>> everything that president trump's administration is doing will be disinflationary. >> our view is once tariffs kick in, they will be more inflationary then the markets expect. >> is likely going to be a 2026 story. >> stocks are pricing that the tariffs are a bluff and growth is going to be great. >> it's clear the market is focused almost entirely on inflation risk. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramovitz, and

annmarie hordern. dani: let's get you -- jonathan: let's get you to the weakened. live from new york city, good morning. "bloomberg surveillance" starts now with equity futures on the s&p almost totally unchanged on the nasdaq 100. in the bond market, a little bit stronger yesterday. yields a little bit lower this morning. a couple of data points to look out for later this morning, 9:45 eastern time, u.s. pmi. after that, umich consumer confidence. consumer sentiment in focus. lisa: last monthlisa: dropped to a seven month low. we are one month into this administration and the polling is coming out. how is trump doing? 62% of americans think this administration is not doing enough to lower the price of goods. you start clicking into some of the surveys, the concern about

tariffs. even if it's a one hit to prices, it's still going to mean higher prices. jonathan: last week it was retail sales softer. yesterday it was walmart, a week outlook. dani: walmart taking down the entirety of the market with it. this concern about growth, you can see it in the long end of bonds. it moved yesterday after that interview with scott bessent. steve majors of hsbc says in the 10-year yield is this idea that growth will be weaker going forward. that has serious implications for this equity market. jonathan: you will hear from the san francisco fed president, mary daly, alongside the vice chair. we heard from the president yesterday, the risk of inflation above 2% or moving higher seems skewed to the upside. fed officials focus on upside

risk to inflation. lisa: it's not a great place to be and it's what we saw in the minutes as well. the fact that tariffs might be inflationary. even if you want to look through them, there will be this potential one hit. and also, changes in immigration? is that going to affect the labor market because you are taking some individuals out of hospitality and other sectors? there is this concern at the fed that they can't cut. dani: i thought what was interesting is this idea that a more restrictive path might be necessary if inflation expectations get more anchored. we don't know whether he meant hikes or just keep things as they are but he started to kind of say it. you get this idea it almost that the fed cannot give guidance right now. raphael bostic saying his opinion might change six month from now. jonathan: equity futures on the

s&p just about unchanged. we will catch up with steve chiavarone, robert casey and kelce berro. we begin with stocks study. steve saying our view remains unchanged. a volatile choppy and uncertain first half of the year will give way to a better first half. steve joins us for more. that's about three or four minutes of bearishness. tell us why we should be constructed for the year ahead -- constructive for the year ahead. >> you've replaced some euphoria in the fourth quarter with a nice healthy wall of worry and you see it in your opening segment that we are in this fog of uncertainty.

are we more worried about inflation or growth? the story is if you stay anchored on the fundamentals, gdp is still growing 2.5-ish percent, inflation is still lower than it's been. it is still sticky but certainly not resurging at this point and corporate earnings are growing this quarter and we are setting up with a conservative guide. i think you can get yourself worried sick over the crosscurrents and you just end up whipsawing yourself as opposed to saying if inflation is grinding lower, even at a slow pace, labor market is strong, it's not a bad place to be. jonathan: there's always something to worry about. as the fog clear at any point this year? a guest was making the argument that may be the whole of the first half will be focused on upside risk to inflation, tariffs, and the second half may be some of this clears. do you share that view?

>> you've got to take the wall of worry down brick by brick. we've seen excess seasonality in inflation data in the last couple of years. we expect as you get into the spring, you will start to see inflation come down. if doge is really going to lead to as many separations of government jobs as we are seeing, whether layoffs are firings or departments closing, and you start to see claims move up a little bit, i think you will see the fed change their tune very quickly. you could see rate cuts start to come back into focus i think this tariff issue especially as get into april, may, it looks like we will get some more clarity there. once you get to memorial day, at least that's the plan at this point, you get that quote unquote big, beautiful bill out of washington, you are going to start to remove that uncertainty. i think we are in this uncertainty for most of the first half. but you could start to see the opportunity to start to people away some of that uncertainty.

i think markets have been resilient so far and may be more than resilient in the second half. >> is there any degree were having the first half of uncertainty candid damage if you have companies who are -- where having the first half of uncertainty can do damage? >> i think they can. we have four major money centers in the u.s., finance in new york, tech in california, energy in texas, and politics in washington. and we know you can have a texas energy recession and the rest of the economy does well because it lowers costs for everyone else. what we have not tested and i think we may during the course of this year is can you have a washington recession and have the rest of the economy power through? if less government spending and economic activity in that area leads to a little bit more money in the pocket of the rest of the country, i think that's possible.

while the doge dividend is an interesting alliteration, it may matter. i think that will be one of the tests. can you shrink washington in a structural reform way and still have that benefit the rest of the economy in the short run? i think we are about to find out. >> how are you thinking about what that shrink to washington, the ramifications of it? it's not just federal workers, there is may be concern among state employees that they could be hit in various places of the country. there is concern for contractors not directly employed by the federal government. how are you thinking about that holistic picture? >> i think when you see the minutes from yesterday and you hear some of the fed speak being as focused on inflation as it is, i think they are -- feel like they are fighting the battle of three or four months ago. the single most important economic data right now is unemployment claims and what's going to happen to those claims? it's not just government workers

themselves being laid off but one of the things we saw from usaid, forget about what your opinion is on that spending, is that there's a lot of ngo's out there that probably do not exist without that funding. we've seen this idea of an 8% budget cut, the reaction and defense stocks -- in defense stocks. we are leaving this keynesian world of either the government spends and it is stimulus or they cut and it is restrictive and we are entering a world of structural reform. that could be bigger and have more tentacles through the economy as industries, companies that are reliant on the government come under pressure. where you are going to see that is in unemployment claims. is that localized to d.c.? or do you start to see that spread through the economy? that's what you need to watch. i think the fed's concern about inflation right now is a little bit rearview mirror. what you need to focus on is,

what are these policies in the short run? dani: you asked the question, can the u.s. whether a washington recession? >> i think it is possible that you can. if you think about a new york or california recession, if you will, when wall street comes under pressure, there is no offsetting balance to the rest of the consumer base. it does not help. it does not make things cheaper. it does not return money to the taxpayer. same thing with california and tech. when texas is under pressure because oil prices are lower, there's is a lower-priced mechanism that benefits the rest of the economy. if you really are cutting government spending and employment, is there an offsetting benefit to the rest of the economy? if that means lower taxes and or lower borrowing rates, which i know scott bessent is talking about and targeting directly, then it can. it's not a shoo-in. i think it's a candidate for if

washington's pain is the gain of the rest of the economy, then you can. but we still have to see. >> another piece of uncertainty and i know it is just a proposal but they are talking about these doge dividends, $5,000 checks going out to the rest of the country. take away from some of washington but put out to the rest of the nation. do you think those would be inflationary? >> no, they cannot be. if they are being funded by cuts. if i cut a chunk of spending and that a return 20% of it back to the taxpayer, it cannot be inflationary in the short run because i have already pre-cut that money and i am just shifting it from one part of the economy to the other. and over the long run, the idea is that the private individual is going to use that money in a much more productive way than the government would have. so, no. there's a lot of things that are being thrown out like tariffs being inflationary. they are not.

you have to look at that offset against how much activity are you cutting out of washington? how many jobs are being lost? you see what's happening to the real estate prices over there. it might be disinflationary for the government and a little bit inflationary for the private economy but it is not inflationary. people need to remember inflation is a persistent upward cycle in prices because you are putting too money after too few goods. >> a lot of people would say we will take that. appreciate it. have a good weekend. we have seen the big focus on doge and spending cuts. a guest said yesterday said our concern is that one cut will be deeper. the outlook for the broader jobs market will finally dim on increased uncertainty. we did not see this at the

headline level in jobless claims but i think market participants very focused on that number week after week. >> especially september. a number of individuals decided to defer basically getting laid off but taking this buyout. to september we will not see the full picture until the end of the year. in 2024, every month, the average of federal workers added to the nfp number was about 34,000 people. how much lower will be every single month once we have doge clear through the government? jonathan: it could be a factor. we will get manufacturing and services pmi there shortly after that, university of michigan consumer confidence. let's get you an update with your bloomberg brief. >> israel's military says hamas has violated the gaza cease-fire deal by handing over an anonymous body instead of one of the hostages. the idf says the remains they were given were not those of a woman captured alongside her two

sons in the october 7 attacks. hamas is due to free six living hostages tomorrow. u.k. retail sales group 1.7% -- grew 1.7% in january, exceeding expectations. food sales were the strongest since the start of the pandemic in march, 2020. however, consumers are still cautious with the decreases in other categories and confidence remaining week. rivian shares are falling some 5% in the premarket after the ev maker issued a disappointing vehicle delivery forecast. that development overshadowing its first-ever quarterly gross profit. they are warning changes to tariffs, even tax credits and regulatory policies out of washington could impact sales. jonathan: more from her later this hour. up next on the program, tariffs replacing taxes. >> president trump has spoken about replacing income tax with tariff revenue, especially with

all this waste, fraud and abuse we see been cut. is that a possibility? >> absolutely. if you think about china tariff revenue that we are estimating coming in from the 10% we just added plus the domain amiss thing that it is between 500 billion and a trillion dollars through 10 years is our estimate. we expect the tariff revenue is going to make it much easier for republicans to pass a bill and that was the president's plan all along. jonathan: that conversation coming up with rob casey. taking you into the weekend with futures just about unchanged. good morning. ♪

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yesterday, down this morning. we are very close to a sixth consecutive week of declining 10-year gilts. on the week so far -- 10-year gilts. on the week so far, just about unchanged. tariffs replacing taxes. >> president trump has spoken about replacing income tax with tariff revenue, especially with all this waste fraud and abuse we are seeing being cut. is that a possibility? >> absolutely. if you think about china tariff revenue that we are estimating that is coming in from the 10% that we just added, that it's between 500 billion and a shogun dollars over 10 years is our estimate so we -- a trillion dollars over 10 years is our estimate so we think the tariff revenue will make it much easier for republicans to pass a bill. jonathan: national economic council director telling reporters tariff revenue could replace income tax as part of president trump's economic plan. rob casey of cigna global

advisors joins us now. i think we will all take that. is it going to happen? >> sounds good to me, no income tax. i don't think it's going to happen, even if we look at maximum numbers. 10% tariff on china, which we have not gotten it. we are not even close. >> howard lutnick, the newcomer's secretary, said the irs -- the new commerce secretary said the irs should be abolished. how maximalist can we see the trump administration go when it comes to tax reform? >> they are certainly working hard. they want to get tax reform done early and in one big bill. when it comes to the irs, we have heard that from republicans for quite a long time. president biden beefed up the irs during his term and i expect to see that rescinded and pulled back. i think four years from now, we will still have an irs, much to our chagrin. >> when it comes to the tax

bill, how much will the tariffs offset? where do they need to look elsewhere for the, like, the offset of the cuts? >> when we are thinking>> super broadly, if republicans are trying to make the rhetorical message that tariffs and offset part of the agenda, and we see whether it is a 10% universal tariff or similar, that looks like in the ballpark of 100 billion plus dollars per year. that's not nothing. those are not the plans we have seen so far. we are talking about autos, steel and aluminum, that's not universal and certainly not 60% on china. potentially more importantly republicans want to extend the tcj tax cuts infinitely. they have to pay for the holding, which looks like 4.5, maybe even $5 trillion. they would have to write tariffs at that level into the reconciliation bill, and there's no conversation in d.c. about

actually writing the tariffs into a congressional package. they can talk about some of the offsets but it is not going to work. >> you mentioned tcga. what else are they going to put in this tax bill? trump has had tons of provisions, whether it's no tax on tip, no tax on social security. what else gets added? >> i think no tax on tips is clearly president trump's favorite policy, his priority number one agenda in addition to extending tcga. the house bill allows for $4.5 trillion in quote unquote "spending" on tax. maybe they fit no tax on tips in but it's going to be tight. tcga looks like 4.2, four $.3 trillion over 10 years. i think it's an open question as to what else they are going to include. it seems that no tax on tips his number one priority. they've got to include something new, right?

