tv Bloomberg Surveillance Bloomberg December 28, 2021 7:00am-8:01am EST
>> we could end up with a good year, not a great year in 2022. >> you are underestimating the fed's ability to tighten. >> it will start to decrease of the year-over-year number. >> you will seek real divergence in monetary policy. >> we see the rapid growth behind us. announcer: this is "bloomberg surveillance" with john keane, jonathan ferro and lisa abramowicz. jonathan: good morning. this is "bloomberg surveillance" live alongside kailey leinz and matt miller. i am jonathan ferro. kailey, let's start with the cdc decision. a sigh of relief as the covid quarantine gets cut from 10 to 5 . kailey: we saw this with
airlines over the holiday weekend, having to dramatically cancel thousands of lights due to staffing shortages because if you get a positive case, you had to isolate for a long time. do some disruptions now start to ease for some wall street banks? jonathan: apple one of them as well. was that down to staffing shortages? kailey: they did not indicate. it could be trying to protect employees as new york has an omicron problem more so than other places but staffing could be a large issue. it is not just about people not being able to come and shop. the genius bar is not something you can access and that requires somebody to talk to you. jonathan: matt miller, that stock, apple, very close to $3 trillion. matt: kailey told me it has to get up to $280,000.
kailey: that's right. matt: it will be interesting. i personally love big, round numbers and i love the dow jones which is why i am generally not welcome on this program. i think it makes for a more interesting storyline and i am not opposed to that. jonathan: if you go deep into the archives, there will be a special with matt miller in a bowtie. [laughter] you have to go back about 10 years. don't go looking for it. [laughter] s&p 500 up 2/10 of 1%. the euro-dollar 113.30. matt: i think it is fascinating.
as the equity market climbs in the face of omicron, in the face of inflation may be being helped a little bit by more stimulus out of china and the fact that the severity of the disease seems more mild. but i think it is interesting we are looking at lower pes. we talk about how difficult it would be to forecast 4800 year-end 2021 even though we had a guest to did that. most people could not have guessed it and we are at a pe of 31 and now we're looking at a pe of 26. jonathan: earnings have been better than expected. matt: exactly. jonathan: something we have not talked about enough. the s&p 500 all-time highs but we have got to talk about airlines. kailey: this comes back to the
labor issue in that quarantine period. they are dealing with serious staffing shortages. we will get more on the staffing shortage and how omicron might be throwing a wrench in that with helene becker. what is the outlook for oil? can we get to triple digits in the year ahead? ellen wald will be joining us with the atlantic council and patrick armstrong of plurimi wealth. looking at nominations from president biden, will get them by the end of the year? good question. we address that with john ryding. jonathan: looking forward to catching up with john. right now joining us as ed yardeni of your denny research. looking for 4800 on the s&p. you're now looking for 5200 on the s&p.
walk us through the playbook for next year. ed: i think the playbook is basically earnings. 5200 is only 8% higher than this year which is going to be around 4800. i think we are getting some feedback. jonathan: we are going to work on that. just take a second and the technical team will work on that. ed your denny will be back any second. matt: gino that reminds me of? jonathan: what does that remind you of? matt: i used to call in on radio shows when they were offering free led zeppelin tickets. i would leave my radio turned up and i think that is what ed needs to do. turn down any broadcasting equipment. jonathan: do you want to tell us how that was? matt: it was before kailey was born. jonathan: i believe we could try again with ed yardeni.
let's work on what we're are talking about moments ago. ed: my apologies. the fat finger problem i think. i think the story ahead has to be earnings. hard to imagine the valuation would go higher. the s&p 500 has been hovering between 20 and 22 the past year which is incredible when you look at the past. when inflation started going up and there's talk about the fed tightening the pe tended to go down. here it has remained remarkably high. remember in 1999 we got 25 on the pe and that was the peak and then we went down. it is going to be earnings. i am making the bold assumption the pe is going to stay up because of liquidity and earnings should be up 8%. matt: earnings are going to
remain strong at what do you think about buybacks and dividends? this is one of three key components. if you know what earnings are going to be, you know what dividend or payouts are going to be and if you know with the market is willing to value those, you can make easy calls. what you expect in terms of payouts? ed: it is easy to forecast the market. the trick is getting them right. where i am sticking my neck out is arguing the valuation will stay high. to your question about buybacks and dividends, i think dividends will continue to make record highs going into next year so we should be fine. buybacks are also at a record high now. i have been contrary on the buybacks arguing not all of them, maybe two thirds of them, are associated with employee stock option plans.
