2023 Outlook | Bloomberg Surveillance 12/27/2022
>> 2023 IS LIKELY GOING TO BE THE YEAR OF RECESSION. >> WE MIGHT START A RECESSION AND IF WE DO A RECESSION IN IS RELATIVELY LIGHT. >> IT IS AN OPENING QUOTE -- IT IS AN OPEN QUESTION OF WHEN WE WILL HAVE A RECESSION AND HOW DEEP IT WILL BE.
>> IF IT -- IF INFLATION IS NOT ON ITS WAY TO 2% THE MARKET WILL STRUGGLE. >> THE MARKET IS BEING OVERSHADOWED BY THE SLOWDOWN. >> THIS IS "BLOOMBERG SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. MATT:
GOOD MORNING FROM NEW YORK CITY FOR OUR AUDIENCE WORLDWIDE, THIS IS "BLOOMBERG SURVEILLANCE" AND ALONG SIGN KAILEY LEINZ ON NATIONAL LOG SIDE KAYLEE MORNING -- KAILEY LEINZ I AM MATT MILLER. JOHN, LISA AND TOM ARE ON VACATION. LET US LOOK AT WHAT IS GOING ON IN THE MARKETS. WE HAVE GAINS ACROSS EUROPE, AND YOU WOULD THINK THAT EVERYWHERE ELSE WILL BE RISK ON, I WOULD SAY, IN TERMS OF WHAT WE SEE ON FUTURES. WE HAVE A LITTLE BIT OF RISE, .6% ON THE S&P MINI, SO WE COULD BE ON FOR A BELATED SANTA CLAUS RALLY. KAILEY: WE WERE UP ON FRIDAY HAD THREE
CONSECUTIVE WEEKS OF LOSSES ON THE S&P 500. WE WILL SEE IF WE CAN EKE OUT A GAIN ON THIS FINAL TRADING WEEK OF THE YEAR. CHINA IS TRYING TO HAVE A HAND IN THAT, RELEASING THE LAST COVID ZERO CURVE AND THEY ARE RELAXING THE QUARANTINE REQUIREMENT FOR INBOUND TRAVELERS ON JANUARY 8. BASICALLY REOPENING THE SECOND
LARGEST ECONOMY TO THE REST OF THE WORLD THAT HAS BEEN SHUT OFF AND THAT IS WHAT IS FEEDING INTO THE COMMODITIES RALLY. MATT: THAT WILL BE OUR TOP STORY AND WE WILL TALK A LOT ABOUT WHAT IS GOING ON IN CHINA. THE LAST FEW SESSIONS WE HAVE HAD THIS KIND OF NEWS ABOUT CHINA BUT IT HAS NOT ALWAYS HELPS OR MEANT THAT PEOPLE ARE OUT THERE BUYING STOCKS AND SELLING BONDS BECAUSE THERE IS CONCERN THAT THERE IS REOPENING AND INFECTIONS ARE ON THE RISE. 37 MILLION PEOPLE GOT COVID IN ONE DAY LAST WEEK. KAILEY: THAT IS A GAS -- GUESSTIMATE.
BUT CHINA IS CHANGING THE WAY THEY CALCULATE THE TALLY OF CONTAGION AND AS IT WHIPS THROUGH SO MANY AREAS IT IS A QUESTION OF IF IT WILL BRING ECONOMIC OPTIMISM, I WILL SAY COMING THROUGH OR IF IT IS WORTH -- WORSE IN THE NEAR TERM GIVEN HOW MONEY PEOPLE WILL BE HOMESICK, DEFINITELY A QUESTION. WHEN CHINA REOPENS AND IT IS BACKED UP, THAT WILL MEAN MORE COMMODITIES AND THAT COULD BE FORTIFYING FORCE. MATT: JANUARY 8 IS THE DAY THEY ARE EXPECTED TO OPEN FULLY OR AT LEAST AS FULLY AS WE HAVE SEEN IN THE LAST THREE YEARS. THEY WILL STILL BE MASKING I AM SURE THAT THERE WILL BE TESTING TO GET IN. YOU HAVE TO HAVE A TEST AT
LEAST 48 HOURS AHEAD OF YOUR FLIGHT. THE QUESTION I HAVE IS HOW MUCH DEMAND WILL THERE BE? INTERNATIONAL FLIGHTS HAVE BEEN KEPT TO A LOW LEVEL. SO WHEN THE CAP COMES OFF, DOES THAT MEAN AIRLINES WILL SCHEDULE MORE INTERNATIONAL FLIGHTS OR ARE THE TRAVELERS NOT REALLY DEMANDING THOSE TICKETS? THEY HAVE NOT FACTORED IT INTO THE PLANS SO THEY WILL TAKE TIME TO RAMP THAT UP. KAILEY: WELL WE ARE TALKING ABOUT AIRLINES I WANT TO SHIFT TO DOMESTICALLY.
IF YOU ARE TRAVELING OVER THE HOLIDAY WEEKEND I HOPE THAT YOU GOT WHERE YOU ARE GOING TO GO AND IF YOU ARE COMING BACK YOU HAD A DIFFICULT TIME. SOUTHWEST WAS RESPONSIBLE FOR THREE QUARTERS OF CANCELED FLIGHTS CANCELING MORE THAN 3000 AND THAT COULD CONTINUE FOR DAYS OF -- FOR DAYS TO COME. MATT: A LOT OF PEOPLE ARE CALLING IT SOUTH WORST. IT HAD A LOT MORE OF A DIFFICULT TIME THAN THE OTHER AIRLINES SO WE HOPE IT CAN RECOVER FOR EVERYBODY WHO IS TRAVELING. 80% OF THEIR FLIGHTS WERE
CANCELED OR DELAYED AND THAT IS A REAL PROBLEM FOR SOUTHWEST AIRLINES WILL BE WATCHING THAT. STOCKS LET US BRING IN THE CHIEF TRY TO JUST AND INTERACTIVE BROKERS GROUP, STEVE WHO JOINS US TO TALK ABOUT THE GOOD NEWS, OUT OF CHINA. IT GOOD NEWS GOOD NEWS? WE ARE USED TO ECONOMIC DATA, U.S. ECONOMIC DATA IN A POSITIVE WAY OFFERING OPTIMISM FOR THE ECONOMY. THAT HAS NOT BEEN GOOD NEWS FOR
MARKETS BECAUSE THE CONCERN IS THAT THE FED WILL GO WITH STRONGER RATE HIKES. WHAT ABOUT THE CHINA NEWS? THAT HAS BEEN UNDECIDED. IS IT GOOD WHEN THEY REOPEN? STEVE: THERE IS A LOT TO UNPACK. IN GENERAL, HE FLIPPED A GOOD NEWS IS GOOD NEWS AND BAD NEWS IS BAD NEWS AND THE REASON FOR THAT IS THAT WE HAVE COME TO GRIPS WITH THE IDEA THAT THE FED FIGHTING INFLATION. THE IDEA OF DEPOSIT -- THE IDEA OF THE PIVOT, PAUSE, OR PEAK OF THE FED BACKING OFF OF ITS DESIRE TO RESTRICT MONETARY POLICY HAS FINALLY GOTTEN THROUGH TO PEOPLE. NOW THE WORRY IS WHAT WE GO -- WILL WE GO INTO A RECESSION OR WILL HE HAVE A SOFT LANDING.
ANY ECONOMIC NEWS ON THE POSITIVE SIDE IS HELPING NON-RECESSIONARY WORRY AND IS THEREFORE BEING TREATED AS GOOD NEWS AND OF COURSE THE INVERSE AND OPPOSITE. CHINA IS MORE OF A WILDCARD BECAUSE WE WANT TO SEE THE ECONOMIC GROWTH COMING FROM CHINA BUT WE DO NOT WANT TO SEE THEM CONTRIBUTING TO INFLATION. I THINK THIS WILL BE A MUDDLED STORY BECAUSE AS YOU NOTED THE FULL REOPENING OCCURS IN A COUPLE OF WEEKS. AND THEN A COUPLE OF WEEKS AFTER THAT IT IS THE CHINESE NEW YEAR AND IT WILL BE THE FIRST TIME FOR EVERYBODY TO BE TRAVELING AND THAT IS GOING TO BE VERY INTERESTING IN TERMS OF HOW COVID SPREAD IN THAT ENVIRONMENT. I DO NOT THINK WE CAN TAKE OUR EYES OFF OF THAT STORY AND THAT IS A WILDCARD. MATT: IF WE DO HAVE CHINA OPENING UP AND COMING BACK IN TERMS OF GROWTH, FIVE OR 6% GROWTH OUT OF CHINA IN 2023.
HOW HELPFUL IS THAT FOR THE REST OF THE WORLD ECONOMY? ARE THEY STILL A DRIVER OF GLOBAL GROWTH OR HAVE WE SEEN ENOUGH DEGLOBALIZATION THAT THEY DO NOT CONTRIBUTE AS MUCH? STEVE: WE HAVE SEEN SOME DEGLOBALIZATION BUT HARDLY FULLY DECOUPLING. REMEMBER THAT CHINA WAS MORE OR LESS THE EARLIER PART OF THE CENTURY, AS A LOT OF THE OTHER WORLD ECONOMIES WERE MUDDLING ALONG, CHINA WAS PULLING THE REST OF THE WORLD UP. THERE IS A HOPE THAT THEY CAN DO IT AGAIN AND IT REMAINS TO BE SEEN BECAUSE THEY HAVE THEIR OWN ISSUES IN TERMS OF SHADOW BANKING AND OVEREXTENDED REAL ESTATE AND A WHOLE BUNCH OF OTHER ISSUES THAT NEED TO BE RECKONED WITH. I THINK CHINA IS NOT AS CLEARLY A BLACK-AND-WHITE STORY AS IT USED TO BE, SO CHINA IS GROWING IT HELPS THE WORLD ECONOMY AND THERE IS A LOT OF SHADES OF GRAY AND THAT IS WHAT BEARS WATCHING. KAILEY: AS WE TALK ABOUT THE WORLD OR U.S. ECONOMY THERE SEEMS TO HAVE NOW FORMED A REAL CONSENSUS THAT WE ARE GOING TO HAVE A DIRE ECONOMIC PICTURE IN THE FIRST HALF OF 2023 THEREFORE THE MARKETS WILL HAVE MORE DOWNSIDE IN THE FIRST PART OF THE YEAR. THE CONSENSUS IS THAT INTO THE
SECOND HALF THINGS GET BETTER AND WE COULD RALLY TO THE LEVELS THAT WE ARE AT NOW. ARE YOU WORRIED ABOUT HOW MUCH CONSENSUS THERE IS AROUND THE IDEA? DOES THAT ESSENTIALLY MEAN THAT IS NOT WHAT IS GOING TO HAPPEN? STEVE: THAT DOES MAKE IT TRICKY BECAUSE CONSENSUS TENDS TO BE WRONG AND MARKETS HAVE A NASTY WAY OF PENALIZING THE LARGEST NUMBER OF PEOPLE AT THE MOST OPPORTUNE TIMES. -- IN OPPORTUNE TIMES. THE FED FUNDS FUTURES MARKET IS NOT PROTECTING A RIPROARING ECONOMY.
THEY ARE PRICING IN A BIT OF RECESSION. SOMETHING HAS GOT TO GIVE IN MY EXPERIENCE AND GUT TELLS ME IF YOU ARE MAKING A BET ON THE ECONOMY AND YOU HAVE TO CHOOSE BETWEEN THE STOCK AND BOND GUYS, THE BOND GUYS USUALLY HAVE THE ECONOMY SUSSED OUT BETTER THAN THE BOND PEOPLE. THE BOND PEOPLE WERE DRASTICALLY WRONG ABOUT 2022 BECAUSE THEY HAD A TERMINAL RATE BELOW 1%. SO TAKE THAT WITH A GRAIN OF SALT. KAILEY: VERY VALID POINT AND WHAT WE GOT WAS MORE THAN 400 BASIS POINT HIKES. HOW QUICKLY THINGS CAN CHANGE. YOU MENTIONED WHAT IS ACTUALLY PRICED IN AND WHAT IS NOT.
