>> the market is react and change and we are in the goldilocks scenario and then suddenly recession. >> the rally we have seen, we have also seen a broadening in terms of earnings growth. >> in terms of the earnings story relative to the rest of the world, it has been driven by big tech. >> the tech sector is vulnerable . the valuations are too high. >> ultimately it will be a good environment for stocks, but it will be more difficult. >> this is "bloomberg surveillance," with jonathan

ferro, lisa abramowicz, annmarie hordern. jonathan: good morning, good morning. "bloomberg surveillance" touch right now, s&p 500 negative by .13 -- .3%. we are on the three-day side of the equity benchmark. on the russell, down by 0.3. from trump, sending stocks lower into the closing session. tariffs going forward on time, on schedule. lisa: rochester summed it up well, saying that tariffs are no longer treated as inflationary, they are now seen as a growth shock unabashedly with a rally into bonds and a selloff into stocks. it's the reverse of what people expected coming into the year, shows the fading of american exceptionalism. jonathan: next week, 25% tariffs on canada and mexico.

the week after that, 25 percent on steel and aluminum. early april, 25% on autos, chips, and drugs. the month ahead is stacked. annmarie: and we will have the report from commerce on potentially more tariffs they deem as necessary for what their favorite word is in this administration, reciprocity. we should note that if trump is in full on negotiating mode in the tariffs are up next week on canada and mexico, we have reporting that his team is meeting with mexican officials telling them -- put the tariffs on chinese companies and those imports and maybe we can do a deal there. jonathan: lisa mentioned that yields are down again once more. lower on the 10 year. on the trade fund, focused on the growth head and out the inflation story and that's important going into the data later. the key data point this morning, 10 a.m. eastern time, paying

more attention than usual to consumer confidence. the recovery in consumer sentiment that has been underway since the recession of 2022 has been broken. annmarie: in a number of different surveys we have seen consumer sentiment getting pummeled. you can say it's highly partisan with expectations going up and down in contrary ways, republican or democrat, now we have to see if corporations start to feel the same thing. we saw it earlier from walmart. how much do you end up with forward guidance that gives people a sense that the lack of confidence is leading to lower growth estimates going forward? jonathan: for the year coming up this morning, dropping right now, home depot, coming in with upside surprise and fourth quarter comp sales at positive

0.8%. lisa: it's a beat across the board in terms of shop -- past performance. going forward, it's a full year of comparative sales at 1% as opposed to an estimate of 1.65% and we have to look to the commentary to get a sense of why. going back to what happened with walmart, they seemed less confident about the forward-looking outlook because of the potential tariffs. maybe that's why the forward-looking outlook is not as positive. jonathan: guidance is almost impossible until we get clarity on policy. coming up, sharon bell, john lieber, and dan ives. chinese tech stocks, getting hit on decoupling risk. stocks lower, adding to three days of losses as trump says levees are moving forward on

time, on schedule. joining us now, sharon bell, goldman sachs. how vulnerable are ratings to a tariff hit over the next month? sharon: yeah, i think, as you see on your screens now, everyone is a little bit left -- vulnerable, increasing uncertainty again. clearly, we don't know what trump will do when it comes to tariff plans, even for canada and mexico. will they start again? are these tools that he's talking about negotiation tools? does he plan to use it permanently? it's unhelpful for growth and for inflation as well. you are right, european markets have done well this year, but i don't think it's related to tariffs. valuation and the u.s. just got so large and european companies are benefiting from may be peace in ukraine or fiscal spending in

germany. lisa: that was one of the big questions, is it just a lobar, or signs in europe that there will be moves to engender growth? are you seeing the hopes come to fruition with the latest information on the possibility of expediting some sort of a madman in germany to get some sort of extra military spending? sharon: i completely agree, germany absolutely needs to spend more. germany is one of the very few places in europe where debt to gdp is not extremely stretched and that's because of the constitutional debt break in recent years. now, why would they do that? growth has been so weak. again, we had week numbers out of germany. a lot of the industry has reduced their exposure. i do think, exactly what form it

takes is difficult to know, but i think the new german administration will be looking to spend more on infrastructure and defense as well. annmarie: this is one of the most confusing markets to understand from a macro perspective, let alone germany and spending more. there's a question about what it means for interest rates in europe and how it balances with stocks. the consensus was that the be cutting rates more aggressively than in the united states and now you have a potential growth shock in the united states and in the europe the potential for more fiscal spending sending yields marginally higher. how does that factor into the bullish call on equities? sharon: in the case of europe you're talking about more spend in an environment of pretty much no economic growth. really, it's the infrastructure on the supply side of the economy improving.

i don't think that even by itself it will be hugely inflationary. given that, you got other disinflationary things going on like the labor market loosening a bit. if there is peace between ukraine and russia, you might see more energy supplies. ecb is looking at all of those things. we do expect them to cut every meeting given the weakness of economic growth. annmarie: in your note you talked about this idea of deregulation driving of growth. we have heard this from a lot of european leaders but is a rhetoric matching what you are seeing on the ground? sharon: there are some big levers that you can pull. one of them is for germany to spend more fiscally on infrastructure. another is to potentially bring down energy prices and bring gas supply to europe. potentially another one would be deregulation.

europe does have more regulations than you see in the u.s. and you certainly here companies complain about the regulation levels being extremely high, but it takes a long time to move that. you have got a lot of different countries with different incentives to regulate. i'm more skeptical about that one. i feel that more spending on fiscal and defense in europe, especially in germany, especially lower gas, could the needle this year. annmarie: the u.k. prime minister is coming this week. they have seemingly had a somewhat good relationship having had a number of meetings. is there an investment case for the u.k. outside the eu right now in terms of a comprehensive trade deal? sharon: he's got some advantages. one of them is that it's not a knowledge manufacturing economy, it's services, not as exposed to

tariffs. trump has already said that u.k. is not a special target. given those things, the u.k. is probably less vulnerable to the trade war tariff risks, but nonetheless it is a smaller economy and will have some vulnerability to all of that. the other helpful point is that if you saw it, ultimately, a cease fire in you cane that is ukraine, those elements could be better for the u.k. and the u.k. index stock markets are on a particularly large valuation discount compared to the rest of europe, so that may look attractive. lisa: sharon, wrapping it together with the sense of your highest conviction trade, after you got it right to start the year, europe would outperform equities because of a valuation gap, is the trade done or are

you leading into that? sharon: this is the number one question i'm getting from clients at the moment. this is what investors want to know, given that we have seen this before, can it persist? europe being a long-term underperformer and every now and again pops of over performance, but will it last? it could last because of this huge valuation differential. maybe it has closed a bit, but even adjusted for growth, it's lower in europe for sure and we find europe on quite a big discount. institutional inflow is quite minor, you do have to have those politics go the right way with informal spending, etc., with possibly a little bit more to go. jonathan: sharon come appreciate your time. equities are softer by one third of 1% on the at -- s&p 500.

big moves in the bond market over the past five weeks or so. on the 10 year we are down six basis points. this came from the team over at mizuho. tariffs are no longer treated as inflationary and instead of risk off duration rally factors, if the tariffs go ahead on march 4 on mexico and canada, the moves so far may look small in hindsight. lisa: you are getting a number of proposals, expectations, estimates from economists about how much it would caused people if oil is taxed. we will get into that later. increasingly it's translating into what you talked about a couple of weeks ago, the longer this drags on, the more that corporate executives don't make decisions and you have a stalling out of investment and it changes the optimism heading into the year. jonathan: jamie dimon said wait

and see, his words in the last 24? hours. guy johnson heard the same thing, everything's slowing down a bit. jonathan: and we heard that from walmart as well, we have to wait until the 9:00 a.m. call from home depot to really understand what happened here because it seemed like they were able to outperform in the more that we get this kind of commentary, the more people will be leaning into that growth shock idea. jonathan: with your bloomberg brief, here's dani burger. >> home depot beat wall street estimates with shares weaker in the premarket. the numbers themselves were a forecast on comparable sales for the full year of 1% and raising a quarterly dividend of one point 2%. elsewhere, donald trump says tariffs scheduled to canada and mexico next month or on time and

moving rapidly and were originally delayed to allow countries to adjust their concerns over border security, going into effect on march 4. the u.s. officials cautioned that it could be less certain. in d.c., elon musk said federal workers will be given one more chance to email a detail of what they did last week or face termination. it is up to agency leadership, not musk, what happens to those who ignore the message. trump to fend of the efforts, saying it's a legitimate bid to root out fraud and waste in the government. jonathan: up next on the program, trump doubles down. >> terrace are going forward, on time, on schedule. this is abuse. it took place for years. i don't blame the other countries. i blame our leadership for allowing it to happen. jonathan: comments sending

stocks lower into the close. we get the views of john lieber from the eurasia group in just a moment. good morning. ♪ ♪ when i started walton goggins goggle glasses, i didn't know how to turn all this fancy pretty-ness

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jonathan: equity futures this morning are negative vibe .25%. 10 year treasury, down for five consecutive sessions. this stretch could make it seven. the 10 year, 4.33 86. trump doubles down. >> tariffs are going forward. on time. on schedule. this is abuse. it took place for many years.

i'm not blaming other countries. i blame leadership for allowing it to happen. who can blame them. great deals. taking advantage of the united states. jonathan: donald trump sang 25% tariffs on canada and mexico are going to hit on time, on schedule next week. tyler joins us from washington. what's the latest? tyler: u.s. officials told bloomberg news that the schedule is less than certain. while trump responded directly to a question about the pending mexico canada tariffs that could take place in a week, u.s. officials said that a lot still needs to be determined considering that negotiations are underway. the reciprocal trump tariff plan are on track and we are expecting commerce to present the country by country findings by april 1.

a bit of couching by the administration. still, it's important to remember that those negotiations are tied directly to tangible policy priorities when it comes to immigration on sentinel, the latter that trump tied directly to china. i mentioned that because just this week we reported that u.s. officials asked mexican officials to hike tariffs when it comes to china in the bed as negotiations continue. lisa: is it a potential off temper mexico? tyler: it remains to be seen. the administration has ramped up the chinese rhetoric. seeing the administration opening the door to enacting fees on goods exposed to chinese chips. potential room for negotiation, looking for whether or not more tangible policies come about when it comes to mexico and canada on immigration policies, like an increase in troops at the border, which mexico had

pledged when trump originally delayed the tariffs, as well as progress when it comes to fentanyl coming over the border. jonathan: appreciate the update, tyler. joining us now, jon lieber. welcome to the program, sir. these are the proposals right now. next week, 25% on canada and mexico. one week later, steel and aluminum. to recap your base case, what is your base case on what does and doesn't happen over the next month? jon: the april 1 deadline is the important one to watch. there are a bunch of investigations directed across the government that will be coming out april 1. the reciprocal tariffs we just talked about. the unfair trade practices of america's many trade partners. i'm sure that we will see allegations against countries like vietnam, japan, germany, coming out april 1.

