>> we are in a better environment. >> the u.s. equities valuations are pretty much [indiscernible] >> you have a global rally and a balanced rally. >> we think the market is ending around $6,600. announcer: this is "bloomberg surveillance." jonathan: live from new york city this morning, good morning, good morning. "bloomberg surveillance" starts right now. it equities on the s&p declining .2% following back-to-back all-time highs. on the nasdaq your down by .2%. on the small caps, down by about .25%. this morning about an hour from now we will be catching up with

the treasury secretary, scott bessent. lisa: the key question is going to be how much he looks at the bond market as the key u.s. bond salesman as well as a deficit, at a time when that is going to be a check. this is the moment what we want to understand how these conflicting policies come together in a way that does not increase inflation, does not bloat the deficit and allows for a 3% growth backdrop. annmarie: how was he thinking about tariffs today as opposed to prior, before he was in the administration? he has talked about revenue raising, negotiating tool, and reciprocity. relate last night trump saying maybe there is a deal with china. also when it comes to the deficit, how do you keep in check when, besides extending the dcj, now they are thinking about doge dividends? jonathan: early march, 25%, canada and mexico. then we go into april, 25% on autos, chips, and drugs. lisa: julian emanuel had a

wonderful point. it is not a coincidence we are hearing all of this discussion around tariffs and the bigger every single day from donald trump at the same time we are seeing record highs and i'm of equity market. to the extent that markets are offering any kind of check on tariff talk, they are not. that is only emboldening some of this discussion and raising the bar to really go big. jonathan: stops keep climbing. one sector that has done that repeatedly is autos in europe. autos got a reality check this morning, and that came from mercedes-benz. expecting a sharp drop in earnings. bearing in mind that imports into the united states, within 60% of their autos sold here. they are now cutting costs. they are not the only ones. lisa: they are cutting costs into profits declining to near-pandemic levels. you also had a check when it came to stock performance. suddenly people are waking up to the possibility that some of these tariffs could be implemented and have real

rebound affects on the economies outside the united states. annmarie: autos is so important because it is one of the biggest grievances president trump has when it comes to the european union. there is a 10% tariff. 2.5%, they want to come here. mercedes benz plans to reduce global capacity for cars. doesn't sound like they are moving to the united states to produce more cars and factories. jonathan: overcapacity has been an issue that has plagued those names in europe for a while. equity futures down by .2%. later this morning live and exclusive on "bloomberg surveillance," 25 minutes with scott bessent. you will be catching up with john stoltzfus. will speak to terry haines of pangea policy as president trump floats doge payouts. and gennadly goldberg of td. we begin this hour with stocks steady. the s&p 500 notching another

record traders brushing off signals the fed is in no rush to cut interest rates. john stoltzfus saying, drivers include the success the fed has had in pursuing tighter monetary policy. which had provided support for the economy and markets too. welcome to the program, sir. just to pick up on those minutes we got yesterday from the federal reserve, they are in no rush to cut interest rates. does that matter to this market? john: we don't think so. it was no surprise to us. we can't help but say, you look at or hear or read anything that jerome powell is saying it is very clear that he does not want to be arthur burns, you know? and he doesn't want to have to get traumatic, as did paul volcker. he wants to be his own man and he wants to ride through this stickiness of the inflation. so, it is going to be a while

before the crowd that wants to see lower rates from the fed gets any kind of pleasure here. we think the fed will probably wait until midyear if it has to cut, then maybe a quarter at the end of the year. mostly, again, as we have said before, a down payment for the market to recognize the hike cycle is over. we are moving towards normalization. be patient. jonathan: we will have a detailed conversation on policy with secretary bessent. you putting more weight on earnings at a time when there is a policy obsession coming into 2025? john: i most certainly am looking at earnings on this, but we believe we are going to see at least 10% growth in earnings this year. we think a lot of that is reflective and related to the progress the fed has made. the resilience and the consumer even as the economy has slowed somewhat, as well as the resilience of business.

and you look at that, that is a very good support to this market. in addition, you do have an administration that is much more business friendly and -- in policy, but you do have a lot of headwind dealing with geopolitical things. just an approach that tends to shock sometimes from the administration in terms of the way it negotiates. lisa: when you talk about earnings growth, we are talking about specific stocks delivering outsized growth. then you have the big drivers of the outperformance over the past couple of years. big tech. and they have not been performing in the same kind of way. could you get a good backdrop and yet pretty unimpressive overall gains to the s&p 500 simply because the drivers of any gains are going to be so different and smaller than they have been traditionally? john: i think that is a great question, what we are already beginning to see it with a broadening of the rally we have

seen. we have also seen a broadening in terms of her growth. i was looking at the ea page on bloomberg this morning. earnings growth is now up in the fourth quarter year-over-year. over 10.4% revenue growth. if you look at it, the thing that is, ferreting -- comforting is you have eight sectors that are positive earnings growth. seven of those are double-digit earnings growth. only three are negative earnings growth, as i will call -- i recall. it is materials, industrials, and energy. which makes sense based on where the global economy is, but it looks like things are actually moving to get a little bit better as we move forward in that area. so, at this point we think 7100 could be very likely our

year-end target may work very well. my gosh, what if we would have to race it at some point? lisa: $7,100? you have been the guest bull on the street for some time and you have been right for several years and have not been lush enough, if anything. what is going to be the obstacle to get to that level at a time where everyone is trying to shut out noise and decipher what the signal is from a host of different policies? a budget that could come out with a $4 trillion addition to the deficit? and a lot of questions around tariffs? john: i think part of what is going on is you have got somebody moving parts here, but fortunately i think the market is focusing on businesses itself and on the consumer and on the fed. all of those things seem to be very supportive of the market maintaining a relatively calm, observing what really counts. if we look at the last four

quarters reported, ok? from last year until now, really things are getting better. they are not always in increments and what you should expect moving forward if you are overly-optimistic. but if you right-sized expectations a combination of all of the aforementioned, plus innovation and developments occurring tell us we are still very much in a market. technology is sharing the center stage in terms of the appetite of investors. you are also getting some interest now among the market capitalizations and style. on our last read last week, in terms of style you have value playing a much better role in terms of large caps. when it comes to the mid and small, growth is performing better. gosh, doesn't that make sense, really?

annmarie: he said the trump administration is business-friendly. do you think tariffs can be business-friendly. john: you know, that's a good question. when it comes to tariffs in a traditional sense, if it is done for protectionism or jingoism, tariffs are bad thing. if tariffs are done because other countries have tariffs that are unfair to your country's manufacturer, your country's production, the market, then tariffs might be something in a reciprocal fashion that at least as a challenge would open up an opportunity for a better environment. the problem is for decades now we have given away so much of our production. the fortunate thing is, as consumers we have great buying power. i think for china, europe cannot replace us, and i think the

emerging market in general does, and europe realizes that they need us as well. if you look at the interdependence in north america, canada needs us, mexico needs us, and we need them. it is not the end of globalization. it is not the kind of cranky populism that drove the u.s. into a depression in the late 1920's into the 1930's. rather what it is, it is a new view to diversification, of globalization away from one country-centricity, where more players will be able to enjoy playing a role in it. think it is very feasible. it is not used to the u.s. stepping up to the plate and saying, we need to bring back some businesses, we need cooperation. we probably have been giving too long. it sounds like a country music song, doesn't it? jonathan: appreciated.

john stoltzfus of oppenheimer, bullish on equities. way from the index level this market is moving on spending. but on spending cuts, not spending increases. this came from the washington post yesterday. the u.s. military is the note -- is developing plans for cutting a percent from the defense budget. palantir going into the close got hammered off the back of that story. lisa: a significant proportion of their budget is financed through government spending, which is the reason palantir got hit hard. it is notable is something you picked up on yesterday, which is over in europe the defense stocks have been flying. in the u.s. there is skepticism. that they are going to make cuts, especially yesterday as they started to engage with the defense department cuts at a time when a lot of people are saying there is not a lot of fat to trim. jonathan: in the premarket, close to 3%. with an update on stories this

morning here is your bloomberg reef with dani burger. dani: the rift between donald trump and volodymyr zelenskyy seemingly deepening on wednesday. on truth social trump called the cash ukrainian leader a dictator without elections. zelenskyy accused trump of repeating russian population -- propaganda. also said zelenskyy had better reach a deal with russia or he is not going to have a country left. apple has unveiled its iphone 16e, a new low-end smartphone after a sluggish holiday season. the new phone goes on sale february 28. preorders begin tomorrow. delta airlines is offering $30,000 to every passenger aboard the regional jet that crash landed and flipped up -- and flipped upside down at the toronto airport this week the payments are a good faith gesture and have no strings attached. there were no fatalities among the 76 passengers and four crew members involved in the accident. that is your brief. jonathan: i would want top-tier

for life. i'm not sure $30,000 would get it done. lisa: you are basically saying, give me another offer? jonathan: without a doubt. i'm not a lawyer, but for me personally to get back on a plane after going through an incident like that? that would not get it done for me. lisa: you would need delta one lounge access on every single flight? jonathan: i do bear minimum, without a doubt. equity futures right now on the s&p negative 5.2%. up next, doge dividend. pres. trump: there is even under consideration a new concept where we give 20% of the doge savings to american citizens and 20% goes to paying down debt, because the numbers are incredible. jonathan: that conversation up next with terry haines of pangaea policy. live from new york city this morning, good morning. ♪ ♪

only servicenow connects every corner of your business, putting ai to work for people. pfft ... every corner? every corner, nick. ow! so kate in hr ... hey kate! ... can focus on people, not process. patty in it is using ai agents to deal with the small stuff, so she can work on the big stuff. and ai helps jim solve customer problems before they're problems. oh. so we all work better, together! my work here is done. excuse me, which way back?

i had no idea what i was doing. but godaddy airo does. using ai to build a logo, website and social content. so i can let the world know, if your goggles ain't goggins, they don't belong on your noggins!

jonathan: 45 minutes from now a conversation with secretary of the treasury, scott bessent. live and exclusive on bloomberg tv in new york city. don't miss that. equity futures on the s&p 500 slightly softer. we are down by about .2%. under surveillance this morning, doge dividend. pres. trump: i signed an order creating the department of government efficiency and put a man named elon musk in charge. they are saving taxpayers billions of dollars every single day. there is even under consideration a new concept where we give 20% of the doge savings to american citizens and 20% goes to paying down debt, because the numbers are incredible. jonathan: president donald trump

proposing to use savings from the doge efforts to pay down federal debt. and give americans cash. joining us from that conference in miami is bloomberg's tyler kendall. along did that address go on for yesterday evening? tyler: it went on for over an hour. we saw president trump to his signature weave there, hitting on issues from trade, to of course also this doge dividend. front and center was elon musk, the man he credited in that bite. doge announced this week it had cut $55 billion over the last month. but it might actually be a fraction of that. president trump trying to use this as a way to talk about how his economic policies could bring revitalization to the u.s. economy. mick mulvaney, the former white house chief of staff, was on "balance of power." he said doge is a winning issue

because what taxpayer likes weight? but it is going to get complicated. the bulk of these cuts are to the federal workforce, and those employees are all around the country. only about 18.5 percent are in the nation's capital. republicans are already sounding the alarm they are hearing from their constituents and it is only getting more complicated from here, particularly as congress starts to weigh trump's reconciliation agenda after he threw his weight behind the house plan yesterday. annmarie: he also made news on his way back to washington, d.c. , potentially now trade negotiations might start with china? tyler: right. saying that on air force one to reporters who were there, and it came after he spoke about his tariff plan also doing these remarks. we're going to be closely looking forward to your conversation with treasury secretary scott bessent later today. during his confirmation hearing he was asked about tariffs and the way forward when it comes to trade with china. floated this idea of doing some

