500 infotech index up 48 , and the energy index was the least best performer. It still was up, though, which tells you how much these markets were looking for good news. The second best performer, Consumer Discretionary in the s p 500. That includes home depot to amazon, ebay, even general motors, so really across the board, it was a good year. For more on the markets more broadly, we are joined by ing head ofvey, global debt and rate strategy. We widened the curve with a bit of steepening going on. To what do you attribute that . Been a really interesting move. We were inverted six months ago. Happened is the fed has cut 75 basis points. Theyve injected a mountain of liquidity into the system, and theres been a real change in sentiment in the sense that six months ago, we were genuinely concerned about a recession in the u. S. Next year. Have beenerns significantly downsized. Theres still trimming this uncertainty, and we so have a very flat curve. If you look at the twostens, it is now at 12 basis points, so it is not that steep. Vonnie still not incredibly steep, but we are moving a little wider. Do we stick with this trend into the new year . Is this just something that will reset again in january . Padhraic january is very interesting. I think one of the themes in 2019 that theres been tremendous demand for duration. The low yielding assets. That has helped the entire credit spectrum to do very well over the course of 2019, and i think when we look at 2020, what we see is a continuation of Strong Demand for duration. You look at the 10 year treasury yield, and it looks like it will have above 2 . That 2 handle, it is going to start to look very attractive again. I think the trade for the next couple of weeks is to let that 10 year yield drift back above 2 . We are probably going to have a risk off tone at the very start of the year, and we will take it from there. We are not convinced that yields are going to rocket higher. We still think they will reach a peak likely above 2 , and then drift back down again. Vonnie what is the ing consensus on how healthy the economy is . Padhraic we dont see recession next year. We are cognizant of the fact that the curve did invert, and that tells us something. That tells us that there is Recession Risk out there. For 2020, it is very much an lshaped profile. This is a 2 economy in the u. S. Inflation is stubbornly below 2 . The forwardlooking indicators like breakevens are well below 2 . The 10 year treasury is probably going to hit 2 . We could stick at those types of levels. So it is not a recession, but also not a very strong growth year in 2020, which is tolerable. Vonnie do you see the fed moving at all . Padhraic if the fed moves next year, and our opinion, it will be in the direction of loosening. So either they are forced to extend the nonqe program into a week qe program, or we do have a rate cut penciled in for the middle of next year. We are concerned about the feeling that Corporate America has about prospects in 2020. What i mean by that is that we still arent sure what the rules of engagement are. We still have to get a phase one trade deal signed, but where does that leave us . The potential conflict between the u. S. And europe. Made, is a decision to be and theres tremendous uncertainty. Even when we have a trade deal, we know, given historical experience, that things can change. The best parameter for that is what we are going to get early next week, which is the manufacturing pmi. Intells us that we are still a manufacturing recession. Vonnie right, and we also get data on friday as well which should tell us all about that. Case, why are the dots so unanimous . The median. As for everything to stay the same. Think in it is, i fairness. They had been discounting rate , so it is a very benign rate outlook for 2020. Head of debte also strategy. Im really curious as to what you see for debt markets nest year. Its been a bumper year for distressed funds. Its been may be a mixed year for junk bondholders, and a strange year for corporates. Padhraic it has been a genuinely fantastic year for fixed income. I think sometimes we miss that when we are focused on equity markets, but fixed income has done fantastically well. The big push has come from treasuries. Over the course of 2019, been 7 ,s returns have which is an unbelievable return. On top of that, you add the extra elements. Hard currency emerging markets are up 12 , 13 this year. In 2020, its going to be incredibleult difficult to make those go up. Risk to aing on more tree greater returns. Risk to achieve greater returns. If i look at the emergingmarket space, i gotat dressed myself, will i make money in the high beta names . That will include mexico, brazil my south africa. As far as we are can concerned, local currency can do very well. Currencies are relatively cheap, and these things can really perform. That is where we think you can make money next year. Vonnie we will get more on that in just a moment. Padhraic garvey is ing global head of debt and rate strategy. We want to take you live to hong kong, where the new year has just begun. As you can see, fireworks are just taking off. Of course, its a bit bittersweet this year because the territory has been putting on a big fireworks display, even as protesters have been gathering peacefully to call for independence from the mainland. Fireworks will continue for a few more minutes. Again, a very black and white picture from hong kong as it rings in a new decade and lots of concern for its citizens. Lets check Global Markets now with kailey leinz. Kailey final day of 2019, and why markets are already closed in europe and asia, and the u. S. We are looking at relatively muted price action in a year in which the s p has rallied nearly 30 . 