U. S. Trading session. We have a third up session . Julie hyman has the answers. Do, at least for now p we know things tend to change throughout the session. Right now, we are seeing stocks in the red, even as Jerome Powell talks. Keeping an eye on rates as well. Far to his thus comments, all those are bouncing off the lows of the session. Take a look at the groups on the move today. Even though we are not seeing steep declines in u. S. Markets, we are seeing a broadbased decline. Look at the imap on bloomberg mostly read on the screen. All of the major groups are down. Sensitiveest rate groups continue to suffer. Health care is one of the big drags on the major averages. There is a lot of movement in health care this morning to keep an eye on pay first of all, keep an eye on. Dental trade we are talking about henry schein and patterson companies. These Companies Control 85 of district readers sales of dental products and services, according to the ftc. The ftc alleging these companies refusing discounts to groups that serve smaller dental practices. Then, you have the amazon threat continuing. The wall street journal reporting that amazon has met with hospitals about potentially becoming customers of its business. Amazon shares higher. The journal reporting a potential deal that the strategy and part would be to resist that threat from amazon. Walgreens in talks to acquire bergen, of which owns 20 ,are ready said it would buy the rest. What about companies of drug produces not being named as the likes of wall walgreens . They are taking a hit. Cardinal health, their shares are lower. Mckesson and owens are also falling today. There is concern about amazon getting more into the health care business, what that could look like. Vonnie thank you. Lets get back to this breaking news coming in prepared remarks for Jerome Powells inaringin ceremony washington. We are joined by michael mckee, saying the type of things you would expect the fed chair say, particularly considering the rout. Michael the fed is remaining vigilant, but not just towards inflation but to the markets. A reassuring comment from him as he tries to establish credibility. Basically, it is what you would expect. The fed gradually raising Interest Rates. Making progress towards our targets of moving inflation up to 2 and bringing down unemployment. We are also aware of Financial Stability risks. He did not suggest changes in fed policy, but did suggest the fed is keeping an eye on things. At every little thing he says. He is trying to reassure him since day one. His First Official comments on his swearing in ceremony. Vonnie tomorrow, cbi cpi will be on how wills radar. Small Business Owners are optimistic. They see the tax cut as providing them an opportunity to expand. The question is do they follow through . We will have to wait and see. Toll business also looking hire people, but can they find the people . That is a real question that comes up. Inflation data, very important paid although in january, it looks like we see inflation fall back a little bit for statistical reasons. It may not give people a clear lead on what the fed is seeing. Vonnie is there something that may give the fed pause in march . Oesnt look like it at this point. We will have to see how inflation continues to develop through this month. And seeo the core whether we are seeing some of the stuff that happened this time last year fall out. The cell phone prices that janet yellen used to like to quote a lot. That will fall out of the data. We will see if there is a big jump in inflation to compensate for that vonnie thanks to michael mckee. Nejra interesting to see whether we get any kind of reaction globally from any more comments or fall out. We have been asking a lot of guests whether there is a powell push. Lets get back to europe. 90 minutes until the close of trading in europe. Firmly in the red. Julie made the point it is not necessarily the magnitude but the breadth of losses. You are seeing a lot of these benchmarks in the red after the stoxx 600 closed higher by about 1. 2 in yesterdays session. Some jitters coming back. Againstputting again premuch every g10 currencies. These currencies against the dollar here. We are seeing dollar weakness. Euro strength as well, up 6 10 of 1 . Yields moving higher, generally, is what we are seeing. We are seeing that more in the periphery than in the core in europe, but you certainly see yields at higher in italy. Moving on to the look at the Industry Groups. To what juliee was showing in the u. S. Underperformance in defensive sectors. The terminals stocks outperforming, but over all, most Industry Groups down. We want to focus in on the pound, because we did see that move higher after her the inflation print from the u. K. 2. 