sort of catch up provision under the phase one china trade agreement to help bring china back up to those purchase agreements that they had made under that plan. perhaps that is something we could see here. sort of heard president trump talk about it, saying he had reached this agreement previously and they did not live up to their purchase agreements. i think that as a starting point here, but it is definitely complicating matters, particularly the fact that that 10% tariff has already been slapped on. jonathan: we will catch up with you later this money. tyler kendall in miami. joining us now, terry haines of angier policy. talk about the proposals on tariffs. steel, aluminum, mexico, and canada. then the reciprocal tariffs. what do you think sticks and why? terry: good morning, everybody. i think a lot of it sticks, but what you're going to end up with is a lot of it sticks depending

on country, depending on geopolitical issue, and depending on the reciprocity. depending on what the other countries are prepared to do, either before the tariffs come in or what they end up doing in negotiations with the united states. i think it is underappreciated that what trump is trying to do is actually lower trade barriers across the board. but we will see if other countries are interested in doing that. we are entering a moment, kind of maximum market uncertainty about the broad panoply of things going on in washington and tariffs are one of those. annmarie: also added to the list last night, trump is thinking about a 25% tariff on lumber. he talked about potentially reaching a fresh trade deal with china. remember, china is the only tariff trump talked about that is actually in place. an additional 10% on imports. what do you think this administration wants to see to get to a trade deal with

beijing? terry: i think what they are interested in first and foremost, and fundamentally, is a lowering of geopolitical temperature. a lessening of geopolitical risk. let's remember the basics. we are supposedly in competition with china, both on geopolitical levels, and on economic levels. i think what he is going to be interested in having is a lowering of the geopolitical temperature, and also going to put back on the table a lot of the tree-related things that were front and center in the first administration. things like intellectual property and all of the rest. i think the trump administration gauges that they are in a better position to press their own economic advantages with china this time, even the relative economic incisions of the two countries. lisa: annmarie: when it comes to the uncertainty in the market, a lot of that comes from tariffs.

what is your base case that gets done in terms of extending tcg a and some of these extras trump has talked about on the campaign trail? terry: i think two things. one is on the tax cuts bill, i think that is still second half of this calendar year, and i would look to the fourth quarter specifically. there are lots of hoops congress has to jump through for the even get to the tax bill, and tax bill is determining the size of the deficit, how much money is -- how big the deficit is and how much they can pay for. all of those sorts of things. that will take up most of the first half of the year. there's going to be an -- additional uncertainty in march because you have not only the state of the union address, which i think probably jolts people, but you're going to have a likelier government shutdown then you had before, because of democrats focusing on using that to protest against spending cuts that are going on now. lisa: do you think it is

feasible for this administration to send every american $5,000 from the savings from doge at a time where those cuts are supposed to be an offset to some of the excess spending that is going to be in this budget? terry: if washington politics were hollywood, hollywood calls these all concept of meetings, you know? i had a concept lunch about this. i had a concept lunch about doing that. we are in the concept phase here, and i think a lot of these are put out to tease people and tease voters specifically that the president is thinking about them and trying to return some of the benefits that the government has taken away. it has great rhetorical impact, but i think we are a long way from deciding whether it is serious. lisa: he said we are at maximum market uncertainty. we just had the third record s&p close yesterday of 2025.

i wonder if the lack of market turmoil in response to this uncertainty is emboldening donald trump to go further with some of these tariff threats? terry: i think so. the data, a whole bunch of other things. the way that they look at it from inside, certainly, is, look, the markets think i, the president and the administration, are generally doing good things and we will continue to do good things. so, therefore there is a fair amount of market confidence demonstrated in what you say. they think that will continue. that gets tested a little bit over the next month, but that is actually what they think today. jonathan: terry haines of pangaea policy. thank you. amazing to watch these proposals come together in real-time. posted, elon musk replied, saying he would speak to the big man. it is in the address yesterday evening.

lisa: all of a sudden we are talking about $5,000 checks signed by donald trump. much does this signify how much people want to make this popular ahead of some cuts? annmarie: to tyler's point, he was really doing the weave last night. also the commerce secretary talking about how trump wants to abolish the irs. jonathan: i can't speak for 60 minutes straight. i can speak in five-minute segments. i just can't. i just can't do that. [laughter] ♪ what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all...

the answer is j.p. morgan wealth management. you go to sandals to connect on a deeper level. i've been waiting for this... [wind blowing] [zip up] time to get wet! thanks. with the caribbean sea. ♪♪

jonathan: back to highs on the s&p 500 for the first time in 2025. equity futures pulling back by .2%. on the nasdaq, on a five-day winning streak. something we have not seen so far this year. we'll see if we can extend that run. in the bond market, the 10 year at the moment just about unchanged. at the front end of the curve, big talk about the federal reserve. never mind what would it take to hike rates, what would it take to cut again at the federal reserve? lisa: they are on pause until they see meaningful progress on inflation. now our focus is, what is meaningful progress? yesterday i have to do a mea culpa. the meeting minutes were fascinating. they did not warrant a nap.

there were something to be scoured because it was not just the commentary that was more hawkish on that site. it was their commentary around the balance sheet that was more interesting, saying maybe they are not going to pause quantitative tightening. jonathan: i'm pleased to take an interest. i think tk's interest was too much. lisa: a lot of the speeches have been trying to make them news. how do you move something forward at a time when there is lack of clarity? they don't have any insight on that. the balance sheet aspect is fascinating at a time when people are concerned about the reserves in their system. jonathan: a sneak peek of the euro, then i want to turn to the japanese yen. the euro looks like this. positive by more than .1%. the outperformer on the year so far is the japanese yen. the outperformer on the morning so far, it is the japanese yen. one official at the boj suggesting more hikes to come. lisa: they had growth that are performed.

they have been beating expectations when it comes to growth. now people are talking about bank of japan rate hikes at a time when the u.s. is on hold. some people have talked about maybe cuts later this year, but those seem to be erased from the table. does that mean about the flow of capital? that is something we talked about with terry weissman. given how much these japanese buyers -- jonathan: on our radar this morning, president trump suggesting that some savings from doge could be sent to taxpayers. trump pitching 20% to american citizens, 20% to paying federal debt. elon musk floating the idea of $5,000 tax refund checks. annmarie: reminiscent of the covid checks that were sent out, and trump actually signed. a lot of voters say they remember that, so potentially trump is trying to tap into that idea. question all of us have is, 20% goes back to the american people, 20% goes off to the

deficit, it is the other 60% go? lisa: that is one question, and how does this factor into balancing the budget? it's taken on face value. let's say everyone gets a $5,000 check wasn't the direct check payments really responsible for some of the inflation we saw in 2020 on the back of the pandemic? at what point does a $5,000 direct check to every single american act as an inflationary impulse at a time when that is exactly what donald trump does not want? jonathan: it is something the team was talking about this morning. non-inflationary growth, which secretary bessent has been pushing in recent weeks. it is something we can talk with him about. annmarie: you have to think, how much does this hamstrung congressman? the pay-fors for all of the extras trump wants to do, no tax on social security, no tax on tips. how much can you do if you are now starting to send the checks out the window? jonathan: let's go to the bond

market and checked the scores. the 10-year is down every week since the president has been in power. yields declining, not pushing higher. lisa: people are looking at the discussions on tariffs more than potential for skill impulse because that is where the conversation has been. at what point does that shift? or is this going to be the path for that makes it easier? jonathan: trump also discussing the possibility of a trade deal with china. the president did not mention the parameters of a potential deal. any agreement likely to face off after trump hit china with an additional 10% tax. annmarie: i think what is interesting is trump is throwing out new countries, new materials like lumber last night, but yet the only tariff that is in place is this 10% additional on china. he speak to people in the administration and it feels like an opening salvo when it comes to china. this time around trump wants to get other things done with china. he wants president xi to put

pressure on putin to get an agreement in ukraine. once the chinese to stop buying you -- iranian crude. how many different levers could be pulled when it comes to a grand bargain deal? lisa: donald trump seems to like the element of surprise. if that is the case than the surprise has been who the more friend the conversations have been with an where the animosity has been. with traditional allies of the united states. especially when it comes to this tariff discussion. watch what he does. as you say, the 10% tariff has remained on china. the discussions around china and russia much friendlier than canada and mexico. jonathan: for the ukrainian leader the discussion has been scaling. the president saying zielinski had better move fast to reach a peace deal or he will not have a country left. trump is set to meet with vladimir -- with president putin

to negotiate a deal to end the war. annmarie: frederick has been very hot. not only in that post yesterday where trump called zelenskyy a dictator, he also said it yesterday in miami. this is what individuals close to the president have said. individuals who are defense hawks president trump is driving this very quickly. some people may not like the order it is happening, but you have to talk to both sides and get both sides to the table, and that is what we are doing. kind of saying, this is his way to push zelenskyy into the peace negotiation agreement, but the rhetoric is very incredibly hot right now. jonathan: here is a take from peter trubowitz of the london school of economics. trump's declaration is nothing short of strategic gas lighting and should be seen for what it is, an effort to structure the negotiations in a way that is less about guaranteeing ukrainian security then it is about realigning u.s.-russian relations. peter joins us now for more. want to pick up on that last line.

it is less about guaranteeing ukrainian security than it is about realigning u.s.-russian relations. what guides that view for you? peter: i think for trump -- to be with you. i think for trump this turnaround, a stunning turn around, bringing russia basically in from the cold, you know, has at one level all the trappings of grand theater. it is bold, it is dramatic. to pick up on a, lisa just made, it is a surprise. but i don't think it is designed really to move the needle closer to a just peace in ukraine. i think you can look at it as a way to kind of put europe in its place. as a way to potentially put russia in play in america's

competition and rivalry with china. and i think you can also look at it as partly an attempt or hope that this will lead to access to russian energy and minerals. i think for trump, on the trump side here i think the idea is that ukraine is part of a larger game. annmarie: when it comes to the prior administration, they said putin did not want to engage. we see almost immediately this administration get the russians to the table. could this be a reset of a relationship, a feeling out of what each side wants to do? these are two nuclear powers. do you think it is important for them to have a dialogue? peter: may be important for them to have a dialogue, but it is pretty easy to see why putin came to the table. if the american leader is prepared to concede upfront any of the things he wants --

ukraine is not going to be in nato, there is not going to be american troops in any kind of peacekeeping force on the ground -- remember, i mean, russia had been treated by american presidents, republican as well as democratic, as a pariah state for some time now. and trump has essentially -- just take marco rubio's words in saudi arabia that they see moscow as a partner going forward. so, from putin's standpoint, this allows him to kind of get back into the game in a way that i think few people expected. annmarie: but at the moment russian central bank annmarie: assets are still frozen and annmarie: there are still a ton of sanctions levied at that economy. what do you think putin would want to see in order to get this peace agreement that trump is efforting? peter: we would like to see a piece that is very much on his

terms. that is, a piece that leads him -- leaves him with a very large trunk -- chunk of ukraine. that ensures there is no long-term security guarantee for kyiv, and that leaves europe much weaker than it was before these negotiations started. i think whether or not war when he gets the u.s. to ease up on this sanctions, that probably will depend less on what is negotiated over ukraine than what putin is offering the united states in this larger game that i'm referring to. lisa: you keep talking about this larger game that ukraine is a part of. it is certainly the case for russia. what is the goal for the united states in this game? peter: well, i mean, you know, if you take the officials at their word part of this is to put russia in play, to cry to do

a nixon in reverse, where russia becomes an instrument of u.s. policy vis-a-vis china. that they draw russia in closer. not only with respect to china, but iran, and so forth. i'm not sure how much weight i attached to it, and also it is important to keep an eye on the potential strategic implication, the downsides of what trump is doing. i mean, one of the messages being sent here to countries like japan and south korea and poland is in trump's world, where might makes right and american security guarantees are not really that credible, the only way to protect yourself is to go nuclear. that is certainly one consideration. another strategic downside risk in all of this is that if america is willing to accept the proposition that coercion pays

