Fivemonth high. I am calling it the by a celling rally, even the news situation earlier. We will break this all down, speaking with pgim economists nathan sheets and betsy graseck. We want to dig deeper now into this tech rally after amazon added more than a billion dollars in market caps. Abigail has more. Last week it was about it is done now, but that is not the case. Wasail co. Yesterday incredible. Year,s the story of the we will see the stayathome stocks drop, and yesterday that nasdaq 100 on fire up more than 25 , this relative to the s p just up 1 . This has so much to do with the weighting of these mega cap amazon,specifically, apple, and these stocks alone are 46 of the weighting of the nasdaq 100. , andyou have amazon up nothing changing, just a few analysts becoming more positive, that really shifts the metric. A big reason why when you have these stocks, this that is hard to get my mind around this idea, but when they have big days, so does the nasdaq 100. 500 closed sharply higher, and finally if we go into the bloomberg terminal, we have this great chart of the nasdaq 100 fear and greed indicator. Huge swings over the last couple of decades. Had ar this year, but we fear grade sentiment indicator, and that we are looking at yesterday the record high. It is amazing how quickly that shifts. That is not a picture of stability. Expect more big swings to come through the earning season. Doubt. Ote that no joining us now is nathan sheets, he is the former undersecretary of treasury Front National affairs. I promise one day you will be here with me. Not this month, but maybe next month. When you take a look at the market and that euphoria at the equity architect, what is your explanation . Marketsmy sense is the are playing this episode as a temporary shock. I think the markets are saying this thing might go another six might even go another 18 months, but we will get to it. In a think about it temporary perspective, from there it is pretty clear that there will be a lot of winners and losers on the others. I think that is exactly what we are seeing in the equity market and the Financial Markets broadly. That tech was critical to our economy going into this, and it will be more critical on the others of this thing. I think that is what we are seeing in market pricing. I think the markets are also where they are today because there is a sense that the Federal Reserve and policymakers are there to support them and protect them during some of the bad outcomes. I think the key drivers are temporary coupled with relative value consideration. Our Technology Stocks , because they look too expensive Going Forward . Nathan it is hard to look at the traditional metrics for these stocks, that in some sense they hold our future and embedded in their pricing i think is a sense of optimism. Quite frankly there is a sense know, itability, you is hard to get a handle on valuations. I think for the market as a whole the other major factor is the real Interest Rates are very low. When investors think about that arbitrage, some of these tech stocks look like Good Investments over the long run. Alix i wonder in the u. S. How long that can last. Vice president joe bidens plan, paid for in essence with taxes, and a lot of it real estate, and regardless of who wins the white house, it feels like the narrative is higher taxes. I just wonder when the market starts to be attention to that or if the stimulus youre going to get before hand just trumps everything. Like that isfeels the other side of the ledger where there is a lot of uncertainty out there, and with that nearterm it is about the virus and the impact on the economy, or the long run, about the fiscal position and higher taxes. On the other hand, if we do not do something with taxes, the doubtility of much higher levels. I think i understand the thinking of the markets and why it is what it is, but i think there are risks that we need to worry about. I think that asks the right question that every investor needs to be asking, are those risks adequately priced in, even if we think the fed will be there with morse fiscal with more physical stimulus. Francine are we in a bubble . No, i woulduld say not call this a bubble. Do i think that some of this pricing particularly in the equity market is aggressive . I think there is a sense of inevitability, but that does not mean it translate into ever higher prices. At this stage i would not call surebubble, but i am not that all of the uncertainties that i described our adequately priced in. If we continue along the current trajectory for another 612 months, i think at that point we would be in bubble territory. Alix we will talk more about the european recovery, but i wonder if the story of it is time to rotate into value means rotate out of the u. S. Into europe, or is it one of those buy u. S. Tech at the same time question mark nathan europe looks really attractive right now. In terms of their real economic performance, all of those economies are coming out of this covid episode together, and it feels like europe is wellpositioned for recovery Going Forward. I almost am inclined to say it seems like they are better positioned than the united states. My hesitance is that we have felt that way in the past, and inevitably the u. S. Economy gets flexibility and ends up outperforming. Thatis episode it feels europe is in a good place over the next six or 12 months. Started theguess we economies at different cycles which is why you can see the