president trump was elected to cut taxes further. our base case is that we wind up getting two reconciliation bills, one early and one on tax late. the tax package looks relatively narrow. >> we had some movement in the senate yesterday. how does that progression look in comparison to what we might get from the house, the big beautiful bill versus something skinnier? >> after dollar trump said he would prefer one big, beautiful bill. if i am president, i want one big, beautiful bill, too. i think what senate republicans realizes that in congress, especially with as slim a majority as the republicans have in the house, you need a plan b. i don't doubt the president's sincerity or speaker johnson's belief that a one bill packages better but i do doubt they will be able to get it done. now a week or a month or even

two months from now when they have failed to get that package through, both the because the house freedom caucus is potentially upset that they are not more spending cuts, and also because moderate republicans, particularly in new york are worried about things like medicaid cuts, at that point we would be looking at the senate bill, which is already making its way through the senate as a plan b. and we will deal with tax in q4. i think it gets done. >> you have the effort from the democrats trying to pin down various members and voting on those sorts of things. you see efforts of ideas of may be pushed by the democrats. would do you make of their messaging -- ideas of a government shutdown may be pushed by the democrats. what do you make of their messaging? >> they have yet to hit on a great message to counter trump. it is our base case that we will see a government shutdown on march 14 into march 15. it is like the one lever of power that democrats are going

to be able to wield in the short-term. otherwise, i was just talking to a democratic senator last night who said knowledge democrats need a positive message, they need a consistent messenger. the challenge is single consistent messenger looks like the front runner for the presidency in four years and so there will be 40 other democrats who are going to poke and prod that person. that's a real challenge. at least democrats are talking about the need for not only a message, but a messenger. jonathan: they are very unhappy with some of the work doge is doing but this market increasingly is focused on it. spending cuts. we saw the reaction with defense stocks. the other focus is what it does to jobs. i mentioned bmo earlier, the quote that cuts might be deeper, government contractors will be the next sector to seek to rationalize their labor force. the outlook for the jobs market could dim from here.

what is the outlook from your team on how deep these cuts might be? >> what we are hearing from d.c. is donald trump and elon musk have the prerogative to cause spending across the board -- pau spendingse -- pause spending across the board. a lot of that spending will get restarted. if we are thinking about things like cancer research, dod, it is a pause and donald trump's prerogative to say we want to know where this money is going and why it is being spent. i think for the most part, a lot of that money will get restarted over time. jonathan: robert casey of cigna global advisors. a lot of people in this market become laser focused on jobless claims week by week. dani: because the federal workforce is a massive issuance and add additional jobs to this market, 35,000 people a month for nfp, so this is going to be potentially huge holes. jonathan: up next on the

program, we've got a big headline for you, the gold is in fort knox, according to scott bessent. we will catch up with francisco blanch with gold on track for an eight consecutive weekly advance, the longest winning streak i think going all the way back to 2020. gold just about negative this morning. more on the commodity market in just a moment. live from new york city this morning, good morning to you are. you are watching bloomberg tv. ♪

jonathan: the s&p 500 barely green on the week so far. this morning kind of the same. just about positive on the session and the week so far. nasdaq 100 positive 5.1% this morning. small caps up by one third. two-year down a basis point today and about unchanged on the week. 425.76. 10-year, secretary bessent -- dani: off to the races we went.

the rally is somewhat contained because of uncertainty. it is something that keeps coming up over and over again. for all the people who came 2025 sank it is going to be steep, the two-year will come down, they have been proven wrong. it has been the opposite. jonathan: it has fallen every week of the trump presidency. one more session to go. that has been the theme of the last month. some data out of europe. pmi's were not great, particularly out of france. dani, 104.69. dani: you have to ask what this bad data in hand and german elections coming this weekend, is all the best of already in there? the biggest risk is for a surprise to the upside. there is so much negativity in europe from tariffs to defense spending. perhaps the direction could be a

surprise this weekend. a leader coming out of europe. expectations are not for that but everyone is dour on bonds. jonathan: look at for that on sunday. on the radar, chinese officials are for plans to tap into the country's massive customer base. the chinese premier urging the cabinet to improve supply services across several major sectors as u.s. treasury terrie secretary scott bessent says he was the rebalance away. annmarie: he wants chinese consumers to buy chinese goods and nazi dumping on the market. people have a phone call with this counterpart this morning, who janet yellen also dealt with, and they will have a conversation. both men are not attending the g 20 finance ministers meeting next week in south africa. the first time they will be face-to-face will be at the spring meetings. these are the most important economies.

at the same time, we have not seen the conversation between trump and xi since the tariffs went on. dani: china is doing a lot of things people in the west that they would not do. they stopped short of giving direct subsidies to people to try to spur consumption but it is a focus on consumption that maybe caught us by surprise. and the embrace of private tech caught us by surprise. everyone rushed that aside but it has worked because of this renewed focus. both on the private sector and on consumption. jonathan: deepseek, a big shakeup in the past few weeks. you mentioned the european election in germany. olaf scholz and the conservative front runner frederick mertz making their final pitches. polls showing mertz in the lead. emmanuel macron is said to visit d.c. next week, likely defending

european interest around the world ukraine. annmarie: dani nailed it when we said maybe we'll see a europe leader. germany will be a practitioners government -- fractious government. macron is trying to step up to the plate to be the interlocutor between europe and the united states. he says he will have a message to donald trump on monday. telling him he cannot be weak in the face of vladimir putin. this is coming at a time where we have seen a lot of acrimony between solesky and donald trump. -- zelenskyy and donald trump. dani: you could get a leader out of germany to be the "leader of europe." for talking about joint issuance from the eu. they are free -- few europeans willing to see fiscal 30 to brussels. germany is going to brussels to try to get that done, it could be a different conversation. jonathan: we will see what we

get when you wake up monday morning. another big change from another big bank. citi ending workplace d.e.i. goals. bloomberg attaining a memo sank the bank is dropping the policy, citing pressure from the trump and administration. -- trump administration. annmarie: it's important to note we are living and then environment where things change quickly. we will determine if additional updates are needed to other areas in the coming weeks. the question i have is, citi is doing what everyone else is doing. who is not changing their d.e.i. at their companies given changing environment? dani: i was reading an interview with the citi global head of talent two month ago. "d.e.i. is a business imperative and part of our dna." that was two months ago. i think we have this problem with corporations assuming they will be the arbiters of social responsibility and social change. we are getting a reality check over and over that they are

corporations, they have a product to sell, and the need to follow the lay of the land. jonathan: step one was virtue signaling. i will push citi to one side. step two was a tap on the shoulder from the legal department. that is what this is all about. the lawyers told him you cannot do this, can't do that. i see nothing else here. dani: pam bondi issued a memo saying we will start doing criminal investigations on d.e.i. policy. if that doesn't wake of the legal department, i don't know what does. there has to be elements of continuing to have diversity through your ranks. maybe just call it something else. maybe not this big hourly virtue signaling -- outwardly virtue signaling. annmarie: the lawyers are winning and hr is taking a backseat. jonathan: more still to come. back to the commodity market and gold. scott bessent weighing in our recent speculation. annmarie: elon musk was talking about maybe going to fort knox

to make sure those gold reserves are there. that is under your purview. any plans to visit kentucky? sec. bessent: all the gold is there. jonathan: all the gold is there. gold falling slightly from all-time highs. the take from francisco blanch. "we have bullish gold for the best part of two years and first published are $3000 price target back in june of 2024." francisco, we are around $3000 right now. can we start with some of the conspiracy theories at the moment? maybe they are not conspiracy theories. your thoughts on fort knox and where this is coming from. francisco: i really don't know. it is kind of a social media frenzy. look, we have heard it from the u.s. government that the gold is there. will they want an audit? i don't know.

those 8000 bars of gold have been there for a long time. the u.s. government has idly changed its policy on gold for decades. -- has not really changed its policy on gold for decades. jonathan: when you speak to clients have you got a decent read why we are seeing some movement we are seeing? lots of reports about gold shifting from the united kingdom over to the united states and being taken out of the vault at the bank of england. what is behind that? francisco: there are a couple of things. there has been a strong demand for gold from investors as a result of the policy changes we have seen in recent weeks and months. also, the fact that tariffs could be applied on gold. the u.s. gold market, co mex, trades on a net basis of tariffs. we have seen forward points in the gold market have essentially

started to reflect some of that. we have seen shippers trying to move gold from london where the biggest markets. we have seen the physical arrangements to push gold out of the u.k. into the u.s. market. that has been shifting the shape of the gold forward market, but also the uncertainty around how things will play out. gold is becoming a core tenet of portfolios. frankly, one of the few assets that is providing diversification to equities and bonds. i think that is the story. we have seen ironically building back into the market. it happened during covid, during the great financial crisis. could we see it again?

it is possible. dani: someone who tried to visit the gold vault in the u.k. and was rejected and told i couldn't, i feel personally invested in the story. a physical arbitrage like this, how long can a continue? this dislocation in the market? francisco: it can go on for a while. the new york fed vault, i saw the gold was there 25 years ago. just as an anecdote. it was during my associate program back in the day. i think the arbitrage can go on for a while until there is certainty on what will happen to tariffs. to me, i think the whole tariff discussion is very much one tool to put pressure on certain political goals. as long as the trump

administration feels they can use tariffs as leverage, they will continue to use them, and the market will still be tight for several months, i think. annmarie: that is a gold of the boe and central banks, right? the u.s.'s is in fort knox. interesting were all this gold is stored around the united states. we spoke to the treasury secretary about monetizing the balance sheet. many thought he meant maybe remarking u.s. gold. he said that is not what he meant. what if they did do that? but would that mean for the price reaction -- what would that mean for the price reaction? francisco: hard to say. remarking u.s. gold is an exercise for the most part. it would certainly increase the fed's balance sheet quite a bit. that gold is marked at a very low price, as you know. it would effectively boost the fed balance sheet and change the

composition on an accounting basis. it would probably be bullish for gold markets. it would show gold is along this relic that has been sitting in central banks and been dismissed a little bit. not even the biggest central bank is taking a renewed interest in gold. any renewed attention will be constructive for the market. that is my initial reaction. annmarie: if we know the administration like to be creative, would you take it off the table? francisco: yes. it is possible to take it off the table. i'm not sure why you want to boost the gold price at this point. the u.s. government is trying to lower energy prices. inflation can continue to normalize and allow for normal interest rates. they are also trying to weaken the u.s. dollar. i'm not sure how bringing

attention to the gold market is going to help any of those two goals of bringing down inflation, bringing an interest rates, and eventually weakening the u.s. dollar, which is at record high levels. jonathan: let's pick up on the last point. bringing down energy prices. how can they go about doing so? francisco: we have seen this past couple of weeks, it's been fascinating to watch. we had a meeting earlier in the week in saudi arabia. russia and the u.s., the world's three largest oil producers by a long stretch. you cannot help think that energy has been part of the discussions. that last third of gold that secretary rubio mentioned in his comments of potentially engaging in some economic cooperation with russia was a bit of a surprise to many.