WHAT WOULD REPRESENT A BUYING OPPORTUNITY? AT WHAT POINT WOULD WE KNOW THAT THE SIGNAL -- AT WHAT POINT IS A SIGNAL THAT THE BOTTOM IS ACTUALLY IN? STEVE: ONE WE ARE NO LONGER FIGHTING THE FED AND WE STILL ARE. AND EVEN IF THE FED STOPS RAISING RATES THEY ARE STILL DOING QUANTITATIVE TIGHTENING. PROBLEM NUMBER ONE IS THAT WE PROBABLY WANT TO FIND A POINT WHERE IT IS OBVIOUS WE ARE NO LONGER FIGHTING THE BAD. SECONDLY, WE WANT TO FIND A SPOT WHERE IT APPEARS THAT EARNINGS REVISIONS WILL START GOING UP. RIGHT NOW THE BIG FEAR IS THAT
WERE -- IS THAT EARNINGS WILL BE STAGNANT OR IMPROVISE LOWER AND EVERYBODY IS WORRIED ABOUT WHEN EARNINGS SEASON ROLLS AROUND AGAIN WHAT WE HAVE TO SAY. IT BECOMES EVIDENT THAT THE EARNINGS HAVE STARTED TO TURN A CORNER OR AT LEAST NOT GET MATERIALLY WORSE AND AGAIN U.S. COMPANIES HAVE BEEN REMARKABLE IN THEIR ABILITY TO BE RESPONSIVE TO BAD ECONOMIC TIMES. THOSE ARE YOUR TWO BIG SIGNALS. I DO NOT SEE THEM YET THAT DOES NOT MEAN THEY CANNOT BE AROUND THE CORNER. MATT: WHAT ABOUT VALUATIONS AND
EARNINGS? WE ARE TRADING AT 17 TIMES, HOW LOADED WE NEED TO GO BEFORE A BEAR MARKET ENDS, AND WHAT KIND OF EARNINGS DO YOU EXPECT WHEN WE TALK ABOUT FORWARD EARNINGS? STEVE: IN TERMS OF WHAT SORT OF VALUATION, GIVEN THE CURRENT ENVIRONMENT, IF WE WANT TO SEE A WASHOUT WE ARE TALKING ABOUT 15 TO 16 IN TERMS OF PE. IN TERMS OF ACTUAL EARNINGS NUMBERS THAT BECOMES ECONOMICALLY DEPENDENT, IDEALLY WE COULD GO BACK TO DOUBLE DIGIT GROWTH AND IF THAT IS A CONSENSUS PROJECTION THAT COULD BE REALIZED THAT IS A GOOD SIGN. IN TERMS OF VALUATION, MY BIGGER WORRY RIGHT NOW IS THAT A LOT OF INVESTORS ARE IN THE CULT OF THE GROWTH SHOULD JUST -- OF THE GROWTH STOCK. WHAT 2022 SHOWED US IS A
DIFFERENCE BETWEEN GROWTH AND VALUE, THE ARBITRARY DIFFERENCE IS MORE GONE. WHAT WE NEED TO BE DOING IS THINKING OF OUR CLASSIC ROAD STOCKS. HOW DO THEY SHAPE UP AND THAT IS THE IMPORTANT THING GOING FORWARD. THAT IS TAKING A LOOK AT WHAT YOU CONSIDER YOUR GROWTH STOCKS AND ARE THEY DECENT VALUES. IF THEY ARE IT IS A GREAT SITUATION. IF THEY ARE NOT THAT IS STILL HARBORING A LOT OF RISK AND THAT MENTALITY NEEDS TO GET A LITTLE MORE WASHOUT FOR WE TURN UP. MATT: THANK YOU SO MUCH FOR JOINING
US. STEVE OF INTERACTIVE BROKERS TALKING TO US ABOUT THESE MARKETS AND I THINK THE QUESTION WILL BE FOR MOST OF OUR GUESTS TODAY AND THIS WEEK AND OVER THE NEXT COUPLE OF WEEKS IS WHEN DO YOU KNOW? WHAT IS YOUR SIGN THAT IT IS TIME TO START SELLING AND START BUYING THE DEBT. KAILEY: NONE OF US HAVE A CRYSTAL BALL SO ANY HANDS THAT ANYONE HAS, WE WILL TAKE THEM. MATT:
COMING UP AT 7:45, DAN IVES TALKS TECH WITH US AFTER THE HORRIBLE, AWFUL, NO GOODYEAR THAT 2022 WAS. THIS IS BLOOMBERG. ♪ >> KEEPING YOU UP-TO-DATE WITH NEWS AROUND THE WORLD. CHINA IS REOPENING ITS BORDERS TO THE WORLD BY REMOVING THE FINAL COVID ZERO RESTRICTIONS. STARTING JANUARY 8, AND BOUND TRAVELERS WILL NOT BE ABLE TO QUARANTINE THEY JUST NEED TO OBTAIN A NEGATIVE COVID TEST WITHIN 48 HOURS.
THEY ALSO MIGHT REDUCE THE FREQUENCY OF REPORTING CASES, CHANGING TO A MONTHLY REPORT. IN WESTERN NEW YORK, 28 PEOPLE ARE DEAD AND ONE OF THE WORST WEATHER DISASTERS EVER TO HIT THE REGION. MORE THAN FOUR FEET OF SNOW FELL ON BUFFALO.
CARS WERE BURIED IN SNOW DRIFTS AND EMERGENCY CREWS COULD NOT RESPOND TO MEDICAL CRISES. PRESIDENT BIDEN HAS OFFERED PRESIDENT -- FEDERAL EXISTENCE. -- ASSISTANCE. SOUTHWEST AIRLINES EXPECTS THE CHAOS THE LAST FOR ANOTHER FEW DAYS. THE CEO SAYS IT EXPECTS TO OPERATE STOVER ONE THIRD OF ITS TYPICAL SCHEDULE SO WE CAN GET CREWS INTO THE RIGHT POSITIONS.
SOUTHWEST CANCELED 3000 FLIGHTS ON MONDAY. RUSSIA'S FOREIGN MINISTER WARNS THAT UKRAINE MUST SURRENDER WERE FACED CONTINUED OR. HE SPOKE TO THE STATE RUN NEWS AGENCY TASK SAYING THAT IT WAS FOR ITS OWN GOOD AS RUSSIAN TROOPS ARE FORCED TO RETREAT IN A SERIES OF DAMAGING DEFEATS. IN SOUTH KOREA THE MILITARY SAID IT SET ROOMS AND TO NORTH KOREA FOR THE FIRST TIME. IT IS AN UNPRECEDENTED MOVE
THAT FOLLOWED THE DECISION TO SEND FIVE UNMANNED AERIAL VEHICLES INTO SOUTH KOREAN AIRSPACE. KIM JONG-UN MADE -- OPENED A MAJOR POLITICAL MEETING TO SET POLICY. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. THIS IS BLOOMBERG.
>> WE ANTICIPATE A STRONG RECOVERY ESPECIALLY FROM CHINA AND FOR COMMODITIES. AND TO DIFFERENTIATE THAT FROM OTHER TYPES BECAUSE CHINA, BY FAR, WE BELIEVE THAT THE FISCAL SUPPORT REQUIRED TO GET THERE GDP GROWTH GOAL WILL BE SIGNIFICANT. INFRASTRUCTURE SPENDING CAN MAKE A SIGNIFICANT DIFFERENCE. MATT: THAT WAS THE DWS PORTFOLIO MANAGER AND HEAD OF COMMODITY IS TALKING TO US ABOUT HIS OUTLOOK. IT WILL BE A VERY DIFFERENT YEAR INDEED BECAUSE THE GIGANTIC ECONOMY, SECOND BIGGEST IN THE WORLD AND FASTEST GROWING, THE CHINESE ECONOMY IS OPENING UP.
ALAN IS IN SHANGHAI TO TALK A LITTLE BIT ABOUT WHAT IS GOING ON. WHAT DO WE KNOW, FIRST OF ALL IN TERMS OF THE HEADLINES, WHAT HAS BEEN DROPPED IN TERMS OF THE COVID CURVES AND WHAT REMAINS TO GO? >> I MEAN THIS IS THE LAST BIG ONE. FROM JANUARY 8 THE GOVERNMENT IS IN QUARANTINE FOR THE REVIVALS AND THIS POLICY HAS HURT THE ECONOMY AND LEFT CHINA ISOLATED.
THAT SAID, CHINA WILL STILL REQUIRE ARRIVALS TO SHOW 48 HOUR PCR TESTS RESULT. THAT IS NOTHING COMPARED TO WHAT WE HAVE RIGHT NOW WHICH IS AT LEAST FIVE DAYS OF HOTEL QUARANTINE OR THREE DAYS AT HOME FOR HOME MONITORING. I HAVE DONE TWO LONG QUARANTINES AFTER LEAVING CHINA AND COMING BACK. ONE FOR 10 AND ONE FOR 14 DAYS
AND THEY ARE PRETTY BRUTAL. MATT: I BELIEVE IT. WE WERE TALKING EARLIER ABOUT THE INTERNATIONAL FLIGHTS THAT WERE CAP IN TERMS OF THE NUMBER OF PLANES THAT COULD COME IN. IS THERE DEMANDS TO LIFT THE CAP? ALLEN: FOR SURE.
I THINK ONE OF THE THINGS THAT THEY WERE SAYING AS WELL IS THAT THEY ARE GOING TO REMOVE THE CAP. I WILL HAVE TO DOUBLE CHECK. RIGHT NOW, THERE IS SUCH HUGE DEMAND FOR FLIGHTS INTO CHINA AND HONG KONG. I WAS CHECKING THIS OUT. THE ONLINE SEARCH AS PER FLIGHTS FROM HONG KONG TO MAINLAND CHINA HAVE SURGED SIXFOLD ON SOME OF THE WEBSITES LIKE C-TRIP AND TRIP.COM COMPARED TO WHERE THEY WERE A WEEK AGO. KAILEY:
THERE IS THE QUESTION OF PEOPLE TRAVELING ELSEWHERE FROM CHINA. JAPAN WILL REQUIRE TESTING, GIVEN THE RATE AT WHICH INFECTIONS ARE CLIMBING WITH ALL OF THE RESTRICTIONS SUDDENLY RELEASED AND THE VACCINATION RATE NOT AT WHAT IT WOULD NEED TO BE TO INSULATE THE POPULATION FROM THE EFFECTS, DO WE HAVE A SENSE OF WHAT THE NUMBERS ACTUALLY ARE GIVEN THE REPORTING OF THIS IS IN QUESTION? ALLEN: THAT IS A GREAT QUESTION. CHINA HAS BEEN OFFICIALLY BEEN REPORTING A 3000 4000 DAILY INFECTIONS WHICH IS FLYING ON THE BASE OF WHAT SOME OF THE PROXIES HAVE REPORTED. THEY REPORTED ONE MILLION COVID ACTIONS AND EXPECTS MORE BEFORE IT PEAKS. IN TERMS OF WHAT CHINA IS GOING TO DO ABOUT IT, I THINK RIGHT NOW IT PLANS TO INCREASE ICU BEDS AND INCREASE THE NUMBER OF HOSPITALS.
THEY HAVE TO RETROFIT A LOT OF QUARANTINE FACILITIES INTO HOSPITALS TO DEAL WITH THESE PATIENTS. KAILEY: IT RAISES THE QUESTION OF WHAT IS THE FEELING HE'S POPULATION BECAUSE WE KNOW A NOVEMBER -- WHAT IS THE FEELING OF THE CHINESE POPULATION BECAUSE IN NOVEMBER THEY WERE PROTESTING. IT WAS SO OUTSPOKEN UNDER THE RULES THAT PEOPLE WERE BEING FORCED TO LIVE IN THE GOVERNMENT HAS RESPONDED DIRECTLY SAYING THAT THEY WILL MAKE ALL OF THOSE GO AWAY AND NOW THAT IT HAS, I WONDER IF SENTIMENT HAS TURNED THE OTHER WAY. WHAT DO PEOPLE FEEL RIGHT NOW?