difference, but overall is the market assuming that we have a vaccine in the next 12 or 18 months . What happens if we do not and we go into a stop and start kind of recovery . What will that mean for markets . Nathan i think the markets are expecting a vaccine. I think if it is operational in less than 12 months, that would be an upside risk for current market pricing. If it takes longer than 18 months to get that vaccine, i think that would be a distinct Downside Risk relative to current market pricing. I think it is right and that , that 12you mentioned or 18 months is critical. If we do not achieve that and this episode drags on and the only way out is hurt immunity, this will be a longer slog than we currently expect. Francine thank you so much. Up next we talk a lot more about what we heard from the you leaders about this historic stimulus package to help lead them out of the virus crisis. We will get his thoughts on the deal coming up shortly. This is bloomberg. The stakes could not be higher. The differences remain very very great. 50 ,would say less than but you never know. I do not like playing games but that dutch man is the real responsible man. The majority of them ever states trying to come closer to four countries, but they need to make an effort. We have come up with a response to this crisis of the european union. Takenwe have taking a historic step we can be proud of. The conclusions reached are historic. Francine some of the leaders there negotiating over the last four or five days, and this was an inside story, they started on friday morning sipping mineral water on a sunny terrace and they finished yesterday morning drinking wine and having potato chips. It was a marathon. At the end we did have this deal , and lets get more on this nathannation date sheets. Thanks thisple means everybody gets a bit of what they want, but actually parliament had asked for certain things, more investments in climate change, the rule of law which they did not get. Is this a good deal . Would a no deal have been better . Nathan i think what we are that europe gradually progresss, and this happens from crisis to crisis. I do look at the agreement as a powerful symbol of the intentions of the european leaders to continue to come together and strengthen europe and their underlying institutions. I think the specifics of the deal are constructive and helpful. For one ofthis stage that National Parliaments to reject it would be really hard. I think both from a diplomatic standpoint, even everything this means for europe and certainly from a market standpoint why think that markets see this as an important step toward fiscal integration. Alix i wonder how much more get for their buck can they , based on Something Like this . I think a lot of this was priced in, when the news arrives, at the end of the day, people are happy. I was looking at, if they fail to reach agreement, there wouldve have been a reversal. I think it is constructive, but it is also another piece of this puzzle toward integration and a big piece that supports spreads those actions. I am not expecting necessarily a further tightening of the european the spreads, but it they failed that wouldve been backed up noticeably. Francine what does it mean for i do not know whether you assume the ecb will do whatever it takes for no fragmentation, so there is value in periphery bonds. Believe that there is value in the periphery. I think the combination of what the ecb is doing and other european apparatus in place will make sure fundamentally that these european peripherals pay their debts. In this environment of low rates, low base negative rates through much of europe, investors will continue to be attracted to those peripherals. Net just expands the safety and makes it more compelling than it was previously. Alix we had to look at the differentiation in recovery for example, because the money will be doled out by how much you need it, how much youve been hit by the pandemic, which else the peripherals. Recoverya two speed based on this or do you feel like this helps level everything . Nathan i think a critical point is the money and resources that are allocated will come slowly over time so that the power of this through this crisis period italieso much that the portugals of the world the fact that europe is showing a common commitment to integration and taking a small step towards fiscal integration, and i think that is significant for these peripherals. I look at it more as a level muchrather than how various countries would get at various times. Francine what does this mean for europe . I do not know whether it translates, tom come 10 days no one will care about the summer, it was a disaster and the markets will move on. Nathan i think this is another part of the market effect that has been priced in over the last six weeks or so. I think the euro has strengthened due to the policy response from the ecb, but also the anticipation of this recovery fund. , myon the margin expectation is that this agreement will reinforce the euro, and that along with the monetary stimulus, and as i said earlier the favorable position of the european economys as they come out of lockdowns, i think that puts europe in a relatively strong position and is likely to be distinct lovely distinctly positive over the next few months. Alix if i had wine and chips i would probably also remember that. That sounds weird. Francine i have that everyday. Income, nathan, it is always wonderful to catch up with