tv Bloomberg Surveillance Bloomberg December 30, 2021 7:00am-8:00am EST
♪ >> we are going to have a very volatile your ahead of us. >> we haven't seen is how they react when the ecb money gets pulled back. >> the buy the dip half-life has been shrinking. >> we won companies that aren't predicated on free money. >> the story ahead has got to be earnings. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: is it the beginning of the end for easy money? for our audience worldwide, good morning. this is "bloomberg surveillance ," live on tv and radio. alongside matt miller and kailey leinz, i'm jonathan ferro. your s&p advancing 0.2%. it has been all-time high after all-time high. kailey: the most since 1995. we could see another today, possibly even tomorrow. it has been quite were markable.
this equity market up the better part of 30%, far above where we thought we would be coming into this year. jonathan: is the beginning of the end of easy money, or is it just the story of easy money getting less easy, but still remaining easy? matt: we don't know the answer to that. we look forward to seeing the fed in march, what is likely to be a live meeting, but most don't expect a rate increase in march. the question is sequencing. how will we see the balance sheet unwound if they feel like doing that at all? these are all things that affect financial conditions, and we will be following on the terminal very closely. jonathan: you sound extremely excited about the new year, just like me. [laughter] matt: you know what? i was so pumped when i came in on monday. we had three days of a big rally. we rallied hard. i know it was like volume, but i
felt like there was a lot going on still. even yesterday with the richmond fed manufacturing survey, i was genuinely excited. that enthusiasm is starting to fade a little bit because the market feels like someone let the air out of it. jonathan: whenever someone is excited about the richmond fed, i do have to ask the question how excited you actually are. we will talk about that in the moment -- in a moment. nasdaq up 34, up 0.2%. yields are in a couple of basis points to 1.5289%. kailey, you gave us the streak on crude earlier. we are snapping it. kailey: still looking at a $76 handle. the supply picture is looking a little better, and demand, how much is the omicron variant really a threat, or have we reevaluated that? we will also be taking a look at the path forward for volatility.
the question is, does that normalization continue into the new year? amy wu silverman will be joining us, and we will continue the equity conversation with steve whiting at citi global wealth. then we will get into whether or not those prices will be enticing shale players to drill anymore, or do they keep that discipline really focused on returning money to shareholders? jeanine wai will be joining us, and then we will come back to the pandemic because it seems like we have never-ending questions. deborah fuller of the university of washington school of medicine will be joining us later on. jonathan: the confusion from the cdc, your thoughts on that. are you any clearer on what you need to do after you have tested positive for covid? kailey: absolutely not. i thing messaging has been a continual problem throughout this pandemic. first it was on vaccine and who needs to get boosted. the messaging around this is
also one of the policy failures we have to talk about, is within about what has gone wrong during this pandemic. jonathan: the financial community, the banks that they work for are requiring a negative test to come into the office. we just heard from the cdc director saying don't get a pcr tests after you have tested positive because you could test positive for up to 12 weeks. matt: to be fair, she can't control the science. if those tests continue to give you positive results because they are testing for antibodies in your system and not for viral shedding, then that is simply the case, as we just heard. you should instead get an antigen test, which tells you how much of the virus you still have venue. do they rick -- you still have in you. do they require pcr tests? jonathan: some companies do. matt: they will have to change
that. jonathan: on the rapid tests, they don't understand still the relationship between a positive test entrance visibility. that is a difficult one because if they don't understand the science, they can't control the science. they don't understand the facts yet either. we don't have the facts for that. so if you don't know, then it is all about risk management. the previous had adminstration workers to size for this as well. is it about the science or behavioral psychology? because the cdc director also said it has a lot to do with what we thought people would be able to tolerate. is that about the science or about behavioral psychology? matt: i think they are sprinkling in a little to both, and this is the common complaint that you get. it is not backed by science. i get these ibs from viewers all day long when we are talking about the regulations or suggestions that come from these