european companies, u.s. companies have been pulling out of russia for the last three years, trying to pull out for the most part. ultimately, russia is a commodities producer. mostly energy. kenny cooperation will come on the energy front -- any cooperation will come on the energy front. it is something that has been brought up in the conversations. how does the u.s. redone global energy prices and how does that impact the inflation picture? there is potentially an angle. if russia eventually gets sanctions relief, does that mean that we have a new stream of petrol owners flowing into the market? are they potentially a source of funding for the u.s. government down the line as we see this constant need to fill that to

trillion dollar budget deficit -- to trillion dollar budget deficit in washington -- $2 trillion budget deficit in washington? jonathan: wti just short of $72. your bloomberg brief with yahaira jacquez. yahaira: the washington post is reporting president trump is planning in order this week to fire the board of the u.s. postal service. his plan is to full the agency into the commerce department undersecretary howard lutnick. the board is repaired to sue if the president threatens its independence. shares of nissan traded higher in japan today. a high-level japanese group has drawn up plans to seek investment from elon musk's tesla. the group believes the electric vehicle maker is interested in

acquiring nissan's plants in the u.s.. shares of celsius are soaring 30% in the premarket after pronouncing plans to buy rival energy drink maker aligning new for $120 billion. it's expected to close -- $1.8 billion. get suspected to close in the second half of 2025. that is your bloomberg brief. jonathan: thank you. up next, counting words for the bond market. >> the fed said they may stop their balance sheet runoff. easier for me to extend duration when i'm not competing with another big seller. it will be packed dependent. jonathan: not happening any time. we will catch up with kelsey berro from j.p. morgan asset management in a moment. you are watching bloomberg tv. ♪

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jonathan: yields lower and the bond market. 10-year, 448.18. calming words for fixed income. what is the medium-term? let's say those ambitions become reality. do you think about turning down the debt? >> sure. that is a long way off. we will see what the market wants. the fed said they may stop their balance sheet runoff. it's easier for me to extend duration when i'm not competing with another big seller. it will be packed dependent. jonathan: scott bessent looking to fight inflation, sang any move to boost the share of long-term treasuries is a long way off. kelsey berro writing, "the biggest risk for the bond market is a sustained acceleration in

inflation in wages that result in rate hikes being considered." good morning. kelsey: good morning. jonathan: what did you take from the treasury secretary's comments? kelsey: the bond market was encouraged. it is not the time to be turning out the debt, which makes a lot of sense. the yield curve is positively sloped. 30-year real yields are the highest levels in 20 years. the bond market is comforted by the fact there is somebody at the helm that understands the supply-demand dynamics and is looking to manage term premium and not aggregate -- aggravate term premium further. annmarie: you are concerned about inflation and that means the fed is either on holder might have to weigh a hike this year? kelsey: the biggest risk is inflation but we actually feel

fairly comfortable with the inflation backdrop. we do feel like with the fed, they are still in and easing bias where there are two decisions at every meeting or two options. one is to stay on hold, which is where they are now. the other is to cut rates. i was hearing in the earlier segments a discussion about the labor market, monitoring jobless claims, looking at the impact the layoffs are going to have on the broader economy. we believe the fed is much more sensitive to labor market weakness than to labor market strength. you get a stronger part, the fed does nothing. you get a week report w -- weak report, the fed is stepping back in to support the economy. yields are brains found with risk of moving lower. dani: login bonds have followed by about -- long end bonds of fallen this year. how much of that is supply and

structural changes that may or may not happen? what is a bigger driver of that, supply or growth concerns we are seeing in the long end? kelsey: primarily growth concerns. i think supply is a secondary factor. the one thing i with highlight is, while the treasury secretary has control over where we issue on the curve and they are in charge of determining what the weighted average maturity of the treasury's debt is, they are not the ones ultimately responsible for determining how much debt needs to be issued. that is still a function of how much the government takes in, how much revenue they get from tariffs and taxes, versus how much they spend. that is what the congress is debating on terms of reconciliation bills. that hole is not something the treasury controls but ultimately is a function of what the congress decides.

what the bond market is ultimately going to be trading off of in the long end is what the growth impulse is or is not as it relates to the fiscal trajectory. do we get the tax cuts? the extension of tax cuts? is there room for anything else or just status quo? in that case, not a lot of impulse coming from fiscal. jonathan: you explain the fed's asymmetric reaction function. let's say we got some weaker economic data. labor force data starting to soften a little bit. will they face the prospect of policy change further down the road? we are trying to gauge whether that asymmetric reaction function would be compromised by the prospect of policy change further down the road. kelsey: i don't think so. i think they are aware there is a high level of uncertainty. they don't want to hamstring themselves with the what ifs. there's always what ifs. we never know what is coming next. in fact, perhaps we know a

little more than we did before as it relates to what the trump administration is trying to achieve. i think they will stay very focused on the data. they will stay focused on the labor market, which are now is still quite healthy. on inflation, which i think this year the fed is much more prepared for the january inflation heat. the bond market is any good job fading the extremes. you had a week retail sales report. the mark -- weak retail sales report. on the other side, we have a strong cpi report. they also brushed that aside. when we know that january continues to surprise to the upside nomadic with the economists are trying to do to seasonally adjust it, it is not working. when you look at pce, we are respecting that defaulted 2.6% on the year-over-year basis.

it is not to percent but it is pretty close. jonathan: there are a lot of what-ifs. spending cuts, tax cuts, tariffs on canada and mexico, 25% on steel and aluminum, 25% on autos, chips, and drugs. annmarie: and also april 1. before the april 2 deadline he said april 1 is when the team is supposed to come together and say this is for the issues are on these countries, on the sectors. at that point he will have jamieson greer in place. jonathan: good luck to them. kelsey, good to see you. kelsey berro of jp morgan asset management. up next, we catch up with aaron kennon, dan clifton, edward fishman, and the former chair of the council of economic advisers jason furman. equity futures just about unchanged on the s&p 500. live from new york, this is

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>> make no mistake, the u.s. is still strong dollar policy. >> the economy is strong. labor demand is increasing. >> an economy entering this period with a lot of momentum. >> we have had the u.s. exceptionalism story. >> this is bloomberg "surveillance" with jonathan ferro, lisa abramowicz, and

annmarie hordern. jonathan: the second hour of bloomberg "surveillance" starts now. yesterday, snapping a runner back to all-time highs on the s&p, small pullback. on the nasdaq 100, posited by about .1%. on the russell, the small caps up by two. the bond market, let's get a flavor of fixed income. the 10 year yield down by two basis points, four point 48. down a single basis point, 4.2576. nine: 45 eastern come you get some pmi's. after that, consumer confidence sentiment. we typically wouldn't make a big deal of this, but given where it is going recently, it's getting more attention. annmarie: sometimes you see the market trade on it even though it's highly political if you break down what democrats and republicans are saying when it comes to how they feel about sentiment. in early february, it had a seven month low getting people concerned because already consumers are trying to

understand what is going on in policy. it is a fog of uncertainty. trying to think about what could tariffs mean, even if it is only once it is a price hike. jonathan: a boom in sentiment from consumers. confidence is a little lower, expectations for inflation or little higher. at the center of that, at the epicenter, are tariffs. lisa: tariffs mean uncertainty. how much as we are thinking about earlier in the hour, how much does that create scars of companies less willing to hire and less willing to commit to capex. you hear about walmart talking about uncertainty. the team at rbc did work digging through research, not just research, but company earnings. over and over they talk about uncertainty. about not knowing where things are going. we might get some answers april or march, but until then, how much does it mean that we all pullback and demand is a little softer?

jonathan: some companies come officials, institutions, the federal reserve, are not able to give real guidance at all on the outlook. gm gave a dissident outlook and people didn't believe it. all mart wasn't great. people really believed that. they also believe that it could get worse if we see some of this. i mentioned this, keep going through the proposals. this is what we have to confront over the next month or so. 25 percent tariffs on canada and ask ago early march. who knows? the base case for a lot of people's it won't happen. 25% on steel and aluminum in the middle of march. who knows. the base case for a lot of people as it will happen. middle of april, 20 5% on autos, chips, and drungs. have no sense of the consensus on that one at all. annmarie: april 2, autos, it's in the neighborhood of 25%. even the administration hasn't been clear on how high the percentage will be on the tariffs. what was interesting with the treasury secretary yesterday, when you asked him about how he thinks about tariffs, because he

talked about revenue raising, reciprocity, and negotiating, he said that the revenue raising will be the countries that will not negotiate and come into reciprocity with us. meaning, europe. maybe they want to have a deal on autos. we saw the head of the european trade commission in d.c. this week. if they don't, that will be a revenue raiser. jonathan: evercore's julian emanuel called it an uneasy calm. coming up, we will catch up with clear harbor asset management on the impact of tariff uncertainty. dan clifton on secretary bessent's push for lower bond yields. edward fishman from columbia university on the rising tensions between trump and zelenskyy. taking a hit after weak walmart results yesterday. weighing in on the current earnings season writing that foreign guidance was clouded by tariff uncertainty among other variables. welcome back to the show.

what does the market look like when fed officials and corporate executives are no longer able to hold our hand and offer us guidance? >> good morning. certainly, a period of uncertainty around tariffs. the market in the u.s. seems to still march higher on a year-to-date basis, jonathan, and we welcome that. yet, if you look at the investor community looking at the u.s. equity market, looking at the tariff profile, they are wondering how much higher we can see the risk-on trade continuing without clarity on that front. not to mention valuations in the u.s. are at historically high levels, 22 times forward for the s&p 500, whereas the rest of the world looks far more attractive on a valuation perspective. even when you adjust for the relative historical pe multiples in those regions around the world, and even when you adjust for sectors. jonathan: have you any thoughts

on the tariffs themselves to begin with? how the costs will be distributed and whether companies will take this on the margin or be able to pass this on to the consumer? that is why for many reasons the walmart numbers were slightly concerning. evidence may be they won't be able to pass some of this on. aaron: time will tell. that was an interesting earnings report because the numbers are relatively strong. the outlook was strong. the outlook was weak, excuse me. it didn't include the unknown, which is tariffs. that's an important point, that the outlook is weak and yet it is not weighed down further by the prospect of increasing tariffs. will it pass through to the consumer or the company? they weighed in on that and i will paraphrase something like, we will press on our manufacturers and distributors pretty hard. the read there is to try not to allow this to feedback into the consumer with higher prices.