in europe, then perhaps it would be willing to accept the proposition that coercion pays in east asia as well. lisa: there has been a real move in europe to bolster their defense system in part in response to questions around what kind of u.s. support there would be. are you saying this is as much a negative as a positive at a time when a lot of people are saying this is what they needed to do and would most of their defense? peter: i think it is a positive in the sense that europe needs to take its own security, meet its own security needs, or at least invest much more heavily than they have in the past. on that level you could say this is a wake-up call. you know, but it is not obvious to me that europe is the solution to the problem in ukraine. you know, partly the problem here is that the europeans themselves do not want to be in

the role as peacekeepers there. and partly their ability to kind of ramp up on the security front, on the defense front in time is, you know, it is limited. what you really need -- you need u.s. military equipment and backing. at the end of the day if there was going to be a settlement in ukraine on kind of just terms, you need the u.s., you need u.s. skin in the game. jonathan: professor, appreciate your time. peter trubowitz of the london school of economics. boris johnson making the point, alluding to what you have been saying lisa, that this was designed to shock the europeans into action. certainly doing that. the europeans were shocked into action more than a decade ago. the original incursion into crimea. annmarie: 2014. jonathan: look at them drag their feet over the last decade or so. lisa: it seems there is more

urgency, given the fact that people are meeting to talk about financing mechanisms. it just is not a sure thing. annmarie: not just the annexation of crimea, but novoch ok used on your own soil. the trump administration would say, you have been well aware of what putin was like and you forfeited your seat at the table when you continue to rely on russia. when it comes to the europeans next week manuel macron, going to the white house later in the week. keir starmer, going to the white house. jonathan: it is the message they have sent repeatedly. equity futures negative by about .25%. with your bloomberg brief, here is dani burger. dani: in the middle east hamas handed over the remains of four israelis taken hostage on october 7, 2023. the bodies of a young mother, her two children, and a man in her 80's were given to the red cross. the exchange happens as negotiations are due to start.

six living israeli hostages are set to be released on saturday. elsewhere in washington, donald trump considering returning 20% of the savings from elon musk's doge american taxpayers. the white house has claimed $55 billion in savings so far i'm a itemized documents suggest the savings are far less. bloomberg estimates that 20% of the roughly $8.6 billion of doge savings so far what amounted to about $11 per taxpayer. the trump administration is moving to block new york city's congestion pricing program. the federal highway administration plans to withdraw its agreement with the state, which allows tolls on driving the city's transport authority has filed a legal challenge to the move. that is your brief. jonathan: thank you. it was quiet for about five minutes, wasn't it? in the early part of this year, then the roads get busy again. annmarie: the roads get busy and now there is not going to be what trump would call a

regressive tax if you are traveling below 60th street. jonathan: is it a pitch to the people of queens? annmarie: some of us are part of the people of queens. then he put out this photo of himself with the crown saying, king. i think he was making the point, my department of transportation will rule over your congestion pricing. jonathan: brammo looks furious over the whole thing. lisa: it was passed. it would have made public transportation safer and better. how is that going to get paid for now? jonathan: it is nice to take two views. up next, the new trump tax cuts. pres. trump: new trump tax cuts will also include 100% expensing for new factory construction. if you buy something that is going to be good for our country we are going to let expense it. jonathan: we will catch up with gennadly goldberg of td securities. we will speak to the treasury secretary, scott bessent. new york, this is bloomberg.

-- from new york, this is bloomberg. ♪

jonathan: in the next hour we are going to be catching up with the treasury secretary, scott bessent, right here on bloomberg surveillance. do not miss this conversation here in new york city. equity futures on the s&p, negative by about .25%. under surveillance this morning, the new trump tax cuts. pres. trump: the new trump tax cuts will include 100% expensing for new factory construction in the united states. if you buy something that is going to be good for our country we are going to let you expense

it. we are trying to balance the budget immediately, and because of the tariff income, which has already turned out to be amazing, actually, it has really meant more for bringing countries and companies into our country. jonathan: here is the latest. so far, so good for the bond market under president trump. gennadly goldberg writing, markets retain a dual focus as the year wears on. economic fundamentals and politics. trade uncertainty has dominated headlines, but immigration and fiscal policy also matter significantly to the market. it is good to see you. let's talk about this bond market. yields are dropping. that was not the call coming into 2025 from the consensus. your call was different. what you looking for? gennadly: we are looking for a first, second-half story. the first half is trying to figure out the macro backdrop. we have a fairly strong economy that is on its way to gradually

moderating, and then we have a lot of the uncertainty on trade, on tariffs, on immigration, on all of these things. that is going to push us toward a second-half where we think we assess and rates drift lower over the course of the year. lisa: right now range-pound, as people weigh these counterbalances and remain in a fog, do you have clarity yet? you understand trump? gennadly: a lot of my conversations with clients, the conviction level is about a negative two. nobody has any clue as to what is coming next and what we are trying to understand is, what is the end goal of these policies? we are still very much in the thick of it. it has been a month at this point. it has felt like longer than that for the bond market. it seems like everything is calm, but under the surface there is a lot of announcements going on. a lot of people trying to understand, what is the angle with these policies? lisa: we looked at the meeting minutes yesterday from the last

fomc meeting, and they talked about the policy uncertainty and said generally appointed to upside risks to the inflation outlook. do you agree that when you put the soup together the risk is to an upside vent in inflation rather to a downside swing in growth? gennadly: if you look at the date of last couple of months the fed is painted by that. they do try to look at longer-term trends. i will say less firm than expected. if you look at the translation into core pce we are still looking for a .25 next week. we are not seeing this massive re-acceleration of inflation folks were worried about. i think we are still on a downward trajectory. it is not downward enough for the fed. want to be making more progress and i think that is what has the bond market stuck. lisa: it is not lower enough for the fed and it is not lower enough for the treasured part. we are going to be speaking with scott bessent, who says he is

focused on the 10-year yield. how much control do you think the treasury has over this? how much will their issuance plans, as well as offsetting some of this spending, how much is that going to be the main driver for the 10-year is? jonathan: i gennadly: think the focus is well received by bond markets. there are a like of the fact that he is looking at the long end of the yield curve and saying, what can we do to ensure there is ample supply and demand? maybe that means once november comes around, which is when we expect auction sizes to increase, maybe they moderate the increases on the long end. that is something potentially on the table. i doubt that would have been on the table with prior administrations. here we are really looking at, where is the optimal issuance point with the keen point of, let's try not to increase rates further. term premium is already higher, so that is something the u.s.

taxpayer has to be paying for, and they are trying to minimize cost to taxpayers. annmarie: what can they do in the short term if they are laser-focused on bringing down the 10 year? gennadly: get the budget in order. annmarie: so not send out $5,000 checks? gennadly: use $5,000 checks to pay down the deficit. that would be the best thing received by the bond market so far. if you really want to do this -- we are running about a 6% deficit to gdp. we not down. i know there are efforts to do that at the moment. i don't know if the bond market is fully convinced that lower deficits is the direction we are heading and to what extent they are going to be lower. jonathan: it is early days, but yields are following -- are falling, not rising. lisa: i love the analysis underneath the hood of all of these potential policies and how they offset each other. right now the focus is on what this could mean for growth hit more than inflation. jonathan: it is good to see you

as always. gennadly goldberg of td securities on this bond market. in the next hour, u.s. treasury secretary scott bessent joining the program come alongside libby cantrill, bob elliott, and a whole lot more still to come. the biggest story this morning on the bond market. annmarie: as an individual who says what regulates him in the president, a be not so much the stock market, it is where the 10-year yield is. but what can they do to get the 10 year down if they are still issuing at the same caliber janet yellen was? lisa: the stockmarket has not translated into the bond market. how much has that given them the leverage to not necessarily be concerned? jonathan: the second hour of "bloomberg surveillance," up next. ♪ ♪ 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 ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. investment opportunities the answer is are everywhere you turn. do you charge forward? freeze in your tracks? or, let curiosity light the way. at t. rowe price, we ask smart questions about opportunities like advances in healthcare and how these innovations will create a healthier world tomorrow. better questions. better outcomes.

>> so for elon musk and his team have found $50 billion in deficit savings. that is far from the $2 trillion there targeting. announcer: this is "bloomberg surveillance."

jonathan: live from new york city this morning, good morning, good morning. the second hour of bloomberg surveillance starts right now. with equity futures on the s&p -5.1% following -- .25% following back-to-back all-time highs. we begin this hour with the self-described nation's top bond salesman. he has worked alongside some of the most well-known investors on the planet, including george soros and stanley druckenmiller. going on to build an investment career, he joining us for a conversation live on bloomberg tv, the 79th secretary of the treasury, scott bessent. it is good to see you, sir. sec. bessent: it is good to see you. jonathan: a warm congratulations from all of us do you. quite a ways from, what was it, little river, south carolina? sec. bessent: it is an american success story. jonathan: how is that going to

help you approach some of the challenges in this economy? sec. bessent: the way i look at it, for my career, for 35 years i have been sitting outside the room with my ear up against the door, trying to look over the transom, trying to figure out what policymakers should do or going to do and how that would affect markets. now i'm inside the room trying to figure out what everybody outside the room expects us to do, how the market is going to react. and what the economic and market implications are short-term, but more importantly medium term and how that is going to affect the underlying economy. jonathan: we have a lot to discuss. let's start with the debt market. what people expected you to do was change some of the issuance for treasury. something you said last summer about then-secretary yellen is that yellen had taken control of monetary policy through treasury issuance. then you are basically maintaining her plans. can you help us understand where you're coming from? sec. bessent: sure.

the previous administration shortened some of the duration, and we have not shortened it further, we have just kept the policy in place. and i believe over the medium-term it is going to play out as it becomes clear that everything that president trump's administration is doing will bring -- will be this inflationary. we are going to bring down energy costs. we are going to bring down regulation. what doge is doing in terms of cost-cutting. and i think once the tax cuts and jobs act is made permanent, then we can have a revenue increase, cost decrease, and as you said, as the nation's top bond salesman i've got a pretty good story. jonathan: what is the medium-term? and let's say those ambitions become reality, and you start to think about terming out the

debt? sec. bessent: sure, but that is a long way off. and we are going to see what the market wants. as lisa noted this morning, and it is fun to see someone who believes that fed minutes are exciting. [laughter] the fed said that they may stop their balance sheet runoffs. so, easier for me to extend duration when i'm not competing with another big seller. annmarie: when do you think that time would be? end of the year or further down into the administration's term? sec. bessent: it's going to be path-dependent. we are still seeing the residual biden-flation coming through. as the market starts to realize what we are doing and inflation starts to drop then we will see. it's going to be path-dependent. that is the eventual goal, but not going to see it going down.

annmarie: when you mentioned the fed minutes, participants indicated yesterday that one of the problems they had was, they were waiting for trump policies to come into place. do you think those policies, when you think of tariffs, intentionally deportations, immigration, is he going to hold back the fed from cutting rates? sec. bessent: and that team transitory at the fed is -- still has any credibility, i would say that tariffs, if they have any price adjustments, are the most transitory thing there are. so i don't think that should hold them back very long, and i would point out that depending on what number you want to use, 10 million, 20 million people who came across the border, we had the worst inflation in four years and we added 20 million people. i'm not sure why people are saying it is inflationary if you tell them to go home. annmarie: when you look at team transitory do you think the next move for them would be a cut?

sec. bessent: annmarie, i have said publicly that i will talk about what the fed has done. when i was a market commentator and investor i would talk about what they should do. now i will leave it to them and chair powell and i have a weekly breakfast. sorry charlie yesterday, and i will convey my thoughts there. jonathan: let's talk about what they have done. they cut rates 100 basis points going into the end of last year. yields at the long end rose. do you think federal reserve easing contributed to higher long end yields? sec. bessent: the point of cutting rates is to cut rates. if they cut rates and rates went up, then there probably was something there. i thought that the rate cut in september, i said it may be even on your show here, that it was over-sized. the market responded, but now we are seeing term premium come back down.