7 core. One percentage point above the boe target. We did see some sterling strength. Finally, to quickly show you what is happening in the bund market intraday, we were seeing yields move higher in the periphery. And the core, down two basis points on that 10 year bund yield. Vonnie thank you for that. Mitch mcconnell is a speaking on the senate floor right now, saying he wants a bipartisan Immigration Solution this week. That is this week, according to the majority leader in the senate. As markets look for stability, one money manager is bracing for another sharp selloff. Movesn you get parabolic like we have had and steve selloffs, you do get some kind of error recovery, short you do get some kind of recovery, short recovery. Second laidget a down. As you go to the fed meeting theh, night march 9, plan is to lay it down. Vonnie joining us as Michael Kelly, from pinebridge investments. Jump in or wait . Niblingsit should be through the whole thing. It is impossible to tell whether it is another like down or not. It iseen rates up no longer a oneway street for equities. Up until now, rates have been dormant. Of a fair somewhat fight. Buy equities will still win. Any weakness is really a buying opportunity. We think of this like the mid 90s. Mid1990s. A big selloff in 1994. Stocks soared until 1996. Stocks will follow profits, and profits are soaring this year into next year. Vonnie are you anticipating a big selloff . Can we go past three soon . Michael we are heading to the low to mid 30s. The question is case. If the pace is too abrupt, that will rattle equities temporarily, but not permanently. Equities can handle 3. 5. That would be a sign that things really are that good, and profits are at pace. If it is a slow movement, everything is fine. If it is more abrupt, we will have a temporary, small, little correction. Vonnie where are you taking your cues from right now . We saw the spike in the vix, but now, people are turning to other indicators. Are you looking at economic data, company earnings, Market Metrics . Michael we are an intermediate fundamental firm at pinebridge. We are not looking at some new magical or mila formula. Always one that has worked perfectly until the moment you rely on it and we are looking at profit reports. We are extremely encouraged that top lines, after being fairly stagnant, revenue lines are beginning to accelerate. We think that can go on for a very long time. Because we were in a very slow period as the private sector the leveraged. Deleveraged. When that happened, after eight years, we are seeing a slow recovery of profits. That is moving into a faster motion acceleration. Very exciting. Something to buy into in the equity market. Nejra your two chief concerns and2018 are a minsky moment rising inflation. Given what we have seen over the past couple of weeks, or either of those concerns more pronounced for you now . Michael we had the minsky moment. Stability create its own instability is what minsky said. Because we had such low volatility, many people began betting on that low volatility sustaining itself. The tranquility we had created its own instability. I know it is in the news right now, but we should begin worrying about that a little less now, because those traits are pretty much shaken out. Nejra are they, though . When people keep saying buy the dip, part of me thinks that encourages people to stop selling and kind of puts an end to what would have been a healthy correction if we allowed equities to drop further. There are people saying we need another dip before we say with conviction buy now. Michael touche. [laughter] having said that, follow profits. Whether we have another or do we aree another dip, seeing top lines and bottom lines accelerate. It is a worldwide phenomenon. Many say it is late cycle. We understand there are fears. More midcycle Interest Rates waking up for the first time. There are several years left. Follow profits. Stocks almost always do. That is what we continue to be focused on. Nejra is there any risk to profits if we see borrowing costs, the 10 year yield lets talk about the benchmark moved significantly higher from here . Michael corporations use the low Interest Rate period to lock in their debt very long. They are as long as we have seen them in decades, in terms of locking in borrowed costs. The individual, very wisely, did the same thing. The individuals floating rate exposure i just about mortgage is at a 20 year low. Yes, higher rates will slow things down at some point. We think that point is once you are beyond 3. 5 on the 10 year. Sort of clear sailing for now. We hope it is a slower process than a faster process, but the economy is very strong. It can handle up to about 3. 