government organizations, but they are trying to do the best they can, i hope, putting my faith in them for that. as kailey points out, a lot of these views have changed. the mask wearing i think is one of the most interesting. for so long, they didn't know whether or not masks reduce transmission. then they said you wear masks to protect others from getting the virus from you. now they are telling you if you where ffp2 masks correctly, you can prevent yourself from getting the virus from others. messaging has been all over the place, but that is because we continue to find new results. jonathan: and continues to be the case going into 2022. your 10 year this morning down to basis points at 1.53%. one of the mysteries of the bond market through 2021, inflation all the way up here, your 10 year yield all the way down here. why? cullen martin joins us now, of the charles schwab fixed income
research center. why? guest: it seems like the market is telling us it is not too concerned about the recent surge in inflation, or at least it is not concerned that it is going to be very persistent, meaning at these high levels, it might not go back to the levels we saw pre-pandemic, but the markets aren't expecting persistently high inflation rates, but it is also telling us that we might just be back to this low growth, sort of high inflation era that we were in pre-pandemic. inflation is likely to be higher, but it is telling us that the growth outlook might not be as strong. if you go back to the last rate hike cycle, the markets told the fed they hiked to much when they barely got above 2%. we look at fed funds markets, what the long-term treasury yields are telling us is that the fed early can't hike that much, and it might not be able to get to 2%.
that is why we are seeing yields so stubbornly lower right now. kailey: do you think the curve will be stubbornly flattering the year ahead? collin: we do. but the trend is likely to be a flatter yield curve that is consistent with what we see during most rate hike cycles. what we are seeing today is that we are already at flat levels that we are seeing halfway through a rate hike cycle, and in certain parts of the curve like five stands -- like fives-t ens, fives-thirties. and this time they haven't even hiked yet. matt: what is the terminal rate you are expecting now? we just heard upwards of 3%. collin: that is a bit more
optimistic than our outlook. 80% to do .5% range now. the fed is still pointing to two point 5% based on their median projection. we would probably take the under for that right now, based on what we saw during the last rate hike cycle, but when you talk about the terminal rate, that is preventing long-term yields from rising too much. it is holding down our outlook for yields in 2022. the 10 year treasury today's are at 1.5 percent. we think it can get to 1.7 5%, maybe 2% on the high-end next year. in we see expectations for that terminal rate move significantly higher, it is going to be difficult to get above that 2% level anytime soon. jonathan: what is the number one thing going into next year that the have the lowest conviction on? collin: the lowest amount of conviction on, that the fed will act aggressively in shrinking
its balance sheet. they probably should move somewhat aggressively, and by that i mean maybe just a little bit faster than what they did last time, but they seem to be slow playing this right now. they are clearly laying the breadcrumbs where powell acknowledged that they discussed it at the last meeting, and waller is talking about it quicker reduction. but the way they have approached policy over the last year plus tells us they will probably take a little bit of a slower pace. but if they want to get a steeper yield curve, they have those tools. they hold so many treasuries they could offer to other investors. but until we hear otherwise from fed officials, they will probably take a readily patient approach. jonathan: send our best to the team. cullen martin of the schwab
center for financial research -- collin martin of the schwab center for financial research. don't wait just to roll things off. don't wait to cease investment. maybe thing about selling them. kailey: we heard consistently, there is a difference between what the fed should do and what they actually will do. there's a big gap. jonathan: there's an industry and complaining about the federal reserve. it has really ramped up for the last 10 years. yields lower, to basis points on tens. i just could tell you are fed up as the week grows older. matt is getting a little more upset about the post-christmas coverage going into the new year. futures advancing 0.2%. on radio and on tv, this is bloomberg. ♪ ritika: with the first word