you. Walmart will be paying out another cash bonus to the store club and Distribution Centers that will add up to about a 428 million, and they will not open on thanksgiving day. There will be no preblack friday shopping, which is very interesting. We will go to break. We will be back. This is bloomberg. Alix live from new york, im alix steel. We had some technical issues, but i wanted to highlight some headlines having to do with mitch mcconnell, the leader in the senate, talking about the recovery plan, it says kids and jobs and Health Care Matter the most. He is sticking by the Legal Protections and went to reimburse businesses or virus expenses, so all of this is moving forward. It seems like both sides of the aisle want to support the economy in every sector. Graseck,s now is betsy mobile head of banks at morgan stanley, and betsy, you cover everything. What have we learned so far from the regionals that we did not learn from the big banks . Just to go through the regionals, so far what we have seen is that there is a little pressure from to deposit growth, and a little bit of a pause in reinvesting deposits, because management is waiting to see how much will stick. That is a difference from some of the major Money Centers for the deposit growth is more operational. They can figure that out more quickly. Alix francine should we worry about loans going bad because of covid19 . I have to say all banks are at risk obviously, but when i think about the skew in the books, heres what i am thinking , the less content that is likely to be the highest will be unsecured consumer credit, but we can make estimates for that based on unemployment rates. The big banks have a more skewed to credit card. The commercial banks have more of a skew to real estate and that exposure is a little bit tougher for investors on the outside to estimate who has what and how bad it will get. I have to say the super regional banks i cover like regions, they give a lot of detail on their exposures. We can see the buckets pretty well, that at risk categories, around 9 or 10 of loans, but i do not know how much collateral is there. That will take a good several quarters to know that answer. Alix what about credit Card Companies, discover, capital one one all coming out also and the provisions they have taken have not seemed to keep pace from what we saw with the big banks. Quartere go into the low consensus of higher reserve build, to your point, and what we do expect is pretty big reserve builds at this quarter. The way we are measuring and is how much reserve are you making against these credit card loans relative to your own bank run a stress test, if you gave us the 2020, or the fed test. What we expect is as long as the stimulus comes through, as you indicated before you came to me, we think the estimates will hold and rethink that the Second Quarter could be the highest level of reserve build that we see in the Card Companies and then it starts to pull back. Different story if the stimulus does not come through. Francine given all of the pressures on banks in general, but also regional banks, the expect more consolidation . Does that make sense for some of the regional banks . We have a few that we will continue to see consolidations. Sorry, we have a few technical problems. Betsy we view that we will can send you to see the consolidation we do have a few that we will continue to see the consolidation, but what is the timing going to be. The timing is probably going to be a little later into the cycle. You need to see how much tougher it gets on commercial lending and commercial Real Estate Lending before that really kicks off. We are talking about potentially later this year or into a net. Alix if you look at the credit Card Companies, what they have to do is cut costs and marketing for example, and a little different if it comes to the regionals. How much headroom is there to do that . Actually cut marketing significantly in our forecast. There is room if they need it, but as i am sure you know, this time is different with the cecil accounting rule requiring banks and credit Card Companies to upfront the reserve cost, the bank estimates for what they will lose in this cycle as quickly as possible. That is why First Quarter and Second Quarter see high level of reserves built. As we migrate into the third and fourth, that cost probably comes down a bit. That is why am not reducing my marketing spend dramatically because we see stimulus coming through and reserves being built here in the early part of the year. If you need it, you could flex market in costs lower, yes. Francine thank you so much, betsy. This is what we are looking at, there was all day meetings between the u. S. And the u. K. As the secretary of state was in london and we know he met with the Prime Minister earlier, and moments ago we were looking at a live shot of mr. Pompeo with dominic rob. They discussed trade talks and this trade bilateral and they discussed the russian cyber threat, one of the biggest stories here. Notnic rob saying u. K. Is complacent about these threats. The issue is the u. S. Has repeatedly asked u. K. Not to use huawei. We will have more on those laterals. This is bloomberg. Bloomberg. Francine live from london, im francine laqua. This is bloomberg markets. European regulators could approve the first covid19 covid19 vaccine this year. There is a report expected to be released today. We have more on this from our guest. Thank you so much for joining us. Professor, first