5 . , thank Michael Kelly you. Lets check in on the first word news. Here is taylor riggs. Taylor a judge has held up and arrest warned for julian assange. He spent more than five years of evading the law in london. He is wanted in sweden for questioning about allegations of Sexual Assault and rape. Embassy, hes the could be arrested. It may have been the deadliest fight between citizens of the u. S. And russia since the cold war. According to people familiar with the matter, u. S. Forces in syria killed between 100 and 200 mercenaries, mostly russian, fighting on the half behalf of syrias leader bashar alassad. The u. S. Secretary of state is telling the antiIslamic State coalition to keep their eyes on the prize. The 74 nation group assembled by the u. S. Is meeting in kuwait. Tillerson pressed the coalition to overcome internal rivalries and focus on eradicating Islamic State from iraq and syria. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Vonnie thank you. Coming up, big interviews this hour from the Goldman Sachs 10,000 Small Businesses summit in washington, d. C. Senator tim scott from south carolina. Later, representative Kevin Mccarthy. This is bloomberg. Vonnie live from new york, i am vonnie quinn. Nejra from london, i am nejra cehic. This is bloomberg markets. This week, the u. K. Prime minister is embarking on a push to bring her divided cabinet together on brexit. In the u. S. , the senate is far apart on immigration, and the president is talking trade with senators. Joining us is tina fordham, analystsbal political at citigroup. Thanks for joining us. If we look at what sterling is doing today, it is higher on the u. K. Inflation data. Generally, it has sort of been tracking inflation bets, which could signal the move in sterling is rooted in fundamentals. Our currency traders underestimating the political challenges in the next few months . I suspect currency traders are focusing on the latest announcements from the bank of england, digesting that we may get a series of rate hikes. Whereas exit news has been difficult to price whereas brexit news has been difficult to price. That may start to change in the following weeks, with more planned between the premise that her cabinet. Nejra what would you need to hear from those speeches to feel reassured that the u. K. And e. U. Are on track for the end of march . Tina we need concrete results out of the brussels summit in march. E. U. Summits are not the kind of signposts that traders and currency speculators tend to focus on. They are kind of news nonevents. That will be crunch time, which is why were seeing the Prime Minister launch this series of speeches to put meat on the bones of what the u. K. Wants from brexit. Nejra elsewhere in europe, will be the greatest Political Risk for you . Would it be germany or is it more italy . Fidelity are said to be buying more italy, and those spreads are said to be tightening. Tina certainly, u. K. Risks around brexit are one of the most uncertain around europe, but hurting the u. K. More than any of the parts of the European Union. I put italy next, with elections coming up in the next couple weeks and no clear scenario likely emerging. Fivestar movement in the lead, but with an important caveat the fivestar movement and euro skepticism in general is no longer a big risk. Government inweak italy, a Hung Parliament or some other suboptimal outcome, but we will not face the prospect of an onout referendum in italy European Union membership. As to where curious you put the odds of a second referendum in written right now. Have the in britain right now. Have they gone up . Tina not if you look at public demand for them. Remainders remainers get more organized, but there is not a big uptake of support in staying in the European Union. That leads to the risk that a second referendum would deliver exactly the same results. What may happen is obstacles in the political process along the way, eventually, perhaps, in the house of lords, scottish parliament, or elsewhere. We have to also remember the cognitive dissonance that voters seem to have at the moment. More british voters are worried about the u. K. Economy, but they do not seem to be educating that to exit i chew beaching attributing that to brexit risk. Ie are they concerned about policy . Isa the answer to that mainly geographics. U. S. Investors feeling very bullish. In , this was evident wass, where the u. S. Mood positive. In europe, more cautious. Really ask me, as chief Global Political analyst, about prospects for impeachment risk and also a possible change in control of the houses of congress. There is a considerable possibility that immigrants take control of the House Democrats take control of the house. That would lead to more impeachment risk. But u. S. Risks are underpriced. Vonnie in the u. S. Or europe . Tina amongst global investors. This has been true since Trump Took Office the focus of of the focus is trump would do andbusiness agenda items not other things. The tax cuts provided a huge boost and overshadowed other risks coming down the pipe, for example, results of the mueller investigation. Chief tina fordham, Global Political analyst at citigroup, thank you. This is bloomberg. This is bloomberg markets. I am vonnie quinn. Thats get a quick check of the markets. We are about an hour into the u. S. Session, and the s p 500 1 . About one quarter henry schein down about 10 , leading the s p lower. Under armour up 15 . Rcebergen up about 9 . The vix at 25. 7. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. We use so why do we pay touterst and cthave a phone connected. When were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. Live from bloomberg World Headquarters in new york, im vonnie quinn. Live in london, this is bloomberg markets. Lets check in on the bloomberg first word news. National congress has decided to replace president jacob zuma. No timeframe for handing over power to the new leader. Zuma wanted to stay in office for another six months. Investigators say the crash of a passenger plane may have been caused by human error. Equipmentot turn on that could have resulted in an accurate speed data. 71 people on board died. Low take group will be sent to prison for bribery in the scandal that brought down a president. To 30 months. Ed a former president , in exchange for government favors. A Record Number of small Business Owners in the usa today is a good day to expand. Optimism among small Business Owners rose more than forecast last month. Global news 24 hours a day powered by 2700 journalists and analysts in 120 countries. This is bloomberg. Time now for our stock of the hour and 15, even more under armored shares. Doolittle joins us. Is this the end of the hard times . I am sure they are hoping it is. The u. S. Much better than expected. Internationals very strong. They wanted a turnaround. The Company Started to stumble. Down 80 . This pretty strong. Footwear up 9 . 2017 was a reset. Julie what about the outlook . They are talking about this is a twoyear journey. It looks pretty strong. They guided the u. S. Down. International up 25 . They have a lot of inventory to work off of. Armour, we are going to see in addition to the outlets they have, dicks sporting goods, foot locker, cabelas, they have a lot of inventory to work with. They have also outlined there will be 75 million of cost savings due to this. Vonnie happier days. Italian fashion label gucci past fre rise, surging nch rival hermes. What is behind guccis growth . Gucci has had a wonderful year last year. We grew by 45 . Have very healthy growth. All has been done in every region. 44 , we are still enjoying it. We can continue to grow significantly. Is this a bubble . No. One but it is very healthy. The growth is well spread over all the categories, over all of the geography, over all the client tells. It is very strong. Chain,s of supply ability to cope with the growth in terms of production, we know the lack of quality, this is all in place. Confident we will be to growcontinue significantly above the growth of the market. Become bigger than Louis Vuitton . Why not . 21 million followers on in 2017. , up 17 is it hard to attract millennials . Part of the growth has been driven by this new generation attracted to luxury. Salesd to have 30 of our growth but this generation is reaching above 50 . In addition to the existing is very that generation is completely connected, completely digital. They express their own personality. The only way to create a sincere emotion is creativity. Proposing a strong creativity to talk to that new clientele. How much is the brand dependent on the creative directors . We are not depending anymore on the designers. The designer is depending on the brand. The way we choose our designers, we have a clear vision of the profile of our brand and we recruit people that are fitted did for the brand. To do itrying to is the reverse. It is a winwin situation. An amazing brand like gucci. Also, in paris, in an exclusive interview, lets check on the markets. After gains of more than 1 , seeing a little bit of a different picture today. Some softness coming through. We are lower against a lot of those u. S. Benchmarks. You are seeing the 10 year treasury yield. Of yen gaining against most the g10 currencies. T is a risk off environment nejra live from london. Vonnie this is bloomberg markets. Turning to u. S. Politics with Congress Moving beyond the budget adult for now the focus is turning to other legislative priorities. Immigration and the infrastructure plan. David is with one key republican senator at the center of the action live at Goldman Sachs 10,000 businesses summit. David we are joined by tim scott, from south carolina. Welcome. I have heard you described as a serial Small Business starter. What did you bring with that . One of the things that helped businesses arel the hr department, the ethics officer, the Small Business owner is saddled with so many responsibilities. The least thing we can do is reduce the hurdles. When i start working on tax reform or responsible regulations i thought back to the time of going to the county office were paying my taxes, all the Regulatory Burden, it is oppressive on most small Business Owners. To try to clear the path, they are the folks who are going to reinvest in their