as you think about the fed and economists and analysts inking the fed needs to move -- thinking fed needs to move, is that what the further inverted yield curve today is telling you? >> it absolutely is. the economy is strong today, but it may not be in the future. this is where the debate is being had. 50 basis point rate hike in may and june is very much in the cards. eventually, i think the markets are also telling us through the yield curve that may be by late 2020 three or 2024, we may have a slowdown or even a recession. is also telling us the fed policy reaction function right now has moved very much toward fighting inflation which means if they don't get what they want, expect them to be even more hawkish. right now, we are expecting 2.8%. if we don't get inflation numbers down, they will move that up to 3% or as high is 3.5%. they will do whatever it takes to get inflation under control and if that means an inverted yield curve, they will do it. taylor: is that what you see is wealth of the shift is going back to inflation while focusing on the full employment picture, but the pr

as the fed tries to unwind this. you wonder what the mechanics looks like that means selling or getting rid of or letting mature a lot of different assets. what happens to the assets and what happens to the funds that come back to the fed explain the mechanics of how this works >> what the fed has in mind is they're going to -- so currently the fed is reinvesting it will stop reinvesting that principal as it comes in and sort of allow the securities that they hold to decline. what that will do, since their assets are going to starred to decline, it's going to start their liabilities to decline as well. >> i think they had provide resistance when they provide the liquidity, bank -- and just as was true the last time, think started to shall risen the balance sheet. a simp supply-and-demand way, which means longer-termese will go down. >> that's going to push up longer-temple rates and that will help slow the economy and bring down inflation >> we're seeing a way for it to play out, and it played out in about 1 minutes'

the fed under pressure. >> how high does the fed have to hike? >> cpi headline inflation. >> the fed will try to be data-dependent. >> the market from a pricing standpoint -- >> suggest there is a 50 basis point hike on the horizon. >> they will do 50 basis points. >> inflation will be insane for march. >> the fed is keen on transporting the rate hikes. >> the fed is

fed now. as you know people living paycheck to paycheck are spending billions of dollars in overdraft fees or payday loans because of the lack of a real payment system and their bearing the costs of this inefficiency in our system so i have a very simple question. are we on target for launching a fed now next year? >> we are on target and as you say it's something that many community banks and other payment providers and community groups are very supportive of and i think larger banks are very supportive of as well. >> i'm glad that more and more people are supporting the effort. as chairman powell acknowledged in his testimony before this committee on tuesday, because of the american rescue plan to enable to lower unemployment in the country where i had of projections. at the 3.9 percent unemployment levels we saw in december , that was a full year hitting that target. a full year before what the fed had projected and four years below what the congressional budget office had projected so that

the fed is under pressure. >> the fed has to get inflation under control, the question is what are weilling to do? >> inflation is a problem. >> this is a tricky game. >> the messaging has been incredibly hawkish. >> we had a huge selloff in the bond market. >> the demand for bonds is evaporating. >> this job of orchestrating a soft landing. >> the elusive soft landing. >> it will require fancy footwork. >> the messaging is clear. >> they need to normalize as quickly as possible. >> slow the economy, have a soft landing without a crazy recession. >> that is the question. lisa: joining us right now is brian weinstein of morgan stanley. michael collins. subadra rajappa, managing director at society generate. and with the declining yields, do we have a sign that we have reached peak hawkishness? subadra: it feels that way because the market was priced for a rate hike, getting the country to 3% by the middle of next year. that to me, especially in the context of an aggressive path or runoffs from the portfolios, seemed like it was aggressive market pricing for rate hikes. so i am not surp

we hear from the fed chair on wednesday. u.s.rolls report this coming friday one week from today. let's get to matt hornbach, bob miller, kathy jones for the rapidfire round. you know how this works. three quick questions and answers. let's start with where does the fed peak this hiking cycle? pick a number. matt hornbach. matt: 3.75%. jonathan: kathy jones. kathy: 2.75%. jonathan: bob miller. bob: i will take the middle. 3%. jonathan: there we go. second question. hi yields from where they are now, spreads wider or tighter by year-end? bob miller. bob: wider. jonathan: kathy jones? kathy: wider. jonathan: matt hornbach? matt: tighter. jonathan: tighter? interesting. final question. 2-10s, call it 19. steeper or flatter by year-end? kathy? kathy: flatter. jonathan: bob. bob: deeper. jonathan: matt. matt: flatter. jonathan: to the three of you, thank you, matt hornbach, kathy jones. that does it from us. we will see you next week. this was bloomberg real yield. this is bloomberg tv. ♪ xfinity mobile runs on america's most reliable

you know, the fed may not be there yet. but also, this is part of who is leading the fed. is it the market that's leading the fed or the fed leading the market if the market is going to price in 75 basis points and leave it there, we might see the fed average move, that's the pattern we have seen over the last several months either way, it looks like there's a realization that this fed is very serious about inflation. it is going to raise rates and raise rates aggressively as a matter of fact, i have been saying there might not be another 25-basis-point rate hike it's going to be 50s all the way through until they're done the metric that's going to make them stop is going to be falling inflation. not the employment market, not the general state of real growth >> two-year note yield just below 2.7% where do we go from here is that going to hit 3% and what does that do for stocks? >> well, unfortunately, the history has been when you see epic moves in the bond market, and this from a total return basis, using interest rates and prices, is the worst market we have seen in the