ALLEN: THERE IS A LOT OF WHAT -- MIXED EMOTION AND PEOPLE ARE GETTING WHIPLASH. NO THAT COVID IS ENDING AND THE NEXT SECOND IT IS LET IT. IT SEEMS LIKE A LOT OF PEOPLE HAVE HAD COVID ACCORDING TO THE NATIONAL HEALTH COMMISSION. ABOUT 18% OF THE POPULATION, 248 MILLION PEOPLE. A LOT HAVE ALREADY HAD IT, AND THEY HAVE GOTTEN THROUGH IT AND THEY ARE GETTING ACCUSTOMED TO THE IDEA OF MOVING ALONG, BUT THERE IS STILL A LOT OF OLD PEOPLE WHO ARE ACTUALLY HAVE NOT BEEN VACCINATED AND WE ARE SEEING A SURGE OF OLD PEOPLE GOING TO HOSPITALS AND OLD PEOPLE DYING. THERE IS A LOT OF CONCERN FOR PEOPLE WHO REALLY CARE ABOUT THEIR APPEARANCE AND YOUR GRANDPARENTS, THEY ARE AFRAID THAT THEY MIGHT GET COVID AND IF THEY ARE NOT VACCINATED THEY MIGHT DIE SO THERE IS A CONCERN ABOUT THAT. BY IN LARGE PEOPLE ARE HEADING
USED TO THE IDEA THAT COVID ZERO HAS ENDED AND THAT IS A GOOD THING. THERE WILL BE BUMPS ALONG THE ROAD. I HEAR THAT BEIJING IS REACHING THE PEAK OR NEAR THE PEAK AND OTHER PLACES ARE NOT QUITE THERE YET. NEVERTHELESS PEOPLE ARE SORT OF, YOUNGER PEOPLE ARE GETTING USED TO THE IDEA OF TUBING PASSED COVID ZERO. MATT: IT IS INTERESTING TO GET THE
INSIDE TAKE BECAUSE HERE WE GET A DIFFERENT PICTURE. THE IDEA WAS THOSE PROTESTS REPRESENTED PEOPLE FIGHTING TO GET OUT AND THEY WERE BEING HELD IN AND THEY WANTED TO ESCAPE THESE RESTRICTIONS. AND THEN WHAT WE HEARD HERE WAS AS SOON AS THEY STARTED TO REDUCE THE RESTRICTIONS THE SAME PEOPLE WERE STAYING INSIDE. THEY ARE TERRIFIED OF GETTING COVID BECAUSE INFECTIONS SHOT UP SO IT IS INTERESTING TO GET ALLEN'S PERSPECTIVE ABOUT WHAT PEOPLE REALLY FEEL ON THE GROUND. KAILEY: IT IS A QUESTION OF MOVING OR
NOT MOVING BECAUSE YOU ARE MANDATED BECAUSE YOU CANNOT LEAVE YOUR HOME VERSUS HAVING THE PERSONAL AUTHORITY. MAYBE THAT IS THE DISTINGUISHING FACTOR. ALLEN MENTIONED HOSPITALIZATIONS AND THAT OLDER PEOPLE ARE GOING INTO HOSPITALS. OUR THE HOSPITAL SYSTEMS REPAIRED FOR THIS? ALLEN: UNFORTUNATELY NO. I BELIEVE IT IS LIKE 14 -- 10 TO 13 BEDS PER 100,000 PEOPLE OR SOMETHING LIKE THAT, IT IS PRETTY LOW COMPARED TO WESTERN STANDARDS AND THAT IS WHY CHINA IS RUSHING TO GET OLDER PEOPLE VACCINATED AND THE ICU BEDS. THEY ARE DOWNGRADING COVID FROM HIGHEST DOUBLE TO ENTICE LEVEL BASICALLY SAYING THAT COVID IS NO LONGER AS LEAVE IT PEOPLE OR SERIOUS BUT IT IS MORE LIKE THE FLU -- LETHAL OR SERIOUS BUT MORE LIKE THE FLU.
CHINA IS TRYING TO DOWNPLAY THE SERIOUSNESS WHICH IS WHAT WE HAVE BEEN SEEING IN THE WEST AS WELL. IN TERMS OF HOSPITALIZATION THEY ARE ON THE RISE. AND, UNFORTUNATELY, A LOT OF OLD PEOPLE ARE NOT VACCINATED. AND IT IS VERY SERIOUS. MATT: THANK YOU SO MUCH FOR JOINING
US AND STALKING US THROUGH REDUCTION OF THE COVID ZERO RESTRICTIONS AND THE END OF THAT POLICY. I HAVE BEEN FOLLOWING THE TWISTS AND TURNS OF THESE HEADLINES THROUGH THE OIL MARKET BECAUSE EVERY TIME RESTRICTIONS ARE LIFTED I EXPECT TO SEE OIL SHOOT UP IN PRICE ASSUMING THAT THEY WILL BE ANOTHER COUPLE HUNDRED MILLION PEOPLE FILLING THEIR CARS. WE HAVE NOT SEEN THAT BUT WE HAVE SEEN A TON OF VOLATILITY AND LOOKING AT RENT CRUDE UP TO ABOUT -- BRENT CRUDE UP TO $100 SO THE VOLATILITY HAS BEEN INCREDIBLE. KAILEY: IT IS A QUESTION OF IS MORE GROWTH ABLE TO OFFSET A LACK OF GROWTH ENTIRELY AND OTHER PARTS OF THE WORLD. THE OIL MARKET IS SINGULARLY FOCUSED ON THE LIST OF -- ON THE RISK OF RECESSION BRING DEMANDS DOWN VERSUS APPLY. I WOULD SAY THAT THE CHINA STORY IS RIPPLING ACROSS OIL -- ABOUT -- ABOUT COMMODITIES.
PRETTY MUCH EVERYTHING IS POSITIVE. COPPER IS UP A COUPLE OF PERCENTAGE POINTS. MATT: EVERYTHING EXCEPT FOR ALUMINUM LOOKS LIKE IT IS GAINING THIS MORNING AND WE HAVE REAL JOBS IN NATURAL GAS PRICES IN THE U.S. AS WELL. WE HAVE BEEN USED TO SEEING THAT IN EUROPE AND IT IS A REAL CONCERN THAT WE GET A COLD WINTER AND THEY HAVE LIMITED SUPPLY. IN THE U.S. THE COLD HAS CAUSED REAL PROBLEMS. NUMEROUS FATALITIES
AND NATURAL GAS PRICES ARE JUMPING. WE WILL TALK TO AN ECONOMIST ABOUT THIS. THE PRESIDENT AND MACRO POLICY PERSPECTIVE. SHE HAS EXPERIENCE ON THE FED AND BARCLAYS AND SHE TEACHES AT UT AUSTIN, THIS IS BLOOMBERG.
MATT: WELCOME BACK TO "BLOOMBERG SURVEILLANCE" I AM MATT MILLER WITH KAILEY LEINZ. LISA, JON, AND TOM ARE OFF. ARI ON THE SHOW ALL WEEK TOGETHER? KAILEY: QUEST -- YES, YOU AND I WILL BE HERE ALL WEEK. MATT: LET US TALK A LITTLE BIT ABOUT
MARKETS. WE HAVE SEEN A LOT OF GREEN ON THE SCREEN IN EUROPE, GAINS NOT IN LONDON, LONDON IS STILL CLOSE. BUT THE REST OF EUROPE IS OPEN AND WE ARE LOOKING AT GAINS AND U.S. FUTURE AS WELL. KRITI JUST BACK FROM LONDON IS HERE WITH US TO GIVE US A LOOK AT THE MARKET ON THIS I DO NOT THINK THERE IS AN OFFICIAL NAME FOR TODAY, THE DAY AFTER BOXING DAY. KRITI: IT HAS BEEN A MONTH SINCE I WAS BACK FROM LONDON.
YOU ARE SEEING THE SENTIMENT STORY ACROSS FROM ASIA AND YOU CAN SEE THAT FLYING HIGH. THE F -- THE S&P 500 UP ABOUT SEVEN -- .7%. THE RUSSELL 2000 FEATURES WELL. IF YOU LOOK AT THE EQUITY TRADE ON THE GOOD DAYS THE RUSSELL OUTPERFORMS AND ON THE BAD DAYS THE RUSSELL DOES NOT DO ANYTHING. YOU ARE STARTING TO SEE A LITTLE BIT OF THIS AND PENSION, THE IDEA IF THAT THE U.S. CANNOT HOLD ITS OWN OR BETTER THAN SMALL CAPS BE THE PLACE THAT ARE UNDERPRICED. WE ARE SEEING A LITTLE BIT OF THAT. TO YOUR POINT, EUROPEAN STOCKS
ARE HIGHER AND THE REAL OUTPERFORMANCE IN THAT CONTINENT COMING FROM FRANCE AND THE ENTIRE INDEX UP .4%. SPEAKING OF EUROPE THIS IS A FASCINATING STORY AND I WAS NOURISHING OUT ABOUT THIS. ONE OF THE MAJOR STORIES WILL BE THE WEAKNESS IN THE DOLLAR, AND THE BEAR CASE BUILDING AS THE FED GETS CLOSER TO ENDING THEIR TIGHTENING CYCLE WHICH MEANS THAT THE EURO WILL BE THE BIGGEST BENEFICIARY BECAUSE THE ECB IS LIKELY TO LAG. WE ARE SEEING UP POINT -- 1.06. AS WE TALK ABOUT THAT CASE IT WILL HAVE A RIPPLE EFFECT WHICH IS DEALING WITH A DOUBLE WHAMMY WHEN IT COMES TO THE CHINA STORIES.
THE REOPENING STORY IS SHOWING UP IN COPPER UP 3.3% AND WE ARE HOVERING AROUND SESSION HIGHS. THE ENTIRE COMMODITY COMPLEX IS BENEFITING. THE BRENT CRUDE IS A TRADEMARK WE LIKE TO LOOK AT. HIGHER BY 1.2%.
STILL GREEN ON THE SCREEN IN LINE WITH THE RISK RALLY. I WILL END ON GOLD BECAUSE THE LUNAR NEW YEAR IS COMING UP SO THE IDEA THAT THE REOPENING PLUS LUNAR NEW YEAR DEMAND IS FUELING GOLD AS WELL. KAILEY: THANK YOU SO MUCH. OF COURSE THE CHINA STORY FEEDING INTO THE COMMODITY STORY MEANING THAT HIGHER PRICES THAT COULD FUEL INFLATION, SOMETHING THAT CENTRAL BANKS HAVE BEEN TRYING TO FIGHT OVER THE COURSE OF 2022 AND LIKELY TO BE THE DEFINING STORY IN 2023. LET US GET OVER TO JULIA CORONADO, PRESIDENT AT MACRO POLICY PERSPECTIVES JOINING US FROM A CHILLY AUSTIN TEXAS. WE WERE SPEAKING TO STEVE OF INTERACTIVE BROKERS AND HE WAS TALKING ABOUT MARKETS NOW THAT ARE STILL WAITING THE FED. HOW HARD IS THE FED GOING TO HAVE TO FIGHT BACK IN THE NEW YEAR? JULIA: THE FED HAS SHORT OF THAT HAS SORT OF SHIFTED IT STRATEGY AND SIGNALED BOTH A HAWKISH STANCE AT THE DECEMBER MEETING IN THE SENSE THAT THE CONSENSUS OF THE COMMITTEE IS HIGHER THAN THE MARKET IS CURRENTLY PRICING BUT THEY ALSO SIGNALED A DOWNSHIFT IN THE PACE, ANOTHER DOWNSHIFT TO 25 BASIS POINTS PER MEETING.