we will see what happens from here. lisa: do you think the current rate right now is enough to bring down 10-year yields over time just by virtue of being restrictive? sec. bessent: again, i'm not going to comment on current policy. he talked about how you do look at the 10 year yield every single day. i love that. i love that you are the top on salesman in the united states. are you expecting or hoping for to go down from here? is that necessary to achieve your 3% growth target? sec. bessent: what is necessary are the underlying conditions. the underlying conditions that we need for yields to come down, for growth to go back up. have this affordability crisis in housing. we have an affordability crisis in the auto payments. so, one thing that would be very stimulative, and as jonathan mentioned earlier, the 10 year has come down, or rates have come down every week since donald trump has been president if we continue that for 52 weeks that would be great and it would be very -- it would be a win for

the american people, which at the end of the day that is our goal. so, if we do what we say we are going to do, if we can rein in the budget deficit, if we have non-inflationary growth, if we bring down energy prices and, you know, i think now that i have the numbers on the inside there was a big contributor to this massive inflation was regulation. i think you said earlier this morning that the -- what if these things cause inflation? as annmarie just said, some of the policies. what really happened under the previous administration was you created a demand shock with government spending but it was met by supply constraints as there was more regulation. and trump 1.0, we created demand shock with tax cuts, and it was met by supply-side response of

less regulation. the biden administration created this inflation that camino you know, a demand shock and constraining supply is the ultimate -- is the ultimate recipe for inflation. jonathan: i know you want to cut spending. the doge program. you will remember that clinton tried something similar. the national partnership for reinventing government. how different -- how different will this be and what cost savings are you thinking? sec. bessent: i could go all the way back to the 1980's, to the grace commission. they had some great ideas. most of them not implemented. i think that the clinton-gore initiative, a lot of that was academics. so, this is people on the ground , all areas of government, and it is moving quickly. i really do think it is unfortunate that it has been lampooned and attacked the way it has come about when it is

being attacked like this it tells me that there are a lot of entrenched interests. you are moving people's cheese they don't like it. and it is not there cheese, it is the american people's cheese. annmarie: how about putting cheese back in the american people's pockets? how big would those doge checks be that the president spoke about yesterday? sec. bessent: if we are bringing down energy prices, if we are cutting the regulation -- so, you know, i think it's -- to quote the vice president during the campaign, i think it is holistic, and i think that it is all kind of one mosaic. if you were to inject a lot of money into the economy -- annmarie, think about this. we are at, you know, this massive deficit to gdp. almost 7%.

what we have happening on one side, you will be bringing down that spending in the economy. so, very easy mental model is every $300 billion is about 1% of gdp. so, every $300 billion that doge is able to save, could you put that back in the economy into people's pockets? annmarie: one thing that could happen is may be remarking gold. elon musk was talking about maybe going to fort knox to make sure those gold reserves are there. do you have any plans to visit kentucky? sec. bessent: i don't have any plans. i can tell you that we do an audit every year. i can tell the american people on camera right now that there was a report september 30, 2020 four, all the gold is there. in the u.s. senator who wants to come visit it can arrange a visit through our office. sec. bessent: gold was your biggest holding when you were a

hedge fund manager before you divested to become the treasury secretary. you know the value of gold right now versus where it is marked on its balance sheet. it is close to $3000. is it good for this administration to revalue goal? sec. bessent: when i was talking about the sovereign wealth fund, i can promise you that is not what i had in mind. annmarie: so it is not on the table? sec. bessent: that is not what i had in mind. lisa: when you look at the doge savings so far, how much is that going to offset some of the tax extensions we have seen? what are the savings are you looking at that potentially are crucial? sec. bessent: again, they are just getting started, and one of the shocking things to me has been, you know, when we talk about waste, fraud, and abuse we all think of, you know, what comes out of d.c.. think of waste and fraud and friction costs. one way to think about this is, 25% of the u.s. economy flows

through washington, d.c.. so, if we can cut the friction on that, you know, that is a lot of savings. what we are discovering now, in waste, fraud, and abuse, there may be more fraud going on than we thought. you may be hearing more about that in the coming weeks. jonathan: can we hear about it now? sec. bessent: you will hear about it in the coming weeks. jonathan: what kind of fraud have you identified? you were here now. sec. bessent: i would refer you to some of the statements by lee zeldin at the epa. jonathan: we can build on that in the weeks to come. i would refer some comments from the washington post on defense cuts. they are reporting that pete hegseth ordered senior leaders of the pentagon and throughout the u.s. military to develop plans for cutting a percent from the defense budget each of the next five years. are you aware of that plan? sec. bessent: i'm in contact with secretary hegseth and we are working very closely, and,

you know, again, i'm not going to jump the gun here on tv, but i think everything is on the table, and, can things work more efficiently? annmarie: when it comes to the defense budget we spent more last year on our interest payments than defense. are you hoping for 2025 to spend more on defense than the interest payments? sec. bessent: it would depend how we got there too. does defense spending go down? does the interest will go down? we will see what that calculus is. jonathan: got to focus on tariffs too. revenue raising as part of that story. reciprocity. the president has discussed reciprocal terrace. he has mentioned the europeans also offered to drop auto tariffs. have the europeans actually met that offer? sec. bessent: i have not seen that, but it is possible.

the good thing about president trump's negotiating style is, people with things that were not on the table before on the table very quickly. annmarie: that would be reciprocity and maybe negotiating. but to offset the tax cuts, where is the revenue-raising? sec. bessent: they could be -- you know, not everyone is going to give on every point, right? so, the europeans seemingly put forward very quickly auto tariffs. but not every country is going to do that. my view, as i have said before, china is the most imbalanced economy in the history of the world, and they are trying to export their way out of what is a very serious recession. and the rest of the world can't do that. they cannot dump chinese goods. they're going to have to rebalance their economies. so, tariffs on chinese goods and up 10%. and a lot of that, again,

mexico, canada, china, that was in response to the fentanyl crisis. annmarie: china is the only one those tariffs have stayed in place. is that the opening salvo? how high do you think trump wants to go when it comes to chinese tariffs? sec. bessent: i'm not going to give away his negotiating hand on tv. i do have my first call with my chinese counterpart tomorrow, so i look forward to a productive discussion. annmarie: what is the first point you want to bring up? sec. bessent: that we want to work together. as we have said, a lot of the precursor ingredients from fentanyl originate in china, so we really want to put a stop to that quickly. jonathan: historically there has been currency concerns with regards to china as well. in the conversations before taking up this post with you you mentioned that some currencies are undervalued. his china one of them? is that something you would like to remedy? sec. bessent: what i said is, make a mistake, the u.s. still has a strong dollar policy.

but that does not mean that i laterally other countries can weaken their currencies versus the dollar will manipulate their currencies. specifically on china, china is a very difficult currency to value because i really think that when we think about the value of the rmb it is in different equilibrium. on any deck -- any academic model it is cheap. on the other side you have 1.4 billion people who are subject to capital controls and they want to get some of their money out of the country. and then you have what i would call the x factor. if you put money into china today, what is your belief that you will get it out in 2, 3, 4 years? it is very difficult to come up with a point value. lisa: you have talked about the desire to have a strong dollar policy for the united states. but is a strong dollar at odds with the idea of bringing

industrial back to the united states? it speaks to some of the concerns about other countries trying to devalue their currencies. sec. bessent: i think we will necessarily have a strong dollar if we on good policies, and i think we are going to run good policies. if we cut the trade deficits. if you think about, the trade deficit is a combination of terms of trade, value of the dollar, and our own budget deficit. if we bring down the budget, then i think everyone, if we are deregulating, if we make the tax cuts permanent, if we make the u.s. more business-friendly, then everyone, you know, all of the reserve managers in the world, all of the private investors are going to want a piece of that. the dollar will be strong, but we will be able to push back on that.

through good policies, through productivity. the u.s. productivity, i think, i have been meeting with a lot of the tech leaders lately, and i think we are very close to the cusp of this ai finally coming into the productivity numbers. lisa: do you think a strong dollar is necessary to offset some of the costs that could be associated with the tariffs? sec. bessent: traditional economic theory would tell you that the dollar strengthens on the tariffs, but who knows what we have already seen since the dollar appreciation since november 5? you know, our kids live in the future, so have we already priced in some of that? on the other side, what we are trying to do is to get other economies to successfully rebalance. my conversation tomorrow -- and this is really just an introductory conversation. but as we go down the road the

chinese need to rebalance their economy in favor of consumption. that they are suppressing the consumer in favor of the business community. so, you know, as that happens then they will increase their demand. something in europe. mario draghi, for any of your viewers who didn't see it, mario draghi had a fantastic editorial this weekend in their financial times were he said, look, we have put the equivalent of more tariffs on ourselves. more tariffs on ourselves than the u.s. could ever contemplate. so, could you get a very strong euro? somehow they had an immaculate deregulation. annmarie: you are having this call with your chinese counterpart. will you see him next week at the g20 finance ministers meeting? sec. bessent: i'm not going to, due to some domestic considerations. i do think he is not attending either. jonathan: is that what he has told you? sec. bessent: this is the

readout we have gotten. so, again, i also believe several of my other counterparts will not be there. i have been speaking and am in contact with them regularly. and then i will be seeing them at the spring imf world bank meetings. jonathan: wanted to talk to you national security as well. the dollar has a role to play on that front. the sanctions policy of the united states. do you think that has been misused, abused? sec. bessent: excellent question. when i come into treasury, if you think about, sort of, treasury is five pieces. there is irs on one side, the mint on the other, but the main focus in the building at treasury, domestic finance, international finance. that is what i have been doing for 35 years. i was able to hit the ground running on that.

the terms of finance is where my biggest learning curve is, so i'm spending a lot of time on that, and i am reviewing the sanctions policies. why do we do what we do? have they been effective? are we running a 21st century program as opposed to some outdated modalities? annmarie: the current sanctions on places like russia to try to get put into the negotiating table, you are intricately involved in this deal. were just in kyiv. trump yesterday called zelenskyy a dictator. and said he better move faster or he is not going to have a country does this language make it harder for you to get that minerals deal over the finish line? sec. bessent: i think president zelenskyy, unfortunately, escalated and has put some daylight between -- annmarie: how did he escalate? sec. bessent: a lot of his remarks in munich, i thought, were inappropriate.

president zelenskyy, when i met with him, assured me that he would be signing the minerals deal in munich. he has not. and, look, the real purpose here -- and i think it is -- it has turned into this media circus. president trump had a very elegant plan, and it was, bring the ukrainians closer to the u.s. let's do this economic deal and even karl rove in the wall street journal this morning approves of it doing the u.s., with greater economic interest in ukraine, provides a security shield. so, the sequencing of what is going to happen was, bring the ukrainians closer to the u.s. through economic ties, convince the american people, the american public, them onside, and then tell the russians, go to the negotiating table with a very fulsome message that if we need to we will take sanctions out.