when you have a bull market companies like to pay their employees and employees like to get paid some of their compensation in stock. i am not convinced buybacks have been the biggest driver of this bull market. i think it has been earnings. earnings have been tremendous. just to correct the record, i was not that good. i was looking for 4290 at the end of 2020. i will admit, this bull market -- i got the hoof marks all over my back. it runs over it within three months. i have been catching up with this market. i think 4800 -- i think it was the middle of the year i started to concede this was stronger than i thought. kailey: you are humble and not the only one caught on the back foot given the rally we had seen that no one expected. especially when talking about the multiples and how high they are, can that only be predicated on the fact real yields remain so deeply negative?
we are still -1000%. ed: nobody really knows. we have never seen the real yields this low. we got a negative yield in the bond market. the bond market has been funky. again, i am pretty good but i'm not that good and i thought the bond yield would be up to percent by now. along the way i learned my lessons. maybe push that out to next year. something is going on on the bond market and that as the stock market goes up people get nervous about having made so much money and they are rebalancing into the bond market. bond flows have been good. the bond market is probably going to up to 50, 75 basis points but that is nothing really.
all this excitement about tapering is overdone. jonathan: thank you as always. ed yardeni of yardeni research. your 10-year up about 1%. that is been the story. matt mentioned the year but it is a macro economy. if i could offer you the outcome of next year, gdp, cpi, unemployment, the whole lot, could you call the market accurately? could you call the bond market accurately? given the experience of this year and the previous year perhaps not. kailey: things are hard to forecast in the pandemic era. even if you get the economic call you do not necessarily get responding calls. if it comes in 2022, that ultimate 2% level matter?
when they were disruptive it was only three months when it shot up 80 basis points from 91 to 175. is it a slower move is a something equities need to worry about? jonathan: matt, how disruptive is this going to be? i want to build on what we heard an hour ago. we have deeply negative interest rates supportive of risk assets. matt: it is not tightening yet. they have to finish the taper and start working off the big balance sheet. jonathan: up 11 on the s&p 500. and matt miller i'm jonathan ferro. -- with kailey leinz and matt miller i'm jonathan ferro. ritika: being infected with
the omicron variant can strengthen against delta. the likelihood of someone infected with omicron being reinfected by delta is limited. shortening the recommended isolation for people with covid no longer experiencing symptoms. the new isolation is five days, half of what it was. the cdc said after isolation people with covid should still wear our mask for another five days when around people. goldman sachs standing by its office return plan despite steady infection rates in new york. the firm will make vaccination booster shots compulsory. goldman told its u.s. workforce anyone entering offices must get the booster by february 1 if eligible by that date. kathy woods missing out on the christmas spirit in etfs. it is down 22% and a for its
worst performance since 2014. the price of bitcoin fell below $50,000 today. bitcoin still up roughly 17% but investors have been pulling back from the most spectacle corners of the market. global news 24 hours a day on air and on quicktake by bloomberg. powered by more then 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. ♪
dead. i think there is material likelihood, 70%, we get a package that looks more like $700 billion. something with less than $1 trillion handle is appropriate. jonathan: awesome to hear from henrietta of veda partners. here with kailey leinz and matt miller i am jonathan ferro. short of 4800 on the year and higher by almost 20 percentage points. on twitter somebody said, i was once the 99th caller and won the led zeppelin tickets? . did you ever win? matt: what? i think they were done touring by the time i was legally allowed to go to a concert.