that is certainly an unknown. the steel and aluminum tariffs could impact the auto industry precisely at a time when it would be extraordinarily unhelpful. dani: can you extrapolate what walmart said to the broader market come of the idea that tariffs are not -- there might be some weakening to come in consumers? aaron: if you read the earnings report or listen to the earnings call, dani, that was a really interesting reality of a weak outlook. they specifically stated that their range of revenue and earnings for the year didn't incorporate any tariffs that have not yet been announced. certainly, at the top of the hour, as jonathan pointed out, the market is trying to size of what is bargained what is bite on the tariff front. i think it will probably be more bark than bite, but we will

certainly see tariffs. will they be is uniform as the president is threatening? i suspect may be less so. there are certain regions in the world, like japan, where if you look at imports and exports and the balance of trade, tariffs may not fundamentally impact japan. that could ultimately lead to a tailwind. a little bit of a tailwind in 2025 for japanese equities. dani: that is some stuff we need to work out, how to price it into equity markets. the good stuff already priced in, bank of america and her team put out a note yesterday saying 19 of the 20 valuation metrics that they track have been priced in, but the one thing that hasn't is the idea of the regulation. you can see it in the small caps. the fact that they haven't taken off to the degree that we expected them to. why do you think that the idea that m&a will be coming back, that there will be deregulation, why is not not playing as big of

a factor as he thought it within in 2025? -- we thought it would in 2025? aaron: the tariff conversation has stolen the show. i will push back on that view. the banking sector year-to-date, there is an anticipation that more m&a transactional activity will occur, and that has been feeding into the larger banks. maybe not the alternative asset managers on a year-to-date basis. i would say that there is an expectation that we will see deregulation, and it's starting to price into the banking system . as it pertains to small-cap, the small-cap pieces, i would still argue that that is fundamentally a question around interest rates. as you know, a lot of floating-rate exposure in the small-cap part of the market. the russell 2000 is very exposed to floating-rate interest. rather than the m&a view that m&a will not positively affect small-cap, i think that that is more of a rate issue than a

concern that somehow m&a will bellyflop this year. with that said, the first month and half of this year, m&a has been quite weak. i think the weakest since 2005. annmarie: is that because of policy uncertainty? corporations will wait until they get more clarity? aaron: i think part of it is probably that. it is also policy around taxes, tariffs, regulation. we are also six to seven weeks into a new year with a new administration. you know, we have a long runway ahead of us in 2025. i suspect we will see m&a activity accelerate. you look at private equity, the maturity of private equity funds, they are going to be forced to sell their assets because their funds are coming to the end of their life.

those things may not create ipo opportunities. they may create more m&a opportunities. i suspect that will accelerate this year if you look at the $1 trillion or so worth of pe that needs to be sold and unwound from these funds so that they can give back capital to their shareholders. annmarie: you say you think that we will see more bark than bite when it comes to tariffs, but we've seen one bite, the 10% on chinese imports additionally. how much has the market digested that and moved on? aaron: i think the market is questioning the duration of that. the purpose of that. is it economic? is it to raise revenue? is it to leverage china as it pertains to negotiations happening in riyadh specific to the war in ukraine? there are a lot of dynamics that

investors and market observers are trying to size up that are beyond economics. jonathan: appreciate your time. it is good to catch up. we raise the question this week if the worst was behind us for the likes of europe with stocks closed all-time highs or if we are whistling past the graveyard. it is difficult to get a clear read on where the administration is going. i believe there was a genuine goal of realigning global trade, but i believe that officials around the president trying to rationalize the president's impulses on any given day around the latest red headline. -- trade headline. annmarie: he adds additional countries to the list every day. one thing that is a clear threat is they want to see reciprocity and they want to have the global realignment. you talk to someone like peter navarro who wants to do away with the irs and have the ers, taxes paid with tariffs. that is how they want the federal government to be funded. there is a spectrum around these

personnel individuals around the president. jonathan: we briefly mentioned the lack of m&a and this is early february and can change, but this week is the biggest loss of banks so far. the s&p 500 down by 2.8%. still up on the year, granted, but that was notable. dani: what bank of america talked about, what was supposed to be a strong thesis of mna and the regulation hasn't played out as expected. we have to come back to the thing that we come back to come uncertainty. if you're looking at buying companies and they have operations in mexico, canada, or any international exposure, it is probably a deal put on ice. jonathan: it is only february 21 and one month into the administration. let's see with the year has in store. stories elsewhere with your bloomberg brief. yahaira: standard charter shares are rising 3.7% in london after the bank topped earnings estimates. strength in its trading and wealth business and operating

from global markets jumped 45% in the fourth quarter. the bank will return 1.5 billion dollars in buybacks to shareholders, bringing its total distributions to $4.9 billion since 2023. new york governor kathy hochul is saying that for now she doesn't plan on removing new york city mayor eric adams from office but will take steps to curb his power, including creating a state-level deputy inspector general for the city. mayor hochul was under pressure to act from the trump administration sought to drop corruption charges against adams. elon musk is calling for the end of the nasa space station program into years. the current target is to end in five years. in a post on x, musk said the iss has served its purpose and there is very little incremental utility. musk then reiterated his

ultimate plan to go to mars. jonathan: more from yahaira in about 30 minutes. yield are down, growth is up. >> what is necessary are the underlying conditions. the underlying conditions that we need for yields to come down for growth to go back up. as jonathan mentioned earlier, 10 years have come down every week since donald trump's president. if we continue that for 52 weeks, that would be great. jonathan: we will get the views of dan clifton next. good morning. ♪ so, what are you thinking?

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jonathan: welcome to the program, equity futures on the s&p are totally unchanged. down on the session and pretty much unchanged on the week, down two basis points on the 10-year to 4.4798. yields down, growth up. >> what is necessary are the underlying conditions. the underlying conditions that we need for yields to come down and for growth to go back up. we have this affordability crisis in housing. we have an affordability crisis in the auto payments. one thing that would be very stimulative, as jonathan mentioned earlier, 10-years, rates have come down every week since donald trump has been president. if we can continue that for 52 weeks, that would be great. jonathan: treasury secretary scott bessent touting the trump administration's path to non- inflationary growth. the u.s. is in the midst of a liquidity bazooka, which should temporarily bring down bond yields and weaken the u.s.

dollar serving as a cushion for investors as they grapple with the issues of tariffs and other headwinds. let's start with a tariffs if we can. i have mentioned these dates a few times, early march for canada and mexico, the middle of march on steel and aluminum, and then reciprocal tariffs in early april. having these conversations with clients, what you tell them you expect and what you tell them that you don't expect? dan: good morning, and congratulations with a great interview with the treasury secretary yesterday. you look at the discussion, it is about tariffs and a lot about what we call the spinach. how you get a reconciliation bill done. what do the tariffs look like? at the beginning of this year we have a good cushion, the financial liquidity bazooka that you're seeing. to give you context, next week we will do about $150 billion of net new liquidity into financial markets, bigger than anything

donald trump is talking about on tariffs or any type of spending cuts or federal layoffs. we are in a very good position. the way that we are talking about this to clients is that this is a temporary liquidity bazooka and we should be using this time to be able to make policy changes that will make it easier for treasury, whether that debt ceiling gets lifted later this year. you are seeing those discussions happen. in the fed minutes they were talking about getting rid of quantitative tightening, something that secretary bessent said on your show yesterday would be critical for them if they are going to be able to increase coupons at a later date next year. there are other changes to see. what about a lower budget deficit that could come into the april tax revenues? that is getting those fundamentals in place that will then make it easier to deal with some of the policy issues that trump is talking about. i would say that april 1 is a key date when all of the

government agencies will report on where tariffs will be. whether that is universal, reciprocal, but ultimately, if you look at the headlines, they are talking about europe doing a deal with trump on trade now that he has threatened tariffs. a lot of investors are looking at it as a transactional push and not a real tariff push. we will see if that changes later this year, but for now we are in a good position that's larger than anything we are doing on tariffs. annmarie: how soon after the april 1 meeting they will have when everyone reports back everything going wrong in trade between the u.s. and other countries, how soon can we see trump levy the tariffs? dan: he is talking about the next day. that is a way of accelerating negotiations in february and march to try to get some resolution. the key is, why are they waiting until april 1?they are

trying to use the international economic power act to put tariffs in place and there are legal issues associated with whether they are going to be able to use that. what i saw from the january 20 executive order was a very thoughtful process, where they said we will look at all of the angles. we will talk to the career attorneys who have been working on this for a long time. we will make sure that our i's are dotted and our t's are crossed and we will make sure we are in good legal ground. if they invoked our iepa and they lose they would lose tariff power. i think they will be in a better position to move forward if they needed to on april 1, but it probably won't be for another couple of weeks or months until they actually get reports in place. annmarie: how difficult will it be for congress to raise the debt ceiling? dan: the consensus forecast into this year was that it would be very easy because republicans have complete control.

as you know, republicans have the smallest majority in the house of representatives since the civil war. they probably have 20 members or more who have never voted for a debt ceiling increase before, so it will be tough. what the republicans are saying is that they will put it into a reconciliation bill to try to raise it that way. for you to get those members' votes who have never voted for a debt ceiling increase, there will have to be significant spending cuts getting government spending down as a percent of gdp. if you make that move in that direction, you may wind up losing moderate republican members from california or new york. there will be a push and pull determined by the reconciliation process. the good news is, the longer the debt ceiling is in place, the more liquidity you will have in the financial markets. we find the liquidity brings it down bond yields, it weakens the dollar, and financial conditions should stay loose while they are debating the bill overall. we estimate they won't raise the debt ceiling until mid-august.

as you get to may, june, july, markets will start focusing on whether you can get a reconciliation deal. if you do, will the debt ceiling be lifted? if not, you have to do a bipartisan deal and the democrats will extract very significant concessions if you need their votes for the debt ceiling. annmarie: if we see the yields go down and the dollar weaken it may be welcomed by the trump administration. the use of nonconventional-type policy has serious people on wall street thinking about what else they can do to achieve that aim. jim beyonca a beyonca research says that we could see one of them, like a mar-a-lago accord, forcing different central banks and governments to swap out the current treasuries that they hold or a longer-term u.s. debt. do you think that a proposal like that could be one that we could see enacted? dan: somatically, trump is changing the world order -- thematically, trump is changing the world order. you're seeing big changes coming.