annmarie: what about tapping the russian frozen assets? some $300 billion. would you force your european counterparts did not just have them frozen, but tapped them? trump talks about repaying the american taxpayer. shouldn't russia be a part of that? sec. bessent: they are being tapped. annmarie: the interest. sec. bessent: the returns from the freeze assets file is going to pay the europeans. it is very important to understand here is everything the u.s. has done to date, the american people, the american taxpayer, is grants. europeans, roughly half of what they have done our loans, and the runoff from the frozen assets is being used the repay european loans. jonathan: have you communicated that to the europeans? that you are upset with them? sec. bessent: what is that? jonathan: have you communicated to the europeans that you are upset with him? sec. bessent: i think vice president pence did a pretty

good job in munich. jonathan: do you think that the u.s. running a deficit north of 7%, do you think they understand the gravity of the moment in the united states, the u.s. perspective? sec. bessent: i think they understand that president trump during his first term, this term, vice president pence and the entire security apparatus have told them that many of the countries are deficient in their nato spending, and they need to come up. when i went to ukraine, you fly into poland. poland is spending almost 5% of gdp on defense. look at poland sitting next to ukraine. poland is one of the great economic success stories of the past 30 years. after china they have had the fastest growth. so, why couldn't ukraine, with some u.s. capitol ingenuity,

know-how, out some of the corruption, as well as their neighbor has done? jonathan: if europe spent more wooded allow the united states to cut back on defense spending? is that the goal? sec. bessent: the ultimate goal is for the europeans to come up to where they have said they are going to. and to provide their share of the nato spending. annmarie: you mentioned sanctions. do you have both on the table ready to go? as sanctions ramp-up or wind down on russia, depending on how these talks go? sec. bessent: i think that would be a good characterization. annmarie: trump still thinks he's going to meet with putin by the end of the month. are you prepared for that? sec. bessent: i'm not going to give away the timetable, but the president is committed to ending this conflict very quickly. i will tell you, in kyiv i went to a children's hospital that had been bombed. this was not a children's

hospital where you take your child if he or she scrapes their knee. annmarie: so you can imagine -- i did that trip you are talking about. you can imagine why they haven't had elections then, right? they are living in this martial law? sec. bessent: they are, and, you know, it is probably unnecessary, probably necessary to move forward with a democratic process. jonathan: we've covered a lot of topics. one name that has not: -- come up much is elon musk. you have had some tremendous colleagues over your career, including stanley druckenmiller. you have worked alongside donald trump the campaign. can you describe what it is like to work with someone like elon musk? what is that like, they today? sec. bessent: elon musk, like stan druckenmiller, i always compare the great business people to great athletes. keep their eye on the prize.

whether he is messy or -- whether he is the messi or michael jordan, he is focused and his energy level is unbelievable. he has gotten to where he has because everything is on the table. there is always this examination of, why are we doing it this way? most of all, if something is not working, let's fix it, you know? annmarie: sam altman was on bloomberg tv two weeks ago and called elon musk insecure. do you view him as such? sec. bessent: i'm not going to get into the tech magnate -- [laughter] you know, the slap fast. jonathan: that is wise. he is drawing criticism, though. when you and the administration pick out things money is being wasted on, i think we can all agree that is a waste of money. where there might be some concern is the way that some people have been laid off in

washington that lacks dignity. can you comment on that today? sec. bessent: i think there are many fine public servants, and -- but i think -- you know, i have been in washington three or four weeks now, and there is a real bias toward the status quo. and if you don't move quickly than the lobbyists get involved, entrenched interests, and it is impossible to get anything done. so, you know, anyone who is experienced in financial hardship, any kind of the mental duress, i'm sorry for them, but that is also what the average american experiences everyday. most of us -- you all come to work. you want good ratings. you get a performance readout. you really push forward. and i can tell you that in

treasury i have been so impressed with the quality of the permanent staff. and, you know, i want to get everybody back to the office and a lot of people are on board with that. annmarie: when it comes to your prior life, you did not have a boss. you said it would be like atrophy if you are not trading financial markets everyday. what is it like now to be in this position where you make decisions that people can trade against what you are doing and you also have a have a boss th'e close to you in terms of the treasury department and the west wing? sec. bessent: i only had my own firm for eight years. i worked with mr. soros, with stan druckenmiller. it is a great feedback mechanism. i think i had the best position. i am on the white house campus.

i can be in the oval office in four minutes. there is proximity. not like elon musk, president trump is committed to shaking up the status quo. he came in with a mandate and he is moving on it quickly. michael: urate -- jonathan: you're a total gentleman and you've been generous with your time. thank you for being a friend to this program. secretary bessent of the treasury. let's turn to the markets. bond yields down a couple of basis points. on the two year we are unchanged. tyler tyndall is in miami. welcome back to the program. we are not turning out the debt for quite a while, the message from the treasury secretary. tyler: numerous headlines out of this when we are talking about the deficit and the debt limit. i was struck by how he said he

would have his first conversation with his chinese counterpart tomorrow for tickly as we hear tariffs take center stage. president trump yesterday floating increased tariffs up to 25% on lumber as we look ahead to this timetable of april 2 for additional tariffs on chips, pharmaceuticals, and autos that could hit asia hard. annmarie: what are we expecting today from the president? he is back to washington with a full schedule. tyler: first at 3:00 he is going to be hosting an event celebrating black history month. then he will address the governors of the republican party who are meeting in washington for this summit to talk about their plans going forward. a lot of president trump frederick around what he is doing when it comes to the federal government, just a lot of president trump's rhetoric around what he is doing has to do with giving control back to the state. we are expecting that to be one

of the big focal points. you heard secretary bessent say elon musk's energy is unbelievable and talked about criticism when it comes to letting go of federal workers, saying in many cases the government believes this is necessary. i've spoken to republicans who have heard critiques around their country getting hit with workforce cuts. whether that could be something donald trump talks about, how states are going to be responding to what could be widespread federal workforce cuts across the nation. annmarie: potentially one sweetener to that is something trump talked about yesterday in the arena you are standing in and that was these doge dividends. what is the president's thinking on this concept of a plan? tyler: he said he got it from elon musk who was sitting center stage as trump address the summit. he floated a potential calculation that it could be 20% back to the taxpayer, 20% or

cutting down on the deficit. that will be very difficult in practice, particular he as doge has said they found $55 billion in cuts but according to documents it might be less than that. big questions remaining. there is a lot of big spending questions about to come to the forefront, particular in washington as republicans try to move forward president trump's fiscal agenda. trump has backed this plan from house republicans. the math on that calls for $1.5 trillion in spending cuts. that is not enough for many fiscal hawks and is raising question. while trump says he will not/medicaid that bill calls for $880 million in slashing medicaid if it were enacted in its current form. negotiations will get underway as that bill, $4.5 trillion in tax cuts. that is only enough runway to extend president trump's 2017

tax cuts. that means republicans like to talk a lot more about savings and papers to enact the rest -- and pay force to enact the rest of president trump's policies. jonathan: tyler kendall in miami. joining us is libby cantrill of pimco. welcome to the program. let's talk about what we just heard from treasury secretary scott bessent speaking on inflation. sec. bessent: everything president trump's administration is doing will be disinflationary. we will bring down energy costs. we will bring down regulation. what doge is doing in terms of cost cutting. the tax cuts and jobs act, once it is made permanent we can have a revenue increase, cost to decrease, and as the nation's top bond salesman i've a pretty good story. jonathan: does he have a good story to tell? libby: he is the consummate bond

salesman. always nice to be following the treasury secretary. thanks. as he is inclined to do during his confirmation hearing he very much stuck to his talking points , talked about the path to deregulation. that is something the administration can control. inflation is somewhat out of the administration's control as they are experiencing right now in terms of some of these potter prints. he stuck to his story and talked about the regulation. in terms of the things the market will care about, he talked about a strong dollar policy, the independence of the fed. in terms of staying in his lane and not spooking the markets he did a great job. lisa: he did the opposite of spooked the markets. he said the idea of terming out the debt is a long way off. he has put in place a lot of what janet yellen had put in terms of the issuance mix.

how much of that is the key thing people are looking for out of the treasury? libby: it is also an acknowledgment that any real deficit reduction we may see under this administration is likely going to be a 2026 story, not a 2025 story. that is partly because any sort of spending cuts we see through doge will not materialize until 2026. more importantly we will not see congressional action on spending cuts until later this year and that will be effectuated in 2026. in terms of his flexibility of managing the maturity of debt issuance, he has a lot to do just this year because we are expecting deficits running for a much consistent where they are about 6.5% debt to gdp. lisa: one thing that is so fascinating about this moment is it seems like economic theory is being tested in a multitude of ways. one thing sec. bessent said is

regulation is inflationary and deregulation is disinflationary and that will help when you start to strip away regulations constraining the supply side. how much have you seen that be borne out? libby: what we are telling our clients is a lot of this in washington has longer tales. a new administration who are biased to action and like to see change immediately, deregulation takes a while. in terms of what the president is doing from an executive order perspective trying to roll back some of the things president biden had done by executive order, he can do that immediately. in terms of real deregulation that takes a year if not years. what we are telling our client and what the market has been responding to is more of an absence of new regulation. just clarity around the rules of the road if you will and not necessarily looking behind their

shoulder worried a regulator will come and enforce against them. that is more of what we have seen as it relates to growth, as it relates to productivity come as it relates to bringing down inflation. that is an open question. what the treasury secretary is saying is they would try to do everything they can, pull all of the levers they can. there are constraints. the secretary of the treasury did not necessarily talk about and no one in the executive branch is talking about, but a lot of this does come down to congress. even though congress has been giving the executive branch a very wide birth, president trump's approval ratings are very good, they want to give them all of the flexibility in the world, a lot of this will come down to congressional action. real spending cuts. tax cuts. all that is in the purview of congress. annmarie: which is why i was trying to ask him what he meant

when he talks about monetizing the asset side of the balance sheet. is there a way they can get creative so they can have a $4.5 trillion deficit and have every tax cut they are dreaming of? libby: it was a great question and he did clarify. annmarie: he did not exactly say no. libby: preserving optionality. which politician would not want to do that? the reality is if you look at the budget math, some of what elon musk and the team are doing, maybe it moves the needle but it moves the needle very slightly. in terms of the real revenue raters or spending cuts, the spending cuts have to eat into entitlements and i think that will be more difficult given the slim majorities. on the revenue side it is either tax increases or it is tariffs. this is something he has alluded to. he talked in earlier interviews about raising $2.5 trillion a year from tariff revenue.

that is a huge increase in terms of our affective tariff rate. we would have to see significant tariffs for that to come to fruition. it is revealing the administration is viewing this as a huge revenue source. if you look at the numbers it could add up but it would necessitate a large tariff increase. jonathan: a message for the gold bugs, the gold is in fort knox. i'm not sure they will be convinced. lisa: at some point elon musk will have to go there and take some photos. jonathan: then people will just say it is tungsten dressed up as gold. lisa: why is everyone worried about gold? annmarie: why are bars being shipped to the united states? are people thinking they are not actually there. jonathan: it takes a while to get it out of the bank of england. lisa: do you believe there are people with bars of gold? jonathan: you have to book our slot to get the bullying from the vaults.

lisa: have you done that? jonathan: i have not done that. my goal is still there. i do not have gold. we have heard complaints from the incoming characters in this administration they are unhappy with janet yellen at the time for issuing so much of the front end of the curve. i don't see any sign of a change coming anytime soon, do you? libby: no. i think he was pretty clear this will not be until later in the and ministration and just in terms of the financing needs, the new financing needs, the rollover debt that is maturing, they do not necessarily have a lot of flexibility in terms of debt management. it looks like 2025 will be very consistent with 2024. lisa: which is the reason you are seeing people have a bid into the tenure. i'm wondering yet what point the treasury runs out of levers to pull if you get some sort of inflationary spike in some capacity.

is that the ultimate call on what we are seeing in terms of the trump policies? libby: ". -- open question. the other thing the treasury secretary did not necessarily talk about but will be right around the corner is the debt ceiling increase. this combined with a lot of debt issuance combined with a little bit more of a frothy market, it does all point to the fact he does not have as much flexibility as he was hoping. jonathan: appreciate your time is always. he was the warm-up act. you know that. with your bloomberg brief here is dani burger. dani: walmart shares dropping 7.4% in the premarket session. a lower-than-expected profit for the year. expectations were high with walmart dating share across various areas of business. walmart's conservative forecasts

says uncertainty in the economy is hitting the company's outlook. several u.s. to part of agriculture employees tackling the bird flu outbreak were actually -- were accidentally fired over the weekend. the usda is working to correct the situation and is continuing to hire front-line workers. the outbreak has affected 160 million birds and taken a toll on the poultry and dairy industries. in airbnb co-founder plans to donate $15 billion to victims of the l.a. wildfires. the prefabs will first go to low income residents whose properties burned. the homes can be built in as little as five months and require only weeks to install. jonathan: more from dani in about 30 minutes. next, scott bessent's push for lower bond yields. sec. bessent: rates have come

down every week since trump was president so if we can continue that for 52 weeks that would be great. jonathan: the treasury secretary stealing my lines. bob elliott joins us next. this is bloomberg. ♪

a sleep number® smart bed is perfect

for couples the climate360® smart bed is the only bed that cools and warms on each side and all our smart beds adjust the firmness for each of you. and now, save 50% on the new sleep number® limited edition smart bed. shop a sleep number® store near you.