weren't they done touring in 1980 echo i think that was the end of it. jonathan: are you trying to illegally acquire tickets? is that what you were trying to do? matt: no. it just popped into my head because i was too young when they were touring -- this is a tangent you don't need to hear -- but when i was a junior in high school the local radio station started playing "stairway to heaven" all day long and set, wait for an announcement at the end of the day. all of my friends at skipped school and hung out at a buddy's house. we thought zeppelin was getting back together. we were planning on dropping out of high school and going on the tour but it did not happen. jonathan: ellen wald joins us now of the atlantic council.
we are currently seeing a complete dislocation of our typical utility prices. what do you mean by that? ellen: this is something that has been building for about a year now and we are seeing it get worse. if you look at the utility prices and the price of energy, typically the pattern is these prices trend downward in the winter and upward in the summer. however, starting last year we stopped seeing the downward trend during the summer and instead are just seeing prices continue to rise. this is the continuing the past summer and through october and november. if you look at the average electricity prices, this partially has to do with the fact the united states is much more reliant on natural gas than we have ever been. this has been a good thing. we have cut emissions a lot but
it is affecting our electricity prices in a very severe way. even if winter is not especially cold, this is going to be contributing to increases in household electricity prices throughout the winter. kailey: what we are seeing in the u.s. is nowhere near as bad as what they are seeing in europe. russia has a serious role to play. given the political delicacies between russia and the west do you have reason to believe that is a problem that can be easily solved? ellen: i don't think this is a problem with an easily solution. the potential for the u.s. and u.s. intervention to worsen the situation is there and something we need to keep an eye on. right now the situation, particularly the situation in russia, they are experiencing
record cold. europe has gotten a reprieve as we see more cargo headed to the west but if you look at what the situation is in russia and how that impacts russia's gas exports to the rest of europe, it is not looking good for the rest of winter. particularly if things get colder and the rest of europe. combined with the fact we got the geopolitical situation going on with the ukraine there is the potential for nato or the u.s. to put sanctions on russia. any kind of sanctions, even financial sanctions that impacted the swiss system, could impact russia's ability to sell natural gas and other energy products in europe which could have a catastrophic effect given the tenuous situation with energy. matt: much ado has been made about electric vehicles this year and into next.
i'm sure that will continue but is it possible that we will see real adoption of this technology? when i look at urban centers around the world there really isn't any place to charge these vehicles. ellen: yeah. evs, you know, we see predictions saying the eeev market is going to explode. a lot of these car producers are producing a lot of evs. the question is, is there a consumer market? i don't see that happening right now both because of the price point and the limitations in terms of range and charging. it does not seem to be there yet. yes, at least in the u.s., there are plans to build out larger charging networks but that is going to take time and the question is, what do you put first, the carrot or the stick? it really does seem to be
difficult to push evs on people when they are making that calculation who say, it doesn't make sense for me right now. jonathan: brilliant as always. ellen, thank you. matt, is the order in for the f-150 yet? matt: this is the issue. i want a big truck, not a gas guzzler because the f-150 does use the ego boost. my wife is saying she wants an electric car and she leans toward volvo but where would i charge it? is there a charger near the global headquarters? i don't think there is. jonathan: i assume the wife wins. i cannot imagine you driving a volvo. matt: she would drive that and i would get something else like a mustang gt 500 to quench my thirst. jonathan: what happens with the cars you currently have in
berlin? do they stay there? matt: i have to sell them. you cannot buy cars. even if they make the models for the u.s. market you cannot buy them in foreign markets and import them unless they are over 25 years. it is a really odd rule. clearly created in order to encourage sales inside the borders of the u.s.. jonathan: but the 911 can come back? matt: that can come back. jonathan: are you going to keep it? matt: keep it. it has the 3.8 liter flat v-6. they will never build that engine again. jonathan: is it worth more now? matt: it is worth more now than what i bought it for in 2014. jonathan: eight years ago? matt: yeah. and i put 30,000 miles on it. great investment. jonathan: matt miller, kailey leinz, jonathan ferro. i think misses miller did not
♪ jonathan: more of the same. this is "bloomberg surveillance ." up 13 on the s&p. the nasdaq 100 up 5/10 of 1%. the russell does not sit this out, up six. the story for many people the relationship between the equity market and bond market. let's talk about that. switching to the bond market for just a moment. 148.24. a limit to the move because of the negative feedback loop from risk assets back into bonds. the idea being if you are going too far, risk assets start to break down back into bonds.