, project the greenspan fed. -- particularly the greenspan fed.nal note after i finished reading every word of the minutes today, who writes the minutes for the fed? when you were at the fed were you the guy who wrote the minutes? vincent: i signed them for about six or seven years and was involved in drafting for a decade and a half before that. the reality is that a group does it and ultimately it is the responsibility of the secretary. every draft is seen by every person who was in the fomc room for those two days. it is a group effort. tom: we have seen a massive division this morning on bloomberg surveillance over glass half-full, half-empty. when you see claims where they are, what does that signal to you about a fully employed america? vincent: the glass is more than half full and the federal reserve will have to take a little bit out. that is a difficult event they are trying to -- that is a difficult pivot they are trying to undertake. listening to your conversation in the last five minutes, it is hard to read the data. it was distorted b

this is a powell fed.his is the fed that dug itself in so deep, do you make these knee-jerk, longer-term investment decisions thinking that the narrative could change sometime before the year is over? >> i'm not changing our entire investment philosophy off the new rate hikes. i'm really looking at assuming we'll do 50 basis points at the next meeting in one month but i've changed my investment focus to be much more short term because long-term predictions have been so wrong for some years right now. charles: right. >> so it is being much more short-term focused and -- charles: i love you said that i done that with my subscribers. some of them bristle at that except a few days later, i don't rub it in. someone took angry took profits at something, target was this, week later it is lower you don't ever rub it in. gary you you this because you'ra nimble trader. >> i made some money on the long side, i lost money on the long side recently. i'm heck out of the way now. my biggest problem, as i have been saying

i talked to him about the fed measures wall street versus main street tech stocks hit hard by the fedt of people on main street are hurting with inflation and gas prices going full scircle looking at 401(k). >> i think the fed is considering main street first. after that, there is consideration of wall street there is a knockoff effect teacher pension or police pension or fire pension, et cetera this is something the fed takes into account when it does the surveys from the regional fed offices we think the fed is doing the right thing. related to tech, the selloff is indiscriminate what is important is separating the wheat from the chaff there is something important in the lives of the businesses and consumers. it will do better as things begin to pick up. >> john, i want to ask you about a pick you say this is simply people taking profits without fomo. people have been standing up with the tech names and thinking the market will do up, up and up. >> i think the thing is the historic long-term effect tells you good businesses will weather all kinds of situations in the economy. the pr

former new york fed president and provocative writer. the fed's choice is clear.unemployment should be relatively modest. if it waits and allows inflation expectations to get out of hand, the bill will be much higher. tom: this is a really important essay. what captures this beautiful is robert samuelson's phrase from the 1960's precarious prosperity. the bottom line is everybody felt prosperous but were you without inflation? we are there. jonathan: the slower the fed, the harder the landing will be. lisa: i'm thinking what this means for fed officials who come out interview after interview saying a soft landing as possible. is that going to be detrimental longer-term when inflation is nothing if not easy right now? jonathan: what did they say about officials, policymakers and politicians? you have to get good at lying. lisa: this is a new calculus we have not seen for decades and it creates a very difficult position the policymaker. jonathan: matt hornbeck of morgan stanley. with yields up 50 basis points on a tenure. this month alone. on radio and tv. this is b

fed officials held fast and high.

the fed will have to face that full on.athan: given the opportunity and the decision, to curtail inflation, which one would they choose? >> jerome powell has suggested -- it's interesting that it will be the roaring 20's. they will debate whether it's a technical recession or a technical recession or growth slow down. it appears the central bank is willing to sacrifice growth and that's how monetary policy effectively works. it suggests the reaction function of the fed has so far told us is willing to sacrifice growth in order to calm inflation. that makes sense now with inflation high end feels like it's overheating. it will not make much sense in six months. jonathan: can you run us through what make the mechanical peak means? >> gets around march or april but i did took con -- comfort in that. covid inflation was always going to be transitory. we have to move away from the mechanical piece of inflation. we have been complacent about the damaging impact of inflation on growth because where it was coming from is not necess