jonathan: equity futures -.25% on the s&p 500. yields declining by two basis points. sec. bessent's push for lower yields. sec. bessent: rates have come down every week since donald trump has been president. if we can continue that for 52 weeks that would be great and would be a win for the american people if we can reign in the budget deficit. if we have not inflationary growth. if we break down energy prices.

now that i have the numbers on the inside there was a big contributor to this massive inflation was regulation. jonathan: treasury secretary scott bessent affirming his plan to lower rates. says the terming out of debt issuance is long way off. bob elliott from unlimited joins us. i'm sure you followed that conversation. there was a lot of interest about what they would do with the maturing debt and whether they would turn out the debt. the other thing coming into 2025 where the factors that would lead to higher yields, not lower yields. what has changed? bob: they are facing the reality of the situation which is that terming out the debt will raise interest rates and creative financial tightening they are not interested in having and the circumstances and particularly as they enter fraught negotiations about what the policy picture looks like with the extension of the tax cuts and the possible papers that have to happen -- and the

possible pay fors that have to happen. they want to stay as calm as they can and whether they lose credibility based on their past comment they're willing to take that to keep bond yields stable. lisa: how much of a lodestar can that be? if treasury secretary scott bessent cares about the tenure everything will be fine. long-term rates will not spike higher. much of that is a base case? bob: the main question is how will he get lower rates. he talked about how rates had fallen each week of the new administration. is that happening from disinflation which is what he was arguing or a repricing of growth conditions? you talk about you talk about -- all of that is negative when it

comes to nominal growth and that is why bond yields are following. that is not a good reason for bond yields to fall if you're trying to support an economy. lisa: this is something we were talking about -- he said this is maximum policy uncertainty and that is reading to people getting concerned about what a growth stock would look like. from your perspective, is there a consequence to the uncertainty we are seeing in markets from investing perspective that is affecting what you are buying and what you are not. bob: for most businesses thinking about what they will spend on or invest in, there's so much ambiguity. is the tariff 25%, is it zero, is it happening or not happening? all that is creating disruption the overall market. the biggest risk for many of these companies looking at the forward picture is we will experience a big tightening ahead. the fed is going to maintain higher rates for longer than many people expected given the inflationary problems that exist and the possible inflationary policy.

the fiscal picture is tightening and not using. those things combine into an economy that is already moderately decelerating is not a great outlook for the economy. we are starting to see signs of those cracks. look at walmart earlier today. annmarie: are you more nervous about higher inflation or slower growth? bob: i do not think inflation will be the big story. measured inflation will be modestly above the fed's target for an extended time without a lot of volatility. the real risk is what about that fiscal tightening? tariffs is a tax increase. part of that can flow through the rise in prices but it can also lead to a cut in spending. in an environment with wage deceleration it is likely we see higher savings from households and less spending in response to higher prices. annmarie: you think consumers will push back, even if it is a one hit pass through on tariffs consumers will push back on the

increase of prices? bob: consumers look at the prices they see in the store and the reality is of those prices are rising they can buy less unless their incomes rise. we have a very different story today than we had a few years ago when you had tight labor markets, strong wage growth, people could translate that wage growth into spending. the markets have softened a fair amount that means consumers will be a lot less resilient in terms of their demand when they see higher prices. jonathan: should we focus more on the demand impact of tariffs that inflation? bob: that is the big question. the inflationary pass-through is real but the question is to people substitute or to people increase their spending? you get inflation if they increase their overall spending in order to increase your spending you have to have the wages or the savings to do that. unless you get asset prices that rise or higher wages they will not do that so it is a negative growth stock and that is the big risk in this economy.

jonathan: it takes us back to the labor market. how strong you think it is? bob: it has weakened a fair amount. hiring is soft. part of the story is the federal government cuts to labor ed, 250,000 to 300,000 jobs, that is a few months of payrolls ahead and all of those folks will flow into the labor market. that is a pre-big deal when it comes to an economy only adding 1.5 million jobs a year as a baseline number. lisa: to put together everything you're saying from at the end of last year people are worried about inflationary stock. we have seen bond yields fall on the long end because people are worried about a shock to the growth outlook that we might see downside which ported to walmart. is that how you are arranging, is that what you are investing in? long cold? -- long gold?

anything that might be a haven in the face of economic downturn. bob: you look at how the markets are pricing things in. stocks are pricing that the tariffs are a bluff and growth will be great. maybe that will be the case but the odds looks cute in the other direction. the reality is bond markets, we've not seen much steepening of the curve so far. we've not seen bond yields come down all that much and that looks mispriced, particularly looking at long bonds relative to stocks. jonathan: appreciate your time. bob elliott of unlimited. walmart having a tough ride of it this morning. down a little more than 8%. lisa: talking about how they have a cautious outlook going forward. this does not even include any kind of tariff impact. they say the consumer is steady, not necessarily accelerated and they will lead into their own brands rather than selling other companies products.

a question about how much of a tell this is for the broader economy versus a specific story. jonathan: it is bearish when walmart does well and bearish when walmart does poorly. lisa: we will look at the numbers and get more details before we give a definitive narrative. jonathan: in the next hour we will get some thoughts on walmart up claudia some -- sam linton brown of bnp paribas. lots of thoughts on our conversation with the treasury secretary. we will break down some of that interview in the next hour and also get thoughts on the next move from the federal reserve and how high is that bar for a reduction from chariman powell. from new york city, 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 ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all...

the answer is j.p. morgan wealth management. the way i approach work post fatherhood, the answer is has really 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. in the average household, there are dozens of connected devices. connectivity is a big part of my boys' lives. it brings people together in meaningful ways.

>> we are a better and improving nominal growth environment. >> u.s. equity evaluations are at their peak. >> we have a global rally in a much more balanced rally. >> earnings will drive the market.

>> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: all-time highs on the s&p 500 for the first time since the year started. going into the opening bell come equity futures negative .25%. likewise on the nasdaq down .2%. no real trauma on the russell. small caps -0.15%. bond yields are lower. 4.50. the treasury secretary pushing back against the idea of terming out the debt anytime soon. lisa: this after there was severe criticism of the former treasury secretary janet yellen with lopsided issuance to debt saying it is better lock in yields. if they're going to lock in longer yields it will not come anytime soon which is a huge sigh of relief you are filling in the markets which are saying will not be overwhelmed by supply. annmarie: what does a long way off mean?

people were coming in thinking scott bessent has talked about this saying he was a hedge fund manager, this is what he was criticizing janet yellen to do yet he is not recalibrating the issuance at the moment. is this the end of the year or the end of trump 2.0. jonathan: sequencing matters. what i got from the comments is therefore to do and they believe once they've done the work it will lead to lower yields and once you get lower yields you can think about turning out the debt. what i hear from him is that was not the right time because they have a lot of work to do on tax cuts and spending cuts. lisa: i love how he framed it at the start where he was talking about how he spent his whole life pressed up against the door trying to hear what the guys were saying and now he is in there with his ear on the other side trying to understand what the market participants will take away. it is this dance of trying not to let the market can away from you to stymie the plans you have

longer-term. it is a difficult puzzle to put together. annmarie: wedo before going into the administration he was talking about a gradual approach to tariffs. you brought up the hedge fund letter he wrote last year when he said the tariff gone will be loaded but rarely used. it was used one so far in trump 2.0 and that was with china. he wants to see a recalibration of the chinese economy, more domestic consumption and he is speaking to his counterpart tomorrow. yesterday trump said potentially there'll be negotiations when it comes to a deal with china. jonathan: imagine what would happen if he started saying we will term out the debt and will get rid of the debt ceiling. then at the same time we will cut interest rates, we will cut taxes and put all these tariffs on, 25% canada and mexico. 25% steel and aluminum. in early april 20 5% on autos. where would the bond market be? if you are the bonds top

salesman that is last thing you start telling the market. lisa: all of the site and you have a bond market at 6% and a recession on your hands. in that letter last january he wrote to investors he said the upside growth presents the big risk that long-term bond yields could spike. how do you control that to try to get this done inflationary growth? jonathan: equity futures on the s&p -.25%. coming up we catch up with mira panda it of jp morgan. claudia sahm reacting to jobless claims to out in 26 minutes. we begin this hour with soothing words for the bond market from treasury secretary scott bessent. secretary bessent: we will see what the market wants. the fed says they may stop their balance sheet runoff.

easier for me to extend duration when i am not competing with another big seller. jonathan: meera joins us for more. does that give you increased confidence in the bond market and treasuries? meera: not necessarily. we have to think about why yields have risen. it is not just a function of stubborn inflationary dating. there is still risks to the upside. it is also about the debt and deficit and those conversations have been quieter recently but we are heading into the season of what we do with the debt ceiling, what we do with the next stopgap measure from a budgetary perspective? how do we think about taxes on the table? as much is there is room for doge and we should be thinking about reforming entitlement and cutting spending in the right ways, it will be mired by the tax bill we have on the table. even extending what we already

have. i think there is room for yields to increase. we will see two cited volatility throughout the year. the next stop could be higher for yields after having a breather over the last few weeks. jonathan: is the focus pushes towards cuts which would push bond yields higher, what would that mean for equities? meera: if we are going to see an extension of the status quo -- if we will see a bill on the tax cuts and jobs act as opposed to more corporate tax cuts for consumers is maintaining where we are today. it will not necessarily drive new consumption or drive equity market highs. maybe there will be enthusiasm but the difference between now and what we saw in 2018's and 2018 you had 21% profit growth, half of that from march expansion, that supported the markets throughout the year. we had 19 new all-time highs that year.

the trouble is this year if we have tax reform second and tax reform that is not a splash, not including the deficit but from a market perspective, then how much will that use up the markets from here? the reverse, how much does it affect how corporations act when they are thinking about tariffs on the table here. what you are seeing is a pullback from capital outlay plans. not only a spike in uncertainty the third-highest recording we have seen but also if you look at that portion that looks at capital outlay intentions. that had a big drop as well. it is important to think about the downstream impacts and not just with the market is reacting to. lisa: i believe walmart is having their call in line with that. their guidance was below expectations and did not include what could come from tariffs. i know you cannot speak specifically to this company. the idea you have this type of

commentary at the same time we just got the third all-time high on the s&p 500 for 2025, does that make you think people are being optimistic in some of the pricing right now? meera: we should feel good about the earnings we have through the door. not only have we seen earnings expectations from the fourth quarter move from just over 11% to north of 16%, but you also have half of the contribution from financials. we should feel good about the earnings season we had. the question is if you do see an implementation of tariffs, where does that had profits? 70% of the contributions this season has come from margins. if the consumer is not willing to eat the cost of higher tariffs if we do see them after 15% egg prices, that will hit the margin story and margins have been what are driving profits. from the other perspective it is also revenues.