0. 1 , thes down nasdaq down slightly more. Maybe a bit of profit taking in this final session of the decade, but we also have to note that as it is come volume is relatively low. If we hop into the bloomberg terminal and look at the average volume for the s p 500, we can see that volume right now is about 40 below the average for this time of day, so not a lot of trades being made out there. As for some other action in other asset classes, i want to take a look at the dollar. The bloomberg dollar spot index is lower for a fourth consecutive day, sitting at its lowest level since back in march mere since back in march. You have better Economic Data elsewhere in the world that is meeting currencies look rid of hadley more attractive and the dollar less so. Lets take a look at well. Well is on pace for its best year since 2016, but today it is softer by about 0. 5 . That oil weakness is in part dragging oil services lower. The other part of that story is core labs. It slashed its dividend and pointed to u. S. Onshore weakness as part of that, so that stock is down by the better part of 20 , also dragging on peers like halliburton and schlumberger. Vonnie thank you for that market check. Stick a look at european stocks that did export nearly well this year. Your to date, lvmh up 60 . Luxury stock is doing really well, bringing the cac 40 to a 20 year high. This in spite of renauds performance. Of course, carlos ghosn back in the news today as he flees japan and hides out in lebanon. 42. 18 for renaud. Adidas up as well. Had anxx 600, all told, excellent year, and the best performer was lts was altice, up 230 . This is bloomberg. From new york, im vonnie quinn. Is is Bloomberg Markets lets check in on the first word news. Heres courtney donohoe. Courtney there is still a lot of mystery about how carlos ghosn escaped from japan and ended up in lebanon. Chairman saysault he was escaping a rigged justice system. Allegations faced of financial crimes. It looks like it is a done deal. President trump said he will sign the first phase of the u. S. China trade agreement january 15 at the white house. Deal calls for china to buy more American Farm goods. In return, the u. S. Will lower tariffs on some american products. The president plans to go to beijing to begin talks on the second phase of the agreement. Forident trump blaming iran the attack on the u. S. Embassy in baghdad. They were venting their rage on u. S. Airstrikes. They broke into the compound through a main door and set fire to a reception area. Guards fired shots and tear gas to contain them. In australia, towns in the southeast have now caught fire. Andeast 12 had died, tourists and locals are seeking refuge on beaches. The fire service are mostly manned by volunteers. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im courtney donohoe. This is bloomberg. Vonnie thank you. We are back now with padhraic garvey, ing head of global debt and rate strategy. You see lots of potential opportunities for investors in eem next year. Can you give us a little more detail on that . Padhraic sure. Lets take a brief look at 2019. The big theme has been the outperformance of hard currency linked to the dollar. The dollar has had a fantastic year this year. Think what happened over the course of this year, certainly over the middle part, is cut rates allowed some of the emergingmarket dependent banks to cut rates as well. Dollar, andstrong he we had week emergingmarket currencies. As we look into 20 20, but we have is, and all probably come of the fed not doing an awful lot. Central banks in some high beta economies can still cut rates because their currencies are strong. 2020 isopportunity for to switch from hard currency into local currency, which is code for switching from dollars into some of these higheryielding currencies. They are already performing. Today is a day when a lot of currencies are performing against the dollar, and we think that can continue into 2020. The way to make money it to go out the credit curve at some of these higher beta, higheryielding currencies. Vonnie are there some in latin america that look attractive . Padhraic brazil and mexico are two very good examples. Both of those currencies have and trade election issues over the past year. The brazilian government has made some very hard decisions which will reap benefits into the future, which is bullish for the real. The mexica economy is currently very weak, which isnt usually positive for the currency, but it also has a very high yield differential to the u. S. , which gives the central bank the opportunity to cut rates next year. Those are two examples in latam. We will be looking at south africa, turkey, and russia. What are your clients asking you . What are the top questions coming up the last few days . Our clients of yours concerned at all about the election or other geopolitical risks, or are they purely looking at fundamentals . Padhraic it is really difficult because all of these factors have a direct influence. Yes, you can get all of these factors correct and get things completely wrong in terms of the performance. 