louis fed proceed james bullard saying the fed is behind the curve. needs to rein in inflation my next guest agrees joining me with a playbook to weather it. sneed capital management and portfolio manager of the sneed value fund a question theme of this entire hour used car prices dropping people are wondering if we just wait this out a little bit, can inflation normalize? fed doesn't have to be so aggressive don't have to be so alarmed. what does bill sneed say >> first off, you have to believe the progressive commercial most all investors have trained themselves over the last search, eight years believe millennials ar completely different group. that they won't want to get married. they won't want to have kids they won't want to own homes, et cetera so as soon as any difficulty arises they run to the things that benefit from them being different than in the past, and discard the things that the progressive commercial telling you you should buy. >> okay. i know exactly when commercials you're talking about the only one i like. all turning into our pa

coming up, pricing in more fed action, gearing up for the ecb to hike rates. we begin with a big issue, a global bond market route. >> we are in the bond bear market. >> the fed officials are coming in with more hawkish talk. >> the market has priced in a lot. >> 75 basis point hikes are being talked about. >> an aggressive pace of rate hikes. >> the yield keeps going higher. >> growth is weakening. all around the world. >> slowdowns of global economic growth and type in -- tightening liquidity at the same time. >> a bigger policy mistake. jonathan: you -- treasuries? >> you are at the point where the market has gotten way ahead of the fed and chipped away the consolidations. one thing that is different is the level of growth and inflation. we have accelerated in terms of job creation and inflation numbers have broadened. that is higher than it was in 2000 or 1994. we will have to see if the pace of growth is dented by the first moves by the fed. we may be in the middle not the end. jonathan: the conversation we are having about the fed is the speed at which w

the fed has to follow through.t is not sent to underwriting for the stock market every time financial markets have a hiccup. lisa: we are speaking with glenn hubbard of columbia university, talking about the new dynamic and what the fed is looking at with respect to inflation. what about the labor market? the right about economic bridges at a time when participation rate remains well below where we were pre-pandemic. how does the fed effectively curtail inflation while allowing the participation rate to get back to something that is more representative of a robust economy? glenn: that is a good question. participation is a critical issue. i do not think letting the economy run hot will fix the participation problem. there are things that can. training, education, fiscal interventions that are really not in the fed's toolkit. the labor market as the fed should see it is running quite hot. it would be better if the administration focused more on participation but so far, not. lisa: how much has the fed lost credibili

that is what the fed has to figure out.ow far you need to push expectations to get financial conditions tightening to slow down the economy. tom: how much will trade pay into this? i am taken by the imf world economic outlook of global trade slowed down. how much will that pair off u.s. gdp in full right into the fed discussion? andrew: i think there's a gdp component and an inflation component. in the short run we have a lot of supply chain issues and that is impacting gdp. auto sales have been week. if you think of the longer-term implications, if we have a move away from globalization towards regionalization, you are moving away from lower cost or protection technologies for higher cost of production technologies. the reason the globalization occurred is defined the low cost producer. that kind of global downshift, disinflationary force, that is not going to be there in the same way. michael: -- tom: are you suggesting we stand alone? i am calling it recalibrate monday. we have to recalibrate to a new aloneness of the am

mark: i do not have a lot of conviction we have seen fed hawkish in us because we know the fed tends to overshoot in these environments. they miss early signs of slowdown and keep tightening through high front-end interest rates and qt. the fed does not have a lot of confidence in how qt impacts the real economy. we have heard estimates from powell and others on the fed that qt might be worth one and 25 basis points of rate rise or maybe 50 points but they do not really know. this is a fairy -- a fed that is , like powell said in 2018, walking in a dark room, feeling its way around as it approaches neutral knowing that rate hikes rmp at -- impacting the front and and qt is impacting liquidity, like in the back and likely the financial conditions but they do not know how to calibrate those so the risk of an overshoot in our view is high. john: amanda, you have -- throw in everything the market -- that marked cabana is speaking about, throw in credit and cash. can you tell me how cash competes with credit in your mind at the moment? amanda: absolutely. from a relative value perspective

someone put it to me the fed declared war on the stock market don't fight the fed. it's cutting it both ways, right, steve >> you don't want to fight it on the way up, and you don't want to fight it on the way down. i think bill is sort of right here i don't think he's 100% right. i don't think there's an active war on the federal reserve i hate to use war metaphors and it will throw some things out there and there may be some collateral damage in the stock market i do think the fed wants the market to be down in the sense of tightening financial conditions through equity financing. in other words, the way the fed looks at things, first is the wealth effect which can tend to increase economic activity the other is the cost of financing through equity issuances and you've seen the ipo market come off. you've seen a lot of damage in some of the high-flying nasdaq stocks and overvalued -- highly valued stocks, as we say >> you can say it. it's a freudian slip it's a freudian slip we get it. we've got you. >> i do think at this point maybe the bad news is out. let me sh