will there be ukraine assistance for critical minerals? how will european governments respond to the threat of higher auto tariffs? you will get it in piecemeal or you will get it in a larger deal. countries have to say, should we start looking at a larger deal and are we ready to do that? we are probably not ready. it is something that could come later down the road. the question is, if you are moving to a system that will be more tariff based and less tax-based, you will have to do a deal like that. if you are on the current process or the first current process, we will raise tariffs on china and threaten everybody else, you don't really need to do the accord that you are seeing or is being discussed by some of trump's advisors. it is more of a piecemeal strategy. if you're going to go larger and remake the global trading system, at some point you will need a plaza accord version, the mar-a-lago accord is a great way to talk about it. at least

somatically if not practically. -- thematically if not practically. jonathan: i remember when secretary bessent sat in that seat. you guys were talking about a mar-a-lago accord in the summer of last year. dani: it is being considered because we heard some of the president's advisers not naming at that but talking about this. it has to come hand-in-hand with a complete reordering of trade. jonathan: there will be losers. mexico focused on the quarter on quarter data, the biggest contraction for the economy since 20 tony one, and it could get worse for them in 2025. next, edward fishman from columbia university on u.s.-ukraine tensions. ♪

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jonathan: live from new york city, welcome to the program. equity futures positive on the s&p 500 by close to .1% on the nasdaq 100. positive by .3%. on the russell, small caps up by .3%. two hours from the cash open. morning movers, we can do that with you hair -- with yahaira. yahaira: the company gave a weaker outlook. rivian said that it would deliver 14,000 vehicles and now it says the number looks like

8000. they are citing tariffs and uncertainty over ev tax credits as reasoning for the cautious outlook. next we have bloc down 9%. the digital payments company led by jack dorsey reported a big mess on adjusted earnings. it does expect growth to accelerate, but it seems like investors wanted more when it came to the profit outlook, which it kept in line. this is for you, annmarie. i know that you like celsius drinks in the morning. shares are up 33%, soaring. the company is taking a bigger share of the booming but increasingly competitive energy drink market. they will buy an rival. it comes at a critical time, celsius has seen revenue slow because of all of the upstarts, but they think this is the right move. jonathan: i did not know that you were a celsius influencer. annmarie: it is only every few

months if i go out the year -- go out the evening before and i have to wake up at 3:00 a.m. it is not often. jonathan: israel saying that the body returned by hamas is not that of a hostage taken on october 7, 2023. shocking scenes, barbaric and the last couple of days. annmarie: they are making hamas a terrorist organization, making the release of these hostages done under a deal into an absolute spectacle. on top of that, this woman and her two young children who were kidnapped by hamas, a terrorist organization, died in their custody, there remains were sent back the idf came back and said that those are not the remains of the woman, which has been heart-wrenching to read about. dani: underscoring all of this is come this is supposed to be the time that we are moving towards something that looks like peace, like something that

looks like unity. i don't know how seeing images of child-sized coffins gets us closer to that. if anything it signifies the failure, devastation, and loathing. what does this do to the israeli populace? you have to imagine it hardens them and makes it harder for peace negotiations and cease-fires to go on. jonathan: any updates on that we will bring you on bloomberg. the national economic council director confirming tariff revenue could be used to replace income taxes. saying tariff revenue from china would amount to $500 billion and $1 trillion over the next 10 years. annmarie: we have to see what the tariff revenue will be. now, an additional 10%. talking about numbers as big as that, from china alone, how much higher can the rate get. this sounds like the maximalist approach that you hear sometimes from the trump administration but no one takes seriously that we will all not being

paying taxes to the irs. the total revenue raise is $3 trillion. in order for this to happen, you would need 100% tariffs on all imported goods, not to mention less imported goods because of the tariffs. maybe it needs something like 200%. jonathan: doge will solve all of it. dani: unless they cause a recession in d.c. and we are all happy but d.c. is very unhappy. jonathan: that is the focus, what happens with the spending cuts at what it means for the data. dani: that is why we combed through weekly jobless claims. it hasn't showed up. at the moment, it doesn't seem like a big impact, but does the threat of losing her job for some people, not just in d.c. but for contract workers and local government come is that enough to change the behavior of consumers? jonathan: we didn't see it in jobless claims yesterday, we

will see if we see it in the coming weeks. putting sanctions on the table in ukraine or talks. the united states is prepared to ramp up or dial back penalties based on rush's willingness to negotiate. annmarie: economic warfare basically is being used in terms of sanctions to get putin to the table or punish him if he doesn't come to the negotiating table. i'm reminded of what the biden administration did on their way out the harshest steps that they could have taken over three years by outright sanctioning some russian crude.that is potentially something that we could see this new administration continue if putin is not playing ball with trump. jonathan: the trump administration keeping up pressure on president zelenskyy. >> he needs to come back to the table and we will continue to have discussions about where that deal is going.

again, we have an obligation to the taxpayer. i think this is an opportunity and the president thinks that this is an opportunity for ukraine going forward. in my view, there could be nothing better for ukraine's future and their security than to have the united states invested in their prosperity long-term. jonathan: the latest this morning, the trump administration looking to strike a deal over minerals and resources in ukraine. zelenskyy writing on x that ukraine is ready for a security agreement with the united states after officials met to discuss an end to the war. edward fishman, a professor and author, joins us for more. let's start with the book. congratulations. i know that you look back at the last couple of decades of foreign policy in the evolution of it on the u.s. side. give us the essence of where you started and where it came from. edward: the thesis is that we are living in an age of economic warfare. sanctions, tariffs, export controls have become the way that powers compete with each other. true of the united states but increasingly true of our allies like the eu, china, japan, and

india. sometimes people think, is this a choice? is this because trump loves sanctions and tariffs, but it's rooted in a structural mismatch. you have a global economy that is still designed with a benign political environment of the 1990's as opposed to the more hostile one that we have now. annmarie: what you say to critics, sometimes myself, who say that sanctions don't work they just create new markets? edward: do sanctions work? does anyone ask, does a bomb work? a bomb is good at blowing up something but doesn't get you what you want. u.s. sanctions are extremely effective in particular at exacting economic damage on other countries. if that translates into political outcomes, not always. the 20 years of war in afghanistan, did that do that? no. annmarie: the biden administration levied all of the sanctions and froze russian assets, did any of that work? in the end we are about to enter the fourth year of this war. edward: the initial goal that

biden had was the threat of devastating economic pain to deter putin and that clearly failed. the second that putin invaded ukraine the threat failed. why? because sanctions could have never worked? the evidence shows, as i talk about in my book, that russia underestimated the will that the west had to impose sanctions and the best evidence is he had a war chest of 600 billion dollars in reserves and half of them were left for the u.s. and the eu to freeze. if he thought that the u.s. would go that far he would have diversified more broadly into gold and other assets. dani: you get the acknowledgment from the u.s. that sanctions are leveraged with moscow in current discussions. what do you make of the current discussions? scott bessent was on the program yesterday saying that they are still a tool that they are considering, but do you see it in the language they are discussing? marco rubio talking about unique economic opportunities. is it a tool to help the u.s. improve the economy and that relationship or something about the war in ukraine?

edward: putin is trying to pull a fast one on trump now. saying that you should lift sanctions because it is in america's own interests trying to couch allowing u.s. oil back into russia as a carrot to the u.s. they left russia because of u.s. sanctions, not because of what russia did. but the projects that exxon was involved in in the arctic, i was involved in getting them out in 2014, is no longer profitable. drilling in the arctic is expensive and not profitable at current oil prices. i hope that the trump administration doesn't fall for the illusion of business opportunities in russia. i don't think that they will, but some of the things that marco rubio have said are concerning. dani: you right on the point that -- write on the point that it would go in deference to the u.s. energy goal if they do that but it's not as profitable. what would it mean for domestic energy production if a deal is struck with russia? edward: in a world where trump

agrees with putin's view and says, let's lift sanctions, what would senators and members of congress say from louisiana if we are prioritizing russian lng over gulf coast lng? what with the alaskan delegation say if we are prioritizing siberian exports over alaskan? it is confusing and that is why i don't think we will go there. if you're looking at this from a very narrow america first trumpian view, you would think that you would build on the final sanctions that trump put in place sanctioning russian crude at the end of the administration. that would provide a little price stability to give u.s. shale more room to produce profitable rates and probably create market share for american lng. annmarie: isn't trump in the middle of negotiating mode trying to get putin to the table? i think he wants a cease-fire to start.

edward: i cannot read trump's mind. the russians at least are trying to make this a bilateral discussion about u.s.-russian relations and specifically normalizing relations. the russians don't want to talk about ukraine. they want to get what they want and say to lift sanctions and then we can talk about ukraine. what you're saying is right. sanctions are the key leverage. the idea that you would give that up at the beginning doesn't make sense. annmarie: ukraine, what you think about the minerals pact? edward: i think something will get done. for the ukrainians american support is essentially existential. the deal that we saw, if we can agree that the leaked deal was the real deal, is something that no leader of a democratic country can sign onto, giving over half of your natural resource wealth in exchange for vague commitment. the news that i've seen recently is that the u.s. side has softened the terms and said this is no longer under new york law. maybe this will lay out the u.s. to declare a victory or allow trump to declare victory and

justify support for ukraine, but broadly speaking if the u.s. and ukraine continue down the current path ukraine could wind up becoming a significant economic partner to the united states and a diversify away from the chokepoint that china has over critical minerals. jonathan: we have talked about a failure, the limits of being able to influence our adversaries. can we talk about the limits of influencing our allies? why has it been so difficult to get the europeans on side? not just under president trump, but under president biden and president obama. what is so hard? edward: i was involved with sanctions in the eu in 2014. often we work herding cats, but i have to be apathetic to them. in the u.s. we can impose sanctions on russia and it won't affect us. at the most you have high oil prices but nothing else would affect us.

in the book i talked about, i met with a little whiny and dairy farmer. -- lithuanian dairy farmer. she lost 50% of her business because of the sanctions. we were terrified in the u.s. government. what will she say? she said, you should hit russia harder. some european countries like with the whiny, estonia, latvia -- lithuania, estonia, latvia, feel threatened by russia. but in paris, russia feels pretty far away. jonathan: the american position, how many times do you get european tourists come to the u.s. and say that the infrastructure is terrible and ours is great, let me tell you why. there is an $800 billion plus defense budget that europeans don't have. they have been subsidizing the european infrastructure story for a long time. do you think that they are equally pathetic with the american position? edward: no. we can separate the military

situation from the economic sanction situation. on the military side, the eu needs an independent defense capability. part of the problem if you go back to the early 1990's is that the u.s. discouraged this because we viewed it as a threat to nato. the u.s. wanted to have it both ways where we say don't have a military because that would be a threat to nato, but please, share the burden. hopefully if the trump administration says, brussels, build an army if you have political support, i think that that would be good for europe and the united states. jonathan: we have a lot to talk about and good luck with the book sales. edward fishman of columbia university. an update on stories elsewhere with your bloomberg brief. yahaira: unitedhealth group shares are tumbling nearly 10% amid reports that the justice department launched a fraud investigation into its billing

practices. the journal reporting that the doj is looking into the united health diagnosing practices after claims that medicare paid the company billions of dollars for questionable diagnoses. president trump met with tim cook at the white house yesterday. cook is among the tech leaders trying to foster a closer relationship with trump since his reelection. apple is caught in the middle of an escalating trade fight between the u.s. and china at a time that it is seeking to revive sluggish iphone sales. amazon mgm studios gained creative control over the james bond franchise forming a joint venture with longtime custodians, ending the family control over the franchise paving the way for amazon to offer more james bond content. your bloomberg brief. jonathan: in the 1960's, he said, do you know how many times i've seen that online? that is what people want he said

in the 1960's. dani: i can't think about him without the cgi mustache situation. if amazon owns it, they need a redo. they need to make sure everything looks good. i can't watch him in anything anymore because of that. jonathan: i have faith in bezos. i didn't like how the daniel craig stuff ended, but that's for another time. transitory tariffs. >> to the extent that team transitory at the fed has any credibility, i would say that tariffs are the most transitory thing that there are. jonathan: tell us what you really think, mr. secretary. jason furman, the former chair of council of economic advisors under president obama joins us next. from new york, you are watching bloomberg tv. ♪