communities, hiring folks from their communities. Lets make it easier for them to do what is in our best interest as a nation. David Goldman Sachs is part of this survey. They said what you said. They spent a lot of time on compliance. State and local. Every time they cross a jurisdiction there is another regulation. Is there anyone trying to harmonize these things . I am working on ways to harmonize the Regulatory Burden for Small Businesses. The more we understand and appreciate what that looks like the more energy and urgency we will have to address those issues. Opportunity, it will take 10 years for a Small Business owner who gets a contract to build a road. Is of the things we can do reduce that burden and harmonize where we go with that approval process. The same is true with the retail business. If you have multiple locations youre paying taxes everywhere. Understand the burden so you figure out to lift it. Taxes werehat survey not one of the top three persons concerns. We had a budget plan last week. Some people are concerned that might lead to inflation and higher Interest Rates. How would that affect small theyesses . On the one hand would give people tax breaks. Small businesses have higher Interest Rates. That is going to hurt them. I was reading the economist magazine. Increasings are more opportunity. We have seen positive signs but that puts more pressure on inflation. That created volatility in the markets. It does cut both ways. For us, we have to make sure we have greater confidence in the people running businesses and make good decisions. When that happens longterm what you will see happen is more stability and longer spans of growth which is critical for those folks who are stuck in longterm unemployment. We have folks still in the workforce. When you add back in those folks who have just stopped working, it had six and a half percent. We have a lot of work that still needs to be done. Requirearters do not more than a high school diploma. We have more work that needs to be done. We have to put pressure on reducing the burdens. The Regulatory Burden is the number one thing. Taxes are lagging behind. No Small Business owner thinks they have anything to do with the tax burden. Another one is the cost of capital. The deficit does feedback into Interest Rates. How concerned is the senate . Think the next tuesday i am on the banking committee. I will have a chance to talk with our new federal reserve. Questions im going to pose, with employment numbers , wages increasing, what is the pressure with the rates in the next quarterly meeting . A strong indication of what we are going to have to do in the future. I believe the tax cuts can help us reduce that overall burden. Is consistently out of control and our primary spenders are not the ones we appropriate annual leave. We have not figured out how to wrestle with that yet. Flags and you are going to have to talk about entitlements. If you are a current sinker s senior, we are not talking about you. We have to change the trajectory for folks in their 60s and 70s. Im going to be back with an interview with Lloyd Blankfein to ask him the same questions i just asked the senator. Looking forward to that. Thank you. , we have the vix at 2592. It is lower than it was last week. The dow and s p 500 down a quarter of a percent. Futures atde oil 5869 a barrel. Crude oil feeling the impact. The risk off tone to the markets. Vonnie im tony gwynn. This is bloomberg markets. Stocks are lower but they are off their lows now. A big rebound leading up to this. At thedaq is flat moment. Joining us now, the head of Retirement Solutions at jpmorgan asset management. We are delighted to have you. You were ahead of Retirement Solutions. What is the solution . Tell everyone what they can do to get that rate of return. One is making sure you say. The return rate doesnt matter at all if you dont do that. Thing, i happened to run our target date funds. So ande 125 billion or assets under management. Peoples retirement savings, when our market events like what happened, do you get cold . I would not say them easily. From our perspective, we are trying to manage these target dates over a 40 year cycle. 67 . Nk you can expect that is not a bad return. But you have to get in and stay in. , especially for someone in a 401 k plan, they are generally content to check in once a year. I feel like now we are touting six and 7 as a good return. That would have been calls for real concern. Your assumptions have changed. What are your assumptions when it comes to retirement age . The industry convention, one of the things we setting to talk about is simultaneously with Social Security going up Many Americans are staying engaged in the workplace longer. 