. >> the fed has to come out guns blazing declaring they will conquer inflation. >> the fed will ultimately be successful in knocking inflation down. announcer: this is bloomberg surveillance. jonathan: equities continue to struggle. from new york city, good morning. this is bloomberg surveillance live on tv and radio. futures down. 10 year yields up nine basis points. tom: vicks spread of 23 -- vix spread of 23. that is interesting going into the jp morgan ballet next week. two stories, brainerd and u.s. yield move. default being discussed in russia. jonathan: cpi next week. it could have an 8 handle. the response from the fed is let's go. most people assume they are late. the word "rapid." tom: rapid pace wednesday. i don't know which number of inflation causes angst with that testimony today. that will be part of it. to me it is not the level of inflation, it is the duration of high inflation. that is a mystery. months? quarters? jonathan: would you like the early survey? tom: please. i don't know how to look it up. jonathan: estimate so far 8.3% for the march cpi report in the u.s. lisa

you don't believe the fed is going to pivot back?e that the fed pivoted to step in and support the market, inflation was at or below their 2% target , and now, inflation is now four times their target, so they don't have that wiggle room charles: i've got a minute to go i want to ask you both how are you adjusting in this environment i'll start with you, matt. what beyond sark, beyond that in your portfolio how does an investor weather the storm? >> energy stocks, commodity- based stocks, a lot of cash. a lot of cash. charles: cameron? >> we like high-quality, high-quality can weather the storm. charles: i don't know what that means? >> well high-quality means -- charles: i thought facebook was high-quality. at the time you you just dipped i thought were high-quality. what's high-quality mean? >> it's high-quality with reasonable valuations because valuation is what is that risk here. a lot of the high-quality names will still be able to grow earnings but if you're having to pay too much for them, then that is your risk as the fed re

the fundamental view is that in order to get inflation to the fed target, the fed will have to be moreggressive. jonathan: matt luzzetti of deutsche bank. looking ahead to next week. thank you for all of your work. the optics going into the fed next week are dreadful. contracting gdp in the first quarter, inflation north of 8%. we have to go deeper on the gdp figure and talk about that contraction. it is a blooming trade deficit, it is softer inventory growth. if you want to read the underlying story of the economy domestically, the consumer and business demand picture is decent. tom, you talked about real final sales. citigroup had this to say. "q1 real gdp may decline on a quarterly basis due to dragged from traded inventories, however strong domestic demand and strong imports behind the widening trade balance is consistent with an overheating economy delivering inflation above target. they should leave the fed on track to raise policy rates rapidly at the upcoming meeting." tom: my amateur take is andrew hallman horst is correct. i am taking the back end of the equation that net exp

it was ugly in the bond market hated the fed a lot of years after that but the fed is not around to be liked so much. >> leave it there. lovely note. steve, mike, paul, thank you, all three of you >>> up next a rare interview with billionaire investor and real estate investors sam zell on pick-up in volatility and sectors of the economies he's in you're watching "closing bell" on cnbc. dow down only 100 points. power e*trade gives you an award-winning mobile app with powerful, easy-to-use tools, and interactive charts to give you an edge, 24/7 support when you need it the most. plus, zero-dollar commissions for online u.s. listed stocks. [ding] get e*trade and start trading today. never settle with power e*trade. it has powerful, easy-to-use tools to help you find opportunities, 24/7 support when you need answers, plus some of the lowest options in futures contracts prices around. [ding] get e*trade and start trading today. hey businesses! [ding] get e*trade you all deserve something epic! so we're giving every business, our best deals on every iphone - including the iphone 13 pro with

until the fed meets next month. i have to wonder, what is in store for the bond market then? is it relative calm that we could be seeing or is speculation going to run rampant now whether we are going to get 75 or 50 basis point hike? mark: there is plenty of room for high intraday volatility in the u.s. bond market, even without fed speakers. we're already getting plenty of the big wall street firms changing their forecasts. now some people are talking about 75 basis point hikes in june and july. we have not even have the first 50 basis point hike, although we do expect it to happen next week. so, the range of forecasts on what the fed will do this year is getting wider and wider. that gives bond traders more reason to push the boundaries. so we can expect the swings of up-and-down yields have seen over the past few days to continue. but the trend is probably still for higher yields, particularly in the longer end of the bond curve. so we are probably going to see the 10 year go above 3% or some stage this year, be