it's going to kickstart a process that will eventually lead to higher tariffs on quite a few of these countries. in the meantime, this negotiation is going to be ongoing. if you listened to trump last night, he responded to questions from reporters and started talking about canada and mexico and ended up talking about reciprocal tariffs that are much broader. so, i'm not sure. the president has a way of weaving when he talks, i'm not sure we can take this as any real guidance about what happens next week. our view is that the broad tariffs are likely to be avoided because the countries are doing enough to avoid them. april 1 is the real data watch because of these other investigations into these sectoral tariffs that will wind up being more meaningful for north american countries. annmarie: in the president's response to this we've, he talked about the fact that the agreement under place now is not

working. but the deal, usmca, was negotiated when he was president. what doesn't he like about it right now that he is so willing to put 25% tariffs on canada and mexico? jon: the grievances are relatively narrow and specific, i think, and have to do with china. everything else about it, there hasn't really been any controversy about its implementation. there was an energy case brought against the americans. there was a case brought on some labor issues, mexico. a few other disputes have been brought, but they have all been working as the plan was sketched out. i think the american grievances about chinese goods and the mexican supply chain, but because it is trump they are also using tariffs to broaden it out. i have not heard the administration lay out a reasonable case of what exactly is broken in usmca.

you could raise north american content requirements, but it seems like trump is using the threat of tariffs or leverage this for other policy goals. annmarie: our reporting is that mexican officials have been told they need to put tariffs on to chinese goods coming through mexico and they are concerned about chinese goods coming through the border. is it your base case that he's in negotiating mode when it comes to the tariffs next week? jon: yes, but that review isn't due until the middle of next year and this all happens in the background of that review. they want to force changes to mexican law and usmca to make it harder for chinese goods to get in the supply chain. i think that's the context for all of these things. in the near term he's having a fight over unrelated policy issues that matter to his political agenda. the whole suite of issues with mexico. lisa: chaos might be the point, it might be the strategy that he

uses to try to break through and get change. at the same time, chaos creates uncertainty in c-suite's, companies, you see that any earnings expectations going forward. how much of the rank-and-file republicans getting concerned? jon: i think there is quite a bit of concern. right now the focus on economic policy is around the budget and extending the trump tax cuts at the end of the year. the real issue causing concern in washington right now among republicans is his approach on ukraine, which seems to be taking a russian position, causing quite a bit of consternation and it's taking up a lot of the oxygen in the room. when it comes to the budget cuts and does, i think these issues actually have quite a bit of support from republicans who continue to look at the u.s. deficit challenge and see it as a generational issue there is no solution for because they are not willing to raise taxes.

the spending cuts, despite the uncertainty, are relatively popular. the tariffs or something washing could do without outside of trump and his team, but this is the reality of what happens when you elect a tariff man. lisa: how are people understanding it? jon: i think the president wants to end the war and is susceptible, has a relationship with prudent and is susceptible to the russian message on ukraine and is sympathetic to what's coming out of russia right now. that's a pretty disturbing explanation. i don't know if there's a better explanation for it, however. jonathan: appreciate your perspective as always, jon lieber. stunning moves, 10 year yields are down another six basis points with a rally going into a fifth consecutive day. the 10 year at the moment, 4.34. i've set it a few times, focus on the growth associated with

tariffs more than the inflation response. lisa: it's not just tariffs, it's the paralysis across corporate america when people don't have a framework. it's a lack of understanding of the goal or what the process will be to determine which tariffs to put on and which not to. jonathan: later on this morning, you will get another read on confidence. look at that at 10 a.m. eastern time. coming up, we catch up with michael baker, da davidson, reacting to the latest results from home depot. equity futures, negative by .3%. from new york, this is bloomberg. ♪

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jonathan: three-day slide on the s&p 500, could become day number four. negative by .25 percent on the s&p and just a few percentage points away from all-time highs and are asking questions like this, with michael catching up with guy johnson, the stock market is still the president. what would it take for the s&p to drop 5600 points? already this morning we are talking about it. lisa: there was a theory heading into the year that if trump did

anything wild or significant, stock markets would sell off to such a degree that you would end up with some sort of check on trump. stocks have looked past everything because of that belief. the longer it drags on, maybe they will test that. is this just a hope that people will realize this? at a certain point, you have to wonder when some of these proposals will hit when you look at the extrapolated potential economic hit. tyler: fixed income yields are lower for a fifth day on the 10 year, down by six points. five to 411 with tariffs in the threat of tariffs really starting to bring down bond yields in a way that people hadn't anticipated coming into the new year. lisa: yesterday the two-year option went well and that's a bad thing and it's the first time i ever expected to say that going back a couple of years. today we get seven your notes

sold to the tune of 44 million. if the auctions go well, is that a problem given the demand that's coming with a backdrop on increasing concerns? jonathan: if they go well it's a problem, if they don't go well it's a problem? lisa: i knew you would go there. no, if they go poorly, it asked -- suggests inflationary fears. if they do really well because of a breakdown of growth narrative, that's also not great. jonathan: 10, conference board, consumer confidence. a lot of people made a big deal about it on friday. confidence down, expectation up, with some people poking some big holes in it, saying that the move was driven by respondents who identified as democrats who see prices rising at an annual rate of 4.4% compared to republicans, who are looking for 1.3%. the partisanship issue on the survey has left many, ourselves

included, hesitant to extract signal from the spike. lisa: a lot of people would agree. the flipside is that ism came in with contraction for the first time going back to early 2023 with prices paid rising at the fastest pace. you are correct, the confidence board on information will be important for either ratifying or disputing what we got. jonathan: going back over the comments from steve, and, they weren't great at all, called doge austerity, the most negative he's been a quite a while. lisa: speaking the quiet part out loud. this is what executives say in private but none of them want to face the retaliation of saying it publicly, so they want to put a positive spin on it. does it weigh in on the actual decision-making? not yet. jonathan: it might only last a year or so, but it might be that time with the best gains have been hot -- had.

those comments from steve cohen in miami. equity markets, not doing much. trump says scheduled tariffs against mexico and canada are on-time and on schedule. 20 5% levees set to hit the products from those nations as soon as next week. annmarie: that's march 4. march 12, potential 25 percent levy on aluminum and steel. april 1, report from ustr, commerce on potentially unfair trade practices. in between all of this there is a nugget to know, march 14 potentially there could be a shutdown of the u.s. government. there is a lot of uncertainty coming out of washington, d.c., with trump saying that they are on and going forward, notes from goldman sachs saying that what if oil is it. i could be one hundred $70 per household in terms of extra fuel costs. lisa: retail gasoline prices, if

you get that type of hit, right now you are not seeing it lead through to gasoline prices are oil, highlighting how much people are shrugging it off is not realistic even though it is uncertain. jonathan: april, just a week away on mexico and canada, then reciprocal tariffs in early april. it's all happening very fast. chinese stocks, tumbling, alibaba seeing its biggest selloff since 20 22. president trump directed a limiting of chinese investments across american sectors with a world beating rally for stocks out of china. lisa: what you see right now is see if he is does this already. -- it's a clear sign that the administration will be looking at it with an even more fine tooth comb then we saw in the biden administration and they want investment into allies, not

from chinese companies, and the directive goes through a number of things as well. they will also be looking at how chinese investment comes into the united states with outbound investment into china. the ones in china are not selling off as much at all. it's been the widest since 2020 two. people in china and in the mainland saying they've seen it before. that they believe in the story. it could be an interesting and new divergence with a natural feeling in china and truly diverging markets. jonathan: the directive over the weekend from companies who raise capital with securities that trade on american and foreign public exchanges. that's the line that got our attention. lisa: people feeling like they could be under more scrutiny than before, a push pull with

respect to some of the indexes and exchanges and whether they want to recruit them. jonathan: we'll catch up on that in a moment with dan ives, it's the midnight deadline for federal workers to defend their jobs to the elon musk doge team. musk, doubling down, posting that failure to respond a second time will result in termination. annmarie: at one point yesterday trump said that you might be semi-fired, not clear what it means. some department heads say that you are at the doj and fbi are telling you not to respond. some, i heard, had lawyers review the five bullet points and sent it back. there is a lot of questioning as to whether or not you would be fired if you didn't respond, especially if the director of your agency said there might be

concerned legally or with national intelligence if you actually send through the five bullet points. lisa: utterly trivial, type words and pressed send, yet someone failed that test, urged on by managers. i speak on tv, that's mine. jonathan: how did that go? it's working out alright. home depot shares are following in the premarket. powerful sales guidance below expectations. it's a buy rating on the stock. michael joins us now for more. your thoughts on the outlook and how reliable the guidance is? michael: like a lot of companies, they have a incentive to guide low. last week they called it a

starting point. i think we are seeing a bit of that from home depot. it was a very good fourth quarter that they got more conservatively when they took the numbers down. i think that on the call we will hear about the case from the first quarter. the end might not have been quite a strong. and it might not have been as strong a number. overall it's about trying to set a conservative bar. i think that you use the acronym -- jonathan: i think that you use the acronym rift. the recovery sentiment that has been underway since the session like lows of 2022 have been broken. michael, how do you counter that? what do you look at to say that

maybe the story is bottoming? michael: there are a lot of policy risks but interestingly retail sales have gotten better throughout 2024. which had been a below average year. pretty good holiday. fourth quarter was the best of the year, feeling like it paused a bit in early 2025. the consumer is sort of what we would call mixed. not as strong as we were during covid. recovering and 24, 23, and we think we will see a bit of a recovery this year. the home depot guidance, they called it positively. it was their first positive in two years, seeing a bit of the early signs of recovery. lisa: michael, you are saying to talking heads like myself come out with the narrative that companies are putting forward negative outlooks like walmart

and home depot. uncertainty around tariffs and policy changes, etc., but really they are sandbagging us and will present amazing results later, resetting the bar lower to get more breathing room. michael: somewhere in between. i wouldn't call it amazing results. but in terms of sandbagging, they are giving again what we would term conservative. walmart, they called it prudent. they called it a starting point. january, the third month of the fourth quarter was the best month of the quarter with big business disincentivize to not get too far over their skis given all of the policy concerns. part of the guidance is that they don't know in there is a lot of uncertainty in business is pretty good right now. home depot, best comp in two plus years and we don't know how the year is going to play out for the reasons we talked about.