AND THAT ALLOWS THEM TO BOTH PROCEED WITH CAUTION AND FEEL THEIR WAY TO WHAT IS THE RIGHT RESTRICTIVE -- DEGREE OF RESTRICTION TO PUT IN PLACE AND HOLD THE THREAT OF RATE HIKES OVER THE MARKET FOR LONGER. CHAIR POWELL HAS BEEN FRUSTRATED BY THESE RALLIES, IS UNDESIRABLE -- THESE UNDESIRABLE RALLIES THAT EASE FINANCIAL CONDITIONS BY HOLDING A LONGER STRING OF RATE HIKES THEY HOPE TO PREVENT THAT RELIEF RALLY THAT YOU ARE ALLUDING TO THAT THEY CAN HOLD MARKETS AND CHECK FOR A LITTLE BIT LONGER AND MAKE SURE THAT THE ECONOMY COOLS DOWN ENOUGH TOOK -- TO CLOSE UNDERLYING INFLATION PRESSURES. IF IT COMES DOWN TO THE PROJECTOR HE OF INFLATION I LOVE HOW OUR TEAM PUT IT, SAYING THAT THE STORY OF 2022 WAS HOW FAST INFLATION ROSE.
THE STORY OF 2023 WILL BE HOW FAST IT FALLS, WHAT IS YOUR EXPECTATION ON THAT? JULIA: I THINK IT WILL REALLY GATHER STEAM IN THE LATTER PART OF THE YEAR AND WE KNOW THAT. THERE ARE LEADING INDICATORS OF HOUSING AND RENTAL INFLATION THAT HAVE REALLY ROLLED OVER WHAT WE KNOW THERE IS A LAG FROM THE TIME THAT HAPPENS TO LIMIT OFFICIAL NATION METRICS, AND THAT SHOULD BE KICKING IN TOWARDS THE LATTER PART OF 2023. IN THE FIRST HALF OF THE YEAR THEY ARE DEALING WITH STICKINESS , THE SECOND ROUND OF SETS FROM HIGHER WAGES AND PRICES IN THE PIPELINE THAT RIPPLE THROUGH IN SERVICES.
THEY HAVE BROKEN INFLATION INTO THE GOODS INFLATION DISRUPTED BY THE PANDEMIC, RENTAL AND HOUSING INFLATION, THE SINGLE BIGGEST COMPONENT OF CORE INFLATION AND ALL OTHER SERVICES INFLATION AND THAT IS WHERE THEY ARE TAKING THE TEMPERATURE OF THE LABOR MARKET AND OF CONSUMER PRICES, THAT REALLY HAS STABILIZED AT A HIGH RATE. AND THEY WOULD LIKE TO SEE THAT COME DOWN AND THAT WILL TAKE TIME. MATT: ISN'T THE THIRD BUCKET THE HARDEST. SERVICES IS THE HARDEST PIECE OF INFLATION FOR
THE FED TO AFFECT BECAUSE WITH GOODS CERTAINLY WITH SOMETHING LIKE CAR SALES OR HOME SALES THEY CAN EASILY RAISE RATES AND LIMIT THE NUMBER OF BUYERS. IN TERMS OF SERVICES, DO THEY HAVE TO BECAUSE REAL ECONOMIC PAIN TO BRING PRICES DOWN AND KNOCK MOM AND DAD OUT OF WORK AND PUT PEOPLE ON THE UNEMPLOYMENT LINE TO GET SERVICE INFLATION DOWN? THAT IS ONE POSSIBLE OUT. WE DO NOT REALLY KNOW. THE PANDEMIC DISRUPTED SERVICE
INFLATION AS WELL AS GOODS INFLATION. THINK ABOUT HOTEL RATES AND AIRFARES. THEY HAVE DONE A LOT A BUSTING AND BOOMING THROUGH THE VARIOUS OPENING AND CLOSING WAVES. AND WE HAVE SEEN THAT, ONE OF THE KEY TESTS IS THAT WHEN WILL CONSUMERS BECOME MORE PRICE-SENSITIVE LIKE THEY WERE BEFORE THE PANDEMIC. BEFORE THE PANDEMIC IT WAS NOTORIOUS THAT CONSUMERS WERE BUDGET CONSCIOUS AND THEY WANTED DEALS AND THAT ONE AWAY WHEN THEY COULD ONLY BUY GOODS AND LOCKDOWNS DURING THE PANDEMIC. AND THEN REOPENING THERE WAS THIS REVENGE TRAVEL IBF.
AND NOW WE ARE SETTLING INTO A NORMAL CONSUMER AND WE SAW THAT THIS HOLIDAY SEASON. CONSUMERS WANTS DEALS AND THEY ARE AWARE OF THE LIMITATIONS OF THE BOOM WE HAVE BEEN IN. THERE ARE MORE AWARE THAT THERE ARE CLOUDS ON THE ECONOMIC HORIZON AND THEY ARE IT RESPONDING ACCORDINGLY -- THEY ARE RESPONDING ACCORDINGLY. THAT IS KEY TO INFLATION
WITHOUT A DEEP RECESSION, CONSUMERS START DEMANDING DEALS AND THAT COMPANIES ARE GOING TO HAVE TO MEET THEM IN THE MIDDLE. WE -- WHEN THEY HAVE NOT HAD TO. THINK ABOUT THE PASS-THROUGH OF CAR COSTS, UNIMAGINABLE A COUPLE OF YEARS AGO. THE CONSUMERS TO SIMPLY ACCEPT A 50% INCREASE IN USED CAR PRICES. BUT CONSUMERS NOW HAVE A BROADER BASKET OF GOODS AND
SERVICES. WE SAW THAT WITH AIRFARES AND THAT SOMEWHERE AROUND THE FALL CONSUMERS STARTED CANCELING TRIPS IF THEY COULD NOT FIND THE RIGHT AIRFARES. THEY WERE DEAL HUNTING AND AIRLINES RESPONDED ACCORDINGLY SO WE ARE GETTING BACK INTO A MORE NORMAL ZONE OF PRICE SENSITIVITY AND THAT IS REALLY KEY BECAUSE THAT WOULD ALLOW THE FED TO CREW -- TO COOL SERVICES INFLATION WITHOUT A DEEP AND -- WITHOUT A DEEP RECESSION? MATT: A LOT OF PEOPLE IN THE HOUSING MARKET CURRENTLY ARE ON THE SIDELINES BECAUSE THEY ARE LOOKING AT SIX OR 7%, 8% MORTGAGES. I WANT TO BUY THIS YEAR OR NEXT
YEAR I WANT TO BUY THE LAST DODGE CHALLENGER HELLCAT, 2023, THAT IS THE 15TH YEAR OF THEM BUILDING THAT GIGANTIC MUSCLECAR AND THEY WILL NEVER BUILD ONE AGAIN BUT CHRYSLER IS OFFERING ME 7.29% AND I WILL NOT FINANCE AT THAT RATE. IF I WAIT ARE THOSE BORROWING COSTS GOING TO COME BACK DOWN? JULIA: BY THE END OF 2023, BUT WE HAVE TO GO THROUGH THE SOFT PATCH OR RECESSION FIRST BEFORE WE GET TO THAT RELIEF. THE RATES ARE HIGH BECAUSE THE PAIN IN THE REACTION OF YOU KNOW WHAT I WILL NOT BUY THE COLLAR BE CUT -- A CAR OR THE HOUSE BECAUSE RATES ARE TOO HIGH BECAUSE THAT IS THE DEMAND COOLING THAT THE THAT IS LOOKING FOR AND WE ARE SEEING IT AND WE HAVE SEEN DESPITE BETTER PRODUCTION OF NEW CARS AND BETTER AVAILABILITY, AND THE CAR SALES HAVE BEEN LANGUISHING BECAUSE RATES OF FINANCING HAVE SHOT UP SO MUCH AND CONSUMERS ARE LOOKING AT A BIG JUMP IN PAYMENT FOR A NEW CAR OR ANY CAR, SO THEY ARE RESPONDING ACCORDINGLY AND WE ARE SEEING USED CAR PRICES FALL PRETTY CONSISTENTLY AFTER SOARING IN THE LAST COUPLE OF YEARS. AND WE FIRST SAW SOME SOFTNESS IN NEW-CAR PRICING IN THE LAST INFLATION REPORT. WE WOULD NOT EXPECT THAT TO FOLLOW THROUGH IN THE FIRST HALF OF THE YEAR SO THE ACTUAL DISCOUNTS ON MSRP, IMAGINE THAT. KAILEY: JULIA CORONADO, THANK YOU SO MUCH.
I SIT NEXT TO YOU EVERY DAY AS WE ANCHOR TOGETHER AND I KNOW THAT WE SHOP FOR THIS CAR COMMERCIAL BREAKS AND YOU ARE CONSIDERING TWO COLORS, HAVE WE DECIDED ON THE GREEN OR BLUE? MATT: FROSTBITE BLUE. MY OTHER CHOICE WAS THE F8 GREEN. KAILEY: I LOVE THE NAMES OF CARS MINE IS A SHADOW METALLIC. MATT: I FEEL LIKE DODGE HAS THE BEST NAMES WITH MANGO RED -- TOR READ AND MANGO ORANGE AND BLACK EYE WHICH IS A PURPLEISH COLOR. FROSTBITE I THINK IT IS GOING
TO BE IT FOR MY CHALLENGER HELLCAT. COMING UP WE WILL TALK TO ISAAC, THE POLICY RESEARCH DIRECTOR AND IT WILL BE INTERESTING, HE WILL TALK TO US ABOUT LEGISLATION WE CAN EXPECT TO PASS OR NOT TO. EVERYTHING FROM CANNABIS TO FINANCIAL REGULATION AND WE WILL TALK ABOUT CRYPTO AS WELL. THIS IS BLOOMBERG. ♪ RIKITA: KEEPING YOU UP-TO-DATE WITH NEWS AROUND THE WORLD. PRESIDENT BIDEN DECLARED A STATE OF EMERGENCY IN NEW YORK WHERE A MASSIVE STORM DUMPED FOUR FEET ON BUFFALO. 28 PEOPLE HAVE DIED.
SOUTHWEST AIRLINES IS STRUGGLING WITH THE EFFECTS OF THE STORM CANCELING ALMOST 3000 FLIGHTS MONDAY. THEY EXPECT THE CHAOS TO LAST A FEW MORE DAYS. POWER GRIDS IN WESTERN EUROPE WILL GET A BREAK.
WARMER TEMPERATURES WILL REDUCE THE STRAIN ON ENERGY SYSTEMS THAT WERE STRESSED BY THE FIRST COLD SNAP. FORECASTS CALL FOR HIGH TEMPERATURES OF 16 DEGREES CELSIUS IN FRANKFURT, 10 DEGREES HIGHER THAN THE 30 YEAR AVERAGE ON NEW YEAR'S EVE. IN UKRAINE, THE FOREIGN MINISTER IS CALLING FOR AP SUMMIT AT THE UNITED NATIONS WITHIN TWO MONTHS. HE TELLS THE ASSOCIATED PRESS THAT HE DOES NOT EXPECT RUSSIA TO TAKE PART.
MOSCOW MUST FACE A WAR CRIMES TRIBUNAL BEFORE UKRAINE ENGAGES IN DIRECT TALKS. A U.N. SPOKESPERSON SAYS THAT ANTONIO GUTERRES CAN MEDIATE BUT ONLY IF ALL PARENT THAT ALL PARTIES WANT HIM TO. TAIWAN IS SENDING A SIGNAL TO THE U.S. AND CHINA THAT IT IS SERIOUS
ABOUT DEFENDING ITSELF. IT IS EXTENDING COMPULSORY MILITARY SERVICE FOR MEN FROM FOUR MONTHS TO ONE YEAR. TAIWAN HAS BEEN WORKING TO STRENGTHEN ITS DEFENSE AS AGAINST A POTENTIAL CHINESE INVASION.