what i'm interested in is how the fed will respond. i look for guidance from fed officials. respond to a mechanical pecan inflationary year-over-year -- eak -- mechanical peak in inflation year-over-year. tom: end-of-the-year, july 27, september 21 fed, the ecb has the same calendar. it is a total mystery. lisa: they have a more difficult scenario. what a way to start the show. you have" lisa abramowicz, i forget your name-- it is fair the ecb is in a worse position. does the fed to have to get more pessimistic and have a less sanguine view of the economy moving forward to curtail inflation? tom: i think it is incredible how these 70's gloom after the 1960's reality. jonathan: it's more likely in 2023 or 2024. do you want to talk about the euro? other ways to defer to guy johnson. he is fantastic. tom: he slipped into the german accent. it was incredible. jonathan: an amazing story. [laughter] jonathan: i love winding you up about that. [laughter] jonathan: if people have just turned and they have no idea why that is funny. almost unchanged, up a couple of basis points. tom:

san francisco fed president yesterday daly said the fed would deliberate and not rule out a 75 either. december funds rate contract added 40 basis points. nearly two quarter-point hikes trading at 2.70 for december all of that leading the market to believe that maybe the fed floating a trial balloon of 75 hikes. the august yield of 1.92 suggest a 34% probability of one 75-basis hike. the fed seen hiking to 3.4%. august of next year or so. the market may be ahead of itself the hike would come after two or more 50s andself inflation reports that show what they are looking isn't working. i don't think they'll be quick to ratchet up to another one guys >> let's talk a little bit about what we expect by the end of this year. where do you think the fed funds rate will be we were talking with someone yesterday. it occurred to me we haven't begun the raising of interest rates. >> no. and that's -- two parts to that answer there which is obviously a great question i take the fed or most of the fed at the word they like this 2.5% range bullard alone to 3.5%. we have not begun this guys, with a

has narrowed. >> the fed has to choose between one of two mistakes. >> there is a risk the fed under >> go too fast or slow. >> what is worse? >> it seems unlikely we will be able to avoid a harder landing.

. >> the fed has to declare that they will conquer inflation because that is their job. >> the fed will be in session -- will be successful at knocking the inflation rate down. >> this is "bloomberg surveillance." jonathon: live from new york city from our audience worldwide, good morning, this is "bloomberg surveillance" on tv and radio. alongside tom keene and lisa abramowicz i am jonathan ferro. what a move in this bond market. tom: a huge move and you can look at a short term. did you know that it is rapid pace wednesday? i think this is where we are after we heard from the presumptive vice-chairman and the bond market is moving away from what we remember. a two year yield particularly, valentine's day before the pandemic 1.43% and look at where we are today. jonathon: i love that you base anything off of valentine's day on every given year. are you reading the fed minutes later this afternoon? tom: i am not, vice-chairman presumptive brainerd will read them for me. lisa: honestly, we had this feeling that we would get some kind of bombshell about how quickly they will wind down the

the fed is racing to get ahead of the curve. they had been conscious they were behind the curve, but setting a record as they go into the second half of the year. manus: thank you very much. enda curren with the latest on defining the hawkishness of the fomc minutes. -- targeting to of russia's biggest banks and two of putin's daughters. president biden accusing moscow of committing major crimes in ukraine. let's get to our reporter in brussels. how would you contextualize this escalation going after putin's daughters and the language of biden? after what boris johnson had to say, there is a coalescing of global leaders, in terms of accusations on war crimes. >> it is, but at this point when you look at the pictures, and we have all seen the pictures, the reality, it will probably not be the last of it. russian troops continue invading ukraine. there have been reports of what are war crimes, executions, mass graves, rape against women, all of this against every international convention would be a war crime. it reflects the reali

we will look for the fed minutes. tom: we talked to bill dudley about what is the difference between the vulgar inflation and the brainard inflation and to me it is the intertwined nature of all of this with the pandemic, with the huge fiscal stimulus and i will suggest a massive mystery between bill dudley and david blanchflower is one debate. jonathan: we are moving quicker, much quicker. balance sheet reductions will happen faster because rate hikes have not happened soon enough. the hikes started in 2015. the reduction started two years later. it was not years between. it was a couple of months. that is the change this time around and they believe they can go faster because this economy is stronger. will this economy hold up? tom: the next trip for abramowicz out to lax and up to mammoth mountain. lisa premium in mountain -- mama mountain, $7 -- mammoth mountain, seven dollars per gallon. lisa: this is the issue. we will get the democrats in this subcommittee hearing we are expecting to start around 10:30 a.m.. jo

guy: mike mckee with kansas city fed president, very happy fed president, esther george.hank you very much indeed to both of you. this is bloomberg. ♪ >> time for the bloomberg business flash. i am ritika gupta. elon musk revealed he had taken a 9.2% stake in twitter. the world's richest person will not own more than 14.9% of twitter during his time on the board and for 90 days after he leaves. the twitter ceo says musk is a passionate believer in the company and an intense critic. amazon buying dozens of rocket launchers to deploy satellites for its high-speed internet service. they will buy as many as 83 launchers from blue origin and united auto alliance. it is required to launch half of the satellites by july 2026. pressures on the supply chain have risen to a record. the logistics managers index for a third straight month found to interlink warehouses facing inventory costs. there try to figure out if they own the board. that is your latest business flash. kailey: thank you. we are hearing from federal reserve speakers in the market is reacting. we heard michael mcke