so, why not give a guidance number that we feel like is certainly doable if not viewable? lisa: some of the commentary out of the c-suite from home depot, and it's early yet, they talked about how consumers are adjusting to mortgage rates where they are, that the higher rates are being more accepted rather than viewed as transitory and a reason to put on hold some of the projects. is this another way of saying that the rate regime is no longer restrictive and essentially just par for the course? the new normal in the housing market? michael: that's exactly right. existing home sales have not been great. looking back historically on a year-over-year basis, existing home sales have been up year over year four months in a row. home prices are a big driver of home improvement and have been up 18 months in a row. the housing market has a long

way to go in terms of recovery and is getting worse. maybe getting better. this is the time when you buy these kinds of names. annmarie: the ceo said that there was at the uptick in housing activity with consumers borrowing against home equity. we saw this happen during the pandemic where there was a rush to want to redo their homes. consumers moved to spending on experiences. are they back into wanting to do the remodeling? michael: we are seeing that as we saw home depot upgraded last year and consumers taking more out of their home. i don't think that we are anywhere near where we were in two thousand 8, 2007. we are starting to get back to the environments where they are spending on their home. as it relates to services in their homes, gdp members had it

leading goods. the gap has now narrowed as opposed to where it was 1.5 years ago. we are starting to see more of that spend. home depot had its first positive comp in two plus years. jonathan: michael, a bit of tension between the results in the outlook relative to expectations with numbers better-than-expected in the outlook being a bit softer in the premarket, negative by close to 2%. updating stories this morning with your bloomberg brief, here's dani burger. dani: the u.s. and russia voted against the u.n. general assembly resolution calling out moscow's full-scale invasion of ukraine with the g7 failing to issue a joint statement marking the third year since the start of the war with sources telling us the u.s. opposed language condemning russia that echoed previous language from the group. tesla sales fell in europe last month as competitors saw a surge

in the ev demand with sales affected by production line changes and inventory shortages. the elon musk controversial political views may have weighed in on the sales as he has come -- men criticizing. pope francis reportedly slept well all night after reporting yesterday that he resumed working from his hospital room and doctors said he remains in critical condition with double pneumonia with a reported slight improvement in his condition. jonathan: up next on the program, high risk for big tech. >> in the equity market what's most at risk is the things that are of extraordinarily high valuation. the tech sector is what's really valuable, not just because they aren't making money. jonathan: up next, dan ives. live from new york, you are

watching "bloomberg surveillance ." ♪

jonathan: more losses this morning, down .1% on the s&p, building on a three-day slide. the longest losing streak since the beginning of the year on the s&p 500. bond yields are lower again on the 10 year, and under surveillance this morning it is high risk for big tech. >> in the equity market what is most at risk is extraordinary valuations. it's got an impact to the slight slow down could be substantial. it's vulnerable, not because a

big money, but the valuations that are too high. jonathan: it's a fourth straight day of losses ahead of nvidia earnings tomorrow with chinese tech stocks limiting chinese investment in strategic u.s. sectors. over the weekend, the directive from the president dropped. what was in it that spooked people? but it's a reminder of 2022 when there was pressure on those companies to scrutinize what the numbers are within those businesses. finally, they came to an agreement. it took a long time and they opened the books, those companies in hong kong. china was very reluctant to go that far. it also suggests that u.s.

investment flows into those chinese tech companies like energy and farming will come under greater spotlight with flow into the chinese market as well. on a number of fronts under the directive, there is a vulnerability here. you would have thought that those exposed to these chinese names, particularly those using technology. alibaba, down 10%. dan ives joins us now to join in on the conversation. adr out of china is listed in the u.s., how investable is it? dan: i think that alibaba oversold here. look, there's going to be some fear factor, but when it comes to cloudy and who will be the winner in a i and china, these are names that you only here. the bark will be worse than the bite. that's the best reaction we are seeing in china in terms of

these names. lisa: the idea of buying and mainland china as opposed to buying the adrs in the u.s. at a time when there is increasing focus around these companies raising money in the united states, do you think that there will be an increasing divide between receipts and what we see and mainland china and hong kong? dan: there will be around what could come out of trump and the beltway. the other focus is that even though we are hearing jitters tomorrow, more of us would rather own big tech. there is obviously regulatory risk and their -- that continues to be at the top of the mountain. annmarie: evercore put out a note saying that it was more about cell first and ask questions later given the directive from the president being a directive, a place of

travel that they want to go. how much of this do you read as leverage for a deal that trump might want to do with beijing? dan: i was in hong kong last week. it's all a game of high stakes poker where you get to some kind of deal. given the movement, i get it. but i do think that you will maybe get to a better outcome here between the u.s. and china and that's the thinking, especially in hong kong with a lot of those investors there, rather than the draconian scenarios you would have thought . annmarie: how concerned are you that there are already conversations underway when it comes to trump officials, similar to the biden administration and may be bit sharper? dan: look, it's all going to be a fine line. tiktok is another chip on the table.

like with tesla and fst. look, it's all going to be a negotiation. but i do believe that there will be a balancing act. i wouldn't view this as a draconian impact on ships or the supply chain, despite those fears out there. i think that's maybe why he talks to jensen and coast. musk, of course, has that front row seat in terms of a tricky balancing act and is acting tough without ruining this, what continues to be the biggest tech transition in 40 years. i never know where you're going to be. today you are in kuala lumpur. i'm curious about what you are hearing from people around the world, when we see the uncertainty coming out of the white house, how serious they are people taking that internationally as they decide which tech giants to invest in and how much they can be confidence in the american tech prowess story?

every meeting of the last two weeks, regardless, in terms of trump, what does it mean? especially for these countries that have gotten crushed in terms of the worries over the ripple effect, the data centers, capex, regulatory and what it means, it's just another risk that investors are trying to handicap. a lot of it really does just come down to fundamentals. fundamentals continue to kind of drive, and i think we will hear from nvidia tomorrow, some of it goes to the background. no doubt, white knuckled to start the year. you don't know what's going to come out from a regulatory perspective in terms of the u.s. china cold tech award. jonathan: dan ives, appreciate it this morning. thank you. looking ahead to numbers from nvidia tomorrow afternoon. lisa: i love that he travels around the world, never change, but i do think that kind of view

really highlights though the scuttle on the ground, the international story in terms of u.s. investments, people are still confident about that story. the theme that we keep talking about is how long the uncertainty can drag on before the material effect on those business decisions. jonathan: with chinese tech there was a big challenge to that over the last 24 hours. how much of that was news over the weekend over others? annmarie: it's the whole point of sify us, to make sure adversaries don't have a foothold in the united states. it is trump trying to make it more muscular? i think it shows the direction of travel, but it could also be a negotiating tool because right now he says he wants to do a deal was xi jinping. jonathan: of next, we catch up with mike wilson, sarah bianchi, will venmo, and thompson saurus.

this bond market keeps rallying.

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we got some data that was less than rosy that we have gotten over the past couple of months, but the picture from the consumer is the same, still really strong. >> the economy is strong and labor demand is increasing. >> consumers are feeling inflation in a visceral way. >> we have seen the economy strengthening.

>> the risk is in the current state of the economy. it's that we might be potentially slowing down. >> this is "bloomberg surveillance," with jonathan ferro, lisa aronowitz, and annmarie hordern. jonathan: the s&p 500, attempting to avoid the fourth day with futures negative by .1%, shaping up as positive. important data this morning, and we wouldn't usually say this, but consumer confidence at 10 a.m. taking on additional importance following the surprises we got on friday. lisa: we've got consumer confidence data coming in at 10 a.m. eastern and is considered less politically influenced and has a wider survey sample. if it confirms what we saw on friday based on what we saw in terms of tariffs in the market, expect another risk off. jonathan: terra proposals are

not just proposals, apparently, things are moving forward on time and annmarie: on schedule. annmarie:great, next week, march 4, the first diary outlined for potential tariffs. at the same time, how much is he in negotiating mode? we know that members of the administration sat down with mexican officials for room with tariffs on imports. this story about what could be hurtful to growth has been happening for weeks. jonathan: bond market yields are down for a fifth consecutive session. mike mckee says that the markets overnight are pricing in rate cuts for the first time since the december 3 meeting. the first was in july, the second in december. lisa: follow the data from the citigroup u.s. surprise. it's gone negative for the first time since late last year.

you are seeing a trend in the data showing that maybe we were not as strong as we thought we were to start the year. potentially, the lack of certainty started to bleed into what customers and businesses are actually doing, but it remains to be seen how long it drags out. jonathan: the numbers themselves were decent, better-than-expected. delivering growth. how do you provide that outlook in 2025 without understanding but the policy will look like? lisa: michael baker said that maybe they were using that uncertainty to lower the bar solo that it is the classic sandbagging where they jump over the bar and received kudos. we shall see exactly how this transpires and the longer it drags on, the more realistic it is likely to become. jonathan: coming up on this program in the next 60 minutes or so, we catch up with mike

wilson on a three-day losing streak. evercore, trump pushing for peace, ai fuels energy demand. we begin the hour with stocks lower. mike wilson of morgan stanley says the focus is shifting to growth with potential headwinds from does -- doge reinforcing the view that the first half of 2025 will be choppy past what we experienced through the fault of 2025. good morning, mike. are you seeing those growth scare is reflected in a more pronounced way over the last few days? mike: it really started in december when rates got a 4.5%, the first shot across the bow. the policy announcements that we expected were all growth negative and probably not conducive for inflation, keeping the fed on hold. the combination for all of that was one more in the hopper with afi being called into question

as deceleration went on with deepseek not really helping that view. that is where leadership has been. a lot of the reason for the rally's mag seven fence. there's a lot going on here going back to what we talked about earlier consumer confidence numbers, that one is very centered on labor markets. university of michigan is more about financials and positioning around how consumers feel around the financial standing, so that's important. the fed may pay attention to that, they know that. it could be a positive in some ways, everybody thinks the fed is on hold through june and that is our view, to, but you start to see more signs that the labor market is weakening and it might give them room to bring the cup forward. there's a lot happening. i think that this is what we expected in the first half of the year. the last thing i would bring up

is the economic surprise index with a 60 day lag on the 10-year yield. part of the reason why we saw increased in economic surprise was the rates going down so much in the fall, now going up. good news is if that stabilizes, it might just pick up. it's a ping-pong back and forth and it is a trading haven, but not great for deploying capital. the overhang of the next several months or years, i don't know, you are talking about the level of confidence consumers have at the moment. where is the pricing power? services versus goods, where is the pricing power at the moment? services -- mike: services is where the demand is at the moment but margins have been pinched where they can pass it on. it's probably worked too well, with a spread between consumer services and consumer goods, i tend to like to fade those

things, but not for fundamental reasons but because it is technically kind of overshot but other reasons where there could be pricing power is financials. anything not affected by tariffs looks better, relative software over semi conductors. pricing pressure not being as affected by the tariffs. lisa: people pegged you as a bear on the market for a number of years. [laughter] mike: i'm a bears fan. lisa: people say that about me, too. [laughter] but what you are saying is actually quite bullish, because ultimately you're saying that the ping-pong is a haven for traders where the u.s. isn't on the verge of collapsing at lower rates could fuel another leg of equity optimism. you wrote that it was premature to conclude it sustainable. do you think we are set up for another higher leg on the expectation that the fed could

cut into potential weakness? mike: we called 6100 when we were bearish three months ago, so we aren't always bearish, to clarify that provokes, but 6100 has been a really formidable level. index isn't too interesting, it's kind of stuck, but there's plenty to do under the surface and that's our job. there's always someone bearish, that's what you try to do as an investor. annmarie: in the u.s. are there more opportunities compared to europe where people say that the rotation in europe has more legs? mike: think about it this way, there are more high-quality businesses in the u.s., end of story. the quality factor is continuing to carry the day. if you look at the concentration risk in the u.s., five stocks at 35%, germany being like three. asia, it's even worse.