2019, the fed cut rates three times. At ing, there was a real disagreement as to whether the fed would cut or not. Most of them position for a fed. Ut anyway youve got to go with the market instead of focusing on one of metals and geopolitics. Regards to the election, it is just a bit far away. For the first half of this year, the election will be in the background. It will be very much low background noise. What we do in the second half is important for fixed income. Trade so your favorite that was overlooked for 2019 . Looking back, what was the thing that caught most people off guard . Padhraic i think its fair to say that we didnt expect the fed to be hiking in 2019. If you go back to the end of 2018, we have 10 year treasury. Ields over 2. 5 there was a very low probability scenario that the fed was going to cut rates this year. As 2019 progressed and as the trade war narrative crescendoed, and as the brexit issue in the the overallpart of narrative, it became clear that some support was needed. Of we missed it at the end 2018, as 2019 progressed. Going thats was a big swing. Vonnie it was. Im glad you mentioned it. Our thanks to padhraic garvey, ing head of global debt and rate strategy. Hong kong police are firing tear crowd, justrse the after midnight in hong kong. We had fireworks for a good 15 minutes as protesters were gathered, protesting chinas encroachment, as they see it. Now it seems like Hong Kong Police are firing tear gas. So 2019 going out the same way 2020 enters for hong kong. This is bloomberg. Vonnie now to more of our best interviews of 2019. Erik schatzker spoke with Oaktree Capital cofounder to talk about the impact of very low interest rates. I think that the ultra low interest rates, the rates of 0 and below, have warped a lot of calculations. , in the small picture sense, it makes sense that companies have taken on more debt because it is so cheap. Money androw it cost you almost nothing. The more debt you have come of the less likely you are to get through the economic difficulty. But in the meantime, theres been a lot of levering up at all levels. Erik where do you see evidence of warped calculations . Example, the for pension fund that need the return of 7. 5 and cant use cash, money markets, highgrades, or even get what it thinks it needs from stocks and bonds, pushes out to alternative investments. Private debt, private equity, venture capital, things like that. Erik its been great for oaktree in brookfield. Howard and for our peers, thats right. My colleagues and i left the firm where we were managing 7 billion, and our hope was we would get back to 7 billion. And as you said, now we are at 120 billion. That gives you an idea of when wordarted oaktree, the alternative investment didnt exist. Now it is extremely important. So that is an area of access. Capital has flowed to the alternative markets. Youve heard me before describe the people doing as handcuffed volunteers. They are doing something because they think they have to. Erik do you worry, because of the fact that we have negative interest rates, for example, because we had and still have quantitative easing, that the old rules of the game dont apply any longer . And if they dont, what do you do . Howard thats really one of the most important questions. I wrote a memo to months ago different, time is and historically, those words have been used by people to bullishness that didnt work out in the past, and violations of the norms that prevailed in the past like valuations and that kind of thing. Templeton said 20 of the time, it really is different. Nowadays, you have the sense that it is going to be more than 20 . So i think things you know, you cant say that the old rules apply, and you cant say that in the absence of the old rules, you know exactly how this is going to come out. We are in a difficult period. E capitalaktre cofounder howard marks there. 500 bothnd the s p down about 0. 2 . The nasdaq making an effort to get back to zero. It is still down. The vix above 15 today. This is bloomberg. Vonnie live from new york, im vonnie quinn. This is Bloomberg Markets. The story of brexit for most of 2019 was one of deadlock. But now 10 downing street has new occupants and westminster has a divorce deal that is likely to pass. Joining us on the phone is bloombergs jess shankleman. We will perhaps not go through every twist and turn of how we difficultand it was a process of democracy at work. Jess absolutely. It has been one of the most tumultuous years in british politics. Theresa may tried to get the deal over the line time and time again but failing until we have a new Prime Minister in Boris Johnson who could get a deal over the line and eventually force the country into an election and now he finally has a majority in that divorce deal as part of the negotiations in just a months time. Vonnie what changed . It looked like theresa may was not going to leave until she had some kind of agreement passed through the parliament. Some people were for her. It developed into a mass of a situation and then boris came in and it looked like things would get worse, and suddenly have this large majority. Did the people of the u. K. Vote in by a large majority . Jess what changed was Boris Johnsons leadership style compared to theresa may. Once he saw this parliament was not delivering what he wanted to going tod you are not work with me, i will not work with you. