be 33 in this first phase. that means hundreds if not more than 1000 palestinian prisoners to be released. what this will also guarantee is the ceasing of the fighting within gaza but also the withdrawal of israeli troops from the populated areas in the pop eastern corridor of gaza. this will allow a lot of aid to flow back into gaza after 45,000 people have been killed in all of the infrastructure and supplies decimated over the last year and three months. jonathan: bloomberg's ali crook in tel aviv -- all of her crook in tel aviv -- oliver crook in tel aviv. israel's cabinet approving the gaza cease-fire deal. it includes hamas releasing 33

hostages come israel withdrawing troops from populated areas and freeing around 1000 palestinian prisoners. former central banker mark carney announcing a bid to ead of canada's liberal party. he has resigned all of his positions. just seconds ago friedland, the former finance minister of judo running to be the liberal leader. annmarie: it is about a month ago she decided she would resign and that is when justin trudeau faced his biggest test. he was forced to step aside because of the scathing letter she wrote. jonathan: a very steep hill took crime -- a very steep hill to climb. shohei ohtani is donating $500,000 to the fires. the dodgers and other las sports team are selling ala -- are selling l.a. strong shirts with all profits demonstrating the

red cross. coming up, the morning calls plus citigroup with netflix earnings. you are watching bloomberg surveillance. ♪

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or, let curiosity light the way. at t. rowe price, we're asking smart questions about opportunities like clean water. and how clean water advances can help transform our tomorrows. better questions. better outcomes. t. rowe price jonathan: the opening bell one hour and 13 minutes away. a lift by .6%. let's get you morning calls. evercore isi adding apple to its tactical outperformer citing growth in emerging market and strengthen wearables. that stock is up .9%. real weakness today on apple. dd callan upgrading salesforce to buy saying it's pullback has

created a compelling entry point. bank of america downgrading southwest to underperform, citing execution risk in its product offerings. let's turn to streaming. investors bracing for netflix earnings. the majority of wall street is bullish on the streaming giant. tatian bassinet of city -- jason bassinet of citi is neutral saying we like netflix strategy and execution but we do not see material upside at prevailing levels. jason, welcome to the show. what is behind that call? you're not impressed by the contents late? jason: i'm impressed by the content slate and i think the valuation reflexive from true medicine men of good news. people are excited about the content slate. netflix continues to be the undisputed winner in streaming. all of that is reflected in the stock. it is trading at 20 times 2026

earnings. that is a pretty full multiple, especially because topline growth will begin to decelerate as we move into 2025 and 2026 and 2027. dani: there has been a lot of excitement on netflix on live sports streaming. they spent an immense amount of money getting the nfl rights and having beyonce perform at halftime to a lot of accolades. at what point of the expenses start to pay off? how do you justify the spend they are having not to mention in might get more expensive as the amazons of the world look at what they are doing and want to get involved? jason: there is a misunderstanding among generalists about sports. the reason i say that is netflix would clearly move into sports and it will be very expensive. what peace and under -- what people understand is the sports rights cost is matched by advertising revenue you get so

once netflix stands up a full throated streaming service, the only way you can make this work is if you get more subs. in the u.s. netflix is already penetrated. think going into sports business smart strategy. i am less convinced it is needle moving in terms of helping the firm grow earnings. dani: when it comes to getting more subscribers, it was last year a lot of executives -- amazon was starting to price itself more cheaply than netflix for people coming in and buying ads. what does that market look like right now. is there a race to the bottom and at this beginning stage trying to get advertisers onto the platform? jason: i would not characterize it as a race to the bottom. what ended up happening is because amazon forced all of the prime customers onto the ad tier unless you opted out it ended up

causing supply demand imbalance for digital advertising. i fully expect we will reach equilibrium and pricing for ads will continue to march up. i do not think this is a race to the bottom and that is good for netflix. annmarie: what about price hikes when it comes to wanting to engage, whether it is any other streaming service but also netflix. can they have the ability to raise prices? annmarie: remember the cup -- jason: remember the company has already guided 2025 revenues and they have said the way to get there is relatively balanced between subscriber growth and pricing. what the buy side has been waiting for is for netflix to announce the u.s. price hike. many expected it in the third quarter or fourth quarter and their elevated expectations that if they do not announce it on the earnings call then shortly after earnings they announcer u.s. price hike. netflix view is they take the

price hikes when they can earn it. there's been modest improvement in the level of engagement on netflix. i fully expect they will take a price hike. if they do not than i do not think it will be possible for netflix to hit the 2025 revenue guidance. annmarie: i love how you broke this down in your research. u.s. consumers pay .06 per minute for netflix, very similar to what they pay for television. why are they waiting so long to hike prices? jason: when you ask netflix this question they say they do not look at the price of linear tv as a competitor. having said that, when you go back over time u.s. consumers are paying the same for netflix per minute as they are for linear tv. netflix is much cheaper than linear tv. it is about the same price. it is a guard rail is a way to think about it.

netflix cannot get priced too expensive and get the price per minute too high. part of the push to move into sports, part of the excitement they have around the content slate is to get that engagement up to her in the right to take pricing up. dollar per minute may stay relatively flat. dani: i am a lot of skepticism from you. i know you not bearish on the stock. as we started this out, you're not sure they can reach the level that is currently priced in. you think there is any potential or is it skepticism all the way across the board? jason: there is not skepticism. my only point is a price hike is embedded in expectations. if they deliver that i do not think it is a beat, do not think it causes outside performance in the equity. the need to announcer u.s. price hike to hit guidance for the year. it is not bearishness, is just recognizing good news is priced into the stock. they have to live lever 13 million and adds -- they are to

deliver 13 million and adds, they say they have to do better than last quarter which was 5 million. the multiple is relatively full. i'm trying to find opportunities where we can make our clients huge amounts of upsides and i do not see it in netflix. i love the company and the strategy but i'm not sure it is a stocks that will outperform. jonathan: can we talk about content. paramount, absolutely love it. how much will we see pro-rural america, pro-conservative content like landman? jason: i think you will see more of that. we have seen the middle of america underserved from a content perspective for a number of years. there is whitespace for hollywood to capture and i think the response function as the shows get good viewership will cause hollywood to readjust and serve middle america and red state content for lack of a better word. jonathan: it is happening.

jason bazinet of citi. are you watching any of this? annmarie: the cast is incredible. to me more, jon hamm -- demi moore, jon hamm. dani: take any midwest show, so good. jonathan: it works. coming up next, steve ricchiuto. this is bloomberg. ♪ so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch

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the way that i approach work, post fatherhood, has really been trying to understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families, like my own. connectivity is a big part of my boys' lives. it brings people together in meaningful ways. ♪ ♪

jonathan: 60 minutes away from the opening bell. a nice balance in the last 10 minutes. we're are 60 minutes until the cash open. manus: good morning. it is the chips with a little bit of a frisky move. up. 6%. barclays has a note that permeates and broadcom. they raised the price target to $260. overweight semiconductors generally. they like the capex story. you will see the market

bifurcate into the have and have-nots in the ai world. i'm struggling to understand the move with intel. analog, pc, handset. intel is flying by nearly 5%. let's see what the story unfolds. apple down for present yesterday. gaining a little footing this morning. the stock is down nearly 9% in the month of january. pretty awful iphone sales in the fourth quarter. evercore says it's a tactical outperform. strength, services and wearables are the key. the wildcard is china. iphone 17 and se plus is better than feared. a little crypto. there's executive orders coming down the pike. bear in mind coinbase. postelection frenzy. the stock down 27% in the close of the year. we clawback 50% of that.

this is where you have seen the worst of it passed and it's a bargain. bargain discount relative to robinhood. jonathan: thank you, sir. 60 minutes on the cash open. cleveland president beth hammond telling the wall street journal, "we have an inflation problem and need to continue to finish the job." chris wallace as, "cuts could come if inflation data stays favorable." steve joins us now for more. what explains the difference right now for you between the likes of hamrick and waller? steve: there's a disconnect between the belief as to whether or not global disinflationary pressures will dominate over domestic cyclical inflation pressures. that is the debate. that's why the confusion amongst the members of the fomc. it is an important question as

to whether or not the global inflation will overwhelm the inflationary implications of a tight labor market and the economy running about trend for five years, the longest period in the postwar we have seen the economy run about trend. we have this federal reserve that thinks it needs to cut interest rates. jonathan: i want your opinion on this. is governor walter auditioning to become the next venture? -- fed chair? steve: possibly. i don't think the addition for donald trump is we have to worry about inflation or tighten interest rates. cutting interest rates automatically lead to lower long-term interest rates is a mistake. we have seen that for 100 basis points. i don't think that is fully accepted by this administration -- incoming administration yet. dani: given that they have cut, yields higher, what is the risk this is a reserve that allowed the bond market to get away from them and allowed the market to get away from them at a time

when you have the administration that seems more acutely aware of that, and of the pressures and their ability to turn around and pressure the fed themselves? steve: if the fed took the directive saying i want you to target 2% inflation, i think you would have strong argument that yields should move lower over time. the federal reserve feels 2% was too restrictive. they are probably more comfortable with it being at 3%. that's fine. if you defend it at three, that's fine. the bond market needs to reflect what that means. the bond market today doesn't. the reason why it doesn't is everyone in the business only remembers the new normal riod. that was the biggest mistake bill gross made. that was an anomaly. trying to think we can go back to an economy running at about trend economic growth with 3% unemployment and 2% inflation is just not valid. dani: one argument i heard to

say this is disinflation happening, just more slowly, the consistent piece of data we get our things like the quits rates. workers not leaving their jobs and those who do leave, it is harder to find a new job. you see this ever so slightly slow grind and wage growth. that means softly soft landing is on track and open to door to cuts. steve: that was a 2024 situation. the perception was we would get a big tax increase in 2025. companies were saying i have been underperforming on earnings. 2023, up less than 5%. i have to control costs. i slow down the pace of employment. i'm no up to 10% earnings growth -- i am now up to 10% earnings growth and now i no longer have the prospect of tax increases. i'm pretty come to will now that i can get 10% to 15% earnings because we will probably have a

6% nominal gdp. does that change the dynamics where we say the quit rate is going up and people are getting jobs quickly? what's going on? that is what is going to happen. you are animal spirits even before they executed anything whatsoever. you have a change in mindset. look at m&a activity. they announced -- the announced deals have picked up significantly. there's a more from the administration coming on the pipeline. even though we say m&a destroys jobs, it may take out some initially but it tends to create jobs over the longer-term. annmarie: let's talk about policies we will see implement it as soon as monday -- implemented as soon as monday. what is in the immigration policy for the labor market at the same time we might have a tariff policy that could be inflationary? steve: let me step back.

i'm not sure it will be inflationary. annmarie: the washing machines from last time around? steve: with the dollar getting stronger and global excess of flight -- look around the world. it's a mess. we have produced more global excess supply after covid and we had before it. i think margins take a hit for suppliers into the country. i think the currency offsets a good portion of that. getting back to immigration, i don't think there's any realistic argument to suggest people want to support illegals that are adding productively to the economy. i think there may be a decision to deport people coming into the system because they have been arrested. maybe then getting deported as opposed to going out and trying to get vacuum cleaner and sucking all these people up. annmarie: we have a chinese news organization reporting now that trump and xi are holding a phone call. looks like he getting ahead of what this tit for tat might be.

do you think that is where it is headed, less so in europe, canada, mexico and mostly focused on beijing? steve: clearly he started that piece of the equation. it has become consensus conversation that he will push on. it is a big national security related issue. a lot of what is done here is positioning. i think we have to then go back and wait to see what actually gets accomplished. hi don't know where they will go with this. i don't think a lot of people do. i'm disappointed by the bond market's desire to believe the incoming treasury secretary makes every bad possible thing go away. that is not the position of the u.s. treasury secretary. i'm not so sure because you have been successful in business you will be a great treasury secretary. we have seen several successful businesspeople be horrible secretaries. it's a difficult job. a lot of what you are doing is coordinating efforts with people on the hill to get things done for your president.

just because you are successful at your job doesn't mean you are good at doing that. there are certain people like steve mnuchin who have the skill set to do it. other people we can mention in history but most people would not recover who they are. the reality is making the assumptions we are making is the mistake. perceptions are not reality. this is what i was getting at with regard to the 10-year note. 480 is a great level to buy. we have not -- we touched it once in 2023. i was not even in 2007. i was in 1979. that is a fair level of rates. it's an accommodative level of rates. people were worried about the mortgage environment. the environment is not the reason why we are not getting housing in the country. the problem with housings that we don't want to build homes because it is expensive. we have taken at the speculative aspect of the market through dodd-frank. in addition, the price is high.