PELOTON HAS BEGUN SERVING REFURBISHED BIKES 500 BELOW NEW MODEL PRICES COSTING 1100 TO $2000. PELOTON DISAPPOINTED INVESTORS WITH A LOWER THAN EXPECTED HOLIDAY FORECAST. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. THIS IS BLOOMBERG. >> HISTORICALLY, USUALLY THE MARKET HAS BEEN RUNNING, BUT IT IS THE FLAT -- IN THE FED IN 2022.
IF INFLATION IS NOT ON ITS WAY TO 2% THE MARKET WILL STRUGGLE. INFLATION IS THE STORY AND THE GAME AND IT WILL CONTINUE TO BE AND WHETHER OR NOT IT GOES BACK TO 2% IT IS FALLING NATURALLY IN 2023 AND 2024. MATT: THAT WAS THE PRESIDENT OF IAGO RESEARCH -- BIANCO RESEARCH AND TALKING ABOUT MARKET REACTION.
ONE THING THAT I DID NOT GET TO ASK JULIA ABOUT IS THE POSSIBILITY OF THE FED INFLATION TARGETS, LETTING IT LOAD UP. THIS IS A TYPE OF THING THAT MAKES PEOPLE ANGRY. PEOPLE WILL COMMENT ON TWITTER AND THEY HAVE STRONG FEELINGS ABOUT IT BUT IT HAS BEEN PUT FORWARD BY A LOT OF CREDIBLE ECONOMISTS THAT WE MIGHT NEED TO HAVE A 3% TARGET OR SOMETHING A LITTLE BIT SOFTER THAN A SINGLE INTEGRATOR. KAILEY: IT IS A VALID QUESTION BECAUSE YOU CAN HAVE PRICE PRESSURES EASING AND COOLING BUT COOLING TO TARGET IS SOMETHING ENTIRELY DIFFERENT AND THAT 2% IT MIGHT JUST BE FOR A WORLD THAT WE NO LONGER 11 WHEN WE TALK ABOUT A MORE PERMANENTLY DECOUPLED WORLD WHEN IT COMES TO THE U.S. AND CHINA AND ABOUT LINGERING
SUPPLY CONSTRAINTS. 2% IS MUCH -- IS SOMETHING WE MIGHT NOT BE ABLE TO GET DOWN TO SO WHITE -- WHAT MIGHT BE ENOUGH FOR THE FEDERAL RESERVE OR CAN THEY TAKE THE OFF OF THE GAS MAYBE NOT HIT THE BREAK BUT SAY THAT WE HAVE DONE ENOUGH AND WE ARE SUFFICIENTLY RESTRICTIVE THAT WE DO NOT NEED TO GO FURTHER. BUT MAYBE 2% IS NOT WHERE WE GET BACK DOWN TO. MATT: A LOT OF THAT WILL BE GAUGED
FROM THE MARKET. EQUITY INDEX ACROSS THE BOARD IN EUROPE AND LONDON IS CLOSED FOR A HOLIDAY AND THEY ARE SO GOOD ABOUT GIVING EXTRA HOLIDAYS. THE REST OF THE CONTINENT IS OPEN AND UP AND WE ARE LOOKING FOR GAINS IN U.S. FUTURES UP .2% SO IT LOOKS TO BE A RISK ON START TO THE DAY AFTER CHRISTMAS AND BOXING DAY. LET US GET OVER TO THE DID -- TO THE BIG SMOKE.
ED LUDLOW IS IN LONDON ON LOAN FROM SAN FRANCISCO FOR A FEW GAMES AND A CHELSEA GAME. WHAT ARE YOU LOOKING AT OVER THERE? ED: THE IDEA THAT WE HAVE A FEW SESSIONS LEFT IN THE MONTH OF DECEMBER BUT ME BEING FOCUSED ON TECHNOLOGY IT HAS BEEN A ROUGH MONTH. WE ARE ON TRACK FOR THE WORST DECEMBER IN 20 YEARS. I THINK THE MARKET IS TRYING TO LOOK BACK AT HISTORY AND PARTICULARLY THE NASDAQ 100 FOR A SENSE AT WHERE WE WILL GO NEXT. WE ARE TALKING ABOUT THE FED
AND INFLATION. THE CHART SHOWS THE NASDAQ 100 ON A 182 SESSION STREAK WHERE IT HAS FAILED TO BREACH ITS 200 DAY MOVING AVERAGE WHICH TELLS US NOTHING ABOUT THE OUTLOOK FOR CORPORATE EARNINGS, BUT IT DOES GIVE US A BROAD GAUGE OF SENTIMENT AND I THINK THERE IS NOT A LOT OF OPTIMISM THAT WE WILL BREAK OUT ON THE NASDAQ 100 AND AN UPWARD TRAJECTORY ANYTIME SOON AND THEN YOU, I, AND KAILEY CAN TALK ABOUT INFLATION OR IF IT IS A STRONG JOBS MARKET DATA ON THIS DOUR PATH. KAILEY: WHEN WE ARE TALKING ABOUT THE NASDAQ 100 WE WERE TALKING ABOUT THE MEGA CAPS, AMAZON, NVIDIA, TESLA, MET UP.
BUT THOSE ALTOGETHER YOU HAVE ONE THIRD OF THE INDEX SO PUTTING TOGETHER THOSE STORIES FOR THE INDIVIDUAL NAMES TO HAVE BEEN GIVEN BRUTAL PUNISHMENT THIS YEAR. ED: IT IS INTERESTING BECAUSE HISTORICALLY IN TIMES OF RECESSION WE ARE TRYING TO SEE HOW THESE COMPANIES THEY ARE IN A RECESSION. YOU WILL ARGUE THAT SOME OF THE NAMES THAT YOU MENTION HAVE THE STRONGEST BALANCE SHEETS WITH ENTRENCHED MARKET POSITIONS. YOU LOOK AT THE STOCKS, THE WORST PERFORMING STOCKS THAT YOU SEE, THERE ARE STILL QUESTIONS AROUND VALUATIONS AND THE BASICS OF THE RATE NARRATIVE WHICH IS THAT HIGHER RATES DISCOUNT THE PRESENT VENTURE OF FUTURE PROFITS. WHEN YIELDS ARE PULLING BACK
THEY ARE STILL ELEVATED MAKING THE NAMES ON YOUR SCREEN MUCH LAST -- MUCH LESS ATTRACTIVE PROPOSITIONS AND I AM BROADLY THINKING ABOUT THE NASDAQ 100 TRADING AT 20 TIMES 12 MONTHS OF FORWARD EARNINGS WHICH IS OFF OF THE HIGH OF 2021 AND HALFWAY THROUGH WHERE WE STARTED, NOT AGAINST HISTORIC TRENDS ARE AVERAGES IT IS PRETTY HIGH SO THE MARKET ITS THINKING ACTUALLY VALUATIONS HAVE A WAY TO COME BACK DOWN. MATT: AGAINST OLD ECONOMY STOCKS. 20 TIMES EARNINGS IF YOU ARE TALKING ABOUT FAANG STOCKS IT HAS TO BE LOW AND OBVIOUSLY WITH NOTHING WHICH TO COMPARE THEM BECAUSE THERE WAS NOT A PREVIOUS FACEBOOK OR TESLA, REALLY, I AM SORRY META. I GUESS THE KIDS ARE GOING WITH META AND ALPHABET BUT I AM STILL A FACEBOOK AND GOOGLE GUY. IT IS STILL INTERESTING THAT YOU ARE LOOKING AT 20 TIMES BUT FOR THE WHOLE NASDAQ 100 BUT THAT IS THE MAJORITY OF THE WEIGHTING. MAYBE 20 IS NOT SO BAD? ED: YOU RAISE AN INTERESTING POINT WHICH MAKES ME THINK ABOUT THE PRIVATE MARKETS, THE PRIVATE MARKETS STILL USES THE NASDAQ 100 AND APPEARS TO BASE THEIR EVALUATION ON THE BIGGEST PRIVATE SECTOR NAMES AND LOOKING AT THE PROJECTIONS FOR 2023 AND THE IMPACTS OF HIGHER RATES AND COMPANIES REACTING IN REAL TERMS TO INFLATION, THE RISK FOR ATTACK ON INFLATION IS THAT OPERATING EXPENSES OUTPACE REVENUE GROWTH AND IN THIS ENVIRONMENT IT IS NOT PALATABLE, BUT THE PUBLIC AND PRIVATE MARKET SECTORS LOOK AT THAT VALUATION LEVEL AND SAY YES, WE HAVE A LITTLE WAY TO RUN. KAILEY:
SPEAKING OF ONE VALUATION AND IT WAS ONE OF THE STOCKS ON THE BOARD, TESLA DOWN 65%. THIS WAS A TRILLION DOLLAR COMPANY AT THE START OF 2022 AND IT IS LESS THAN $400 BILLION. THERE WAS A HEADLINE THAT CROSSED FROM TESLA RUNNING A REDUCED TESLA -- AT A REDUCED SCHEDULE IN JANUARY AND THERE BEEN A LOT OF QUESTIONS AROUND DEMAND AND THAT IS A FUNDAMENTAL FACTOR OF THE COMPANY PUTTING ASIDE ELON MUSK AND ALL OF THE RISK. HOW DOES THE STOCK TURN THINGS AROUND? ED: AGAIN, TESLA WE ALWAYS FORGET IS A STOCK THAT TRADES AT 30 TIMES FORWARD EARNINGS OR SLIGHTLY BELOW THAT. IT IS STILL CAUGHT UP IN THE NARRATIVE AROUND HIGHER RATES.
THE MOST RECENT ANXIETY APPEARS TO BE RELATED TO THE QUESTIONS OF DEMAND. I DO NOT THINK ANYONE HAS DRAWN A CONCLUSION THAT THERE IS A DEMAND WARRIOR -- WORRY FOR TESLA AND WE HAVE TO WAIT FOR THE NEXT EARNINGS CALL. THERE ARE SIGNS. IN CHINA THEY CUT PRICES AND THERE HAS BEEN VERY REPORTING ON WHY THEY SHUT DOWN PRODUCTION IN SHANGHAI IN THE PART OF IT THEY DO ANNUAL ME AND THEY PAUSE PRODUCTION IN ORDER TO MAKE UPGRADES THAT IMPROVE THE LONG-TERM. AND THEN YOU HAVE THE $7,500 INCENTIVE AND DOUBLING IN THE INCEPTION OF -- OF THE INCENTIVE OF THE MODEL THREE, BUT THERE HAS NOT BEEN A DEFINITIVE STATEMENT FROM TESLA AND ALL THE WHILE, ELON MUSK IS TWEETING ABOUT THE FED QUITE A LOT IN THE FED'S PATH TO RAISING RATES. SO THAT IS HIS SUGGESTION. MATT: THE MARGIN OF THAT. I THOUGHT THIS WAS INTERESTING
WHEN I SIGH HEADLINE ELON MUSK WARNING ABOUT MARGIN DEBT AND SAYING THIS GUY MUST OF HAD A TON OF IT HIMSELF IF HE DOES NOT HAVE ANY LEFT NOW. HE HAS LIQUIDATED $40 MILLION IN TESLA SHARES. ED: YES HE HAS. THE MOST RECENT REPORT THREE WEEKS AGO WAS THAT ELON MUSK WAS CONSIDERING THROUGH HIS BANKERS SWAPPING OUT SOME OF THE UNSECURED NOTES OF THE 12.5 BILLION DOLLAR ORIGINAL PACKAGE TO BUY TWITTER FOR MARGIN LOAN.