you hit the mid-cap index looks worse than the russell 2000. it's just the same story everywhere. what we have been consistent about is that in this uncertain environment rates are too high and the market is paying for quality. in that sense, yes, there are more high-quality companies in the u.s. with more opportunity. but then there is valuation. that's where we have adjusted over the last few months. the u.s. has gotten too rich, relative, but now i'm arguing it's where should be. it's back to factor selection. annmarie: you said that exceptionalism has been on of your driving conversational points with clients and it doesn't sound like investors are falling out of love with america, but falling a little more in love with europe. mike: they are getting tired of leadership. we hit the targets last year and now deceleration in the numbers.

you mentioned economic surprise factors. earnings revision has rolled over even harder and it's getting to a point now where it is so extreme. here are the two options i think we have. numbers have been sandbagged coming into march. by the way, seasonally that's what they do at the beginning of the year. we warn about in december. look out for the sandbag, here it comes. but now the numbers have been reduced and towards march we could start to hear that things aren't as bad. i suspect u.s. companies will sound better relatively speaking. lisa: are you saying just ignore the guidance? fade the move on the heels of that? mike: i wouldn't say that. i would say the numbers are managed, companies are very good at managing numbers quarter to quarter but aren't as good at predicting 12 months. no better than the rest of us, right? they are just doing what they

should be, they are being prudent in saying that they don't really know. by the way, the rates and dollars were stronger towards the end of the year, affecting fourth-quarter numbers. they managed them. they had to lower the bar for those items. add in tariffs and uncertainty, and why not lower the bar? they didn't get punished that hard, for crying out loud. 40 over the last year, that's good management of your earnings guidance. annmarie: you are talking about march and as jonathan keeps pointing out, that's next week. mike: we did some math on this and if you assume the 25% tariffs stay on canada, mexico, china, into 2026, it's a 5% to 7% hit. it's not insignificant. it will take us down to 5500 no problem. we haven't seen the numbers come down, but we are talking about a

$10 to $15 hit for s&p earnings. it will be a cat and mouse game throughout the year. it affects fed policy as well and we already mentioned of this is holding them back and we are already dealing with it. one last thing i want to mention, people assume that trump is very focused and won't always let the stock market go down. i have no idea, but he hasn't been talking this way this time. scott was on the show talking about main street versus wall street and that is i think how they are evaluating themselves, get main street to participate more in the economy writ large. the government getting a crowding out of their hair with the regulation and getting rates down at the backend. that being what affects mortgage rates and things that american citizens care about. so, there's a lot going on and i am optimistic that one year from now i think that the structure of the economy will be healthier

if they can succeed in doing these things without damaging too much. the path from here to there will be extremely messy. jonathan: mike, just quickly, some are calling the stock market the president traffic light. are you suggesting that isn't to the case anymore, or are you saying it has to fall more than it has already? mike: i don't know, but i haven't heard him talk about the stock market where in the first term it was all he talked about. now they are much more focused on immigration, law and order, things to help the american citizen and small businesses. there's a focus there on doge and what they can do to liberate the private economy. to me that's a better storyline than i'm a perhaps, the first term, which was about pushing, pushing. you can't really do that this time, the crowding out has already limited you to where rates are. you can't just push on

reflationary strategies. in 2017 when we were bullish on that story, it worked, but you had a lot of slack in the economy. today you down and i think they understand that. jonathan: let's update you on the stories elsewhere this morning with dani burger. dani: the u.s. treasury secretary will be meeting with australia in washington today, the counterparts discussing the pitch for tariff exceptions and address the summit at the embassy. the resolution on tariffs is not expected today. eli lilly cutting the price of obesity drugs to combat cheaper copycat versions and in a statement they said they are reducing the costs for the 2.5 and five milligram vials. it's a cut of about $50. they make higher dose vials available for just under $500 a

month. bitcoin dropped below $90,000 today for the first time since november following the postelection rally. the drop comes after tariffs and wider geopolitical uncertainty on the markets after setbacks like the biggest ever crypto hack and a mean coin scandal involving the argentinian president. that's your brief. jonathan: more from dani burger in about 30 minutes. up next, negotiating peace in ukraine. >> working on deals. transactions. right now. particularly getting the war stopped. cease fire or direct to agreement. jonathan: a conversation up next with evercore. this is bloomberg. ♪

jonathan: lisa: lisa: 10 year government bond yields are down by seven basis points, 400-3251 building on six weeks of gains with yields lower across the last six weeks. it could be week seven. this after evidence of disinflation with a core pce reading on friday expected to come in at a seven month low at the same time that these tariff threats are starting to become more growth concerns. jonathan: let's talk about foreign policy, negotiating peace in ukraine. >> i will be meeting with zelinski. he he may come in. this week. next week? he could sign an agreement. that would be nice. we could meet. at the oval office? it would be a deal over rare earth. we are working on transactions right now. particularly the big one, to get the war stopped.

whether it is cease fire or direct agreement. jonathan: trump reiterating calls for an end to the war in ukraine while meeting with the french president at the white house. joining us to discuss, tyler kendall. they did a great job showing that you can be friends when you disagree. did we make any progress whatsoever yesterday? tyler: the french president repeatedly called the meeting a turning point, though it is evident big risks remain. macron suggesting that europe is looking at a framework for peacekeepers on the ground in ukraine, suggesting that the u.s. should underwrite it in some way. i spoke to one foreign policy expert who echoed the sentiment and said it's difficult to see sustained peace without a u.s. deterrent, but noticeably left out are any such guarantees from the white house. instead we are seeing administration officials and trump push ahead with the economic cooperation agreement when it comes to critical

minerals. administration officials have instead been saying that they would rather make those guarantees implicit given the vested economic interests in the future of the country with trump repeatedly saying that the deal is critical for the u.s. to get back on investment and we should note that the ukrainian president has repeatedly asserted that the conditions for the aid were negotiated under the last administration and don't amount to any kind of debt. jonathan: tyler kendall, thank you, joining us now to build on that conversation, sarah from evercore. the sitting president took a very different approach to the situation and you came, some suggesting that it's designed it to shock europeans into action. do you agree? sarah: it certainly has had that impact that we are seeing with the macron visit and the british prime minister coming. looking at the events and remarks from vance and the

defense secretary, certainly it made the europeans realize this is a different administration, in case that hadn't already been clear. they are reaching over to try to get in to meet with trump and try to be, to get into this sort of transactional aspect of the way he does business, making sure they are a part of the conversation. annmarie: under the biden administration there was conventional thinking that there was no way that putin wanted to come to the negotiating table. trump flipped that on his head with his rhetoric. is that what is bringing them to the table? he continues to say the end goal is ending it with a cease fire at minimal. sarah: i actually think it was a good decision for trump to reach out to russia and bring them into the conversation. the concern obviously on the european side was some of the

public offerings of negotiating, taking things off the table ahead of time. look, i think he has his own way of doing business. it's obviously causing consternation. look, all parties have to be a part of the conversation if we are going to get a cease fire or a resolution like people are hoping for and honestly that probably includes russia and ukraine. annmarie: there seems to 8 -- seems to be a fast track for a mineral deal with trump saying zelinski should come this week. implicit in that deal do you think would be security for ukraine? because of how close u.s. investment and protection of raw assets could be? sarah: look, the critical minerals deal is unique to trump and it has caused everybody, all the parties, to rethink kind of what is needed here. that is certainly not what

ukraine was expecting from the last administration. i think they are trying to figure out what cards they have to play here in terms of getting the kinds of guarantees they are looking for, so it appears they might have to at least agree to something as far as minerals. those of the cards they have right now. so, i think they will come to try to make something and i assume these will include some ironclad guarantees in return. lisa: in terms of whether this is all negotiation to bring resolution to the russia ukraine more to get peace or if it is reordering of the global order of friends and enemies with everything not mattering, everything is a transaction. which is it, from your point of view? sarah: probably some of both. trump always viewed all relationships as transactional. we saw that in the first term with the eu when he said tariffs

aren't fair and the steel and aluminum isn't fair. he looks at every relationship and wants to understand what the u.s. is getting. that underlies everything. it also uses negotiations with shock and awe tactics to bring resolution. you know, it's just a matter of everybody adjusting to try to see what the endgame is. certainly, it is causing a lot of, you know, divides over what has been a historically strong partnership between the eu in the united states, and it is certainly causing alarm bells. lisa: there are discussions over the longer lasting implications. are you getting the sense that the ultimate goal is a separation between the u.s. and china with a negotiation about what the u.s. is getting from places like europe, the u.s.,

canada? is that how you see the framework evolving? sarah: he certainly going to be looking at what we get from any allies. be at u.s., canada, fentanyl negotiations, europe. it's not exactly clear where trump is headed on china. there are a lot of different aspects he needs to solve for in that relationship right now. sometimes he likes to talk about this notion of a big deal with them, but the efforts we have seen from the administration so far, whether it's 10% tariffs across the board or other stronger rules, they are anything but. the chinese relationship is evolving and a bit behind these other things. what's the most different is how he thinks of allies in terms of transaction and what the united states in his mind is getting out of any one of those

relationships. it's night and day in terms of how biden thought about the relationship in the world. jonathan: sarah, appreciate that there from evercore on the relationships between russia, china, and the u.s.. tariffs on china, you pointed out, they stuck. lisa: it's the only one that went into place when he said they would go into place. when you talk to officials, they called this the opening salvo. jonathan: hearing from the president, more tariffs are going in on schedule and on time as soon as next week. the rise of ai, fueling a surge in energy demand. w york, this is bloomberg. ♪

jonathan: s&p 500 attempting to avoid day four. equity futures just about unchanged and turning positive. down .1% on the nasdaq 100. with an update on your movers, let's go to yahaira jacquez. jahaira: home depot shares are up in the premarket. the company says it will finally return to growth this year but not at the amount investors were hoping for. they say comparable sales will rise about 1% this fiscal year. that fell short of analyst estimates which was 1.56%.

shares are now reacting positively in the premarket after falling lower. next, we have him said hers. that stock is plunging 22% after executives confirmed they will no longer be selling their compound weight loss drug because they are no longer allowed to sell their copycat drugs. in the next month, their ceo says they will start telling customers that they will have to seek other options for that. quick check on nvidia shares, earnings out tomorrow, but the stock is seeing a little bit of a hit. down .8%. part of that could be the story we have today that the trump administration is drawing up tougher chip curves to contain china's tech ambitions. the idea that more controls

could be in place could be weighing on the stock right now. jonathan: thank you for that. on our radar this morning, president trump seeing terrace scheduled to hit canada and mexico next week are moving forward, but an official saying the fate of the levees are still to be determined. annmarie: because they are negotiating. we have a report that they sat down with mexican officials to see if they can combat some of the imports coming into china and leaking over the border. even if the tariffs are not coming into place on tuesday, trump will talk about this maximalist approach, because if he is a negotiating mode, he will not give an inch, not publicly. lisa: people are getting use to ignore some of this because it doesn't come to fruition. the rhetoric is getting heated on all sides, the retaliatory tariffs coming from canada, pretty she did last night coming from mark carney, others having

a debate. you have to wonder if this is heating up the animosity before a grand deal. are we going to have fights at hockey games from here on out? jonathan: i don't want fights in the stands. on the rink. lisa: the first 10 seconds? when canadians boo us, we have to take note, because they are so nice. jonathan: the way to think about this may be that we could have a lot of government at the border and a lot less within. immigration, tariffs. within the u.s., regulations, cuts. to really get into the dynamism, it can go beyond the second term. how much pain are they willing to tolerate? it is only just started. we are right to say this, only a

few percentage points away from all-time highs in the equity market. but if they are serious about this, you will have to take some pain to take those gains down the road. lisa: we need to define that, and you are absolutely right. if it is cutting the deficit, yes, we are on a fiscally unsustainable path. if it is cutting regulations, it's a question of how you do it, if there is a framework that people can see, or if it feels like chaos. that is a question that is yet to be determined. jonathan: five weeks into this? equity futures on the s&p negative by 0.05%. the u.s. voted against the resolution in the u.n. general assembly that calls out russia's full-scale invasion of ukraine. the u.s. and russia also calling for a swift end to the war without assigning blame. annmarie: the wall street journal this morning is pretty

scathing on what happened yesterday in the u.n. basically a huge victory for russia, sad day for the united states at the united nations. on the same day, you still have the g7 absent of a joint statement, because the u.s. was not on board with the rhetoric that the european union and other allies wanted to use. that meeting was 24 hours ago, and the g7, pretty remarkable, on the third anniversary of the war, cannot issue a joint statement. jonathan: the prime minister is coming over. the idea that this shocks europeans into action, we could see had today from the united kingdom pushing for more defense spending. this is exactly what the president wants. annmarie: we saw it from germany, they are talking about how much money. how much money they want to move on defense. trump is saying you have no choice, we are not going to do it anymore. this is a realignment not for

just defense but trade. jonathan: the british prime minister speaking right now on defense in parliament, saying nato can trust the u.k. for collective security first. lisa: can you cut the defense in spending in the u.s. if you get an increase in europe? jonathan: look out for the headlines from sir keir starmer. the latest from tesla, sales falling 45% in europe last month, coming as the company changes overproduction to the model y, and contending with elon musk's increasing participation in politics. lisa: this is something we've been talking about, how much is political involvement in the u.s. becomes a liability for his company. i wonder if that will impact u.s. sales more broadly or if this is incredibly targeted to

specific people and companies, which so far it has. annmarie: polls conducted in the u.k. found that musk was seen unfavorably and that his meddling was unwelcome. at some point, that is brand destruction. jonathan: and what else? a german car instead? for a chinese vehicle? ok. it is very competitive, that is for sure. let's turn to ai. will vanloh expecting a ramp-up in energy needs. with a focus on electric transmission and distribution and generation to meet the needs of emerging industries like ai and cloud computing. welcome back. can we take a step back and talk about where energy is going in america? the sitting president talks

about drill baby drill. across resources, basic resources, metals, we have seen a shift away from volume and toward cost discipline. are you expecting anything to change anytime soon? will: the u.s. energy industry, primarily driven by oil and natural gas, went through some challenging times. the shale revolution in its early days. today, it is one of the most profitable industries in the united states of america and is very focused on the bottom line, sending capital home to investors. i don't think that will change. jonathan: how mature are those assets? will: the u.s. is no almost 20 years into the shale revolution. it started with natural gas in 2006, oil in 2009. we have a lot more shale gas than shale oil here. the u.s. is the saudi arabia of natural gas.

but the oil fields are maturing. outside the permian be, they are all peeking or will peak soon and will go into decline. lisa: does that mean that you'll end up with smaller production in the u.s., or that you can have more efficiency in a lot of these places but maybe not as many discoveries? will: if you look at the last 15 years, the united states has been responsible for 100% of global apply growth for oil. a country today that produces a little over 20% of global supply is responsible for 100% of the growth. as you fast-forward, can we keep growing like that? no. can we maintain that production? today we are self-sufficient. we export a couple million barrels a day of refined products. we are energy self-sufficient and we are a slight net exporter. can we maintain that for 15 years? yes. forever?

no. that is where america has to get a very concise energy policy, all of the above, because we have this wonderful gift that the shale industry gave the united states. we went from being the largest importer in the world to the largest exporter, energy self-sufficiency for a period of time. that is a window that will not last forever. lisa: do you have a clear sense of what the energy policy is from this president other than produce more? will: he has been clear on four primary objectives. one is to produce more oil and gas, allow the buildout of the infrastructure, pipeline systems, lng export terminals, to facilitate the growth of oil and gas. he is also very focused on reforming, allowing things to get built. a lot of people say build baby build, not drill baby drill.

there is a tremendous amount of power, transmission lines, grid upgrades. that is a second key pillar. on parts of the supply chain for certain aspects of the energy transition, renewables, batteries, they want to bring back to supply chains back home. that would be good for american jobs in manufacturing. the fourth thing is the nuclear renaissance. nuclear is the ultimate form of clean energy. it is the only baseload clean energy we have or probably ever will have. those four things form the pillar of trump's energy policy. annmarie: last night, trump was saying, the company building the keystone xl pipeline should come back to america. i'm not sure it will come back because that company has said we

have invested money and it will not do us any good. how do you invest when policy swings, especially energy, goes every four or eight years? will: these are long-term projects and the payouts are measured in decades, not years. that keeps a lot of capital from coming into the space. the beautiful thing about shale, it is a short cycle time, so companies can make those investment decisions because it is 1, 2-year cycle times. annmarie: what if we need long-term projects like any canadian crude into the united states? are people just going to say, even if trump wants easy regulation, easy approval, it is still not worth it because we don't know what happens in four years time? will: if they can get built in the next four years, they will not be turned off. the challenge is what products can get done in the next four years?

he is trying to find projects he can fast track and get built quickly. if we have an administration in four years, less friendly to the traditional energy business, it will swing back the other way. as an investor, that is the most challenging thing we face to deploy capital, changing regulations, uncertainty about our ability to generate the returns we have to generate for our investors capital. jonathan: were you spooked by deepseek at all? will: i wouldn't say spooked, and i'm not an expert in ai, so i will not pretend to understand it. you all have talked about it. they say necessity is the mother of invention. i think the chinese had to do something different. while it was a lot cheaper in training its models, it also relied on u.s. models for some of its chief training -- cheap

training. the more the cost of ai comes down, the more it will be used. while that may use less energy, people will use ai in more things, and that will increase the demand for energy. jonathan: will vanloh of quantum capital group. we get nvidia tomorrow after the bell and that is the big earnings report of the week. headline coming from the united kingdom, british prime minister speaking in parliament, saying we must change our national security posture. going on to say the u.k. defense budget will reach 2.5% of gdp by 2027. that headline timely because he will be sitting down with the president of the united states in the next few days. annmarie: going to washington, d.c., will have that meeting with trump, and we trump tell nato they need to get their defense budgets up. the problem is, 2.5% by 2027 is

a welcoming step, but this administration is now talking about 5% spending. they may have more work to do. jonathan: the story coming into the year -- lisa: the story coming into the year was that the u.s. would do strongly, some downside stock in europe. we have fiscal constraint in the united states with the potential growth hit. it just highlights how the tone has been in the past five weeks. jonathan: in places like the u.k. and france, somewhat suggest they have the physical space to make these moves, so when you make a move, what are you cutting to accommodate that spending? that is the next headline to drop i imagine. lisa: 10-year gilts, how much do you expect to see them popping up as people expect an increase in spending? at some point, that is the key, the fiscal constraint of what yields do. jonathan: headlines from the

british prime minister before sitting down with the american president, saying the defense budget will reach 2.5 percent of gdp by 2027. the defense budget will hit 3% of gdp in the next parliament. the latest from the british prior. let's get an update on stories elsewhere with your bloomberg brief. dani: president donald trump is letting too tough and biden era over china's tech sector. the white house is sketching out more restrictive curves and encouraging allies to increase their own restrictions. some officials want to further restrict the type of nvidia chips that can be exported to china without a license. elsewhere, indonesia and apple have agreed to lift the ban on the newest iphone models. iphone sixteens have been banned as the ministry for industry sought to negotiate better investment terms. app i will commit to training locals in research and development and invest $1 billion in indonesia.

former republican presidential candidate vivek ramaswamy is running for governor of ohio. he is going to succeed fellow republican mike dewine in next year's gubernatorial election. ramaswamy was named by president trump as the cohead of the department of government efficiency before he was pushed from that role. that is your bloomberg brief. jonathan: more in the next 30 minutes or so. next on the program, the bond really continues. >> the underlying conditions that we need for yields to come down, for growth to come back up. 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: yields are down close to eight basis points on the 10-year. coming up, thomas tzitzouris of strategas. ♪

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jonathan: live pictures from parliament in the united kingdom as they just respond to some important headlines coming from the british prime minister. u.k. defense budget to reach 2.5% of gdp by 2027. sir keir starmer saying the defense budget will hit 3% by the next parliament. i will be this, you might ask? u.k. foreign aid will be cut to fund defense. what does that sound like? lisa: sounds like exactly what happened in the united states although it is coming to increase spending on something that has been underfunded for years. jonathan: he will sit on with the american president later this week. we are all fixated on the bond market stateside. yields continue to drop, down

seven or eight basis points. 4.3232. the bond rally continues. >> what is necessary are the underlying conditions. the underlying conditions we need for yields to come down 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, rates come down every week since donald trump has been president. if we can continue that for 52 weeks, that would be great. jonathan: 10-year bond yields dropping to a two month low. thomas tzitzouris writing debt ceiling driven liquidity will enter the market in large numbers this week. this should temporarily lower longer term bond yields, mortgage rates, and corporate spreads. let's talk about the last six weeks, not the past five days. what is driving this move in

fixed income? thomas: there are really three things that have tremendous drop in yields. the first one has pretty much played out, the realization that the global trade war will not come to fruition. worst case scenario, will not play out. we are very likely to have tariffs along the way but the trade war worst case scenario is no longer on the table. that has played out on the bond market. point number two we are seeing filter into the bond market, the realization that we are right now in the midst of what we call a seasonal slowdown, middle of q1, late q3 are the seasonal slowdown periods because of consumer debt hangovers. there is always a concern that that seasonal slowdown will become a prolonged slowdown. that is where we are right now, the market starting to fear that this is a consumer pullback, especially now without the

tailwind of fiscal stimulus at our backs. number three, and the debt ceiling is part of this, there is a realization that the worst case scenario on treasury supply is temporarily off the table. what i mean by that is coupon auction increases are not slated for this quarter or next quarter, probably not third quarter, but fourth quarter or later. on top of that, the debt ceiling has been hit. measures of cash are coming into banks today. that does tend to flatten the treasury curve temporarily. last but not least, some commentary in the fed minutes suggesting there is an appetite to end quantitative tightening in the somewhat near term. that could mean early q2 or late. a month ago, it seemed like an indefinite policy. so all of these factors have helped to push yields down.