67 is going to be the new 65. Ande project forward someone is saving 10 a year and their employer is contributing 34 they are going to be just fine. You look longterm but a lot of people are looking over the last week. I want to show you a chart here on the bloomberg. Speculatedsitioning short two and 10 year treasury details. They have started to go less short on the front and. We might seel you more steepening . I find it fascinating that a month ago everyone was warned about the flat curve and now we have a steep curve that means we are worried about growth accelerating. That is why we are asset allocators. We have a flexible approach. We have to be able to respond to those views. You want stocks, you want bonds, you want global. You want to have a view on the Interest Rate curve but also have that tied back to your overall view on the macroeconomy. We dont think we are any closer today to a recession than we were. We do want to keep a close eye on inflation. So far we do not see anything that fundamentally changes things. Vonnie if you are not too worried about inflation and the recession what are you worried about . See is thatthat we we are underestimating full employment. Maybe we are closer to that number. ,f i have to put a normal worry is the fed going to be perceived as being behind the curve . Economy,rt of full full employment economy . Vonnie you have 24 targeted date funds. The Income Builder Fund has the most assets as far as i can tell. You are in things like pfizer and microsoft. There is a lot of large names. What are you anticipating for a dividend going forward, particularly with shareholders clamoring for more and more . Has gone back in history and had interesting dividend yields. It has lagged far behind europe and asia. One of the things we have been observing is those dividend yields have been going up. We think that continue to be an attractive source of yields. And we look at europe certainly outside of japan, the asian equities and emerging markets we see higher dividend yields outside of the u. S. Perspective europe is a more interesting play because of where the evaluations are and because they are higher. It is not that far away. You investing bond market wise . In our coreositions bond fund. We invest with others. Fund, core bond underweight treasuries and overweight credit which we think is appropriate. A lot of exposure to highyield in emergingmarket debt. Which we think is a great way to recover the u. S. Economy without having as much risk. I love that you have a 2055 fund. Head of Retirement Solutions, with all the answers. We want to get back to the Goldman Sachs summit in washington dc, live with a top member of the house of representatives. A top member. The House Majority leader, Kevin Mccarthy from california. Good to have you. We are here at the 10,000 small is news conference. You have done some pretty big things. You have a big tax law. That through the prism of the Small Business owner. How is that going to affect his or her life . The lowest rate cuts in 40 years. Access to capital matters. You look at the number of bills that we passed, you will find more people willing to invest. Investors. Private putting a budget deal together, less chaos. For the next to budget years youre going to get away from these continuing resolutions and the government shutting down or not. , you are goingty to think that is better. Atlanta areashe are saying . Lower than the worst your under bill clinton. You want to start a business in the growth years, to make a real difference. Donald trump has made growth a top priority. No question about it. A lot of that is going to come from Small Businesses. Time when you survey small Business Owners they dont put taxes to the top of their concern. Qualified people, training people, access to capital. How much of the responsibility is in washington . Like some is in washington and some are in the state. If you are in california it is a tough ways to start a business today. , thewe first came in congressional review act, only one time in history had it and used successfully. It allows you to look back and repeal. These agencies passed something. One Agency Proposes a new ulation they will score it it is called a major ruling. Last five years under barack obama you have 82 major rulings every year. 15. Epealed you had a Better Climate system. Job training, we have some of the lowest unemployment. We are looking at how do we get those people who are off work sitting out there, how do we retrain them and get them back into the workforce . The participation rate, the lowest it has been since 1978. That is a bad number to have. We have to look at that retraining. And then wages are going to increase. We should work with the space , youtraining, locational have a lot of people from the military coming back home. I dont know if you are familiar with you city. They give you 100 of your to wish and back if you dont have a job six months. They need to go right into the workforce. The g. I. Bill did not allow you to go there. Now the g. I. Bill is not 15 years or lose it, it is 15 years forever. You mentioned being able to borrow money. How concerned should we be