YOU WOULD REMEMBER IN THE EARLY DAYS IN HIS EFFORTS TO BUY TWITTER THERE WAS A MARGIN LOAN COMPONENT THAT WAS SCRAPPED. THE ISSUE IS WHEN WE REPORTED THAT THE MARGIN LOAN COULD COME BACK WAS WHEN THERE WAS A MOST DOWNWARD PRESSURE ON TESLA STOCK AND THE MARGIN LOAN WOULD BE COLLATERALIZED AGAINST TESLA. THAT CAUSED ANXIETY AS TO WHY HE WAS DOING THAT. HE TWEETED AND APPEARED ON A PODCAST OVER THE WEEKEND SAYING THAT THAT IS AN ERROR OF THE MARKET ONE SHOULD AVOID SING ONE'S STOCK AS COLLATERAL FOR A DEBT EVEN THOUGH THAT IS WHAT HAS BEEN REPORTED WHAT HE PLANS TO DO. MATT: QUICK CAR QUESTION. YOU MENTIONED THAT TESLA IS OFFERING $7,500 OFF FOR THE MODEL X OR Y IF YOU SIGN UP. NEXT YEAR DO WE KNOW -- THAT IS THE SAME SIZE OF THE TAX CREDIT. DO WE KNOW WHICH CARS GET THAT
NEXT YEAR? ED: THE BIGGEST CHANGE IS TO LOOK AT THE TREASURY GUIDELINES THAT WERE POSTPONED AND THAT IS DELAYING THE BATTERY COMPOSITION REQUIREMENTS OTHERWISE THE ORIGIN OF THE METALS, THAT PROVISION WAS DELAYED SO A BROADER BASKET OF VEHICLES SHOULD BE ELIGIBLE. MATT: EXCELLENT NEWS. ALWAYS GOOD TO SEE -- GOOD TO HEAR. THANK YOU FOR JOINING US FROM LONDON. I KNOW YOU ARE SUPPORTING CHELSEA AND HE IS A LIFELONG CHELSEA FAN. KAILEY: GO SOCCER. MATT: THANK YOU. THAT IS THE EXTENT OF THE
KNOWLEDGE THAT WE HAVE. DOES HE PLAY FOR CHELSEA STILL? I THINK THAT IS LONG IN THE PAST. 7:45 AND WE WILL TALK MORE WITH DAN IVES, SENIOR EQUITY RESEARCH ANALYST. THIS
IS BLOOMBERG. >> 2023 WILL LIKELY BE THE YEAR OF RECESSION. >> WE MIGHT START A RECESSION BUT IF WE HAVE RSS AND IT WILL BE RELATIVELY LIGHT. >> IT'S AN OPEN QUESTION, HOW DEEP AND LONG-LASTING WILL THE RECESSION BE. >> IF INFLATION IS NOT ON ITS WAY TO 2%, THE MARKET WILL STRUGGLE. >> RIGHT NOW THE MARKET IS
STRUGGLING WITH THE SLOWDOWN WE ANTICIPATE. >> THIS IS "BLOOMBERG SURVEILLANCE." MATT: LIVE FROM NEW YORK CITY, THIS IS "BLOOMBERG SURVEILLANCE." I'M MATT MILLER, IN WITH KAILEY LEINZ. GOOD MORNING.
JONATHAN FERRO IS OUT, LISA ABRAMOWICZ AND TOM KEENE ARE OFF , KAYLEE AND I ARE HERE FOR THE BULK OF THE WEEK. LOOKING AT THE MARKET KICKING OFF THE SHORTEN HOLIDAY WEEK, ON THE UPSIDE WE HAVE GAINS IN THE EUROPEAN INDEXES THAT ARE OPEN. LONDON IS STILL CLOSED. IT SEEMS MORE CIVILIZED TO ME, TO STAY CLOSED FOR A COUPLE OF DAYS AFTER CHRISTMAS. KAILEY: WOULDN'T THAT BE NICE? NOT THAT I'M NOT EXCITED TO BE HERE WITH YOU, BUT SLEEPING IN WOULD HAVE BEEN A NICE GIFT. MATT:
THE 10-YEAR IS AT 3.77 52. WE HAD COME DOWN SUBSTANTIALLY FROM THE FOUR POINT 25 HIGH THAT WE SAW BACK IN NOVEMBER, DOWN TO 350. NOW WE ARE BACK UP AT 378. INTERESTING THERE. NYMEX CRUDE IS BACK UP. WE HAVE SEEN A LOT OF VOLATILITY ACROSS COMMODITIES BUT RIGHT NOW I GUESS THE IDEA IS THAT CHINA IS REOPENING AND AS A RESULT INVESTORS ARE BUYING COMMODITIES AGAIN.
KAILEY: NOT JUST A MYSTICALLY BUT REOPENING BORDERS TO THE REST OF THE WORLD AFTER YEARS OF BEING SHUT OFF THEY WILL BE BACKING AWAY FROM THE QUARANTINED REQUIREMENTS OF INBOUND TRAVELERS. THAT WAS THE LAST COVID ZERO POLICY REMAINING. NOW WE ARE DEALING WITH THE PROSPECT OF A FULLY REOPENED CHINA AND CASES SEEM TO BE SURGING ACROSS THE COUNTRY WITH THE DEATH RATE RISING AS WELL. IT RAISES THE QUESTION OF ONCE WE GET PAST OF THE SURGE AND PEOPLE ARE BACK OUT BEING ACTIVE, DEMANDING COMMODITIES AND OTHER GOODS WITHIN THE CHINESE ECONOMY, WHAT DOES IT DO TO THE GLOBAL INFLATION STORY? MATT: LAST WEEK WE HAD THE HEADLINE OF 38 MILLION CASES IN ONE DAY, MIND BOGGLING WHEN YOU CONSIDER THAT THEY ARE NOT TESTING.
KAILEY: TESTING DIFFERENTLY. MATT: NOT NEARLY AS MUCH IS HOW THEY PUT IT. THE QUESTION OF THE DAY I THINK AND TO THE QUESTION OF THE WEEK IS GOING TO BE DO YOU START TO BUY THE DIP NOW IF YOU HAVE BEEN SELLING THE RIP AND RAISING CASH? THE DIRECTOR OF EQUITY RESEARCH AT AMERIPRISE JOINS US. JUSTIN, IT'S THE TURNING POINT WE ARE WONDERING ABOUT TODAY THAT A LOT OF OUR GUESTS ARE TALKING ABOUT. KNOWN AS A CRYSTAL BALL, TIMING OF THE MARKET IS DIFFICULT.
AT SOME POINT YOU HAVE TO MAKE A DECISION ABOUT RAISING ENOUGH FUNDS. PRICES ARE LOW ENOUGH, VALUATIONS ARE LOW ENOUGH THAT IT'S TIME TO GET BACK IN. WHEN DO YOU SEE THAT POINT? JUSTIN: THANKS FOR HAVING ME. I AGREE WITH YOU, A COUPLE OF DAYS OFF WOULD BE NICE FOR ONCE. IT'S SO, I THINK IF YOU LOOK INTO 2023, OUR TAKE AT AMERIPRISE IS PLAY DEFENSE GOING INTO THE YEAR. YOU HAVE GOT YOUR 2023 EARNINGS YET TO COME DOWN TO A REASONABLE LEVEL. THEY STARTED AT 250 BACK IN
JUNE. WE THINK THAT THEY WILL COME LOWER. THAT ANALYSTS ARE STILL TOO OPTIMISTIC. THEY ARE PLAYING DEFENSE GOING INTO 2023. KAILEY: HOW MUCH LOWER IS LOWER, JUST IN? AT WHAT POINT DO YOU SAY IT'S TIME TO START DEPLOYING CAPITAL? JUSTIN: WE HAVE A TARGET IN THAT 210, 220 RANGE FOR EARNINGS AND IF YOU LOOK AT WHERE IT COMES FROM, SECTORS THAT ARE HIT HARDEST, THAT'S DISCRETIONARY. ON THE BACKSIDE THEY CONTINUE TO WORK LOWER THROUGHOUT THE YEAR.
WE HAD THIS THESIS ON MOVING INTO MORE OF A BUY WHAT YOU NEED VERSUS WHAT YOU WANT. IF YOU CAN GET INTO THAT 210 TO 220 RANGE, IT WILL HAPPEN, IT MIGHT BE PAINFUL, THAT'S WHY WE THINK WE PLAY DEFENSE FROM A SECTOR PERSPECTIVE. KAILEY: THE EQUITY MARKET AS A WHOLE, YOU MENTIONED DISCRETIONARY. WE ARE TALKING ABOUT THE HEAVYWEIGHTS OF THE EQUITY MARKET. THE ONES THAT LED THE RALLY FOR SO LONG. IF IT'S NOT COMING FOR THEM, WHAT LEADS THE EQUITY MARKET? WHAT CAN SUPPORT IT? JUSTIN: GOOD QUESTION. OUR OVERWEIGHT SECTORS RIGHT
NOW ARE A BARBELL. WE HAVE THAT TRADITIONAL DEFENSIVE SECTOR OF THE MARKET, STAPLES, HEALTH CARE. THEN WE ARE OVERWEIGHT ON FINANCIALS AND TECH. THREE OUT OF FOUR OF THOSE HAVE WORKED VERY WELL. IT COMES FROM STAPLES AND HEALTH CARE.
I DON'T KNOW IF THERE IS THAT TALK AROUND STAPLES BEING TOO EXPENSIVE BUT THOSE ARE THE ONES PRODUCING EARNINGS RIGHT NOW AND IT'S HARD TO COME BY. THAT'S WHERE WE THINK WE STAY, IN THAT DEFENSIVE PART OF THE MARKET LED BY STAPLES AND HEALTH CARE. MATT: IN TERMS OF DIVIDENDS, I READ THROUGH YOUR STUFF, I KNOW YOU HAVE THIS 3D STRATEGY FOR THE END OF THIS BEAR MARKET, RIGHT? YOU WANT TO BUY DEFENSIVE STOCKS. THAT'S WHY YOU ARE TALKING ABOUT CONSUMERS MOVING DOWN TO INTO WHAT THEY NEED WITH DIVIDENDS WORKING WELL. YOU WANT TO DIVERSIFY,
OBVIOUSLY. YOU WANT TO MOVE AT SOME POINT FROM AN ABSOLUTE DIVIDEND LEVEL TO COUNTRY -- COMPANIES THAT GROW DIVIDENDS. HOW DO YOU STREAM FOR THEM -- SCREEN FOR THEM? WHAT SECTORS ARE YOU LOOKING AT? JUSTIN: YOU ARE ABSOLUTELY RIGHT. WHAT MAKES IT HARD IS LET'S SAY YOU'VE GOT A 50% ON A 10 YEAR AND A TWO-YEAR AT 430. YOU CAN'T GO WITH A RAZOR DIVIDEND. COMPANIES HAVE THE ABILITY TO
GROW THE DIVIDEND IN DOUBLE DIGITS ARE PAST THAT YOU CAN BUY WITH GROWING DIVIDENDS WITH A GROWING RANGE YEAR-OVER-YEAR. MATT: WHAT DO YOU THINK ABOUT FIXED INCOME? WHAT ARE YOU TELLING YOUR CLIENTS? THEY HAVE HAD I GUESS THE WORST YEAR ON RECORD FOR RATES. RATES ARE NOW BEING SEEN AT LEVELS THAT PROVIDE A DECENT RETURN. IF THE YIELD IS BECOMING A
BIGGER COMPONENT OF TOTAL RETURN, DO YOU ADVISE CLIENTS NOW TO GET IN? JUSTIN: OUR AIM IS FIXED INCOME IS BACK. YOU DON'T HAVE TO GO OUT 10 YEARS, YOU CAN GO OUT THREE OR FOUR YEARS FOR A PHENOMENAL YIELD YOU HAVEN'T SEEN IN DECADES. IT IS SET UP FOR A GOOD RUN IN 2023. YOU CAN KEEP YOUR DURATION
RELATIVELY SHORT AND YOU CAN GET PICKUPS IN A GOOD YIELD. KAILEY: IN OTHER WORDS, RIP TO TINA. DO WE EVER SEE A REVIVAL OF THAT? JUSTIN: MAYBE, SOMETIME.