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jonathan: things are little more calm this morning and equities are not doing much. similar in the bond market, equities about positive on the s&p 500, bond yields closer by close to two basis points. 4.4876. under surveillance, transitory tariffs. >> to the extent that team transitory at the fed has any credibility, i would say that tariffs, if they have any price adjustment are the most transitory thing there are. i don't think that that should hold them back very long. jonathan: u.s. treasury secretary scott bessent defending the trade policy. jason furman with some sharp words for the previous administration writing, in foreign affairs biden never did the hard work of explaining to the public that enforcing further limits on trade with china imposed real costs on

americans, but the national security gain was worth the economic pain. jason, i imagine that you did not write the headline, the post-neoliberal tragedy of bidenomics, but it got attention what feedback did you get from your own party after publishing that? jason: i have been pleased by the reaction that i've gotten. certainly some people have been very negative and critical. i have heard from a lot of democrats who were happy that i wrote it and think that we need to figure out a different way for policy going forward. i have also heard from people with different ideas. what i haven't liked his people from the trump administration who have leaked all over it without realizing it's a description of many of the problems, in some cases more severe come of their own policies. annmarie: what is the most severe problem in your mind but the trump administration is

offering right now? jason: in terms of the economy? tariffs. especially flea go ahead with anything on canada and mexico, which are so inextricably linked in the way that america makes things. it was refreshing that the treasury secretary was effectively admitting that it will raise prices. i would warn him against using the word transitory for inflation. you don't know what gets built into expectations. i don't think that the fed could afford to have the inflation rate go to 3% for a year or two and say, don't worry, it's just because of the tariffs. we will keep cutting rates even though inflation is 3% now. annmarie: will it be hard for the democratic party to throw stones at this administration when it comes to tariffs when we had such high inflation and the biden administration and they refused to remove tariffs on places like china? jason: i wish that the biden administration had removed a lot of those tariffs. i wish that the biden u.s. trade

representative hadn't said the idea that tariffs raise prices has been debunked. but, you know, i don't think what about his -- i don't think whataboutism helps your economy. we end up with 2.9 percent inflation. maybe americans aren't noticing it as much as they did a couple of years ago, but the fed will certainly be noticing it. the fed is not cutting rates in a world with inflation like that. in fact, it might be raising them. dani: to that point, what happens if a similar mistake is made this time around. by similar mistake, the idea that you pointed out what jon started us with, that tariffs are being put on a not necessarily describe the something that you need to grit through for national security. what's more, something that raises revenue and brings down taxes, when the reality might be different on the ground? jason: it is a terrible way to raise tax revenue.

it is highly distortionary. in some cases, it's a national security tool. for example, sanctions on russia. no one said that america would get rich putting sanctions on russia. we understood that we were paying a small economic cost by not doing business in russia, but they would pay a disproportionate cost. if the president uses his leverage well, and it's not clear that he is, it is something that would help bring them to the table. that is basically what tariffs are like. where you especially don't want to do them is where they are on intermediate inputs needed for american manufacturing. when they are on things that consumers want, things made by our allies, things where you could cause trade diversion from another country. lots of the ones that they talked about are poorly designed. dani: we saw last time around the tariffs were something that specifically hurt growth.

which is the bigger concern this time around? some inflationary impulse or weekend growth and weakened demand -- weakened growth and weakened demand? jason: definitely growth. when i teach tariffs in class we don't focus on the inflationary aspect. we focus on consumers having worse options to buy things and producers, who you are effectively putting a tax on as well, having a harder time selling things. the current conduction, we have underlying inflation around 2.5%. if it falls by a few tenths, we are in great shape and the fed can resume rate cuts. if it rises, the fed has to call off rate cuts. it rises by more, they are increasing rates again. given where we are poised, tariffs are the inflation aspect in the interaction with the fed

quite important. jonathan: do we have experience of threats this large lingering this long with respects to tariffs? do we behave as if tariffs aren't going up? jason: yeah, record amounts of uncertainty that businesses are facing now. even threatening tariffs and un -threatening them has been studied by economists has an effect and it is a minus. we shouldn't be playing 5-d chess with it, we should be clear and limited. jonathan: jason furman of the harvard kennedy school on the latest with trade and more than that. in the next hour of bloomberg "surveillance," we will pick out three big winners so far in 2025. we will catch up with tiffany welding of pimco.

the third hour of bloomberg "surveillance" is up next. ♪

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president trump's administration is doing will be disinflationary. >> when tariffs kick in they will be more inflationary than the market expects. >> anything under this administration will likely be a 2026 story. >> the tariffs are a bluff. the odds looks cute in the other direction. >> it's clear that the market is almost entirely focused on inflation risk. >> this is bloomberg "surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: it has been a quiet week so far in the grand scheme of things. equity futures on the s&p 500 posited by about .1%. about 90 minutes away. up by .3% on small caps. the 10 year yield was lower yesterday. down by two basis points, just short of 4.50. on the front end of the curve,

basis point a 4.26. going into economic data, pmi's at 9:45 eastern. pmi's out of europe are not impressive, and there are many in this market who are looking through those tariff threats. annmarie: many say, look, trump is in negotiating mode, but you bring up the calendar. on march 4 we will find out if the pause on canada and mexico is real or if tariffs come into play. march 12, 25% tariffs on aluminum and steel. on april 2, auto tariffs in the range of 25%. can you look through all of this? it has been a lot of bark annalee one place has had a bite, and that is china. dani: it's remarkable that the bond market has been so unmoved and not just by tariffs. earlier, talking about the idea that not only has it been stoic in the face of tariffs, pmi surprise to the upside, retail sales a surprise to the downside and none of it move the needle. if it was last year and we had

the bond market moving back and forth, even after trump's election saying that it's going well because of the volatility. it has completely disappeared. jonathan: at the end of march the federal reserve will put out a forecast. how do you provide guidance right now given some of the headwinds and tailwinds that they might be getting later this year? dani: i.b. it looks like raphael bostic who said, what i believe today could be completely different in six months. maybe it's a market that will look at that and continue to sit on its hands? i'm not sure what you do with something like that. jonathan: bnp paribas started saying that the federal reserve is comfortably numb and not wanting to do anything anytime soon. annmarie: what can you do? if the tariffs are negotiating tactic will we get a deal on april 2? attentively not. at the same time trump is flooding the airwaves. not just tariffs, but the budget deficit, doge, a peace agreement in the middle east, peace

agreement when it comes to ukraine, it's hard to understand what is going to stick. jonathan: what is interesting is how we enter 2024 and 2025. people hope the focus will be on tax cuts and tariffs later. it flipped. in addition, it is spending cuts. spending cuts had a bigger factor on this market may be than tax cuts had. the prospect of doge cutting jobs in washington, d.c. has become an increasing focus for a lot of that i've seen. dani: two elements. one is the economic impact. we are so concerned with the weekly jobless claims. do you see some of the ramifications come through? the other impact is something that is talked about, the idea that you can get the deficit down via budget cuts without hurting the economy. that's part of the reason that he argues we've seen a bid into the long end of the curve. jonathan: a quiet finish into the weekend and let's hope that it stays that way. just about positive on the s&p.

coming up, catching up with stocks near all-time highs. columbia threadneedle on an overly optimistic outlook. we begin closing out a second straight week of gains. writing, we remain constructive on the medium-term equity outlook. the near term, the risk reward, is less compelling. while we are staying invested, we advise hedging strategies and standing ready to buy potential dips. what would lead to those potential dips? >> as we have been talking about, uncertainties around tariffs as the date approaches us, we could see a pickup in volatility. it has implications for inflation and overall economic growth. i think we are watching how much of that would stick. we probably think that 25% tariffs on aluminum and steel will stick. we saw that in trump 1.0 to protect american steel industry.

the 25% tariff on mexico and canada, we think that that is continue to be pushed out and more the negotiation. jonathan: transatlantic come all-time highs. the dax in germany, record high. when you speak to clients, shine a light on those conversations. do they believe that any of this happens? nadia: we are surprised we haven't seen an increase in volatility. we were expecting that as a new administration takes office. what you are seeing is people are surprised. when you look under the hood, there is rotation and dispersion. that is dampening volatility. we are trying to advise our clients to be prepared for a pickup in volatility into march and april, but also what clients appreciate is the rotation happening and the broadening out. nine of the 11 s&p sectors are outperforming. over 50% of the indexes are outperforming. i think that clients are starting to appreciate that rotation finally happening. dani: part of what happened is

the mag 7 underperformed. it is only up 0.5% this year. what has outperformed in tech noticeably is china. china tech has been off to the races come on fire. hong kong up again after alibaba earnings. are the two related? is there some degree to which american tech is lagging behind because china is starting to pose a real threat? nadia: we don't think that china poses a real threat, but we think there is opportunity. we have had a call on chinese internet stock for some time, so it's nice they are starting to outperform. deepseek show that china still has an ai industry despite the fact that we've had chip restriction. we think there is more upside to go. when you look at the chinese internet, the gap is quite wide. stocks trade up nearly 14 times, half as much as their american peers.

we feel the government will be more supportive. we had the symposium earlier this week as well. and then you have biden great earnings. the fact that capex over the next three years will be more than that of the last decade is quite encouraging. we think that there is a little more to go in that trade, and we don't think that over the longer-term the expense of u.s. tech, we will see what nvidia reports next week, but the capex story we've heard this past earnings season should be a positive for some of those semiconductor and computer companies. dani: talking about event risk dates away from tariff dates, february 20 six, nvidia earnings, how big of an event risk is that? nadia: historically, you have seen mixed trading around nvidia. sometimes the stock trades up into earnings and then sell on the news. it has become a macro event. i don't know much about a macro

event this time around because the stock is doing expectations of volatility around that. i think that people will likely be more focused on what the administration has to say in march and april. nvidia is no longer such a macro event as it has been over the last year and half. annmarie: policies can affect that stock when it comes to semiconductors out of taiwan or export controls. how aggressive do you think the trump administration will be? nadia: the fact that he met with the ceo of a company is positive. as president trump says that america needs to innovate, he will be mindful in terms of not doing anything that is so aggressive that it dampens that innovation. at the same time, you want to protect american technology and not have it get into the hands of china. we want to be ahead of that. on the margin come you could see restrictions, but i don't think that it will be overly aggressive. annmarie: talk about all the risks this market faces, and in the medium-term you are constructive?