40% plus of the s&p 500 gets its revenues from abroad, particularly areas like tech. you also have to worry about a revenue slow down in an area that is already a little bit weak. lisa: what is the haven trade at a time you have a lot of crosswinds that could lead to opposite tail risks? meera: what we have seen and i think this is an encouraging sign from the market is everything is mean reversion. you see areas like europe and china outperforming relative to last year. japan and india and the rest of the s&p 500. i do think within the u.s. the rotation to everything else is underpinned by earnings. when you think about financials, driving 50% of earnings growth. there are some areas that are sustainable, some less so. i think the rotation you're already seeing people getting underway is been a healthy sign.

annmarie: is that all driven by policy? the idea that people are falling in love with europe because trump is pushing them to spend more? meera: part of it is more mean reversion from a valuation perspective. european valuations down in the dumps. i was on the show a month ago and made the case for why european equities could do well if we think about financial condition starting to loosen. and more interest sensitive economy starting to benefit from rate cuts. a massive pile of consumer safety ready to be employed. maybe we do see trade deals from european perspective. you are seeing 80% of the rally within europe and many markets coming from multiple expansion. -- our people getting excited about something that will actually pan out or not? that is the big question around europe. we've not seen massive movement on a lot of those items i just mentioned and yet there is the

enthusiasm that it might bear out. jonathan: the banks in europe are 18% in 2025. i keep referring to the date because is only for very 20th of the banks are up 18%. what you do? i got into european equities, i wish i had. what to redo now. -- what we do now? meera: tariffs will be a factor but let's think about the other international markets and where there are lakes and not. there could be legs in china because that is centered around micro ai. reversion from a japanese perspective is unwarranted because if you look underneath the surface multiples are driving most equity markets whereas underneath the surface there is a currency -- it has the biggest contribution from an earnings perspective. i don't think that is an area we should leave alive hiring room

floor. india had a great run in the last couple of years. alternately the multiples are high. i think you have to go market by market and think through where are the legs, where the areas we think about paring back. right now is about being broadly diversified and it has worked for clients. jonathan: good to see you as always. meera pandit it of jp morgan. dollar-yen the biggest mover and foreign-exchange come a move of 1%. just now breaking 150. lisa: increasingly it seems like the bank of japan is on a hiking path. they all seem to move in the opposite direction of central banks elsewhere in this is giving momentum to that. it goes to this question of how much ongoing yen strength can rearrange some of the flows we have seen the past that have underpinned some of u.s. asset outperformance. jonathan: the big mover in the

premarket is walmart. approaching 8% lower in early trading. that's get you an update on stories elsewhere with your bloomberg brief. dani: commerce secretary howard lutnick says president trump wants to abolish the irs. lutnick pulled fox news the president wants to raise revenue by charging other countries. trump has floated the idea of abolishing federal income taxes as a part of his tariff plan. the port of los angeles saw a record january ahead of donald trump's plant tariffs. the busiest trade hub in the u.s. moved 8% more containers than in the same period one year ago. according to the port the boost was driven by retailers. the san francisco 49ers are considered selling a 10% shape -- a 10% stake that could make the nfl team one of the world's most expensive sports franchises.

it is unclear if the team will look for a private investor or a wealthy investor or a family. jonathan: of next, the morning calls plus forrester research on walmart's disappointing numbers earlier this morning. that conversation is up next. live from new york city, good morning. ♪ carin's heading into retirement. [screams] with a lifetime of savings. but that's not the only thing she's taking into retirement. hi! ♪♪ hi. every advisor knows retirement isn't a lump sum, it's the sum of their clients' life's work. ♪♪ now what? you protect their life's work with protected growth and income strategies from prudential. who's your rock?

♪♪

a sleep number® smart bed is perfect for couples. it helps reduce snoring with a tap so you both get your best night's sleep. and now, save 50% on the new sleep number® limited edition smart bed. shop a sleep number® store near you. jonathan: equities a little bit softer. down close to one third of 1%. the opening bout one hour and 14 mint -- the opening bell one hour and 30 minutes away. wells fargo raising its price target on hp.

keybank raising its price target on nvidia, saying the earnings report should alleviate concerns. your third and final call from jeffries upgrading roku to hold, the analyst saying it strengthen disposition as an app platform. walmart shares falling in the company's profit forecast fell short of analyst estimates. that is down more than 8% into the cash open. sucharita kodali joins us now for more. welcome to the program. what went wrong for walmart? sucharita: i think a lot of the softness is due to underperforming from an earnings expectations standpoint but it also sounds like some of that may be one-time charges like some of the payouts for some of the lawsuits. the topline numbers were fairly strong. it suggests walmart continues to gain share from other retailers.

there are companies like target which are competitive with walmart which have been soft. walmart continues to outpace them. walmart's numbers are mid single digits and store sales were stronger than the growth in the retail industry now. it is doing ok from a revenue standpoint. some of the earnings outlook suggests the consumer is likely to be softer in 2025. we still see consumer confidence down and we also have moving tariffs on the earnings call. lisa: it seems like it was that forecast talking about overall net sales growth for the full year in the range of 3% to 4% versus 5%. much of what we are seeing in terms of the reaction is because the shares were up 77% over the past 12 months, given the fact they have outperformed. sucharita: we see this often.

you will see this with tech companies where there huge run ups and then an earnings call happens and it is not as high as people expected it to be and then you see a pullback. it sounds like that is what is happening right now. the macro story about walmart's this is a retailer that has executed incredibly well. they continue to execute well and they are taking share from much of the rest of the retail industry. as far as commodities are concerned they are holding their own against companies like amazon. the bear story is more of a macro story and walmart is a bellwether for the rest of the economy and the retail industry. if this offer walmart it will be soft for other retailers -- if it is soft for walmart it will be soft for other retailers. this is a company that does well in any kind of economy. for walmart to suggest the outlook will be softer probably

suggests consumers are entirely going to pull back on spending across a number of categories this year. lisa: if walmart catches a cold, does home depot, does target get the flu? is this signaling there is real negativity from home depot and target and other retailers center report earnings in the next few weeks? sucharita: target has had a bad run for the last few quarters. it is going to be surprising if they are able to pull a rabbit out of the hat when walmart has not necessarily suggested a positive outlook or not as positive of an outlook as it has in the past and as spectators now. as far as home depot and lowe's and the home sector, that is different. we saw soft numbers with toll brothers this week and those kinds of sectors are more

interrelated. we have interest rate issue which is impeding the home sector right now. not that interest rates are at record highs. they are higher than they have been in a long time. as far as consumers have seen interest rates like in the 1990's, we still have good levels. until consumers get more accustomed and are prepared for the fact that it is a new normal , i think we will see softness in the home sector. that is different than what we are seeing with mass goods that get purchased at walmart. annmarie: when it comes to tariffs every day there seems to be a new item. last night it was lumber added onto donald trump's list of what he might want to go after. at what point will we see walmart and other retailers

start to incorporate what tariffs could mean when they give out guidance? sucharita: we already see companies like amazon had a highly ranked risk factor at there is ec filings walmart is in a watch and see mode because it is difficult to know whether these tariffs have teats or whether they are political theater -- whether these tariffs have teeth or whether they are political theater. these other issues like immigration. tbd. we know the canadians import and export a lot of lumber to us and that will affect the home sector , arguably even more than walmart although there are probably some elements with development and some issues in the warehouse that could be affected by that. there are other things. there are a lot of consumer goods like maple syrup we get from canada which could be much

higher from a pricing standpoint in the future. as far as mexico is concerned the tariffs will likely be on produce and automobiles. we see a variety of sectors. walmart imports a lot of the produce that we see in stores from mexico and that is potentially vulnerable to some of these new tariffs. annmarie: you companies like walmart and others have to pause on expanding even into places like mexico and canada. they have a huge supply chain. technically we are in a trade agreement with them. sucharita: there is not only what they are importing. walmart has presences in those regions. that is also something that impacts their international numbers and we just don't know what the impact is. it depends on how much is

actually imported, how much is exported for that store then you calculate all of the additional spencers that made be incurred due to federal changes. lisa: is there any people case for the retailers -- is there any bull case for retailers given the tariffs and given the fact the likes of walmart already have high valuations? sucharita: i think 2025, this is a white knuckle year. i think people are just hanging on and holding on tight because there will definitely be a lot of volatility. we don't know what 2025 holds. i cannot say it is going to be categorically strong or weak. there are assuming unknowns. we don't know what will happen with tariffs.

we don't know what will happen with the bands on companies like tiktok. we don't know what happens if the thresholds go away. there are a lot of things that are uncertain and we do not know anything about. we do not know what the future of interest rates holds. there are a lot of uncertainties and sensitivity analysis analysts are running as we think of best to scenario and worst-case scenario. all we can do is operate as best we can with the information we have any given moment in time. e-commerce continues to grow but even e-commerce is slowing. one of the things about walmart is there e-commerce is outpacing the industry. they said this past quarter it was growing at 20%. we have e-commerce in the united states growing in the low teens and high single digits. they are significantly outpacing that sector but walmart is so

large unless the stores are also outpacing -- which at the moment they are, they are definitely headwinds ahead. jonathan: the stock is down 8%. sucharita kodali of forrester research. this guidance does not include tariffs. that is the big story. lisa: how can they begin to include tariffs? investors do not have a lot of patience with anything that is not stellar in explaining how you will get around these obstacles. jonathan: up next on the program , jobless claims. ♪

where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

jonathan: equity futures on the s&p negative by one third of 1%. down by a quarter on the nasdaq 100. the nasdaq on a five-day winning run into thursday but if you switch up the board, a jobless claims about 10 seconds away. the two year yield is lower by two basis points. 4.4 995. let's cross to mike mckee. michael: looking to drop 219,000 is the number after 200 14,000 revised up by 1000 last week so no real change in no issue for the economy in terms of the labor market at this point which is what we have been hearing all week from members of the federal reserve.

on a continuing claims basis, 1,869,000, that is down -- up from 1,845,000. the prior week. the philadelphia fed is also out and they come in at 18.1, that is down a lot from 44.3. the forecast was down a lot more. prices paid is the one everybody is following. that one is up to 40 point five from 31.9. one other thing on the jobless claims. what are we seeing in terms of layoffs of federal workers. the initial claims for unemployment benefits filed by former civilian employees totaled 613 in the week of february 8, that's the newest numbers they have. an increase of only 14 from the previous week.

399 filed by newly discharged veterans. so the numbers if we are seeing a significant number of people laid off have not started to move yet but the layoffs didn't really start until the last week or so so we will keep an eye on that. jonathan: the estimate was to 15. this was something bnp paribas set in the last week or so per comfortably numb, the federal reserve is comfortably numb. they won't move it one way or another based on this information. lisa: which is why people are looking to the growth potential and those can be a feature paired what you're seeing in terms of response is not much but you have seen this down your trend of 10-year in two year. it is not because of this question about the fed, it's questions of supply and growth and it is around questions like how companies like walmart will handle some of these tariffs at a time when the consumer isn't

necessarily accelerating. jonathan: it is very difficult to provide guidance. we caught up with the treasury and talked about issuance, he cannot provide guidance on what the issuance will look like. the profile of that a year or two out because we don't know how much we will need to issue or the economic backdrop and how low or high yields might be on the long end. lisa: we talk about at what point this has ramifications of uncertainty for the economy in the here and now. right now you're not seeing layoffs accelerate. we will lock this but amid this paralysis you are seeing a lot of conviction among corporate executives that need to take plans that will decide who gets hired and fired. that's what people are trying to assess at this moment. jonathan: claudia welcome to the program. jobless claims it doesn't look like a ton of weakness here. when you look at the labor market, any reason for concern

at the moment? claudia: 35,000 feet the labor market still looks really good. clearly we have to pay attention to the layoffs within the federal government and how that might spread through contractors and other grants held back. but in terms of the high level that is just one corner of the labor market. back to the uncertainty, we came into this moment with hiring rates that look unusual for the amount of layoffs. layoffs look good but we are in an environment that is not absorbing -- so if we get into a place of layoffs that could be a real problem. it could turn into a problem very quickly. lisa: has there ever been a time in history you can point to where there was a lot of policy uncertainty and a pretty balanced labor market. one that was in stasis, not

