earlier today, torsten slok spoke about how any fiscal plan from washington could affect treasury yields. torsten: this raises the risk we will get headline of a significant number in terms of what the deficit impact is. if you have a bigger risk of higher numbers, that raises the probability we will get some potential liz truss moment we could see a significant number coming out where instead of doing it drip wise having a number were market say there's already qt coming on, t-bills it need to be rolled over any budget deficit and treasury issuance is a hot topic. scarlet: when it comes to today, we have a 10-year auction just under half an hour. yields are higher after a string of economic data. we are looking at ism services which pointed to a stronger-than-expected economy and the biggest part of the u.s. economy. for more for the bond market, let's bring in ira jersey. always a pleasure. i want to go back to what torsten slok was referencing, this truth -- this liz truss moment. causing general mayhem for investors and other asset classes. we saw this in the u.k. do you see this as

torsten slok noted the impact of the fed cutting 100 basis points.ts and associated developments will boost gdp over the coming quarters by one percentage point and boost inflation by .5 percentage points." good morning. happy new year. you wrote they cut 100 basis points in september and the u.s. moved 100 basis points in the other direction. torsten: that is really unusual. normally the textbook would say if you cut interest rates, long rates should be going down. why is it when they have cut 100 basis points that we have now seen long rates go up 100 basis points? that has opened up a lot of conversations about is it because fed cuts were not warranted? is because of fiscal policy? is it because of less demand from abroad? that's an important quantification debate about what long rates are going up. the term premium has gone up 80 basis points according to the new york fed. 80% of the increase in long rates since september has been driven by worries about fiscal policy. issues that are not explained by fed expectations. lisa: which of the three po

we had torsten slok to raise the risk of a repeat of 2022.re that fear the year in which stocks and bonds do poorly? mike: that is fair. i don't think it will be severe. 2022, they raised it 400 basis points and that is not happening. that's a little extreme to save -- say bonds. fonts will not sell off that much. multiples are much higher coming into this year than they were in 2022 relative to where bond yields are. i have been surprised and a lot have been surprised multiples have gotten this high in the face of rates at 4% to 5%. that is the single biggest miss by most people, that multiples could be this high. you have more give and multiples could come down. they don't have to go up 100 basis points for multiples to come in 10%. that is what we are trying to figure out. you still stay at the quality curve. if you look what happened in the fall, the low-quality stocks absolutely went bonkers. that has to come out of the market. that is where we would be concerned or most -- the area we are most avoiding for the next three to six months.

this is a risk that torsten slok presented. underperforming or bonds and stocks get hurt. are we lining up for more the same? emily: if we see inflation continue to be enemy number one here, we see inflationary pressures pickup towards in of the year. the shelter components, while that came down a bit we saw other elements of inflation actually start to accelerate once again. that could be a challenge for yields. that could cause a stronger dollar environment when we are just -- we just experiences one of the best wretches for markets in history. the fourth time ever we saw back to back 25 plus percent returns for the s&p 500. if you look back the last time the third year was over 20% was 1999. we are going back to the late 1990's if we want to see a repeat of that. we are looking at valuations quite optimistic here at 22 times foreign earnings. the best we have seen is 24 times. the most elevated is 24. there's another 9% or 10% to goat until we get to those levels. -- to go until we get to those levels. the starting point is

ratings above 800 but the idea of more broadly how much confidence each household has at a time when torsten slokouseholds are in incredible shape. do we get that from the big banks? jonathan: how dependent is the outlook on the incoming administration? annmarie: scott bessent will have his hearing. that will be interesting and the market will pay attention to what he has to say about bond yields and maybe sequencing of trump's agenda. jonathan: coming up this hour, chris harvey of wells fargo, alex desilva of accuweather, and michael nathanson on huge changes over at meta. we begin with the s&p 500 on a two week losing streak. chris harvey of wells fargo saying investors are staring at a wall of worry, driven by the 100 basis point rise since september. ultimately, we expect high yields to be self-correcting. chris joins us for more. self-correcting is a phrase we have been exploring over the past week or so. do you mean to inflict more damage before we see things turn the other way? chris: i think so. the move has been so sharp. people do not wait and say now is the time. risk does not look tha

this goes to the question torsten slok raised.ng and yield rise by 100 basis points after a series of one hundred basis points of rate cuts from the federal reserve. do you have a since the u.s. is one of those vulnerable spots? mohamed: in relative terms no. you've heard me say the good, the bad and the ugly. the good is the u.s. the baddest china and the ugly is a europe, including the u.k. the u.s., china, europe including the u.k. will focus on the ugly first, then creep up. the u.s. has a good spot. higher yields here associated with stronger growth. that is not the case in europe. jonathan: why do you think the federal reserve is so confused? they sound confused based on the news conference in december. mohamed: how much time do we have? lisa: two hours. mohamed: they are confused in analysis, communication and approach. when you are data-dependent and looking at the futures for the lens of the past, you will get more and more confused. we have not even talked about policy uncertainty, which adds to this. we could solve diff