my question would be how high do we go before we hit that threshold? jim karen of morgan stanley's work comes in here. this is about a move toward neutral. given how deeply negative interest rates are how far can they go before causing any disruption in the equity market, in this credit market? kailey: the real yield is what -106 basis points? these are deeply negative and will remain negative. even if the 15 move higher happens you are still sitting at negative. i don't think it is as much of where it moves but how quickly it does so. if it is too fast, it could take equity markets on the back foot. jonathan: the last time we had real disruption off the back of fed policy go back to the end of 2018. we were positive 100 plus some real yield. complete opposite at the moment. matt: and i wanted to point out,
i did not get to when talking to ed yardeni, he coined the term bond market vigilantes. where are they right now? as we go into an era where the central bank is reducing its purchases or even starting to unload its balance sheet and government issuance may grow, why are we looking at 150 on yields? jonathan: inflation. matt: -1% on real yields. jonathan: we can talk more about this through the week. we have all got a lot of time on our hands. matt: we will. jonathan: let's finish on this one. it's apple. i'm not a big fan around numbers and all that jazz and the media but we are going to play that game through the day here at bloomberg and elsewhere. what is it? 182.86? kailey: that's right.
the value of a growth rate that was supposed to be the story in 2021 did not play out. that whole we are going to 2% did not play out. that strong dollar persistently through the year catching people by surprise. steven englander at standard chartered joining us. do you think we are getting closer to peak dollar strength? steven: we are getting closer but we are probably not there. the support for the dollar is ebbing. there were two factors driving the dollar up. one was the fear of covid and the disruption that it caused in the second is the fear of the fed. we are seeing covid fears ebb very gradually. what is to be seen is the fears of the fed and how is that a going to be triggered by the market seeing peak u.s. interest
rates. i think we are not there yet. we have to see some sign that inflation is hitting the top and there is more downside than upside but on the covid side it is what is lending support the last couple of days to other currencies against the dollar. kailey: talking about the fed and central banks across the world their policies are diverging. do you think monetary policy divergence will be the key driver for fx in the year ahead? steven: not so much. i think it is going to be the question of are we in a cycle that is going to be extended where if the fed is right, they hike three times next year and continue hiking in the markets worry about how far that is going to go? or whether we actually do begin to see evidence that inflation is ebbing. i think the dollar broadly speaking is very risk off as a
currency. kind of the japan of the decade in terms of its risk off properties. i think any indication that the global and central banks don't have to be as aggressive as the market expects them to be would be a strong dollar negative. matt: funny you mentioned japan. kayleigh and i were talking about japanese inflation coming back above the zero line. this is an economy that can really use it. what do you see in terms of the end? steven: not so much. we think it is going to lag. the economy is really that strong. because they don't have an inflation problem they are one of the central banks that don't have to worry about raising interest rates or sounding aggressive on monetary policy. i think if the dollar falls broadly, the yen will follow with it but it is not going to be the top tier of currencies.
it is going to be a funding currency as far as the eye can see. matt: what about the euro? as john points out i make things personal. i am moving things back to the u.s. and it is painful to see us at 113 when we were in the 120s. any movement you see considering the fed on the front foot and the ecb as a follower? steven: i think that is one case where monetary policy divergence matters. i think the shift of the fed sounding more aggressive, the ecb's adamant view that they don't have an inflation problem, what they see is transient. i think for the euro to strengthen, and this may not work for your timing, we may have to wait for the ecb to say, you know, inflation is going to be more persistent than we thought and monetary policy will not be as easy as long as we thought. but that might take some months yet. that would strengthen the euro.