what does the fed do about that? can it do anything >> rather than correct josh brown, i wanted to agree with him and tell him that it's worse than what he even laid out the two areas that the fed should have the most effect on autos and housing, i think are going to be very immune to any impacts of rate hikes and i'll tell you why i think we have this long-running, maybe longer than a decade undersupply of housing. you may get some topping off of housing prices i don't see them going down and changing the cpi input from housing in a meaningful way. the auto business is running a 13, 14 million units it should be normally at 16 or 17 million units i don't think the fed should or will have much effect on that part of the economy coming back, and i don't think, of course, you're absolutely right, melissa, it's not going to have any impact on the trade on the food side of things or on the energy side of things. what the fed can and should do is get to neutral, some form of neutral which is 2%, 2.5% on the funds rate and

the san francisco fed did not say much about this, but also said the fed could start the reduction in a couple weeks. esther george in an exclusive interview with us earlier today said she definitely thinks a 50 basis point rate hike will be an option. if you are going to be 50 basis point rate hikes, twice as big as 25, then that's also going to have to be looked at in conjunction with the balance sheet. so she's also touching on this point of this is kind of a new thing for the fed to do, to use rate hikes but also balance sheet reduction to help bring down inflation. and of course the minutes tomorrow from the march meeting are expected to show, as jay powell has signaled they would, what are they planning to do about balance sheet reduction? i would submit to you that what they were thinking in early march may change over the next 1.5 months. they may feel more urgency to get the balance sheet reduction to be more aggressive. in 2017 they started with a total of about $10 billion a month, over the course of the year they got up to $50 billion a month. people are thinking maybe the

do you think the markets stop fighting the fed and the fed is going to fight back? think the bond markets are not fighting the fed. the bond markets have been punched a few times by the fed, and if you look at nominal treasury you -- treasury yields, they are up. that is a question we get from our equity clients, if really yields go positive, what does it mean? probably tighter conditions. bill dudley is talking about the equity segment, thinking about leveraged loans. stocks are hanging better than a lot of people would have expected in the face of fed tightening. if that's what the fed looks like, the s&p, it probably does have to hit harder. if it is the bond market, it has taken hits already. kailey: is most of that now over and done with? to what extent is the bond market pricing in everything it needs to price in check on mike: i think it is probably getting pretty close. if you look at what forward rates tell us for next year, the tightening cycle is around 3.25%. that is getting to be a hefty number. it has a little bit of upside there, but it is much closer

target on stocks and the fed needs to do damage here. this is pretty extraordinary but not when you consider some of the worse types of financial conditions an the consumer has been most distressed they targeted basically 10 and 10 after the financial crisis they were saying let's get to below 10% unemployment and get to 10,000 on the dow we're in a very different place here but it's not surprising another thing to add about the minutes, the balance sheet is the only thing different, what's different is in the last couple days since that meeting the number of ways different fed governors have tried to use the word expedite in sentences and this 50 is a foregone conclusion for may and probably june. >> do you think there's been a noted change in fed speak to more hawkish tilt or is that the markets not paying attention to nuances of fed speak prior and only now alert how hawkish fed has been. >> the story is the market paying attention i will tell you over three surveys beginning in december or january we did three fed surveys and they al

>> no, the market has been leading the fed, and it is the fed that has been slow to recognize the inflationrong action. if you think about it, when inflation was 4% to 5%, chair powell was repeating, it is transitory, it is transitory, it is transitory. at 8.5%, he's not sure whether it's the peak. now, we talk about 50 basis point hike when we were talking about the half mark getting one hike in the whole of this year this is a massive move in the fed but one that is late relative to developments on the ground and relative to where the market has been. >> so what does that mean? now do you think they have got it, and the market is pricing in i think 12 25-basis point hikes in the next year you think that's about right >> i think at least i understand much better and they have been humble, is interesting and concerning that break evens went up today ten-year break evens are above 3% at record levels. so that's not a good thing to see on a day when fed chair powell says what he says look, they're going to need three things skill, time, and luck to get to a soft landing i'm particularly worri

we are also monitoring what we are hearing from fed president park, saying that the fed may need to hikeine to 10 times. they could certainly move in 50 base increments, if needed. what clarity will be get into this? we will get these from the fed meeting. our question of the day, will it move the market? emily, market pricing has already, incredibly fire. what will be in the minutes today to take it even further? >> in of the aggressiveness that they implement quantitative tightening, we have seen some astonishing volatility already. it is already priced in. they are looking for some details around the fed's plan. the backup has been really good. it is very surprising, considering the fact that there has not been dated to move the treasury market. fed speakers have contributed to the velocity of the move. usually they are the smart ones in the room. we did not think they would be moving up so fast. >> usually definitely the bearish ones in the room. emily, maybe the fed speakers that we have been hearing from are not saying what -- seeing what they want in the market. bill dudley writin