YOU KNOW, YOU HAVE, IT WAS YEARS OR DECADES WHEN RATES WERE COMING DOWN AND DOWN. YOU THINK ABOUT, YOU THINK ABOUT THE SET UP FOR CONSUMERS. IF YOU GRADUATED COLLEGE AROUND THE FINANCIAL CRISIS AND YOU ARE HERE TODAY, YOU ARE 40 IN CHANGE -- NOT ME, BUT SOME PEOPLE ARE. [LAUGHTER] KAILEY: LET ME EITHER. [LAUGHTER]
-- NOT ME EITHER. [LAUGHTER] JUSTIN: YOU HAVE THIS EXPECTATION OF ZERO RATES BUT THAT'S NOT COMING BACK ANYTIME SOON. THAT INFLATION WILL BE STICKIER THAN PEOPLE THINK. WHAT'S ONE OF THE RISKS IN 2023 IS THE STICKER INFLATION THERE. MATT: I WILL JUST CLARIFY THE ACRONYMS, RIGHT, MAYBE NOT EVERYONE KNOWS. TINA STANDS FOR THERE IS NO ALTERNATIVE.
THE IDEA THAT YOU HAD TO BUY STOCKS AND THERE WAS NOTHING ELSE. THERE WAS A NEW ACRONYM, TAR A. THERE ARE REASONABLE ALTERNATIVES. IN ANY CASE IT FEELS LIKE WE ARE MOVING INTO A COMPLETELY DIFFERENT ERA, JUSTIN. BECAUSE AS YOU POINT OUT, PEOPLE BASICALLY A LITTLE BIT YOUNGER THAN ME ALL THE WAY DOWN TO THE YOUTH OF KAYLEE AND ED LUDLOW, THEY HAVE NEVER SEEN ANYTHING BUT IF NOT ZERO, AT LEAST NEAR ZERO INTEREST RATES. DOES THIS MEAN WE ARE NOT GOING TO SEE 10% A YEAR GAINS IN STOCKS FROM HERE ON OUT? ARE WE NEVER GOING TO GET BACK TO THAT? JUSTIN: I THINK EXPECTATIONS NEED TO COME DOWN, RIGHT? IT'S BEEN AN INCREDIBLE RUN BUT IT DOESN'T MEAN THAT YOU HAVE A BIG MASSIVE SELLOFF. YOU JUST HAVE TO TEMPER EXPECTATIONS. MAYBE IT WON'T BE IN THAT 10%
ANNUAL RATE OF RETURN BUT YOU STILL HAVE DECENT RATES OF RETURN IF YOU COMBINE GOOD QUALITY DIVIDEND NAMES WITH INCOME GENERATING 4%, 5% OVER TWO OR THREE YEARS. THAT MAKES FOR A PRETTY GOOD SET UP. MATT: ALL RIGHT, JUSTIN, THANK YOU VERY MUCH. THERE FROM AMERIPRISE TALKING HIS STRATEGIES FOR WHAT THEY ARE GIVING THEIR CLIENTS AT THE END OF THE YEAR, ESPECIALLY IF WE HAVE THIS KIND OF INFLECTION POINT. OBVIOUSLY THE REAL INFLECTION POINT THAT PEOPLE ARE WAITING FOR IS THAT MOVE FROM BARE MARKETABLE MARKET. WE HAVE HAD A FEW HEAD FAKES. WE ARE NOT IN ONE RIGHT NOW, WE ARE STILL UNDER 4000.
THE YEAR-END TARGET WAS STRATEGISTS EXPECTING UNDER 1000? KAILEY: AS WE LOOKED AHEAD, THE AVERAGE WAS 4950. MATT: FOR THE S&P 500. KAILEY: ON YOUR SCREEN RIGHT NOW, 3891. MATT: IT'S A 1000 POINT GAP BETWEEN EXPECTATIONS AND REALITY. GRANTED THERE ARE SO MANY THINGS THEY COULDN'T HAVE SEEN COMING. THE WAR IN UKRAINE. SO MANY FORCES WORKING AGAINST OF THIS EQUITY MARKET IN A WAY THAT I DON'T THINK ANYONE COULD HAVE ANTICIPATED BUT IT RAISES THE QUESTION THAT IF CONSENSUS WERE SO WRONG THIS TIME AROUND, COULD IT POSSIBLY BE RIGHT IN 2023? THE CONSENSUS IS THAT IT WILL GET BETTER ON THE BACK HALF OF THE YEAR AND A LOT OF THAT IS PREDICATED ON A FEDERAL RESERVE THAT IS GOING TO PAUSE AND PIVOT AND THERE IS THIS QUESTION OF IF WE HAVE PERSISTENT INFLATIONARY PRESSURES, COULD THE MARKET BE WRONG ON IT? MATT: IT'S ALSO INTERESTING THAT OUR STRATEGISTS ARE NOT EXPECTING THINGS TO GET BETTER BY NEXT YEAR. FROM BLOOMBERG NEWS WE HAD A COMPILED EXPECTATION COMING FOR US RIGHT NOW AND OUT OF 22 STRATEGISTS SURVEYED, THE AVERAGE FOR THE CLOSE IS THAT 2023.
12 MONTHS AND WHAT, FOUR DAYS FROM NOW, THAT'S 4078. RIGHT NOW WE ARE AT 3891. NOT MUCH ABOVE THAT. EARNINGS ARE AT 210. DOESN'T LOOK LIKE WE WILL GET A LOT OF MOVEMENT NEXT YEAR IF YOU GO BY THE STRATEGIES THAT HAVE BEEN PUT TOGETHER ON YOUR TERMINAL. FUTURES ARE UP HALF OF 1%. COMING UP AT 8 A.M., MATT
BAILEY JOINS US. -- MALEY JOINS US. THIS IS BLOOMBERG. RITIKA: KEEPING YOU UP TO DATE WITH NEWS FROM AROUND THE WORLD, I'M RITIKA GUPTA. CHINA REMOVING ITS BORDERS TO THE WORLD BY REMOVING THE FINAL COVID ZERO RESTRICTIONS.
PEOPLE WILL NEED ONLY A NEGATIVE COVID TEST WITHIN 48 HOURS TO TRAVEL THERE AND THEY WILL REDUCE THE FREQUENCY OF REPORTING CASES, ULTIMATELY CHANGING IN WESTERN NEW YORK AT LEAST 28 PEOPLE ARE DEAD AND ONE OF THE WORST WEATHER DISASTERS TO EVER HIT THE REGION. MORE THAN FOUR FEET OF SNOW FELL ON THE CITY OF BUFFALO. EMERGENCY CREWS COULD NOT RESPOND IN TIME TO MEDICAL CRISES IN THE SNOW DRIFTS. MEANWHILE, SOUTHWEST AIRLINES
EXPECTS THAT THE CHAOS CAUSED BY THE STORM TO LAST FOR ANOTHER FEW DAYS. THE WALL STREET JOURNAL WAS TOLD THAT THE CARRIER EXPECTS TO OPERATE AT ONE THIRD OF ITS TYPICAL SCHEDULE SO THAT IT CAN GET CREWS IN THE RIGHT POSITION. THEY CANCELED ALMOST 3000 FLIGHTS ON MONDAY.
AND SOUTH KOREA THE MILITARY SAYS THEY SENT DRONES ACROSS THE BORDER INTO NORTH KOREA FOR THE FIRST TIME, AN UNPRECEDENTED MOVE FOLLOWING THE NORTH KOREAN DECISION TO SEND UNMANNED VEHICLES INTO NORTH KOREA AND AIRSPACE. KIM JONG-UN JUST SET A MAJOR POLITICAL MEETING FOR POLICY. DESPITE WELL-PUBLICIZED LAYOFFS IN THE TECH INDUSTRY, MOST AFFECTED WORKERS ARE FINDING NEW JOBS QUICKLY ACCORDING TO A SURVEY FROM ZIP RECRUITER. THE SURVEY SAYS ABOUT 79% OF THOSE HIRED FOUND NEW JOBS WITHIN THREE MONTHS. GLOBAL NEWS 24 HOURS PER DAY AND ON QUICKTAKE -- GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES.
>> I STILL THINK IT IS AN OPEN QUESTION OF WHETHER WE HAVE A RECESSION AND WHEN WILL IT BE, HOW DEEP AND LONG-LASTING MIGHT IT BE. THERE WILL BE SOME DISCONNECT HERE BETWEEN THE EQUITY MARKETS, WHERE THEY ARE AND WHERE THE BOND MARKETS ARE. IT WILL BE HARD FOR EQUITY MARKETS TO PRICE IN WHAT'S MORE NOTICEABLE THAT THE RATE OF INFLATION IS FLOWING. MATT: HEAD OF BANK OF AMERICA U.S.
SECURITIES THERE TALKING ABOUT A NUMBER OF THE ISSUES WE HAVE BEEN COVERING THIS MORNING AND WE WILL CONTINUE TO PROBABLY COVER FOR THE NECK YEAR. WHAT HAPPENS WITH INFLATION. HOW DOES THE FED REACT? THE MARKET CONTINUALLY FIGHTING THE FED IT SEEMS LIKE WITH THESE LITTLE RALLIES THAT WE HAVE AND THEN BEING PUT BACK IN ITS PLACE BY JEROME POWELL AT EACH CONSECUTIVE MEETING. RIGHT NOW WE HAVE OPTIMISM ON THE STREET. S&P FUTURES ARE UP. GAINS ACROSS EUROPE.