news, i ritika gupta. today will be the second time this month that the leaders of the u.s. and russia have talked. the white house says president biden and vladimir putin will discuss a range of topics, but the issue of ukraine is likely to be prominent. earlier this month, president biden said that russian aggression against ukraine would be met with unprecedented economic penalties. a new study on the johnson & johnson coronavirus vaccine is welcome news for africa. two doses of j&j's shot slashed hospitalizations by up to 85%. j&j vaccine is increasingly being used across the continent. u.s. secretary of state antony blinken is calling on china to stop arresting hong kong journalists. that comes a day after the biggest remaining pro-democracy news organization there shut down following a police raid. blinken says a free press is a key to hong kong's future as i financial hub -- as a financial
hub. the chairman of credit suisse reportedly broke quarantine rules for a second time, according to reuters. he attended the wimbledon tennis finals in london in apparent contravention of u.k. rules. earlier, he was said to have flown out of switzerland when he should have been in isolation. credit suisse is not commenting. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this bloomberg -- this is bloomberg. ♪
crises are clearly the main drivers of risk in markets, and the point i want to make there is they are also huge problems for incumbent governments that are going to cause a range of attempted policy responses and maybe even poor policy responses. jonathan: looking ahead to 2022 with tina for them the head of global policy strategy at a longhurst -- with tina fordham, head of goebel policy strategy at -- of global policy strategy at avonhurst. as far as the diary is concerned in washington, d.c., the time, 3:30 eastern time is when a call will take place between the president of russia and the president of the united states. joining us as greg valliere, chief u.s. policy strategist at agf investments. your outlook for geopolitics,
and the united states and the communist party. greg: i do think this is a big wild for next year. i think for the time being, vladimir putin has to worry about a guerrilla war if he invades the eastern ukraine. i think the ukrainian army can't beat him, obviously, but you could have in the hills a guerrilla movement. does vladimir putin really want to have that happen to him and his job approval rating back in moscow? i think it will give him pause. the other big story obviously is china. postal olympics, i think china will sound even more belligerent on taiwan. i think that u.s.-china relations will stay very rocky. jonathan: talk to me about how one may impact the other. we have seen president putin make incursions elsewhere, particularly with crimea.
not exactly a big red flag to the chinese to say not to do the same. do you see the two stories linked in some way? greg: in some way, and i would add afghanistan, the way we exited was so inept, so dysfunctional, that i think afghanistan showed not only our allies, but our adversaries, that our foreign policy has some real flaws. matt: is that going to be a problem for this administration and the midterms? greg: you know, the midterms is quite a smorgasbord of issues coming up. you've got terrible messaging, as you guys have been talking about this morning, on covid. you've got fairly inflation being a problem for a while. so i think joe biden needs a victory. he needs to get something. i think the white house will be willing to take just about anything from joe manchin. as you guys know, i said most of
the fall i did not think we would get a deal. now i am beginning to think there will be something in the spring that the white house might be able to call a victory. matt: they will take anything from joe manchin, then you get kyrsten sinema, who once something different. even if they take what joe manchin wants, are they going to face resistance from someone else? greg: good point. i think when push comes to shove, kyrsten sinema will go along. i think manchin is still the biggest wildcard, but i think even he would be willing to take scaled-back provisions, the child tax credit, scale back on a lot of issues, maybe instead of $2 trillion it goes down to $900 billion. i do's and there is a deal there, and i think the white house and even the progressives will take anything they can get. kailey: taking domestic and foreign policy together and
assessing the biden administration, how much success has the admin is to ration had at fulfilling some of its campaign promises to build back better and bring america back to the global stage? greg: we got a big in for structure bill. that was a big deal. otherwise, it has been -- big infrastructure bill. that was a big deal. otherwise, it has been he mixed picture. i think they will look for other people to blame. if inflation continues, they will have officials look at price gouging, anything like that to find blame, because they are looking at a really bad loss in november in the house. the republicans only need a net gain of five seats. i think it is likely the republicans will have a net gain of 20 or 25. that means in the second two years of bidens presidency, i don't think we will get much done at all. kailey: speaking of the president, and this relates to the midterms as well, his approval ratings have been stuck in a very low range.