cpi is exploding and the fed is reacting to that. of this recession recovery has been the speed in which everything happens. the fed is tightening aggressively. profit margins are starting to deteriorate. that is why the bond market is at a recession. it is happening faster than normal. while we don't think there is a recession this year, the risk of a recession next year has gone up dramatically. guy: in aggregate, what will we see in terms of the profit margins? how much have they come down? how quickly or more specifically, when do they have their biggest effects? mike: less labor-intensive companies, that is why people have gone back to the stocks which are asset like an labor like. materials and energy sectors are doing well because they had pricing power pass through and they have not been reinvesting in new capacity. their caution remains lower. those are two areas that could benefit on a relative basis. however, this is -- we don't know the answer to this question. our view is company will -- companies will eat the costs and

is the fed working? is the fed being effective at talking down inflation?u have inflation expeditions on the longer end that are actually rising, you don't seem to see any material slowdown and some of these dynamic aspects of the market, including housebuilding. tom: this goes to jan hatzius the other day talking about a fully employed america. if people have jobs, is anybody talking about reduced labor? lisa: no, no one is talking about that. people are wondering how much we are going to get an overheated kind of feel to it, but we are looking at a participation rate that is still pretty low. those people are not coming back in. we had expect that to be the case given the fact that we already seem to be shifting towards end, phase -- towards endemic phase. tom: want to drive towards the close with netflix earnings as we begin the postbank earnings season. the haves and have-nots of revenue growth. we saw that with j&j today, j&j with some challenging forward view. you wonder if that will be a trend in the equity markets. the equity market is all over the

i think investors played the fed, follow the fed. you don't fade the fed have done very well.ow, again i agree with gary, we're at a juncture, whatever the fed will do to normalize is completely disruptive and investors have no idea. because the fed hasn't been here before. that is the problem. the rally, the one we've seen i think it is over. charles: this morning coke reported. they beat on the top and bottom line. they were able to pass costs along. we've seen this over and over again. i think it is interesting because we're seeing lower wage occupations now getting huge raises. they're spending at a much faster pace than higher income households. when you see something like that, gary could those kind of things could be you were talking about ports in a storm? there are areas where we're still 20 some odd trillion dollar economy. there has got to be somewhere where you probably can take advantage of that? >> well, ultimately absolutely but bear markets, especially bad ones can be vicious and my old line, eventually they get everything and that is what you started to see la

interest rates, a fed that looks at employment, and you said this is a fed that has to look at the acid buildup -- asset buildup in the economic experiment. what we are trying to do now is shrink the asset buildup. do we have any history, model, or theory that explains to us what quantitative tightening in whatever form it is, will be? stephen: the fed is an uncharted territory in terms of providing stimulus at the zero bound, or and interminably long. of time. it is a promise to get away from that, but so far we have seen 25 basis points of that promise. the tapering you allude to is coming up again. an external early high level. every time they try to do that in the past, markets have had a tantrum, or some other adverse reaction, and it sets the fed up for having a very difficult time in weeding the u.s. economy and the financial markets off of the frothy asset markets that they have created. that is a big challenge. tom: the world economic outlook points out the history of taper tantrum and the testing of yield dynamics in that. i want to go to what you weaned at morgan stanley -- l

or is there a risk that the fed could potentially overdo it. that we think is the big risk for markets today. and it is quite likely that the fed is going to have to get real interest rates in to positive territory in order to ensure that demand falls back into a better balance such that prices begin to stabilize. >> yep it is -- it's a tall mountain to climb still. let's put it that way. we'll take the -- what the marjt is giving us this afternoon. mark, thank you very much for joining us mark cabana. >> meanwhile the fed rising rates and a slow down in consumer spending all spooking the markets. you are heard kelly talking about how scary things are out there today and my guest said if you believe any themes are real, there are treatic ways to invest to prepare for each of them. from aus concentrated growth, jim, thanks for being here one of the things you were talking to producers is different sectors hit in different ways and whether there should be trading in lockstep or differences in the way all of them have experiencing this inflation t