this week particularly the debt ceiling cash is the big force. lisa: a lot to pick through. i want to emphasize one thing you said, this is essentially the bond market saying the idea of a trade war is off the table. you disagree that tariffs are no longer being treated as inflationary but people not taking these threats seriously? thomas: i think it was both. there was an overreaction late last year because perhaps it was being pushed out through media sources that tariffs would be exponentially inflationary. that was never going to happen. now there is also a realization, if the tariffs happen, they will be incremental, targeted, and they will dial off back and forth. the risk of a trade war seems less likely. it is not just that there is less chance of an explosively inflationary environment, but more of a chance this would not

play out to the worst case scenario. jonathan: appreciate it. thomas tzitzouris. it is quickly becoming week seven, the 10 year down by eight basis points this morning. lisa: questions about the consumer confidence data we get this morning. does it confirm what we got out of the university of michigan survey? mike wilson saying it's important to look at this one, because if it is a labor sentiment aspect as opposed to just spending. jonathan: taking on additional importance after the numbers we saw on friday. retail sales have been softer, walmart spooked people a little bit. look out for that this morning. coming up in the next hour, we are catching up with thomas kennedy, mark gurman, and neil dutta of ren mac. david rubenstein sitting down with the bank of america ceo of brian moynihan. we will have that here on bloomberg tv. ♪

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>> the market is very quick and change a reactor narrative that we are in angle you lock

scenario and then, no we are recessionary. >> we have also seen a broadening in terms of earnings growth. >> in terms of the earning story of the united states relative to the rest of the world, is been driven by big tech. >> the tech sector is vulnerable not because they are making money but because their valuations are too high. >> ultimately a good environment for stocks but it will be a little bit more difficult. >> this is bloomberg surveillance with jonathan ferro, lisa abramovitz, annmarie hordern. jonathan: futures on the s&p 500 just about positive following a three-day slide. the nasdaq totally unchanged. the interesting story is in the bond market. 2-year, 10-year, 30-year, six executive weeks of lower yields in america, they run that

we have not seen in more than five years. 10-year down by seven basis points and driving lower once again. lisa: the tail risk is no longer the prospect of inflation re-accelerating and that has totally shifted the narrative, as michael mckee pointed out, you have two rate cuts being priced into the market coming by the end of the year. does this change the narrative once again? are people looking for a growth shock to the upside, may be a hit on the margins, but the fed is coming more into play after being sidelined for a bit. jonathan: 10:00 eastern time, we get another read on consumer confidence. consumer confidence a bit softer than expected in friday's read. inflation expectations are a whole lot higher. annmarie: one caveat you mentioned earlier in the program, lie the static front data point is important, the political bias that goes into the university of michigan. democrats are not feeling very

excited about inflation prospects, concern about tariff s. potentially a more clear read at 10:00, especially when market participants, the angst is about trade. donald trump last night the tariffs are on time and they are going forward. lisa: let's talk about consumer feelings. when they say they are unhappy, it doesn't translate into less spending. we have seen that consistently. now we see prognostications from ceos about uncertainties going forward, low benchmarks that they can cross this year. how do you put this into a picture where you can point to one indicator showing strong growth, another showing deceleration? jonathan buy bonds apparently. coming up this hour, we will catch up with tom kennedy of jp

morgan, with stocks looking to snap a three-day street. mark gurman. neil dutta on why he is not constructive on the u.s. economy. we begin with stocks lower as traders way fresh concerns. our base case remains that additional tariffs will be levied on china and other countries for national security concerns. the risk of broad-based tariffs remain but a low likelihood. tom joins us now for more. what instructs that view? thomas: just the assessment of how things have changed and the global supply chain paradigm. china has been supplying the world's critical industries and over supplying them for a long period of time, making the rest of the world rely on them for critical minerals, batteries, processed minerals that go into electrical products. when you look at the tariff, it

becomes a way to slow down the integration of products from china, but you will eventually need subsidies to rebuild. that is a common thread between the body and trump administration so far. jonathan: also a levy potentially on canada and mexican imports. the president was clear, tariffs are going on time as scheduled. do you buy that? thomas: it is not our base case that that happens. when you look at the tray dynamics between mexico and canada, this is well discussed, america, we rely on them critically for their i nputs. they are a big piece of their gdp, so there is a lever that america can pull to get what they want. the question is, what are we negotiating for? that remains pretty unclear for us. that is what we are looking for, are we negotiating, and if so,

what are we negotiating on? lisa: the past five weeks have been an exercise in ignoring the noise. you are saying that some tariffs are more noise than signal. where is the signal? thomas: when you look at 2018 and 2019, the market's reaction to tariff announcements, the s&p 500 was moving 2.5%. now you are talking about tariff s that are substantially bigger in the market is moving 30 basis points. the market is doing a better go around in this administration than the first one, finding that noise and saying i'm not so worried about it. but when you look for what is really the signal, what is the big picture we are trying to solve? is the picture migration trends from mexico? maybe. fentanyl? could be.

but the bigger issue of national security isn't rely on mexico and canada, i think it is this reliance on china. to sit in front of any client and say, 80% to 90% of nvidia's chips are made in taiwan, that could say the dominus that we have on one product is a national security issue. just that type of reliance becomes an issue in and of itself. then you can look at processed minerals from china. 90% of the worlds processed minerals for electrical motion comes from china. lisa: what is the market signal there? these two economies are deeply intertwined. jon brought this up earlier. a lot of people agree that should be done but they will be pain as a result of it. do you see pain not being priced into the market as a result of some of these trade practices, goals that will go into effect? thomas: i think i just see the

market playing the downside of what will actually be implemented. tariffs is one case. when you look at other policies, immigration, deregulation, the market is just muting what they think will come through. on deregulation and capital markets, things are not picking up in the way that we thought they would. i think you need to give it another month to see if it is true, but these high expectations we had for the impact, the market is saying it is unlikely we get that impact. annmarie: it sounds like the market is numb to everything he is saying especially in the trade world. mike wilson was saying maybe this time is different. maybe he is not regulated as much by where the dow jones is. thomas: this time is certainly different. he came out of his inauguration day with pronouncements, executive order that we had not seen in the past. what is similar is we had high

expectations for big market economy impacts. it is hard to get all of those things done as fast as we thought they could be done. annmarie: one part of your thesis is accurate, the base case that additional tariffs would be levied on china. thomas: the only thing that has stuck so far. annmarie: how high does it go? thomas: our baseline is another 10 or 15% on china. if you want to do this operation, it has to be meaningful. to be clear, we do not know what the endgame is. annmarie: he says reciprocity. thomas: that is more impactful for the american economy. i teach my children that the world is not fair but if you look at trade practices, it's very unfair. what you end up happening, price shock higher which will likely

mean growth down. that is the stagflationary end game that will be negative for the market. jonathan: tariffs on china, what would you avoid, what would you go into based on that call? thomas: ai software over hardware. that has already happened. if those tariffs get levied more, there into full names -- individual names that you can pick out. it also does favor the bond call. if that is the only thing, it has this unlikely effect of higher prices and lower growth. the fed, what we have learned, they tend to favor the lower growth outcome. jonathan: that is what the front end may speak to, what does the long and speak to? thomas: this big worry about the deficit excluding is not as big, supply concerns are not as big. it is really simply economics.

u.s. growth outlook is a little bit muted to the downside. that is the dominant driver of the 10-year. when you play with your models, to the role model on the front end, it says you should cut one or two times this year. that is where the market is pricing. your premium in the long end is actually small compared to last year's. lisa: mike wilson was saying it is a traders market in the stock market. is it a traders market in the long end of the yield curve or is it buyers market? thomas: when we are in this phase of the fed giving you no guidance, when we will see individual prince driving the market, you can look at the move index where you see still relatively elevated interest rate volatility, that is a traders market. until we get firm signals a where we are going, if our

baseline is right, the fed will be back cutting not aggressively, firmly rebalance the economy. jonathan: bond yields down across the curve. tom kennedy, good to see you. we are down five basis point on the front end of the curve. with an update on stories elsewhere this morning with your bloomberg brief, here is dani burger. dani: u.k. prime minister keir starmer increased his country's commitment to defense spending. he says the u.k. will increase defense spending to 2.5 percent of gdp by 2027 and will aim to increase that by 3% in the next parliament should conditions allow. he went on to say the hikes in defense spending will be paid for by cutting aid, not in taxes or borrowing. elon musk's spacex is seeking to deploy starlink terminals to upgrade the faa's national airspace system.

it raises questions about m uck's business contracts. former new york governor andrew cuomo is reportedly on the verge of running for mayor of new york city. you may announce his candidacy as soon as this weekend. he resigned from office in 2021 over sexual misconduct claims. he denies the allegations. jonathan: thank you. more a little bit later. next on the program, morning calls, and mark gurman with a preview of the apple shareholder meeting. equity futures just about positive by .1%.

jonathan: the opening battle one hour and 15 minutes away. equity futures just about positive. this decline in bond yields continues. yields lower by six or seven basis points. 10-year, 4.33. let's get some morning calls. barclays loan its price target on toll brothers, citing the company's cautious tone around demand. the stock is up around 1.3%. argus downgrading domino's pizza to a hold, noting higher labor costs. finally, citi raising its price target on hymns and hers, citing multiple avenues for growth after reporting earnings. apple holding it shareholder meeting later on today. investors set to vote on a motion that would force the tech giant to scrap its dei policies.