inflation part of the problem docking his administration. can you see anything being accomplished that is actually able to lift those ratings? greg: that is why i think we can still get a deal. i do think that while there will be really choppy news in the first half, especially with inflation, as we get into the second half, the economy and the markets may look a little steady, but he needs this quickly. if he does not get it quickly, not only is the house very likely to fall, there is also a decent chance the senate could fall as well. jonathan: what do you think will inform the president's decision to run for a second term, and do you think after the midterms is the right time to make that call? greg: it is a subject of great speculation here in washington. he has to say he is running. he did last week. if he says i am not sure, he is a lame-duck instantly, so he has
to say he is running. he said last week as long as his health is good. but i have to tell you, you talk to people inside the beltway in both parties, and there is widespread opinion that he will not run for a second term. the problem for the democrats is that they do not have an obvious successor. jonathan: we appreciate your insight, for everything this year, too. thank you. greg valliere of agf investments. i set a couple of days ago some good news for the democrats exists. the good news is that the midterms aren't today, because if they were today, that would not be pretty. matt: it is a very good point. they have until the summer, and you can bet they are hoping that this pandemic turns to an endemic, but may be even more importantly, that inflation really is transitory. it will be very help full to the biden administration if prices stop accelerating at such a pace. jonathan: to that point, can you imagine a situation by the time
we get to next summer, inflation fading, maybe they passed something big. and next summer looks very different to what we are experiencing right now? kailey: it is entirely possible, but then you have to consider historical precedent, and usually the midterms do not go the way of the incumbent party. that is just how it traditionally goes. i think the democrats have quite a challenge even if they are able to pass build back better in some form, of retaining their majority, given how narrow it already is. it is going to be a very interesting question to see if anything can really move the needle. jonathan: for any written -- for anyone wondering if it is too early to ask if you will run for a second term, they were asking that question even before he was president. from new york city this morning, looking to close out 2021 with kailey leinz and matt miller. just a couple more sessions to go. futures positive nine on the s&p. we are up 0.2%.
♪ jonathan: two more trading is to go -- trading days to go. live on tv and radio, we are positive nine on the s&p, up 0.2%. advancing on the nasdaq 100 by 0.25%. the russell up by just half a point. pretty much dead flat there. we have at 70 all-time highs on the s&p 500 this year, the greatest amount of closing records since the year 1995. can we get 71, 72 to close out 2021? 2.60% on the 10-year. that is the spread between the low and the high i have seen so far. the big groupings are bunching around 2%. let's get into the why.
we spoke to colin martin. he pointed out there are some doubts on the fed's ability to get back to 2% on the fed funds rate. we throw around terms like the end of easy money. if the fed hikes one full percentage point, they are still accommodative with inflation close to 7%. when do they start to tighten financial conditions? that is a conversation we continue to have on this program. it will finish on this for you. in the fx market, looks a little something like this. euro-dollar -0.2%. a couple of hawks out there in the last couple of days talking of the prospects of a rate hike from the ecb, may be the end of next year, maybe early 2020 three. ecb president christine lagarde wants nothing to do with the 2022 conversation. you wonder if it is avoidable with the data set to come in pretty decently for the euro next year. kailey: that data has been coming in hot for some time already, so what case does that make? we are talking about whether or
not monetary policy will get tighter, what that actually means. what will the readthrough be to the equity markets? amy wu silverman of rbc capital markets joining us now. we focus a lot on how him easier -- on how easier money means subdued volatility. in theory, that would mean once you start to see that pulled back, volatility will remain elevated. you see it instead normalizing in 2022 and further. why? amy: i will just give you one data point. in 2008, we hit essentially the same volatility levels we had during the pandemic. it took us four more years to normalize back to pre-2008 levels. we have already done it between 2020 and 2021. there's been a 25 realized volatility point drop in the averages we are seeing in this year's closes. think that continues because even though we get pockets of realized volatility, the market has essentially already gotten used to this new normal. jonathan: -- kailey: we have
also seen this year, buying the dip has worked every sigel time. it has been the consistent behavior. do you think that will change in the year ahead? amy: i actually think it will not. i think we are going to get another gamestop, amc meme/yolo situation. i cannot predict which stock, but we tracked that very closely, looking at these calls and put demand levels. i thing it is going to be very correlated to what we see happen with the cryptocurrency path this coming year, especially with regulatory items coming down the line. matt: what do you look back at to help you predict 2022? do you compare the covid pandemic to the global financial crisis to the internet bubble?