STRONGER EURO AGAINST THE DOLLAR. AND OF COURSE WHEN YOU HAVE THE DOLLAR WEAKENING IT'S ALWAYS GOOD FOR RISK ASSETS. THE 10 YEAR YIELD, RIGHT NOW UP TO 37733. GAINING STRENGTH AS INVESTORS
FEEL LIKE THEY SHOULDN'T LET GO OF THE PERCEIVED SAFETY OF GOVERNMENT DEBT WITH NYMEX CRUDE TRADING AT $80 PER BARREL EVEN, UP RIGHT NOW ABOUT HALF OF 1%. KAILEY: OF COURSE A LOT OF THAT HAS TO DO WITH THE CHINA GROWTH REVIVAL STORY. HERE IN THE U.S. WE ARE TALKING ABOUT A FEDERAL RESERVE THAT HAS TYPE POLICY THIS YEAR AND IS EXPECTED TO CONTINUE NEXT YEAR IN THE FIRST PART OF IT. A RECESSION IS SEEN AS THE LIKELY SCENARIO AT SOME POINT IN 2023. AS YOU HAVE GROWTH INTERIOR RATING AND THE REMOVAL OF MONETARY ACCOMMODATION WILL YOU GET ANY KIND OF FISCAL ACCOMMODATION TO OFFSET THE WEAKNESS IN THE ECONOMY AS WE HAVE SEEN OVER THE COURSE OF THE PANDEMIC? AT THE SAME TIME IN 2023 YOU WILL HAVE A DIVIDED CONGRESS AND CAN ANY OF THAT REALISTICALLY GET THROUGH? MATT: TYPICALLY GRIDLOCK IS GOOD FOR MARKETS BUT ON THE OTHER HAND, THE FISCAL STIMULUS, THE MOUNTAINS OF FISCAL STIMULUS OVER THE LAST COUPLE OF YEARS HAVE BEEN NECESSARY TO DRIVE THE MARKET. WHEN THE TAP WAS TURNED OFF IT
SEEMED LIKE THAT CAME DOWN AS WELL. I SHOULD MENTION THAT WE ARE IN FOR TOM, JOHN, AND LISA, THEY ARE OFF ON A WELL-DESERVED -- ARE THEY TOGETHER? I THINK THEY WENT TOGETHER FOR A SABBATICAL. A SABBATICAL OF ONE WEEK. LET'S TALK ABOUT WHAT TO EXPECT IN TERMS OF POLICY IN THE DIVIDED CONGRESS THAT WE WILL SEE SWORN INTO KICKOFF 2023. THE POLICY RESEARCH DIRECTOR AT BTIG JOINS US. ISAAC, YOU HAVE LOOKED DEEPLY
INTO WHAT'S HAPPENING IN TERMS OF THE LEGISLATIVE AGENDA NEXT YEAR, EVEN BEFORE WE ARE FINISHED WITH THE AGENDA FOR 2023 -- 2022. DO WE FINISH EVERYTHING HERE, CONGRESS CALLING IT QUITS AND STARTING AFRESH? ARE YOU CONCERNED ABOUT THE BUSINESS THAT HASN'T BEEN DONE YET? >> THIS WAS ACTUALLY A VERY BUSY CONGRESS. THEY ACCOMPLISHED A FAIR AMOUNT, FROM INFRASTRUCTURE TO IRA TO THIS MASSIVE ONE POINT $7 TRILLION SPENDING BILL THAT JUST CAME THROUGH. WE ARE STILL COMING THROUGH THAT 41 HUNDRED PAGE DOCUMENT AND IT REMINDS ME NOW THAT I'M SAYING IT, CAMPBELL IS JUST A HORSE THAT HAS GONE THROUGH THE LEGISLATIVE PROCESS. A LOT OF THINGS ARE CRAMMED IN THERE THAT WE ARE STILL FIGURING OUT. BUT IT'S THE LAST AND FINAL
PART OF THIS CONGRESS AND THEY NEED TO START AGAIN NEXT YEAR AND THAT IS GOING TO BE MATERIALLY DIFFERENT NEXT YEAR GIVEN THE COMPOSITION THAT WE ARE ALL NOW FOCUSED ON. SO NEXT YEAR THERE ARE A NUMBER OF SMALLER ISSUES I'M FOCUSED ON. CANNABIS, THE SAFE BANKING ACT. DIFFERENT FOR PEOPLE WITH THE STATE AND LOCAL TAX SEDUCTION. WILL WE GET THAT BACK? THEN THERE'S THE CRYPTO REGULATION TO LOOK FORWARD TO. OTHER FINANCIAL INDUSTRY
REGULATION. ENERGY POLICY WE HAVE TO FOCUS ON. WILL WE BE ABLE TO DRILL MORE? WILL THE ADMINISTRATION BE EIGHT MORE FRIENDLY TO THAT SECTOR AS WE NEED MORE STOCK? WHAT ARE YOU MOST FOCUSED ON FOR 2023? WITH DIVIDED GOVERNMENT WE WON'T HAVE THE BIG MASSIVE LEGISLATIVE VEHICLES LIKE WE HAVE SEEN. WHAT'S GOING TO BE THE EQUIVALENT OF THIS LEGISLATIVE WRAP BAG? WHAT CAN BE ATTACHED TO THE APPROPRIATIONS BILL ON PAGE 900? WE ARE STILL OPTIMISTIC THAT WE WILL GET A DEGREE OF PERMITTING FORM. IT REMAINS TO BE SEEN WHAT SHAPE THE LEGISLATION TAKES. IT'S SOMETHING OPTIMISTIC ABOUT. I ALSO THINK THAT WE SHOULD EXPECT SOME CRYPTO LEGISLATION. HERE I DON'T THINK WE WILL GET
A MASSIVE COMPREHENSIVE BILL LIKE SOMEONE SAID. I THINK IT WILL BE MORE NARROWLY TARGETED TO STABLECOINS. IT'S SOMETHING THAT CONGRESS UNDERSTANDS. LIKE A MONEY MARKET FUND.
BEYOND THAT I THINK I'M MOSTLY GOING TO BE FOCUSED ON HOW CONGRESS INTERACTS WITH THE REGULATORY STATE HERE IN D.C. WE HAVE ACKERMAN NAMES THAT WILL PLAY A BIG ROLE HERE LIKE FTC, CFPB. A LOT OF THESE REGULATORY ENTITIES ARE GOING TO GET FAR AROUND. KAILEY: MACROECONOMIC POLICY, WE WERE TALKING ABOUT THESE DYNAMICS THAT WERE SO COMMON A FEW YEARS AGO. IT'S OBVIOUSLY A DIFFERENT STORY NOW AND WHEN YOU HAVE A REPUBLICAN HOUSE THE LIKELIHOOD OF GETTING A SPED -- SPENT THROUGH IS SMALL. WITHOUT RECESSION WHAT WOULD YOU EXPECT THE REACTION TO LOOK LIKE? 0 I THINK IT'S -- ISAAC: I THINK IT'S GOING TO SOUND LIKE CRICKETS, I REALLY DO. HISTORY DOESN'T REPEAT ITSELF
BUT OFTEN RHYMES. THE LAST TIME WE HAD A REPUBLICAN HOUSE WITH A DEMOCRAT IN THE WHITE HOUSE WAS 2011 TO 2013. DURING THAT TIME WE HAD LEGISLATIVE LOGJAM, FISCAL BRINKSMANSHIP, FIGHTS OVER THE DEBT CEILING AND A PASS FOR FISCAL AUSTERITY HERE IN D.C. WITH SOMETHING CALLED THE BUDGET CONTROL ACT THAT HAD MANDATORY SEQUESTRATION.
JUST AS WE TALKED ABOUT THE FED THIS APPEARING, I FIRMLY BELIEVE THE FISCAL CONGRESSIONAL EXPIRES THE MINUTE THE NEW CONGRESS IS SWORN IN. KAILEY: TO GET YOUR TAKE ON GEORGE SANTOS, THE REPUBLICAN IN NEW YORK WHO HAS NOW ADMITTED TO ESSENTIALLY EMBELLISHING HIS RESUME ABOUT HIS COLLEGE DEGREE, WORKING AT TWO MAJOR FIRMS. MATT: LEFT SOMETHING OUT AS WELL, PREVIOUSLY MARRIED? KAILEY: THERE'S A LOT OF DIFFERENT STUFF CONTENTION.
HE SAYS HE PLANS TO TAKE THE OATH OF OFFICE ON JANUARY 3. I'M WONDERING ABOUT YOUR REACTION TO THESE REVELATIONS. ISAAC: IT'S SHOCKING AND NOT AT ALL SURPRISING AS WE WHITTLE AWAY THE TRUTH OF OUR POLITICAL DISCOURSE. THESE THINGS WILL CONTINUE TO HAPPEN. IT WILL BE INTERESTING TO SEE IF HE MAKES IT. PART OF HIS STRATEGY NOW IS THE
HOPE THAT THE STORY DIES DOWN. I STRUGGLE TO SEE THAT HAPPENING. ONCE HE GETS INTO CONGRESS, AND I THINK IT'S GOING TO BE DIFFICULT FOR HIM TO LEGISLATE EFFECTIVELY BECAUSE HE WILL CARRY A DEGREE OF TOXICITY WITH HIM FROM THESE STORIES. IN A LOT OF WAYS THIS IS THE NEW LYRICAL DISCOURSE NORMAL. MATT: I AM NOT A CRIMINAL, HE SAID THOSE WORDS IN AN INTERVIEW WITH "THE POST." NEVER GOOD WORDS TO HAVE TO SAY. ISAAC BOLTANSKY, TELLING US
WHAT TO EXPECT IN 2023. THANK YOU VERY MUCH. FUTURES ARE STILL UP HALF OF 1% HERE, KICKING OFF THE SHORTENED TRADING WEEK. WE HAVE GAINS ACROSS THE CONTINENT WITH THE EXCEPTION OF U.K., LONDON CLOSED FOR A HOLIDAY BUT WE ARE SEEING GAINS IN FRANCE AND GERMANY.
PARIS, S&P FUTURES AT 6/10 OF 1%. THE 10 YEAR YIELD TRADING AT 3.7714. WE WILL TALK TO DAN NIEVES, MAJOR SECURITIES ANALYST ABOUT WHEN THOSE STOCKS WILL COME BACK. THIS IS BLOOMBERG. MATT: WELCOME BACK TO BLOOMBERG.COM -- "BLOOMBERG SURVEILLANCE." I'M MATT MILLER HERE WITH KAILEY LEINZ. GAINS IN TERMS OF FUTURES,
EUROPEAN EQUITIES ARE UP ACROSS THE BOARD AS WELL. THE LONDON IS CLOSED RIGHT NOW. LET'S GET OVER TO KRITI GUPTA. PRITI -- KRITI: ACROSS THE OCEAN HERE YOU CAN SEE S&P FUTURES ARE UP WITH OUTPERFORMER IS IN THE SMALL CAPS THAT WILL BE A THEME INTO 2023, REMEMBER, YOU WANT A BROAD RALLY TO HAVE A SUSTAINABLE TURNAROUND. WE HAVE EARLY SIGNS OF THAT THIS WEEK. RUSSELL FUTURES ARE UP 7/10 OF 1% AND ACROSS THE ATLANTIC IN EUROPE YOU MENTIONED LONDON CLOSED, THE REST OF EUROPE IS INDEED OPEN WITH THE STOXX 600 HIGHER ON THE DAY. YOU ARE SEEING THE COMMODITY EFFECT COMING FROM THE CHINA STORY, THE REOPENING STORY, KIND OF HAVING AN EFFECT.
EURO-DOLLAR IS AT 106. THIS IS IMPORTANT BECAUSE AS YOU START TO SEE THE CASE FOR THE DOLLAR BUILDING IT WILL GO INTO THOSE CYCLICAL CURRENCIES. THE EURO IS ONE OF THEM. THE OTHERS ARE THOSE AUSSIE CANADIAN DOLLAR CURRENCIES THAT ARE STRONGER ON THE DAY FOLLOWING THE STORY YOU ARE SEEING IN BRENT CRUDE AND THE ENTIRE COMPLEX HIGHER.
FORGIVE ME, I GOT A BIT WONKY, YOU KNOW I HAVE TO, THE BOND MARKET IS STILL NOT CHANGED AT THE MOMENT, CLOSED OVER IN LONDON AS WELL, WE HAVE A CHART THAT'S REALLY IMPORTANT, THE TWO TENANTS OF INVERSION RELATIVE TO THE BANK INDEX ON THE CALLS GETTING LOUDER AND LOUDER INTO THE INVERSION IS LIKELY TO GET DEEPER AND DEEPER. AT LEAST THAT'S THE STORY FROM THE BOND STRATEGIST AND AS IT DOES WE SEE BANK INDEX STOCKS, BECAUSE OF THE PRESSURE ON THE LOANS IN THE INTEREST MARGIN, THOSE ARE DROPPING AS WELL. POTENTIALLY MORE PAIN FOR THE FINANCIAL SECTOR IN 2023 THAT IS ALL DEPENDENT ON THE BOND MARKET. ALL RIGHT -- KAILEY: ALL RIGHT, I DON'T THINK THAT WAS TOO WONKY. IT WAS THE APPROPRIATE LEVEL. TALKING ABOUT THE BANKS, IT STRIKES ME WE NEED TO GET THROUGH 2022 BUT TWO WEEKS INTO THE NEW YEAR WE WILL START EARNINGS SEASON AGAIN. THE BIG BANKS WILL BE REPORTING AND THAT TELLS ON THE CONSUMER WILL BE FASCINATING. MATT:
ABSOLUTELY. DEPOSITS ARE AT A HIGH-LEVEL LEVEL BUT PERSONAL SAVINGS HAVE COME DOWN. THAT COULD START TO ROLL OVER. CREDIT CARD DEBT CLIMBING AS WELL. AS MORE CONSUMERS ARE RUNNING OUT OF CASH AND PUTTING STUFF ON PLASTIC IT'S NOT GOOD HEADING INTO A RECESSION. KAILEY:
LEVERAGING UP TO DO CHRISTMAS SHOPPING. TALKING ABOUT THE CONSUMER CONVERSATION, GOLDMAN SACHS IS SET TO BE CUTTING 4000 JOBS IN JANUARY. THIS AS THEIR CONSUMER BANKING DIVISION STRUGGLES TO BE PROFITABLE AFTER THE BANK HAD BEEN STEADILY HIRING SINCE 2018 WHEN DAVID SOLOMON BECAME CEO. OUR OWN SONALI BASAK GOT TO SIT DOWN WITH HIM FOR AN EXCLUSIVE INTERVIEW LESS THAN THREE WEEKS BEFORE RUMORS OF THE JOB C
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