at what point do you need to see the good stuff coming out of washington, tax cuts and deregulation, to get more bullish? nadia: we always thought that the tax cuts would be quite minimum and likely in the second half of the year. i think that what you want to see from the president is no blanketed tariffs. we don't want to see tariffs on mexico and canada because that would be disruptive. i think you're seeing progress in terms of deregulation. we will see who takes the helm in terms of the provision for the banks. this past week we see volatility around financials given the headlines around president trump's administration sticking with stricter regulations around m&a of the biden era, but those are guidelines and the interpretation may be different than the biden era. we don't think that's a dealbreaker. jonathan: weakness in the banks

this week? nadia: we would buy the weakness. we have an economy still chugging along, trade and activity doing well, asset and wealth management, and then the possibility for deregulation. the scenarios for this year are less harsh than last year, so we could see capital returns in the back half of the year. and then the basel iii endgame. it is said that there needs to be a review of those capital requirements, so we could see easier regulation. jonathan: it is good to catch up. nadia lovell. i think around 8% on the s&p 500 for that particular group of stocks.equity futures are just about positive on the s&p. with an update on stories elsewhere, here is yahaira jacquez. yahaira: patel confirmed to

leave the fbi, which claims has been weaponized against him. patel claims not to weaponize the fbi and says that his top priorities protecting the rights of the constitution. citigroup is the latest company to abandon d.e.i. goals. the bank is ending targets for increasing representation among women and ethnic minorities. bloomberg had a memo saying that the bank is dropping the policy citing pressure from the trump administration peered espn and major league baseball are ending their decades-long broadcast relationship after the 2025 season. the decision came after espn made it clear its intentions to reduce rights, which the mlb deemed unacceptable. both left the door open to negotiating a future deal. jonathan: more later this morning. next, the morning calls plus nvidia earnings due out in a we

ek's time. from new york city, this is bloomberg. ♪ i can't believe you corporate types are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar. i've got another one. 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.

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by near-term lumpiness. positive still by three quarters of 1%. tech investors looking ahead to nvidia earnings next week. i expect solid results, it is the forecast for their april quarter that i wonder about. can a slowdown in sequential growth from their u.s. customers be offset by international customers trying to leverage deepseek and get in front of sanctions and incremental spending by stargate? we have a solid 10 minutes, so a lot to talk about. your calls coming into 2024, not 2025. you had a call early on which was at the time highly contrarian. going back into chinese internet names, which i picked up in 2025, can we start a year ago? why you thought the mood was going to change? dan: the big reason is, i am into very high return risk

-reward trades. for some reason they've been given up for dead for several years because you had the chinese government really going in and trying to suppress those companies, given that they thought they were becoming too powerful and too outspoken. the chinese economy has slowed down massively and you are seeing the government saying, these are the companies driving employment, driving growth. they have finally supported them. if you look at the biggest names, you have the market trading for those big tech companies at half of the valuations of the u.s. ones. that is why i was looking at those sectors. typically, china follows the u.s., always with a lag. i'm sure that we will talk about deepseek, but it has shown up roughly two years after chatgpt in the u.s. and that has driven a surge in a lot of the tech stocks. that is where we are really

interested, because there is a lot of uncertainty and fear and doubt for good reason. when you have alibaba, the biggest cloud vendor in asia, say, we are going to spend more in capex over the next three years than over the last 10 years, that is something you probably need to pay attention to. jonathan: do you think that china's success over several dimensions that you described will be at the expense of u.s. and u.s. companies? dan: let's not forget that it is a global economy. there will be some of that, you can't get around it, but it depends on which companies. chip vendors, assuming that there are no sanctions, which is obviously not the case, you are going to have, whether it is alibaba buying chips or microsoft buying the ships, you kind of don't care assuming that there are no restrictions on where the chips are going. from that perspective, there's no difference.

a lot of the big u.s. companies are not allowed in china. google, facebook don't really operate there. for them, it doesn't make a lot of difference. for a semiconductor company, that will move things around in terms of where the chips are potentially going in terms of where the demand is coming from. that's what it comes down to. dani: there has been recent action by the chinese to take a closer look at what u.s. tech is there. the ft had a story that china was reconsidering giving tesla a license for autonomous driving, and they were investigating google practices and launching one against apple, too. are they looking more closely at american tech as america adds more sanctions on to china? dan: there is obviously a political football going on.

the chinese never let in a lot of the u.s. tech companies into china in the first place so they don't have a lot of negotiating leverage. if you're talking about other things that we ship to china, there is obviously -- excluding tesla. tesla ships a lot of cars into china. if you look at the big tech players, there's not a lot of revenue that comes from that area, so they don't have a lot of leverage. it is all of the other stuff that we care about. let's not forget, depending on how you want to view taiwan, there are a lot of semiconductor manufacturing, a lot of the iphones manufactured in that region of the world, that is where they can put more of a threat on the u.s. companies. but they also risk hurting their own economy, which we know hasn't been doing very well. that is the other side of that which is what they are trying to balance. dani: one thing i keep playing over in my head is if there is any signal to be gleaned from

this. when we had the inauguration of president trump, lined up behind him was american tech executive after american tech executive. one person was absent, jensen huang. not only was he notably absent he was notably in china. is there any signal to be taken from that? dan: i mean, i don't know. i guess what i would tell you is, the first time around president trump got elected it was only tim cook embraced him from the start, the ceo of apple. this time most of the tech ceos have gone ahead and embraced him, because they know that it's important. with jensen not there, nvidia is probably one of the most, if not the most, important company we have now given we are in the early ramp phase, two years in, for generative ai. jensen is very smart and

important for the u.s. i think president trump wants to put america first and that means being supportive of nvidia, but i fully expect some kind of give and take when it comes to these chips making their way into china. deepseek, some of the claims were absolutely overstated, but it was a big improvement on the ai technology in the u.s. i am sure that some of the chips from the u.s., through other countries, made their way into china, and that is something president trump is very focused on. this will be a moving target as we go through the year. this will obviously get caught up in negotiations, but let's not forget. necessity is the mother of invention. to some degree deepseek came about because we were trying to restrict technology going into china. that made them work that much harder. we can't get the hardware, let's focus on the algorithms and the

software. they made pretty substantial improvements which will make it back into the u.s., just like a lot of the improvements that we made in the u.s. made their way into china, which is what deepseek built on. annmarie: do you think deepseek did this with the lesser tech, or that they got their hands on some of the high-tech that the u.s. was trying to keep out of their hands? dan: i believe that they probably got their hands on some of the high-tech stuff through other channels, but that doesn't take away from the fact that they made some massive improvements on the way that you process all of this information to generate ai results. i think there is a mix of both. all companies overstate what they are able to do and how they are doing it, and i don't think it's any different with deepseek . annmarie: tariffs, tsmc, trump is threatening 35% on semiconductors and how taiwan

should pay us for their defense because of the chips. do you think that tsmc will have to invest more into the united states? dan: don't forget, they started doing that. they have a massive plant in arizona. there has been talk about how they will have an ongoing relationship with intel. will they take over part of the fabs? intel has been massively struggling. there will be more involvement between taiwan, tsmc, and the u.s. that is the ultimate threat that china has. if you play out this scenario, and china has been clear that they consider taiwan an integral part of china. president xi jinping has talked about wanting to reunify the country. the ultimate threat is they say, we are not going to let tsmc put out chips to the u.s. apple gets those chips from tsmc and nvidia. you can go down the list.

the major tech companies in the u.s. need that. that is china' is ultimate threat. down the road a few years, they say you can't have any chips at which point the u.s. tech industry has a massive problem, more than anything that tariffs or any restrictions on the u.s. jonathan: texas instruments, a name that you previously said that you liked. do you like that name at what you think is within the pickup in the last six days? dan: that's easy. if you look at analog devices, the closest comparable to texas instruments, after having numbers cut close to two years consistently and underperforming, you finally saw signs of, hey, they beat the revenue for the quarter in the forward numbers went up a little bit. that is the first positive sign you've seen out of those end markets or companies that struggle with end markets in a long time and that is why you see texas instruments stock

pickup. jonathan: i appreciate your time, sir. it is good to see you. a lot to unpack. the kweb story, chinese internet stories. dani: it is a mental block because we have been burned before about china, so the idea that it was finally coming alive, that jensen huang was in china, a lot of people missed it. annmarie: the rhetoric has been so hot between washington and beijing, then deepseek happened and everyone was like, we should pay more attention to what they are doing. jonathan: pay attention to this. we round out the trading week from new york. this is bloomberg. ♪

jonathan: equity futures on the s&p just about positive. the opening bell 60 minutes away. the nasdaq positive 5.3%. outperformance on the russell up .5%. let's get an update on the morning movers. >> we start with united health group taking a major hit in the premarket down 11% because the wall street journal is reporting the justice department is launching a fraud investigation into its medicare billing practices. sources say the investigation is

looking at how the company records diagnoses that trigger extra payments to medicare advantage plan. one to watch. drop box following the 6.5%. guidance came in light. analysts writing the latest report does not provide many signs of an ai-led lift to the top line, a problem when you are a tech company. mercado shares soaring 12%. this is a latin american e-commerce company. they smashed profit expectations and the income came in at a record $69 million. they are saying they are poised to capture rising interest in digital shopping and financial services across latin america. jonathan: let's turn back to the

economy. fed officials signal rates will remain high for longer with government policies bringing risks. they are likely to coincide with market volatility. how much is tolerable is the key question. tiffany joins us now. where is the volatility? equities are close to all-time highs on both sides of the atlantic. some believe that leaves the door open to be more aggressive with terror threats. what are you and the team expecting? >> there is clearly a lot of uncertainty. i definitely think inflation and market volatility will be a constraint to what the administration eventually does. what they say they are trying to do is they want to rectify decades of trade imbalances that

have treated the united states and the any fracturing sector in the united states unfairly. to rectify those, they have to get at structural issues within the global economy, within the economies that run surpluses like china, japan, south korea, and germany. these will not be easily negotiated. the trump administration is trying to force changes that could result in disruption. how much is tolerable is the key question. when we look at market pricing, it does look like there is a lot of sanguine pricing when we look around. the markets do not seem to be reacting to the potential for this type of disruption. jonathan: do you think the fed will react?

we know we have certain tariff proposals on the table for march including 25% on canada and mexico, steel and aluminum. in april, there are the reciprocal tariffs people are looking for as well. how do you expect the forecast to change at the federal reserve? >> i think this puts the fed in a tricky position. these types of policies will result in, or likely will result in a delay of the fed meeting it's 2% inflation goal. they will result in one-time price level adjustments as the tariffs are passed on to consumers. they can also result in economic disruption. growth can have a drag from this. other policies the trump are implementing like more aggressive immigration policies, potential government spending cuts in the reconciliation bills, all of that will put downward pressure on growth.