expanding or contracting. claudia: that is tough. when we start into an administration there is going to be a lot of uncertainty about where the economic policy is going altogether. we have these moments in time and it doesn't have to really cause a big upset in the labor market it is more what the policies turn into going forward rated so we are in this holding pattern at the moment, but i would not necessarily say this is out of the normal. lisa: i'm wondering as an economist how much you are looking at the economic data put out by the government versus the economic data put out by corporate executives. i say this because increasingly what you are seeing is corporate earnings are the driver of pretty much everything across the board. i wonder if that is increasingly on the bond side and from an

economics perspective as well. claudia: we need to be looking at all the pieces of data. a lot of government data is doing a better job of rolling out and giving us the bigger picture and trends. clearly there are going to be important idiosyncratic at the different form levels, the earnings levels that will drive markets. i don't think we should ever be in an either or situation. it can be times where it's difficult to match up the two. things in different sectors than the economy as a whole. annmarie: can we talk about what's going on of the job sector at the federal level. what kind of average numbers do you expect to be added every month. last year was about 35,000 on average of federal workforce employees added to the jobs report. claudia: at this point it is really hard to get a firm sense of numbers out of their in the

reporting. we are getting things in piece mail -- piecemeal in terms of the layoffs. i think keeping a perspective, a federal government less than 2% of the full government, if we had the full probationary workers, the 200,000 that have been targeted, if they were all laid off that is a 10th of a percentage point on the unemployment rate. these are small numbers, in that big picture there federal -- very disruptive for the federal government and for services, we are getting constant headlines of layoffs and they will add up. it is a question of how big those are in reality and that is -- and how it spreads. this is not just about the federal workforce it's being targeted. i think at this point it is clearly negative. i can tell you the direction. whether it is the kind of numbers that are portending of a

recession or major contraction in the labor market that would require a lot of amplification outside of the federal government sector braided annmarie: how are you taking into consideration what we are seeing on the immigration side with the trump administration. deportations and much stricter border control? claudia: this is one where the numbers will matter. in terms of are they really doing -- are they really adding up in a way the administration inspires two. it may not be there now but they will get there. a lot of that is going to be potentially destructive to supply-side. we are losing workers that have been a big boost to growth coming into this could be a drag on growth. the numbers being aspired to will far exceed what it looks like are the deportations happening. the data and what's happened,

the reality matters. we don't know what the reality is right now. jonathan: claudia of new century advisors on the labor market. we can talk about the reality of the data we got just moments ago. the estimate was to 15, mike mckee bringing you back, we had the minister of the federal reserve's last meeting, they did reflect on some of the policy uncertainty. what jumped off the page for you? michael: in terms of the monetary policy. the fed does not know what the president will do and that folds into this unemployment claim issue with firings of people. we don't know how many are being fired or whether they will stay fired. and when you look at the states with the most federal employees, virginia, maryland, california and texas all of them saw declines in jobless claims. it is hard to predict what will happen with the economy. the biggest thing is the fed

talking about the possibility of suspending its balance sheet reduction if they don't fix the debt ceiling issue. that it's something that had not had been brought up before and they stuck that in because they want the markets to know it is a possibility. jonathan: appreciate your time this morning. secretary s and reflected on this he does not want to compete with the federal reserve. lisa: if they are buying a lot of the debt that becomes a problem for them at a certain point. if they are selling the debt, which is essentially what the runoff is that becomes a problem in the u.s. government is also trying to sell it. it is such an interesting moment. he doesn't want to comment about the federal reserve and the fed policy but on the other hand we are -- they are very much in lockstep. jonathan: he did essentially agree with the idea reducing interest rates by 50 basis

points at the end of last year may have contributed to the high yields on the longer end of the curve. >> right now he's taking on the role of treasury secretary last year when he came on the show he was not in that position break he had a more aggressive commentary on the timing of these rate cuts. >> rates went down and yields went up. >> jay powell said it wasn't because of inflation expectations. jonathan: welcome to use from london it is good to see you. let's start with the federal reserve. >> the economy is strong. labor demand is increasing and our view is once tariffs kick in there will be more inflationary than the market expects. as a result this is a federal reserve that won't cut rates. >> why do you think those will be more inflationary than people expect. what tells you that? >> when we look at previous

episodes of the impact they have on inflation, the starting point of the u.s. economy is strong in the labor market is tight. the fed will have to be very in tune to inflation expectations. so there is an argument in the market that tariffs are short-term price level increase in the fed should look through them especially if they are not positive for growth in the medium term. if we think about for example the docs -- dots from the fed when they shifted more hawkish, they implied higher inflation, far fewer rate cuts than they previously suggested. we would argue they agree that if tariffs come through some of the participant's including them in their forecast at the meeting that it will be consistent with the fed not cutting rates this year. lisa: increasingly people are looking at the potential for growth to disappoint and you are seeing that with walmart earnings today and in general. on the margins some of the commentary from companies.

what would it take to change your view that maybe some of these policies are not really going to be surprisingly inflationary but quite the opposite. sam: growth expectations are high in the u.s. so the bar for earnings to be a little bit weaker than expected and trigger some sort of position reduction in a very sort of well held bit of equity in the u.s. isn't that high. the key is when the labor market is this strong, the fed around how -- they can be quite numb to that. lisa: why do you keep saying the job market is strong. it doesn't seem to be showing any alarm bells but we are not seeing incredible acceleration in hiring in any way? sam: we until the latest nonfarm payrolls data in the market all thought the line of the moving average went like this. it got revised so it now looks like this. so labor demand in the u.s. trough to six months ago.

if fed policy is that restrictive that is a dynamic that should be happening. labor demand should be softening so we have an unemployment rate that's falling. job layoffs that are still there. annmarie: let's get your take on what's going on in europe. feels a trump policies are pushed europe to spend more especially on defense. but you are a little bit more cautious on what happens in germany. d.c. higher spending out of germany following the selections this weekend? sam: higher defense spending in europe is a question of when rather than if. that's the medium-term path it seems clear for a number of reasons. germany will be a part of that especially if this weekend we get the cdu led coalition. i think in the market we are already pricing a lot. the market is in this mindset that because of these elections because you're likely to have a coalition but wants to spend more able happen quickly.

that is not how it works in germany. the average time for a coalition to form is two months. the best case scenario is for the market in terms of the spending is you see the parties which do not want more defense spending to do quite poorly and the party that do want it, do well. a minimum process of coalition talks which may result in a suggestion to increase defense spending in the second half of this year. in germany that's about .35% of gdp. it's a lot for germany but women compared to the fiscal we talk about in the u.s. these numbers are not huge. >> do you think it's at peak pricing in europe? sam: i think it is over its skis on the likely timeframe with respect to expectation of an increase in defense spending for there to be a cease-fire in ukraine and a speed up in which germany will increase defense spending so we like long-duration. jonathan: where does that leave

the euro? sam: we are bearish. at the same time on the tariff side, while it is very hard to predict what will happen, we can look at market pricing. market pricing today is extremely complacent. we think there is a must know tariff risk premium embedded in euro-dollar at the moment pretty >> parody which is not too far away. sam: if we are there the end of the year versus forward about one point -- 1/6. it's not that small of a move. jonathan: good to see you as always. euro-dollar 1.0447. an update on stories elsewhere let's cross over to dani burger for more. >> president trump set a new trade deal with china is possible speaking to reporters wednesday. he did not describe the parameters of a deal, trump has

ratcheted up pressure on china with additional 10% tariffs on all imports from the country. the irs reportedly planning to fire 6000 workers today. multiple media outlets reporting to government workers will lose their job who were more recently hired and therefore on probationary status making them easier to cut loose. he comes less than two months before the april 15 deadline for americans to file their deadline -- taxes. the flu is overtaking covert is the deadlier virus in the u.s. this winter. it's the first time in five years the seasonal illness surpass the pandemic virus. the cdc said influenza made up 29 million people sick and resulted in 16,000 deaths since last october. mortality from covid has been declining. that is your brief. >> up next we will set you up for the day ahead and bring you some of our interview with the secretary -- treasury secretary scott bessent. this is bloomberg. ♪

[laughter] you go to sandals to get really, really close... to the caribbean. we should do this every morning.

♪♪ jonathan: equity futures down by one third of 1%. that opening bell is about 40 minutes away, here is your hire hike us. >> wal-mart shares down 6.5%. retailer lower than expected profit calling into question the consumer and adding to the uncertainty is a point you made before which is this guidance does not include the potential impact of tariffs. but possibly we get details on the earnings call which is underway now. next up is alibaba with a different story there. shares are up because it's e-commerce business at home in

china and internationally smashed expectations. as did its clouded ai divisions and the results are a positive signal as alibaba tries to stage a comeback after that regulatory crackdown by president xi jinping. jack ma staying on president xi jinping's good side with that meeting earlier this week. we have car vona who shares are down here and yes it posted a quarterly revenue and profit be but what impressed print investors was -- but for adam jonas at morgan stanley this is nothing but an opportunity. jonathan: that name is down about 5%. equity futures just a little bit softer. into the open, a lot of fed speak later on today. tomorrow some economic data, u.s. pmi's paid into the weekend

germany's snap elections in a sneak peek of next week earnings from home depot on tuesday and then on wednesday it's the big one. earnings from nvidia, let's turn to politics and turn to politics and turned back to the economy. we caught up with scott bessent early on on bloomberg surveillance with soothing words for the bond market. secretary besson: we will bring down energy costs, we will bring down regulation and i think once the tax cuts and job act is made permanent and we can have a revenue increase cost increase. jonathan: what's the medium-term and once you see those things went to those ambitions become reality then do you start to think about gathering debt. sec. bessent: that is a long way off. the fed may stop their balance sheet runoff. easier for me to extend duration when i am not competing with

another big seller. it will be dependent. jonathan: tyler joins us from miami. we heard from the treasury secretary this morning. for more than 25 minutes what's your take on with the policy emphasis is now going into the next few months. tyler: that's a big question particularly when we look at the policy proposals we heard from president trump. particular when it came to tariff. scott bessent's comments there about the future of economic and foreign policy coming together. here we are waiting for remarks from that special envoy who is still here on the ground in miami. one of the central players in this continuing conversation about foreign policy for this white house and normally i will see if he builds off of any of those comments the treasury secretary told you all particularly when it comes to the future of stations of the u.s. is either to ramp them up or tone them down depending on what happens with talks between

russia, ukraine and the u.s.. some big headlines as the special representative is in ukraine meeting with zelenskyy. jonathan: from new york we will wrap it up, and maria big foreign policy focus today. annmarie: he said both options were on the table which says to me the administration does not know where the negotiations are going but can you sanctions as a lever meaning they can but heavier sanctions on moscow or wind them down if they think he is close to a peace agreement but the rhetoric is very hot between zelenskyy and trump and the treasury secretary was just there. he said there seem to be a signal he would sign this mineral packed and they went to munich and he didn't. lisa: frustration trying to understand what the broader framework is and listening to these different messages coming and the rhetoric to understand how we are getting closer or not to that. the market is struggling that.

-- struggling with that. that is being walked back just a bit. jonathan: we have a president and his second term but had a four year break and is happy for your break and knows exactly what he wants to do so they are trying to get a ton of things done really quickly. we are only a month in. think about how anything things up and thrown up against the wall. annmarie: i am looking forward to what this looks like 100 days in. where are we on all of these thrusts -- front spring jonathan: see what sticks. coming up tomorrow we speak to cassie barrow jp morgan, jason furman the former chair of the council of economic advisers under president obama. from new york city this morning, good morning and thank you very much for choosing bloomberg tv. this was bloomberg surveillance. ♪

matt: after record highs yesterday and stocks futures are down. 30 minutes till the start of trading. katie: bloomberg open interest starts now. sonali: treasuries gain in the wake of scott bessent's interview on bloomberg. the treasury secretary says any move to term out u.s. debt is a long way off. >> also signaling sanctions relief could be on the table after president trump blamed for lottery zelenskyy for starting the war and called him a dictator. katie: a warning sign for the world's largest retailer