jonathan: away from the euro -- we will get back to that later this week -- how much hike can we see before it becomes tightening? morgan stanley wade that a few minutes ago. give us an idea of the level of how much hiking there would need to be to see a tightening of financial conditions. steven: that is the toughest call there is, understanding why long-term interest rates are as low as they are. even when the economy seems to be picking up. it is possible we have injected so much liquidity into the market that the market fears even a modest degree of tightening would end up creating a financial event. the long-term real interest rate level has been marked down. there is evidence that could sustain high real interest rates
that we have not seen in a while but we are reluctant to think the fed can go that far. plus, the u.s. economy is it straight now because people are working for -- looking for work, they lost their benefits, they are looking to get picked up. the time we get to the middle of next year all of those guys will have been so that and what will be left is the people who are having hard times getting jobs. the perspective on how far yields can go and how far the fed can go could be very different six or eight months from now than it looks right now. jonathan: just to go back to that and spent time on if you can. use of the most important feedback loop is with risk assets. steven: it's possible. those loops and feedback chains have not been established but
they are having a decade of easy money. people have done what they do when there is easy money. what we have not seen is how they react when that gets pulled back and whether or not the financial chain ends up being more important. if the fed is serious about raising rates, there is that built into the 10 year. that might be why they are so low. jonathan: fascinating conversation. thank you for everything this year. brilliant research coming from you the last year and further than that. matt, i know you feel bad about where the euro is right now. i managed to move before brexit. can you imagine how much worse that could have been for me? early 2016. we broke through 150 on cable. if i moved six months later, nine months later, it could have
been vicious. matt: you think i can put it off? i was scheduled to fly back a week from friday. do you think new jersey would mind if i push that back three or four months? jonathan: or three or four years. [laughter] matt miller with us alongside kailey leinz. i am jonathan ferro. up 13 on the s&p. the market is open stateside. i have no ide why? . the euro-dollar at 113.30 and i think kailey picked up on this earlier. kailey: the highest level for crude in over a month. you still of the questions out there as far as demand. how is the omicron variant going to impact that as you start to see more restrictions being put into place? the supply question as well. maybe the oil market is more confident in striking that balance given a shorter
quarantine that seems to be less severe. but oil has been volatile the next several months and i wonder if that continues in 2022. jonathan: matt miller, crude positive this morning? matt: absolutely. i want to make two points in terms of the rally. yesterday you were talking about the possibility of the cdc reducing the time you need to quarantine from 10 to five days. they have done it and i think that is bullish, especially since sony flights were canceled. jonathan: i would agree with you. matt: i want to clarify it is o -mi-cron. jonathan: hopefully we never have to talk about it again and we will not have to debate how to pronounce it. equities of 13. thank you for weighing in, matt miller. that must've been driving you nuts the last month. matt: it has been a problem. jonathan: big problem
apparently. from new york, this is bloomberg. ♪ ritika: with the first word news i'm really good group -- ritika gupta --. -- -- i amrita could go debt. the omicron strain was first identified. -- the health secretary urged people to be careful, especially at new year's celebrations and said the government will not hesitate to act if necessary. tensions between the u.s. and china rising on a new frontier, outerspace. beijing complying to the united nations about elon musk's spacex satellites. they said two of those came
close to the chinese space station forcing astronauts to take evasive action. the transport industry is bracing for another roller coaster year of disruptions. trade group estimates 1/5 of all professional trucks and driving jobs are unfilled. many drivers concerned about covid related auto closures. companies are having to hire other firms and offer good bonuses to sign on. global news 24 hours a day on air and on quicktake by bloomberg. powered by more then 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. ♪
better than people anticipate in the first quarter because we are going to have strong earnings. yet valuations may come down. i think will have strong earnings, good growth, i think we will see inflation pressures ease and that is going to allow the longer the curve to go and steepen the curve a little bit. jonathan: that is the construction view from the chief market strategist across global investments. with kailey leinz and matt miller i am jonathan ferro. s&p advancing one quarter of 1% after another all-time high yesterday. yield higher half a basis point and the euro-dollar unchanged at 113.32. crude $76.66. matt, you mentioned earlier the story about earnings. matt: i think ed yardeni he said he expects it to grow. to come down from 31 to 26 it is