that goes against the dual mandate. you have conflicting issues. the fed has signaled the economy is coming in in a relatively strong position. inflation has been stickier than expected. the last mile have been more difficult. with the uncertainty, they are happy to sit and watch and see how this plays out. >> could that lead to something that looks like a policy mistake? if history has told us one of the impacts of tariffs is weaker growth, they might not move or cut as much as they should when we know what some impacts of tariffs are. as you say, it is not great for the economy. >> i certainly think that is possible. i still think federal reserve is squarely focused on the labor market. as we saw in the latter half of last year with unexpected

weakness in the labor market kicking off about 100 basis points of cuts, we think they are focused on that. maybe they are more delayed but if the labor markets deteriorate , we would expect the fed to react in a strong way. annmarie: what about the inflation side? we are going to get university of michigan. we have seen the surveys come out. people are concerned about higher prices because of tariffs. how is the fed going to react to that? tiffany: ultimately, we agree. it is a tricky position for the fed. for now, the fed is going to stay on hold and watch how this plays out. a movement higher inflation inflation expectations would be something the fed would be focused on and could delay or mute the extent to which they

cut the policy rate even amid a growth scare or deceleration on the activity side. i think this is something they will continue to watch and it sets up for a tricky position for them. jonathan: what is our experience of tariff threats lingering for this long? if this persists, how does the consumer behave? how do companies behave? tiffany: i think there is, i hate to be a two-handed economist, but you have expectations that impact behavior. that can go both ways in terms of growth and inflation. you certainly have evidence from the first trump administration that increases in policy uncertainty, economic or trade policy uncertainty does hold back hiring an investment as businesses are more unsure of the rules of the game.

at the same time, you see some frontloading behavior. we think we are seeing consumers do that now. we have seen an increase in goods purchases. that drove the acceleration and consumption the second half of last year. we calculate it contributed about two percentage points to the growth in real consumption. consumers hurrying up purchases of various goods expecting tariffs. that is a near-term boost to growth. that will not last forever. eventually you would think the broader uncertainty will start to hurt growth. i think the risk relative to where we see consensus in terms of forecasts, 2% growth for 2025, i think the risk is growth comes in lower as you look across the policies being discussed and implemented. many of them outside of maybe

tax are not great for the growth outlook in the near term. when and if we do get tax cuts that is more of a second half and 2026 story. near-term risk is a loss of momentum in the u.s. economy. jonathan: god bless you and the team at pimco for waking up early on the west coast. amazing what you do. tiffany wilding on the west coast. those guys wake up so early on the west coast. dani: it is kind of our wake up time. jonathan: with us now is ed of columbia threadneedle. it is good to see you. do you see reasons to be bullish fixed income, treasuries specifically? ed: i think the reasons are good and have been in place the last six months. the starting level for yield is quite effective and risk assets

are still rich. we have an environment where bonds are in a better place to play that buffer role in a portfolio. jonathan: risk mitigation. what do you think is behind the pullback in 10-year yields? ed: i think we overshot a little bit. if you look at where we started september of last year, we overshot a little to the downside. there was fear of what was going on in the labor market. we have corrected that. the fed has gone on hold. we overshot to the upside the end of last year. now we are in the right zip code on the 10-year yield. dani: we have seen yields come in in a really tight range. we have gotten economic data that surprised. in the last year, you would have seen more volatility. what do you make about the lack of volatility in the bond market? ed: the volatility has been

unusually warehoused in the fx market. beyond the fx market in equities and credit, things well behaved, there is a fair amount of greed in the markets. the technicals are good. a lot of money is being put to work. there is not enough of a catalyst to change the picture even though data has surprised to the upside, we did all that work in the rate space in the fourth quarter last year. since then, the data has been muddy, not enough to shift the fed. the fed messaging has been consistent and we have settled into a groove. that is driving volatility. dani: are we near danger zones? ed: hard to say. the risk markets are pulling fx volatility down. you are starting to see high carry trades, short dollar trades come online.

in part because the dollar richened to the end of last year. annmarie: business this driven by policy entrance and heat -- policy uncertainty in washington -- is all of this driven by policy uncertainty in washington? ed: the longer you marinate in it, the less relevant it is to price action. annmarie: the fed is numb but maybe the market is known to what trump is doing? ed: it is becoming more difficult to focus on specific policy action that has the scale and scope to shift our view of the future at the moment. there is a lot more stasis today than three or four months ago when we were anticipating big changes straight out of the gate. jonathan: we have seen a sentiment shift in certain parts of the world. we told you about china earlier in the hour and europe as well. there is a big conversation about to happen in europe.

we would love your thoughts on that. we will catch up with our correspondent in berlin about the german elections sunday. are you expecting fundamental changes to spending in europe and how it will be funded? ed: that has been a conversation the better part of the past 15 years. the demand story in europe has been chronically weak. i think it is critical for that conversation to be accelerated in terms of rebalancing domestic demand away from an export driven economy. defense has entered the conversation in a major way, particularly the last couple of weeks. can we expect a significant gearshift coming out of this election? no. germany is not capable of moving that fast. jonathan: become trees -- the countries with the willingness do not have the ability. in the u.s., we are set to see a big tax package go through.

do they have the physical space at the european level to do the kind of things they need to do? ed: the answer is yes they do. they have been reluctant to use that fiscal space going back to the financial crisis, global financial crisis. to the extent they are under pressure now to reevaluate that stance, the mario draghi report last year was important, an important move in that direction. they have the right ingredients. whether they will cook into something interesting in my mind is unlikely. dani: does that mean you are not bearish european bonds, that we will not get that level of spending coming in? ed: if you look around the world, duration in the u.s. is more attractive. rates are higher here on currency adjusted basis. to the extent there is a fiscal conversation happening globally

in china, europe, and the u.s., the incremental impact on the deficit in the u.s. is quite small. we are talking about extending existing tax cuts rather than adding new spending at this stage of the game. i'm feeling more comfortable with duration in the u.s. if you are diversifying, i think it is quite attractive. annmarie: one market that has been moving his gold, hitting an all-time record. it comes as china is dumping their treasury holdings the most since 2009. is there a connection between gold going higher, central banks buying, and some hesitancy and range boundness? ed: i think the short answer is no. the treasury moving to domestic buyers has been the better part of a decade.

it is the rebalancing of china's domestic economy. to me, not that important. central banks diversifying into gold perhaps more important. it is not clear they are diversifying away from treasuries. they are buying gold and treasuries at the same time. the dynamics of the gold market might be dictating the price action. the extent to which these are interconnected, i think that connection is quite loose. jonathan: to wrap it up, what number do you like on the 10 year? ed: when i think about where we will end up the next 12, 18 months, in my mind, the fed is underpriced at the moment. we have about two cuts for the next 18 months or so. in my mind, pricing skews in the favor of doing more rather than less. the 10-year a little too high right now. i would be shooting sub 4%,

3.5%. jonathan: thank you. a little bit of data in an hour from now. we get u.s. pmi and after that the university of michigan consumer sentiment survey. let's get an update on stories elsewhere with your bloomberg brief. >> we start with coinbase shares rising, up nearly 5%, after the sbc agreed to drop the lawsuit accusing the platform of running an illegal exchange. the move marks the latest retreat from the policies of former sec chair gary gensler. the agreement is pending commissioner approval. coca-cola is warning of potential negative impacts if it changes its dei policies. it says changes pose a potential risk to its business going forward. pepsico going in the other direction joining a number of companies dropping dei programs.

the first ever foreign nations hockey tournament ended in a thriller with cam and a thriller with camera beating the u.s. 3-2 in overtime. connor mcdavid scored the winning goal for canada after jordan whittington saved 31 shots. emotions were high. after, justin trudeau posted on x that you cannot take our country and you cannot take our game. jonathan: fighting words from trudeau. next, setting you up for the day ahead. we will look ahead to the economic data and a big election taking place this weekend. from new york city, this is bloomberg. ♪

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jonathan: that governor trudeau stuff really gets to him. >> trump called the u.s. team before the game to amp them up. it did not work. jonathan: i love a friendly rivalry in sports. not sure how friendly. dani: the americans got their revenge. they booed when they sang " oh canada." jonathan: it is tough stuff in the bond market, yields lower by about a basis point. the opening bell is about 40 minutes away. let's look ahead to what you can look ahead to later this morning and through the weekend and into next week. later this morning, u.s. pmi's and consumer sentiment. later this afternoon, president trump signing another round of executive orders. sunday, germany's snap election. tuesday, earnings, home depot, plus more fedspeak.

wednesday is the big one, nvidia earnings a week away. as we look ahead to the election in germany, let's catch up with our colleague in berlin. how frame is the -- how big is this sunday going to be? >> this is a story that began november 5 when he pulled the plug on his government the same day donald trump was elected president of the united states. that have been in the background the entire campaign trail which is a unique one for the german political establishment the last few decades. it is unique because it is the protagonist. the right-wing group has 20% of the group. the number two has set the agenda on a lot of topics going into the election. the expectation for sunday is still for merkel's party to lead in government with 30%. the question is how fragmented

the political establishment will be this time around. this was part of the problem in the last mandate where you had a three-party situation governing. that was very awkward and could not get a budget through. that is what we will look for on sunday. 6:00 p.m. local time is when we get the results. that may just be the beginning of coalition negotiations that could take months to getting a government in germany. >> a traffic light coalition could not get a lot through. what could they get through if they are being led by the cdu? >> what i think is very interesting about the situation is if frederick marts gets a strong mandate, he is able to put a government together with one other party. if he is able to do that, there are a lot of ingredients to make big changes in germany and also the european level. there is a vacancy in the chancellery behind me. there is a vacancy at the european level at the top

leadership. if the cdu is able to gain a strong mandate and willing to go to brussels and talk about big changes like joint debt and reforming the european project in the face of a huge challenge from donald trump, germany will have a huge amount of power governing what the future of europe looks like. whether frederick marts will be able to do it is another question. jonathan: looking forward to the coverage over the weekend out of berlin. the german economic model is failing. some might say it has failed. they have their own challenges domestically on top of that the immigration issues. a lot of these difficulties seen across the whole continent of europe. the timing of the election is striking because it comes when the u.s. administration is putting more pressure on the europeans to do things for

themselves. >> there was a great moment you had yesterday with scott bessent. you said, have you communicated your frustrations to europe? he said jd vance did for us. it comes at a brutal time for germany. the americans are pushing for them to do more. unless the cdu gets a big majority, it will be challenging for them to get any policy through that government. jonathan: germany celebrated balanced budgets for a long time. that has been at the expense of the u.s. taxpayer spending all this money when the europeans have not kept the course and done what they needed to do. this is where the pressure starts to build in a bigger way from a second trump administration. coming up on monday, reaction to that. from new york city this morning, good morning to you all. thank you for choosing bloomberg

tv. this was "bloomberg surveillance." ♪

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matt: we are looking at futures higher and treasury kwreudz that may end this week up. 30 minutes until the start of trading. katie: bloomberg "open interest" starts right now. katie: brace for morad calenda