this conversation of the fed funds outlook, but trading at 265 now is trading above where the fed, several fed officials have said it where they think the upper end of where they think the funds rate ought to be by end of this year. they've set 2.25, 2.50 market now taking the fed a step further and saying, okay you guys hawkish let's price in a little more hawkishness out there and take a look here. because we now see 340 by september's 2023 where the rate is penned right now, kelly market has been aggressively postured and powell really just confirming where it had been, and not really going as far as some other fed officials have gone in recent days. >> david katz, what do you think it means for the market? >> trying to talk expectations to significant rate hike is. the more they do and the more the bond market raets, possibly 6 to 12 moss, the fed will reopen comfortable the way powell is navigating this and a good likelihood we'll continue to have growth next year. for sure the economy solid over the next 9 to 12 months and hopeful we don't get into recession. a dell wit tigicate tigh

fed has to move ahead to control inflation. >> it is really now for the market to catch up to the fed. >> the fed needs to step in and take some of the steam out of labor markets. >> the longer-term risks of this consumer led recession or slow down, whatever it may be, are building. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. lisa: good morning. a pivotal week starts with a yield spike. this is "bloomberg surveillance" on bloomberg radio and bloomberg television. jon ferro, tom would say, is on sabbatical. i will say it is vacation. kailey leinz is with us this morning. we've got the q1 earnings kicking off, the ecb meeting on thursday. how much is the scenes that are really 10-year gilts rising to the highest going back to 2019? tom: all we have done is set the table this morning. one is that in flirt -- is that important inflation report tomorrow. there is some data. all you have to do is look at the headline data, 8.4%. i guess that is a boom nominal gdp for a while, but then what? lisa: is it headed upward? how much upward? or is this t

if the fed is tightening so much, doesn't that hurt hem?l emerging markets, and for example, i would separate the companies from the currency exposure and depends on where you are and what most investors are most importantly just radically underdiversified and emerging markets, one of the nice things about the companies is they haven't really received the inflows. you went through the post covid period where people got all these checks and put it into stocks and crypto. they didn't really going into emerging markets, so there are a lot of places where company valuations are very attractive there are places that are going to benefit from the commodity boon, for example, and you can separate that view from a view on the currency, which is more sensitive to balance of payments, but you have to look at each place. >> karen karniol tambour, always good to hear from you. thank you. >> after the break, the market's next catalyst, earnings season kicking off next week. mike santoli looking at the latest expectations. check out the nasdaq 100 heat m

wire this is a fed that is -- every day they have an opportunity to do it.we're within a whisper of not just with year highs, but 15 year highs this is a straight move up, painful for the consumer yields need to slow down >> i'm interested to look at a stock like facebook. one of these big cap tech stock that is way below market multiple the growth is good huge free cash flow margins, huge growth margins. does a stock like that hold its head a little bit better than some of the names that haven't got hit as hard. that's an interesting tell whether that's a good place to be or not. >> fed fund futures and oil prices two things that will tell you where risk is heading into monday. >> all right it is time now on this friday for the final trade. boy, did that go fast. >> good to be here on the desk. >> really. >> group hug here. >> tim seymour >> so i -- back to what broke down today and really it has been a two-day trade alcoa, free port mac, pulled back almost 15% over a couple of sessions i think this commodity pullback is an opportunity to buy. >> jeff? >> s

treasury fed, without the cpi being lower than the fed funds rate the fed funds rate is now 50 bips inflationlose, nowhere close to being able to control inflation with what we have, and the pressures are probably going to be -- inflation is going to tick up. i'm very worried about having one to 1.5 monthly inflation prints that's going to push consumer purchasing power down about two points on top of the 2 .5 points it's already declined since the beginning of 2021. you can't have a consumer absorb that much of a shock quickly without having recession >> and you've said that we need to start getting the monthly cpi increments down to .3% that's what to watch for if the fed is going to reach the goals it wants and have a soft landing. and we're running at three times that pace. it's a lot to go down. even goldman, think they we're going to see about 1% gdp growth this year q 4 over q 4 they're saying they're not sure that's enough for the fed to hit the inflation targets. >> oh, no. not only do we need to have the fed funds rate above cpi we've never had a disinflation without a recession. so

this there's a lot the fed can't control.t can't control oil prices. it really can't control the supply chain and they've got to be even more aggressive to hit demand because of those inflationary factors that wouldn't normally exist in an economic cycle and that's one of the reasons why i'm so bearish because their hammer has to be bigger, harder and swung a lot, lot more so i think you -- i don't know how else to say it. >> it's no surprise that the commentary from the fed feels more hawkish by the day, almost, from whether it's a known hawk or a dove. everybody sort of is speaking the same language. steve liesman, our senior economics reporter is joining us we're not imagining this it's been happening day by day >> it has been, that is correct, scott, but i'm going to -- what's the right way to say this, i'll go away from what we were going away from and talk about something different. it is on the 75 stuff and it was a trial balloon. i know what a trial balloon looks like, this is not a trial balloon. i want to go through

fed officials are out and forced again. that the fed may be behind the curve, calling for rates above 3% this year or more. the eu bands of russian coal imports. the u.s. c