we have an aging population so how much more do we need? jonathan: you know the effective mortgage rate in the u.s. is around 4% at the moment. nowhere near with the market rate is and a lot of people are locked in. we have a supply issue but for different reasons. steve: why would you leave unless you have to? jonathan: do think reducing interest rates would unlock some supply? steve: i don't think so. i think a lot of people in the position where they have locked in given how low the rates are effectively, some that we know and particularly -- particularly have opted to rent their homes. jonathan: i'm trying to get lisa to sell her home. annmarie: she's at 3%? jonathan: it's a great trade. whoever is the first to complain about the bond market will not be the last. steve ricchiuto. a report president xi and donald

trump have held a phone call. no clarity on details of what they discussed, which is the important part going into next week. annmarie: hopefully we get a readout. he will be the president on monday. hopefully we get a readout on what they discussed. we are seeing a lot of different policies regarding china discussed. scott bessent was bearish on china yesterday in his hearing. they think they are in a recession, depression. talked about the national security concerns and the fact that maybe they will be using tariffs when it comes to beijing. at the same time, donald trump invited xi jinping to come to his inauguration. maybe this phone call was just an rsvp. i'm sorry i cannot attend but i will send my vice president instead. dani: it's a good moment to take a step back and think about how different it is from four years ago. hours after biden's inauguration, china issued sanctions on 28 trump officials.

months afterwards we had talks between the two sides that completely fell apart in alaska. this is a very different starting point. at least positively for the market despite the hawkish people in trump's cabinet, talks are happening and people are attending the inauguration. jonathan: he understands how to be president and where the levers of government are. he will be a different one. that is why the think they will move more quickly this time around. annmarie: he stands were to push, pull, and based on conversations with people in the trump administration, one thing they want to do that is different geopolitically speaking, not just china, they understand the power america has with its military might and capital markets. they are willing to brandish it around the world the same when they did nothing the by demonstration was. jonathan: equity futures positive by .7%. session highs going into the opening bell 45 and its away. equities up. bond yields down in america by four basis point. the rally is picking up.

down 5% on 30's. keeping a close eye on fed policy. "the fed will be on the sidelines for the first half of the year. furthermore, this economy is not interest rate sensitive." phil, good morning. a lot to unpack. he talked about a soft landing, gradual rate cuts and a broadening of equity returns. does this set up a challenge there? philip: we have new information. the 10-year treasury rate continues to push around the equity market. 10-year rates bus at the moment. you'll despite in the equity market heads for -- worst day since the feds hawkish cut in december. wednesday, you said it, we had this little letter than expected inflation and the best day since the day after the election. are you kidding?

we are in straight sets when it comes to the equity market. the true north, and we have kind of come full circle, inflation. we probably set at this table 12 month ago and said, is inflation going to cooperate enough for the federal reserve to cut policy? we went into the summer and it was now time for policy to adjust. the fed cut rates 100 basis points. now we come into this year. is inflation going to cooperate enough for the fed to cut policy? archery north still is this probability of a recession that we have in the next 12 months, which is akin to the story around the soft landing, the broadening out rally. i cannot say enough good things about the u.s. consumer. i don't even know where to start. all-time high in household net worth. 20 straight months of positive real wages. 20 straight months. then the coup de grace in the last session. people's first time holmes

became there forever homes because of the mortgage rate and they are locked in. that is the biggest reason we did not go into recession in 2022 and 2023. dani: basically everyone who thought they would be a recession last year just got slapped in the face and completely removed those calls. does that mean when you see a selloff prompted by something like yields you just want to buy that dip. it's about consumers spending, a strong economy that has been able to withstand high yield. phil: people talk about wire yields moving higher. last week with that payroll report there's no such thing as good news is bad news when it comes to the labor market. if you are producing jobs, that's a good sign. yields went up and that was the reason why the equity market was supported this week. if they going up because of this unhinged acceleration, whether it is shelter, insurance, any

service sector, if that is going up, that's a warning signal for us. that's the biggest risk that we have. this cost-benefit analysis that policymakers need to do here. does the benefit of lower rates outweigh the cost of potentially accelerating inflation? that would be a pause or warning signal for us. number growth is made up of two things, real gdp growth and inflation. if the inflation part is going up in real growth is coming down, that's not nominal growth. 245% real gdp -- 2.5% real gdp, 5% normal growth. you will get a really nice picture and that is what we are accounting on. annmarie: the michigan survey talks about consumer expectations higher for inflation. are you concerned about a self fulfilling prophecy? phil: the inflation story is not over.