one of the key parts you need to know, or forecast, in order to guess where markets are along with earnings and payouts. i think it is interesting investors are willing to value stocks -- not willing to value stocks that they were at the end of last year. jonathan: when you look at the likes of morgan stanley and say, is it oppenheim or? er? looking for the multiple to come down. give them what is happening with tapering. jonathan: saying repeatedly -- kailey: mike wilson is interesting. obviously thought the market would and lower and with the high-end of the forecast for 2021 at 4400 that is where mike
wilson thinks it will end next year. it will be interesting to see if he is more right next year. jonathan: if you are betting against the market, can you bet against these big names? apple heading for a fifth straight daily game. they drew a line in the sand. let's get to kriti gupta for more. kriti: share price of 182 point $86. -- 182.86. -- 20% decline last fall when it hit $2 trillion. the question is does that mean when you hit $3 trillion you will see another drop? yes big tech believes the
benchmarks, you could be seeing one today, it leaves corrections. could this signal a macro correction? kailey: i hope tom is watching or listening. matt miller is talking, we have the chart. in new york city they started shutting down stores. how indicative is that of a macro story? kriti: it brings back the summer of 2020 while we were dealing with the lockdowns. big hit to demand and that only disposable income but the driving season was under wraps. one of the big indicators of the market where you saw the s&p 500 trade off headlines was when apple closed stores and decided to -- i should say shut down the services like the genius bar in
new york but also across the country. you saw a lot of the recovery trade first emerge and apple stayed reopening stores not only in new york but in l.a., chicago, dallas. that became a proxy for the reopening. the reason is because apple is a proxy for luxury demand, for that disposable income that they are willing to spend on luxury products. everyone has an iphone these days but they are a luxury product. add that onto the foot traffic to get in for their services and you kind of have this macro proxy built into the stocks. matt: it's true. i need to get to the genius bar. ever since the software refresh on my apple watch it runs out of battery in 10 hours in sleep mode is not working. [laughter] kailey: i will make a call to tim cook to get right on that. matt: yesterday talking about
the importance of reducing the time people need to quarantine after testing positive. it was 10 days and the cdc has reduced of that down to five days. this is bullish for markets. airlines that were having to cancel flights or apple -- maybe this is one of the reason they had to close stores -- are not going to need that if they can get a deeper bench. not only for the corporate world for health care. if you have more first responders going to work, that is a good thing. kriti: the key word is if you have no symptoms. health experts point to the first days of infection as when you start to see being more contagious. it also comes to things like airlines. a lot of flight crew
shortages, this could make it one step closer to treating the coronavirus like the flu. if you have the flu, you do not have to quarantine you just at the deal with it. once you are not contagious anymore you can come back to work. this would be a positive for much of corporate america dealing with labor shortages. jonathan: thank you. just to build them what she was saying matt, can you imagine how stressed out some management teams were looking ahead to 2022 and wondering how they were going to staff their teams facing ten-day isolation? i am on board with you. major step toward making this much less disruptive for the economy going forward from here. matt: absolutely. if it continues to move this direction, we get to a point where people start coming to work when they are covid positive like they used to. jonathan: let's not go back to that. [laughter] we mentioned this yesterday.
i hope we move away from that but think about where we have come from. 18 months ago i remember the summer of 2020. you were in 14 day quarantine if you traveled into the u.k. even if you are negative. you had to stay there. that is a big change. matt: and that is the biggest difference. to be honest, a lot of people, for instance, if you or i had gotten covid over the last couple of years, we would have been able to work from home and i'm sure a lot of people on global wall street have been working from home after testing positive as well. but traveling is not an option. that is where the really big difference is made and i don't think the cdc guidelines are changing that yet. jonathan: one final word, i am not big on conspiracy theories but the apple thing, totally with you. every single time they upgrade the thing shuts down and you need to get a new one. matt: and i am big on conspiracy
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♪ >> you're going to have to get the call right for whether the market or the economy can observe rate hikes. >> this is such a flat curve to start hiking. >> it has to respond more aggressively to inflation. >> i feel confident the fed is more right than the markets in terms of tightening. >> it is relatively high. announcer: this is "bloomberg surveillance" with john keene, jonathan ferro and lisa abramowicz. jonathan: from new york city and audience worldwide good morning. this is "bloomberg surveillance" live on tv and radio alongside