mark gurman is with us for more. welcome to the program. have to build on your story from yesterday, the statement from him could on increased investment from the united states, increased tiring. was that a message to shareholders or the white house? mark: i think it was a message for one man, president donald trump. it is pretty clear apple wants to avoid tariffs particularly on the iphone. that 10% goods would be not destructive but hurtful to the bottom line. specifically the margins on the phone. they definitely don't want to deal with that. they have essentially taken investments they had already announced years ago, plant to implement, 5000 r&d hires a year, investments of $125 billion in u.s. interests, they put it in a pretty package for donald trump to see. now trump can go back to his

supporters, congress, back to the citizens of the united states and say i got apple to invest half $1 trillion into the u.s. now, that is not true, they were doing it anyways, but trump gets to claim that. in exchange, tim cook will probably get a reprieve on tariffs to some extent. annmarie: $430 billion in 2021 is that commitment today. that commitment that he made to joe biden, he is giving to trump today. he wants this flashy proposal because of a carveout. what could that be when it comes to tariffs? mark: we look at what happened last time, apple did not get an additional tariff on the iphone. tim cook made the same maneuvers at the beginning of the previous trump administration and the iphone was not slapped with tariffs. you saw some on some lower-priced apple products,

airpods, some of the macs, accessories, computer components, etc., but that would not have as significant of an impact of the iphone for apple. i am sure tim cook made the argument, samsung would stand to benefit. apple makes all of their stuff in china but they are an american company based in china. samsung makes their stuff overseas, import a lot into the u.s., but they don't make their stuff in china, so they would not be subject to tariffs in the same way that apple is. and they are a south korea company. that was a pretty good argument on tim cook's point. now you combine it with these press releases, showcasing apple is making these announcements. it was very clear that the prior announcement, that came in 2021, when biden had a few years left

in his administration, but donald trump started his second term a month and change ago, inaugurated in mid february. apple's announcement was clear say over the next four years. this is very much free used in a way for trump to be able to present as something specific and special to his term. lisa: what i find fascinating is tim cook's response to tariffs is to kiss the ring, not to shift rapidly out of china or a greater proportion of business away from china. is that basically the core of it ? mark: it is not possible to shift the majority of production outside of china. don't forget apple spent 30 years building up its supply chain in china, and you cannot just rebuild that even over 10 years in another part of the world. there are so many idiosyncrasies, things in china

that make it helpful for apple to produce their, that really cannot be replicated in other parts of the world to the same scale it is in china today. they are doing some iphone production in india, some going on in places like brazil. you are seeing airpods, watches, macs being produced in thailand, vietnam, malaysia, some production being done in indonesia. but 95% of their products are still being produced in china because apple doesn't have an alternative to be able to produce at the scale that they can do in china and across the region right now. jonathan: 10 years ago, we would have said it's all about cheap labor. tim cook has made the argument that it is not about cheap labor at all, it is advanced labor, finding the people with the skill set to do this. how important is that to china at this moment? mark: it is one component.

you are going to get labor at similar costs to china in vietnam, malaysia, thailand, indonesia, brazil to some extent. but what you will not get is the sheer number of people, sizes of these factories, who by the way have been doing this for 20 years, so they have the experience. apple will not risk quality in order to move its supply chain. the quality of their products and hardware is what allows them to price their products, have these immense margins. it is not how much they are paying these people, it is how many people they can get, how many they can get into the manufacturing culture in china, the experience they need, and the equipment and machinery, how this is done, that they have really set up for the past two or three decades. it will take time to move everything. even if apple started moving its supply chain right when donald

trump took office in 2017 the first time, they would be anywhere near the finish line at this point. this is a multi-decade effort. quite frankly, i don't think it will ever happen. we have been talking about this diversification for years, and that is all that is, diversification, not relocation. lisa: tim cook, in a really difficult spot. on the one hand, apple is creating partnerships with the likes of alibaba to advance some sort of artificial intelligence in china, at the same time trying to placate donald trump, bringing jobs back to the united states. is there a sense he will not be forced to choose, and if so, could that be catastrophic for the business? mark: let's talk about alibaba in china. that is placating also. apple knows it will not be able to sell as many phones in china if it doesn't have ai.

i will not say if the i/o is good or bad, but from a feature standpoint, it's essential to have in place. alibaba, that partnership is also placating. they cannot sell iphones without artificial intelligence by law if it doesn't have a censorship engine. a feature in the iphone where, if china, the government regulators disagree with that ai output from the iphone, they need a middle to fix that, to block, sensor, modify content. the alibaba partnership is essentially a layer on top of apple's large language models on the iphones that can shift and update the content at the behest of the chinese government. so you are seeing apple placating in other areas of the business. apple always talks about how it

follows the rules and regulations of the countries it operates in. tim cook's ethos has always been to make adjustments, in some cases a dramatic extent, in order to keep selling products in their region. apple doesn't want to lose any revenue over a disagreement with the government, so they will do whatever they can to keep things moving. another example last week was in the u.k., they pulled a feature called advanced protection. this is a feature that enables end-to-end data encryption for your file stored in the cloud, messages, notes, reminders. that is being pulled from the u.k. because the u.k. asked apple to build a backdoor into its devices globally, so the u.k. government could infiltrate the data of anyone it would like to.

jonathan: incredibly controversial over the last few weeks. we have to leave it there. thank you for joining us. the story of apple, regarding china and quality, not because of cost, but in china because of quality, that is a part of the story. lisa: it is also the point about why all of nvidia's chips are produced in taiwan. it is not because cheaper, it is the quality and supply chain of talent. jonathan: catching up with neil dutta of ren mac and what he sees a slowdown in the labor market and broader economy. that conversation is up next.

jonathan: equity futures positive by a little bit more than .1% following a three-day slide on the s&p 500. up by more than .1%. 60 minutes until the opening bell. with your morning movers, here is yahaira jacquez. jahaira: he lightly shares up 1.5% on the news that it plans to cut prices on some of its obesity drugs. this is a way for the company to stave off competition from the cheaper alternatives out there. as i said earlier, the fda is

trying to clamp down on this but they cannot get everyone. lilly says you can expect to pay about $50 less for its zepbound. next we have chegg, down in the premarket 22%, as it faces increasingly tough headwinds due to generative ai. as lisa knows, all the kids use chatgpt to study, and it's gotten so bad, chegg's wings strategic alternatives to its business. i wanted to end with something sweet but there is nothing sweet about these shares right now, down 15%. fourth-quarter revenue came in weaker than expected at krispy kreme because of a hacking incident last year and the sale of some of its cookies, more than a $1 million hit. the revenue outlook doesn't look good either and that is what is weighing on stocks. jonathan: getting very excited

about insomnia cookies. annmarie: they have a gluten-free, vegan cookie. my guilty pleasure. lisa: generative ai, you do your homework, and you eat your insomnia cookies. jonathan: eating cookies is so healthy. neil dutta ren mac raising concerns on the labor market, writing what we see in the press, tariffs, uncertainty is a red herring, and ex post rationalization for an economic slowdown that was already in motion. expect condition to deteriorate further in the jobs market. welcome to the program. as soon as you hit published yesterday, we talked about that note. share with us while you think this is a train already in motion, it's not about the last month. neil: i am being to have second thoughts already because i see annmarie rocking fendi so it must be able market? annmarie: vintage.

jonathan: she says it is secondhand. neil: all i'm doing is just applying the playbook from late 2022 when we made that call of no landing. it was basically four things, real incomes, housing, government spending, and the way the consensus was positioned. you fast-forward to today, real incomes are slowing as the labor market continues to cool. the housing market is getting worse, even though the fed had been cutting, state and local governments are pulling back. doge gets all the attention but state and local government spending has been a meaningful tailwind to growth, and that is likely to go the other way. back in late 2022, everyone was positioned for essentially recession. people held on to that of you believe it or not through the

middle of 2023. one of the way it works is through an element of surprise. if everyone expects recession and it doesn't happen, you have to have this period of catch up. by contrast, if everyone is expecting things to be fine and they are not, that could prompt a clearing out of inventories, hiring investment and so forth, create a negative feedback loop of the economy. that is what i'm concerned about. the data has not been particularly encouraging of late. and i would expect that to continue until the fed gets on the right side of the april. jonathan: i said yesterday, what is worse than a slowdown? it is a slow down the fed is not willing to respond to any time soon. the federal reserve was going to get ahead of something last year, dropped 100 basis points across three meetings. what changed coming into 2025?

neil: they are basically taking out an insurance policy against the new administration. if you look at what happened, adjustments to their risk assessment around inflation, the notion that they are innocently responding to the inflation data is a bit ridiculous. the upside surprises on inflation that we saw in the back half of last year paled in comparison to the upside surprises we saw in the first half of last year. the risk assessment didn't change all that much. to me, this feels eerily similar to the period between june 2024 and september 2024. if you recall, the fed went peak hawkish in june, and then three months later cutting 50 basis points. where i am at right now, the fed is waiting for permission from the markets and data in order to respond. that is essentially tempting fate.

if you are waiting for something bad to happen before you move, chances are something bad will happen. lisa: but i think a lot of people are picking up on the same thing that you are, the idea that tariffs are no longer considered inflationary, more of a growth shock in some more progrowth measures. the bond market is turning to your side, two rate cuts being priced in until years end. does that make you more positive if the fed goes through with 50 basis points of rate cuts by the end of the year? neil: no, not really. i think the fed needs to do more than what is price because the economy is weaker than we think. i do find it amusing how everyone is using tariffs and policy uncertainty as a rationale for their forecast adjustments now. to me it is a bit rich. if you thought that, why didn't you make your changes in november after the election?

the guy ran on tariff being his favorite word in the dictionary on you are surprised that he wants to go through with it? lisa: let's be clear. it is not just that he is going through his tariffs. it is the sequencing of it. there is not a clear path for the offsets with respect to the tax cuts, progrowth measures, you are not seeing the boone in deal activity. that is why people are focusing more on the growth hit on tariff than inflation, no? neil: what i'm seeing more if people talking about policy uncertainty related to the trump administration and that is why they have gotten cautious, why there will be a freezing investment and so forth. it is ultimately demand that will be driving the discussion. household demand is slowing because the labor market continues to cool. tariff stuff, all of this is just ex post thinking. uncertainty would be high if the shoe were on the other foot. we have one of the largest tax

increases ever potentially at the end of the year. it is this heads i win, tails you lose analysis that i think is ridiculous. everyone should focus on the here and now, including the fed. instead of trying to take out an insurance policy about what may or may not happen, congress is evenly divided. the fiscal expectations of people after the election, you could pin that at the feet of congress, so it is not just the trump administration from where the uncertainty is coming from. but i think it is wise to focus on the here and now. what the here and now tells me is that demand is slowing down, housing is still weak, and inflation is likely to continue to moderate as rental inflation keeps cooling off. jonathan: he knows his fendi. neil dutta, thanks for catching up. longer conversation next time you're in the studio.

let's get a catch up on stories elsewhere with dani burger. dani: elon musk says federal workers will be given a second chance to respond to an email detailing what they did last week or face termination. the federal agency who sent the email said it is up to agency leadership, not musk on what happens to those who ignore the message. president trump defended the efforts, saying it's a legitimate bid to root out fraud waste and abuse in the government. anthropic is said to be near a deal to raise $3.5 billion. the funding round would value the company at $62 billion which is more than originally planned. the philadelphia eagles appeared to be what housebound after all. early report suggested that they turn down an invitation to attend a ceremony to honor their when. a source says that they would be honored to visit, although the white house has not sent a formal invite. the eagles did not visit president trump when they won

their first super bowl in 2018. jonathan: i appreciate the update. i want to take you to economic club of washington where david rubenstein, host appeared to to peer conversations, is joined by a good friend of this program, bank of america ceo brian moynihan. >> there is a lot of burden on the banking system to both report suspicious activity reports and a lot of analysis. we have to close accounts. we cannot tell people why we did it. that creates confusion. another area that comes up in these discussion, the crypto area, regulators say you cannot bank employees of crypto companies. we bank everybody. but the operating company, they said that is a high risk opportunity. you would have never got the authority. at the end of the day, it's about getting the regulations right.