of all, we have trials and the market is saying that we are close to the vaccine. If we have a vaccine, how far away is it, five months, sixpence, or could it take three or four years . The back are they safe, do they generate the type of response we are looking for, so we need to have enough time to see if they protect and how long they protect 4, 6 months, thinking of that, that would be a really short time to make a decision with regards to these vaccines, but we could get there. We note the first vaccines coming out not necessarily be the ones using in five years time. They will improve over time and maybe have longer durability over time. We are just getting to the end of the phase three, we still have to manufacture and distribute, and get it into arms. Alix in the meantime, you work with companies to wind up helping them to reopen to get business as usual, particular here in new york, people are not returning to the office. What are you telling your clients . You are in hollywood, how do you they do business . Ain we have to go ahead with plan thinking it will be a long time, planning on at least 12 months at this stage, just trying to adjust to this new normal to get back to business the best way we can, knowing that we have this respiratory pathogen around them and if a vaccine becomes available, then we just start shifting plans back towards what was before this time. Thingne what is the one that you want to wait on the trials to be more confident about, is that the antibody response in people that have had covid or some of the trials to see whether it stays long enough . Yesterday we were talking about whether it is oneshot or two shots. Erin we really need to get the full safety profile, and while the phase i and phase ii trials have a few people, we are looking at 1000 people was one of the best trials to date. That only allows us to see the Adverse Reactions that occur in 1000 people. We want to know the more rare Adverse Reactions, so safety is paramount. When we get up to these larger 30,000 considering people, that is when we really get a Better Safety profile. When we look at the two studies released monday, we saw that the safety was pretty good, but they were some sort arms, some fevers, things to watch, just to make sure a larger study, we do not see anything more severe. It is durability and protection, we need to know that it protects. We do not have that data yet. We need to know if it actually protects you and how long it lasts. I see this as becoming more like an annual vaccine. Alix i will happily take a sore arm. Phase four is happening in new york and part of that means that movie studios and film and tv can start again. How do they do that safely . Erin that is similar to what we are putting in place for schools. It comes down to isolating groups together to keep that group as small as possible and then lots of testing. The testing protocol that the unions and guilds with movie production have put in place is a requirement of going back safely. Having testing regularly and results quickly is that wall that you need to make sure that what youre doing is safe. We put in place these zones, not allowing interactions to take place between different departments that may be need to have interactions, we have to manage those much more safely so they do not come within that 60 where they do interact, and it is with protective equipment because being indoors over an extended time, which is really film and television, can lead to big problems if you do not manage this correctly. Francine what kind of percentage of the population do you actually need to test every week to get it right . Symptomatic,at are picture . We get a big a lot of politicians are worried about testing given that march was a surprise, that it was here and we missed it for so long. From there is a doctor harvard that has a great plan with regards to testing, and they have come up with a cheap test that we are doing. It may not be good as the current test that we are using in labs, that if you get a read on where you are every day, that is what we need to bring it under control. E do not have those yet the technology is developing, but when we are looking at schools, we want to have a good Testing Program in place, and one of the better ones would be just screening in general, picking five or 10 of the population of the school and seeing what is going on in the school so that you understand the silent transmission. We will definitely have you back, erin bromage, diversity of massachusetts at dartmouth. Coming up, james quincey, our interview, coming up. This is bloomberg. Hike Simon Pagenaud takes the lead at the indy 500 coming to the green flag, racing at daytona. Theyre off. In the kentucky derby. Rory mcllroy is a two time champion at east lake. Touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. Alix live from your, im alix steel. Guy johnson is off. We are talking european close. Mitch mcconnell saying he hopes to get a deal the end of next week. Time is ticking. Francine the time is ticking can we expect to have more detail on what they want to put in the stimulus package. We have the chief executive abruptly exiting. I dont know if we have the reason. What they gave officially is for personal reasons. Alix we will dig into that later. A stock on the move. Definite optimism when it comes to europe, particularly with the dax over 1 , almost in positive territory for the year. U. S. Equities moving higher, particularly energy