how do you gather the experience necessary to look forward? amy: that is a big part of it. we look at seasonality changes both through realized and implied volatility levels, back as far as we can go, even to 1987. one of the really interesting facts is during the pandemic, we had volatility levels that actually surpassed 1987, as well as the other crises you mentioned. the fact that we come down to pre-pandemic levels within the last two years compared to all the other situations tells you how resilient the market has been overall, and how that has led down into the volatility markets as well. matt: in terms of volatility, we still have a lot of elevated indicators. for example, if i look at price-earnings ratios, we are still at 26.
historically the level is around 17 to 20. how long do you see this market taking to get back to normal from the pandemic? amy: i think it happens next year. one thing i would .2 is the way we are going to see disparity, particularly in options, is going to be within the different subsectors and factors. as interest rates rise, you are going to start to see that distinction between value and growth, so i think you will see it's a volatility difference, but that overall level, i think when we are sitting here at the end of 2022, we will probably be at a 12 or 11 handle in terms of realized volatility and certainly a sub 20 level in the vix. kailey: i want to come back to the retail investor, and you mentioned gamestop. i cannot believe that began an
entire year ago. and i think about the factors driving that activity on the part of retail traders, we had massive government stimulus. they had more money in their pockets. you obviously had ample liquidity provided by the federal reserve. if those two things are normalizing, why would retail activity not be more subdued as a result? amy: i think that is a great question. part of the answer is the person who is on robinhood and trading gamestop options is really the same person who is also owning bitcoin and ethereum. so if we go into 2022 and we get a massive rise in cryptocurrencies, you are going to see that wealth effect spread over into the options again. we know that this investor is savvy in both pockets. the other thing is, i don't know if you recall when we had that the lability freak out with the vix -- that viability freak out
the vix, you saw the retail owning cohort quit, so it may not even be that they are trying to do an upside call. you might actually see that put option volume really spreading as well. kailey: let the record show, retail traders can be bearish on some occasions. you mentioned the cryptocurrencies. we talk a lot about equity volatility. there was a narrative out there that crypto volatility was going to start to become much more subdued as you have institutional adoption, as you have the introduction of formal mechanisms like a crypto etf. we did get those things this year, and yet you are seeing just as much volatility. do you have any reason to expect that will change? amy: i think in the overarching 10,000 foot level, sure, the institutional adoption, all the
things you mentioned will eventually cause volatility to normalize. i don't think we are anywhere close to that. i think the large part will be regulation. the second half of next year will also be a big catalyst for the ethereum network when they go from proof of work to prove of stake. all of these things are still really in their infancy, so i think that cryptocurrency continues to behave like a risk asset. when you say the top 10 still only 30%. i thing that has a long way to go as valuations come down. jonathan: as we assess 2021, it was about 12 months ago when we started the gamestop mania, people talking about the apes, etc. what is frustrating is how many looks down their nose at these new investors. what is your lesson? you talked about just briefly
the sophistication of some of these individuals in this market. i think that is still overlooked 12 months later. what have you learned about that? amy: it has been an absolutely fascinating ride for me. i have been in derivatives for 20 years, and for much of that time, no one ever knew what i did. they think i am a stockbroker or that kind of thing. and then you look at reddit, and they are talking about gamma squeezes, which is something that you can't really know unless you have had a more savvy introduction into the industry. these investors knew that they were causing these momentum based over hedging in the markets, and that was causing a lot of action you are seeing. that is why we separately track now the activity of skew inversions in something like tesla or gamestop or amc, and we split that up from the more
blue-chip parts of the market because we know this activity is something that can continue to be a phenomenon. jonathan: amy, thank you. the wonderful amy wu silverman of rbc. i think we've got to appreciate on some of these forums company composition of the investor base -- these forums, the composition of the investor base is not all of the same. i think it is fair to say we've got to get from this dumb money story of decades ago. the retail store today is exceptionally sharp in many cases compared to what people might have thought they were 20, 30 years ago. matt: absolutely, and changed the narrative. this is not the case of something that has burned out already. we were just talking about gamestop, still up 700% from the beginning of the year. i am still not sure what people are going to buy from gamestop because i download all of my video games online, directly on the console. it will be interesting to see,
and i think amy's point to the sophistication of investors is really key. a lot of them know what they are talking about, and if you spend enough time there, you pick some of it up. jonathan: it is funny that we end the year with institutions working out what is driving their trading strategy. kailey: retail investors have proven to be a collective force in this market because a lot of their power came from the mentality that you had all of these people going and once -- going in at once on these trades, so they were going in one direction. jonathan: i've never liked that phrase, the dumb money, the smart money in the market. ask the smart money why we are at 1.53% on tens. this is bloomberg. ♪ ritika: with the first word news, i'm ready. president biden and russian leader vladimir putin plan to
talk by phone today on what the white house calls a range of topics. this concern about russia's military buildup on ukraine's border is leslie to be high on that list -- is likely to be high on that list. the u.s. warned russian aggression would be met with unprecedented economic action. a record number of daily coronavirus cases worldwide. more than 1.7 million people were reported to have covid on wednesday. that is the most ever come on the third day in a row with more than one million infections. a high transmissibility of the omicron variant is expected to drive records and the days to come as well. ghislaine maxwell is likely to face years in prison. she was convicted in new york on five counts tied to sexual abuse. she is not likely to be sent to mmm security prison camp -- to be sent to a minimum security prison camp.
more than 200-6000 cars are being recalled because the rear trunk lid may interview with the review camera. tesla is also recalling model s vehicles because of problems with the front trunk latch assembly. robinhood is working to let more traders use roles options contracts to let them close out a position and still not pay to open a new one. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪
collapse we have seen over the past year. this is the start, but i think we are still going to be dealing with these supply issues for the better part of the upcoming year. there's a long way to go in terms of rebuilding those inventories. jonathan: sarah house, senior economist at wells fargo securities. with matt miller and kailey leinz, i'm jonathan ferro. the s&p advancing 0.1%. yields in a couple of basis points, down to 1.5324%. you have two days left of trading in the united states as we close out 2021. i know there are some complaints out there. why are we open for trading, never mind tomorrow, but the whole of this week? this story stipulates that the exchange will be closed either friday or the following monday if the holiday falls on a weekend. good news, unless "unusual business conditions exist, such as the ending of a monthly or yearly accounting period." for that reason, we will be at
work tomorrow. matt: sounds like those rules were written up in 1892. jonathan: i agree with you. matt: it is so arbitrary. i want to reiterate, i am happy to be here at work, and i am thankful for this job. [laughter] kailey: he's hoping management is listening. jonathan: who is that message for this morning? you know management are off too, matt. matt: although yesterday i was complain about working during this week and got a message from someone higher than me in the managerial chain who said, don't you want a paycheck? yes, i do. [laughter] jonathan: i share that view. voting is now, bloomberg's kriti gupta with our chart of the day to keep matt and i out of trouble. 1.53% on tens. kriti: one of the big questions we are ending 2021 on is if we are expecting three rate hikes in 2022, why are yields so low?
i like to look at history for mom is like these to see if there's a pattern. that is what my chart of the day shows. essentially, the twos-tens curve going all the way back to 2010 and really accounting for the last recovery period, this expansion you have seen. i want to highlight three distinct parts of the historical timeline. first in 2013, when we talk about the taper tantrum, and then what we are seeing now. in 2013, the big question was do we start to see a hike in monetary policy as signaled by a ben bernanke tapering? that testimony sent the 10 year yield higher in particular, and created this extreme reaction in the treasury market which was then turned around and pared back. we saw a similar reaction with the trump election in 2016 for the 2017 start of his term. he saw this massive risk on behavior after his election, this massive jump in yields, and then it turned around at the start of the term.
you are seeing a similar thing now because at the end of 2020, that pfizer monday when we got the vaccine news, you saw this extreme move in yields get that is now getting pared down. we are wrecking our minds talking about what is the fundamental reason for some of the yields. matt: i'm wracking my mind with all of these dates. how many years did you just give us? kriti: i've given you a lot, but there's a lot of history to get through. a sickly come of take away here is that we are talking about fundamentals. how much fundamentals are driving the market. but sometimes it is just technical. sometimes you are just reversing a very extreme move. i know that jon is cringing that i mentioned nichols, but that -- mentioned technicals, but that seems to be what is driving the market. kailey: but tom keene is smiling because he loves the historical. we have seen a persistently flattened curve, and the financials are up 33% this year which of the best performing
groups in the s&p 500. kriti: that is really where you see the massive macro disconnect. a lot of folks have been saying the stock market is taking their cue from the bond market, and they were earlier in the year. now you are starting to see that dispersion. if the bond market, even on a fundamental basis, is pricing and slower fundament of growth in 2022, or perhaps the effects of the omicron variant, the stock market is still hitting record high after record high. that is something that is not just isolated to financials, but in the broader market as well. matt: is this all built off of 2022 earnings expectations? kriti: it kind of seems like it is. in addition to operating margins, if you look at how much operating margins are a prediction in 2022, the consensus seems to be that those margins will continue, the a lot of these companies will be able to pass on those higher costs on to their consumers, which is interesting because that is not what the bond market is saying.
the bond market is saying inflation is still going to be a problem in 2022. jonathan: awesome as always. i was not cringing at all. i was reading through this cathie wood tweet fred from overnight that says the following. "in our view, fears of inflation will give way to confusion and fears of recession during the next three to six months. if so, the rapid growth rates of truly innovative companies, many of their equities should be rewarded handsomely." an important thought exercise for is all going into 2022. matt: absolutely. you said at the beginning of the week, we have not been talking enough about earnings. i think that is very true. we started off with ed yardeni. i have been talking to pretty much every guest about it since. if we have 8%, 9%, gina martin adams saying almost double digit earnings growth in 2022, then
that would continue the strength, or you would think that the market strength would continue, especially if we continue to get these kind of valuations. jonathan: what do you make of that? fears of recession during the next three to six months. if so, the rapid growth rates of truly innovative companies should be rewarded handsomely. kailey: i think it is interesting. part of that thread which is quite long, she talks about it being the opposite of y2k, in that the industries that are most dealing with these excesses in inventories are the ones that are going to be disrupted by technology, and therefore you are going to see a flipping of what we saw two decades ago. on the growth versus inflation side, i am not sure anyone is too worried about the risk of recession right now. i guess the question is maybe this is reflected in the flatter yield curve we were talking about, the fears for growth down the line if the fed is really aggressive in normalizing policy. jonathan: i will get to that quote. "this build up, along with m&a and ipo's, rhymes me -- and
ipo's, remind me of y2k. energy financial services, transportation among others, if so, this will be the flipside of y2k, completing the circle." matt: i have been hearing about transportation disruption for nylon a decade -- for nigh on a decade now. i just don't see us getting away from individual car ownership, and whether the powertrain goes from i.c.e. to electric or not, that does not really change the way the whole industry operates. jonathan: when can i get a subscription to sadie's and have a self-driving car just turn up on the street for me? matt: you can get a subscription now. it is interesting you mention that because i am on the volvo website. you can get a subscription to a volvo. you only pay a monthly fee, but
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>> the fed has probably overstated its welcome on qe by about six months. >> there is some limitation and what the fed can do given a lot of the inflation pressures. >> once they do that rate hike in march, maybe that is the end of the dollar strength. >> they are moving towards neutral. >> monetary policy stays in the middle. that is great for markets, great for the investor class. it is great for the country. what we don't want is shocks. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. -- what we don't want is shocks. >> this is "bloomberg
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