opening a dialog to get the regulations right. we are open for everybody. we serve millions of americans, trillions of transactions every year and continue to do so. >> when this administration was elected, there was a lot of jubilation in the streets in the banking world, people thought the banking regulation had been too tough under president biden. some people thought regulation would be more amenable to banks. has that turned out to be the case or is it too early to know, is the banking community happy with the direction the current administration is going or you don't know yet? brian: you have to step back and say, the regulation of banking has always been true. our charter, 1784, so we have been regulated from that day forward. if you think about the great financial crisis, dodd-frank, capital rules, liquidity rules,

there was a reason for the world to not be happy with the banks. and non-thanks that became banks. morgan stanley, goldman sachs. fast forward the 15 years since, through the pandemic, the banking system stabilizes the economy, you go through the regional banking crisis, and they keep on adding capital and liquidity. wait a second, we are a source of strength. the american banking industry is really a source of strength. the pendulum kept on swinging even though the reason that it was swinging stopped. our industry was saying, why do we have 20% more capital than during the pandemic? it is just mathematical creep of calculations. why are you saying that we are going to limit your fees, charge for certain activity when it wasn't a loan? an overdraft is not a loan,

somebody just saying i want to make it a loan. this idea of regulators imposing new rules, which the congress did not intend, was interesting. david: many people when they talk about the federal reserve, they wonder whether they will increase or decrease interest rates. in the banking world, you are often concerned about the trust us -- stress tests. do you think it is too tough the limit on banks or are you comfortable? brian: the stress tests are publicly available. every year you can see this report card on the banking industry. every year, the industry has great health. the issue, we ended up suing the fed, because the rules kept on changing. if you think of the last four or five years, volatility in capital requirements that went from 75 basis points of

basically 10% unemployment, 50% downturn in the equity markets, 30% drop in housing, drop in commercial real estate, high yield spreads by whatever it was. all the same test produce different results and it didn't make sense. behind the scenes the transparency was not there. the stress tests are a good thing. we do stress tests every quarter in multiple scenarios. our trading book is stressed every day. if you think about it, it's a good thing. just behind the scenes, the dials were being turned on us and the numbers were irrational to the market. we had to have capital available for the industry. david: the vice chairman of the federal reserve who is in charge of regulating banks and so forth, that person has given up that position recently.

is that something the banking community was happy with, or you didn't care whether he stepped aside or not? brian: at the end of the day, he had a year left on his term and the new administration would have appointed somebody to that position. when people ask me, do you have different approaches for different administrations? we have been around since washington has been president, so if we geared ourselves up for this president and not that president, we would have to change 45 times. think about how many different prime minister there have been in england. at the end of the day, you run the company the right way. get us to rational structure, habits stick to the ribs. if you keep swinging like this, our clients cannot be as dependent on us. david: before the great recession, a number of large banks in the united states, europe, asia, and now it seems

post the great recession and post-covid, the united states is dominating the global banking world. what happened to the european banks? they are not competing with you, j.p. morgan, wells fargo as much as they used to. what are american thanksgiving that have enabled them to become so dominant in the banking world? brian: the american banking system is as much of a story about the american capital system being successful. the banks represent the size, scale, scope, vibrancy of that economy. what happened from pre-financial crisis to now, at that time, we would have been talking about how china's economy would be bigger than the united states by now, the european economy was going to outgrow the united states under the enthusiasm of the eu framework. guess what? we are one point 75 times the economy back then.

we have outgrown them. dealing with the financial crisis, feeling a bunch of industry participants, bringing people into the tent, the right regulations, going forward, and europe has not caught up economically, therefore there banking system has been hamstrung at this end. david: you have been ceo for 15 years, the bank has recovered from a lot of problems. suppose the president of the united states said next year i need a new chairman of the federal reserve board. you have been running bank of america. why don't you come in be the chairman of the federal reserve board? your response would be? brian: at the end of the day, i get up every morning and i have teammates out here in the audience. this team is unbelievable. if you see what we do for our customers.

when we are doing great things for them, when we are not, it comes directly to me. if you see what we can do for a company, individual, you see the enthusiasm for a young kid opening an account, enthusiasm for the kids that we hired coming into our company every year, communities we support, that is a great job. i love doing it. as long as i'm healthy, as long as i have the energy. david: recently another banker that you probably heard of, jamie dimon, he testified on capitol hill that may be the regulators and congress should get together and say let's start afresh and take a look at all the banking regulations from a fresh perspective building from scratch. is that a good idea? brian: the spaghetti chart of overlap is a question. just take the consumer bureau.

2010 with dodd-frank, they set up the consumer bureau. the theory was all of the consumer regulatory activity would move to a new agency. guess what? we still have the fed regulating consumer activity. you have the consumer bureau. you have the fdic as regulator. none of that happened. much like after 9/11, hhs came in, was supposed to sweep everything in. i think you can start with a fresh sheet of paper, recognizing the national banking act of the 1800s, the federal reserve act, fdic act of the 1930's, the world has changed a lot since then. the idea of national regulatory consolidation even on a country like the united states is probably more appropriate today than when you have 15,000 banks distributed all over.

there was a day when everything went on in richmond, and it was only there. david: you are regulated by the federal reserve, fdic, comptroller agency. brian: consumer bureau, sec, cftc. there are 100 plus regulators in our building every day. david: do you spend a lot of time with the regulators or try to avoid them? brian: i would like to spend time when they are telling us we are doing good stuff. we spend a lot of time. i have a great chief risk officer who organizes all of that. the day today regulators are trying to help us get better. we understand that. we are on the road to perfection as a company. you strive for perfection. if they have ideas, we are all

years. -- ears. simplifying the organization would allow for us to take costs out of the regulatory side. it wouldn't be the worst idea. david: when interest rates go up, the theory is banks can charge more for loans, therefore are more profitable. when interest rates go down, is that a concern for banks because of less profitability or you don't really care? brian: the toughest time to be a bank with $2 trillion deposits is when interest rates are zero. we cannot charge people to store the money. we are not like a self storage unit. you have a floor on interest rates. when interest rates came down, you start squeezing margins. the loan rates come down but the deposits have a zero floor. when rates move up, that changes. zero interest checking accounts and everything else becomes

worth more. as long as the rate structure is more normal, anyone under the age of 40 has not seen a rate structure. the idea of a 3% fed funds rate is not a high rate, it is the usual rate. in that environment, banks will make money. at the end of the day, the net interest margin, the difference in what we pay, tends to run about 250 basis points. that benefit goes back to the depositor side, debtholders side. just when it hits that floor, that margin got down to 150. david: as interest rates come down, that will not affect your profitability? so you don't want jay powell's job. suppose he called you, should i increase, decrease interest rates, hold them the same? what would your advice be?

brian: our team right now says there will be no further rate cuts through this year and next year. we were one of the first people to pull that off the table. they said inflation is coming down but there is a bigger bite. dual mandate, employment, they are in great shape. it takes multiple years to squeeze inflation out. it started in 22. think of 26 as a normal period to squeeze it out. and there is a drag on the economy today. you are seeing economic growth from 3% in the last quarters to 2%. our expectation is they will not cut rates. for the rest of the year and into next year. david: let me ask you, the business my firm has been in, private equity.

private equity firms have become private credit firms as well. private credit firms, they lend money but they are not regulated the way you are. is that a source of concern that we can lend money, not as highly regulated as you are, but you don't care about that? brian: i care about your firm. at the end of the day, the private capital has grown because they can do something we can't along a couple dimensions. one is, they can finance companies that have more leverage. we are basically stocked out at six times leverage. that was a rule that was taken back, then it was wait until we are examined. the second thing is the ability to bring the whole capital structure. debt, equity, the whole nine yards. on top of that, we have a truly

dollars of commercial loan commitments. we don't fear any competitor. and we work with companies like yours to generate assets. i think the world should be concerned to make sure that those enterprise making loans, billion-dollar operating company, have the ability to work with them in times of stress. we have not gone through a stress period like this. david: i think jp morgan, other banks like yours have raise credit funds that you can lend out without the normal credit restraints that you have with the money from depositors. good idea? brian: we have created some capacity. at the end of the day, the credit we like, we are willing to do as much as we can. we have almost $2 trillion of deposits and loans. we are trying to do all of the loans that we think have good

credit quality. david: let's talk about your background. i am an only child. you have how many siblings? brian: seven. david: growing up with eight people in the family, wasn't that crowded at times? brian: trying to think. i was set up to get my own bedroom for the first time in my life when my brother decided that he wanted to move out of the room. probably when i was in college was the first time i had a bedroom to myself, so yes, it was crowded. david: what did your father do to support eight children? was he in private equity or something? brian: he was a research chemist for dupont. he spent his whole life on plastics. david: you grew up in ohio, then you went to college on the east coast, at brown.

you were the cocaptain of the rugby team. do you still play rugby or not so much? brian: no, i do not. i played rugby at brown, law school, after. it's a great sport. never played it until i got to college. in a way, it looks like disorganization but it is extremely organized. it is unique in that it is physical, tackling, everybody gets to handle the ball, and you run for 80 minutes. very demanding game, a lot of fun. david: now you are the chancellor of brown university, which means chairman of the board essentially. how do you have time for that? brian: i have been on the board 15 years. at the end of the day, the chair of the board runs it spectacularly. our job is to govern. david: after you graduated from brown, you went to law school at

notre dame. did you play rugby at notre dame? brian: i did. david: then you want to practice law in rhode island. why did you move back to rhode island? you are from ohio, the midwest, why did you go to rhode island? brian: none of the boston law firms would hire a person from notre dame law school. i was the first lawyer to be hired at the firm from notre dame. it worked because of the brown connections. the big law firms in boston, even one of my teammates working there, they couldn't convince him to hire me. i ended up with a great law firm, had a short legal career there. david: i'm a big fan of people being lawyers, getting out to go into finance. you are practicing law, minding your own business, i assume you are a good lawyer. corporate lawyer? brian: when i came out -- when i

went to law school, i was going to be a criminal lawyer. or i was going to be a labor lawyer. then i went to law school, i went to a firm. oddly enough, i went to law school from 1981 until 1984, there were no corporate lawyers because this was before things took off. then the activity died. being a person that is impatient, i said why not be a corporate lawyer? others thought that i had lost my gourd. i could see the opportunity to get responsibility. i did that for nine years. david: how did you escape from being a corporate lawyer, what did you do? brian: one of my mentors, terry murray, he ran fleet. i did a lot of work for fleet. terry, after we did the bank of the women transaction, kkr put

money into the industry and then we bought the bank of new england from the federal government in the early 1990's after the real estate crisis. i structured the deal in a way that i structured private equity, dual convertible preferred stock. parent company stock or bank stock. terry said to the general counsel, he is too smart to be a lawyer. he said get him in here and we will figure out. david: he went to work at fleet which is headquartered in rhode island. brian: general counsel for three months. david: and then complete bird -- merged and how did you survive that? brian: that was the last deal i did. they put together a deal and chad took