there is no declaring victory. annmarie: at what point do they start to push back? phil: that goes back to the waiting story. if you have wages, 3.9%, that is on top of a 50-your average. back in 2022 when the fed was raising rates was up around 7%. if we go to a labor market and the unemployment rate below 4%, hourly earnings picking up, that's a warning signal. inflation is ok if you get the real gdp growth on the other. it is the stagflationary part we are about. jonathan: headline crossing the terminal, xi and trump held a phone call according to reports. what are you respecting on trade in the next few weeks? phil: good question. the first part, the deregulation site. that is the positive. the wildcard is the headlines

around tariffs. annualized performance of the s&p 500 and trump 1.0 was 16% annualized. with all the noise and headlines around tariffs. jonathan: biden cap the tariffs in the stocks kept going up. does that make a difference? phil: we don't get us. if we believe the tariff issue would hurt growth and earnings and things like that, the bigger positive is the pro-business environment from president trump. jonathan: i get it. progrowth. for me, is like a football game with and without cheerleaders. phil: soccer or american football? jonathan: we can go with your version because are no cheerleaders. we -- 3% gdp under biden. they were against m&a. how different is it going to be, the actual economy? phil: the actual gdp number is

not going to be very different. if you look at the small business survey in the last two months we saw the biggest two month jump in the 39-year history of that survey. when we talk about deregulation, it's not that you're going to get less cost of rules under trump 1.0. the biden administration had four times the cost of regulation then-president obama. not president trump -- than president obama. not president trump. we think it will be positive. adding to the broadening out rally. mid-cap. we don't have as much as we did in december. the new information on inflation risk but we like accommodation of large cap and mid-cap in the portfolio. in fixed income, this is the high starting yield on the 10-year note since 2007.

we got to 5% before but starting the year we need to back up 75 basis points to breakeven with the coupon. we don't love core bonds. we like high yield better. that as durability to the portfolio. we have to think about the cost-benefit with core bonds. jonathan: great to catch up. phil camporeale of jp morgan. let's get annette on stories elsewhere with your bloomberg brief. president-elect donald trump is planning an executive order to make crypto a national priority. the team reportedly considering the creation of a national bitcoin stockpile. elsewhere, the government targeting under blockbuster weight loss drugs. the drugs will be subject to price negotiations in an effort to reduce medicare costs. the legislation hopes to save the government more than $200 billion over a decade. spacex's starship rocket

exploding. the rocket losing its top section but the lower portion was brought back on earth successfully. elon musk pointing to a possible leak and saying next month's launch is still on track. that is your bloomberg brief. up next, setting you up for the week ahead. day one of trump version two.

jonathan: equities up on the s&p 500. positive by .6%. next week shaking up as follows. on monday, trump's inauguration and the world economic forum beginning on tuesday. earnings from netflix and united airlines on thursday. jobless claims on friday. boj right decision and data in america including u.s. pmi's. we count down to inauguration day. let's catch up with tyler

kendall for the latest in washington. a call between donald trump and xi jinping. what is the news? tyler: good morning. news coming as china's foreign ministry confirmed yesterday they will be sending the country's vice president to trump's inauguration. we get more news about who else will be there. a whole host of ceos, including elon musk, mark zuckerberg, tim cook and jeff bezos will be there. tiktok ceo could also be in attendance. as you have been covering all morning, inauguration day just one day after that expected ban going into place on tiktok, unless the supreme court intervenes or there's a deal today best. i caught up with democratic senator mark warner on capitol hill yesterday. he's the ranking never on senate intelligence. he was the chair when the tiktok ban passed and he was confused

by this invitation. he doesn't understand how it squares with the incoming administration's get tough on china rhetoric. trump would likely take -- would likely not agree with that assessment considering he says he's trying to broker a deal with all sides to get the negotiation over the finish line. jonathan: looking forward to your coverage into the weekend and monday morning. tyler kendall. to noon for special coverage on monday. annmarie will be breaking this one down. we will be in switzerland breaking down what happens in washington. annmarie: i will be at the capipi -- the capitol when 45 because 47. everyone and davos will be trying to understand with this all means. jonathan: some highlights for you. jp morgan's dan pinto. lynn martin. brian moynihan and morgan stanley's ted pick.

looking forward to breaking it down with you. enjoy your weekend. this was "bloomberg surveillance ." ♪ whe 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

let's go boys. wh the way that i approachth work, post fatherhood, has really been trying to understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families, like my own. connectivity is a big part of my boys' lives. it brings people together in meaningful ways. ♪ ♪

matt: the last trading day of the biden administration. katie: "bloomberg open interest" starts right now. ♪ sonali: the clock is ticking for tiktok. the supreme court is set to rule on the app's shut down as the incoming president trump pledges and attention. matt: rio tinto and glencore have discussed combining their businesses. what could result in the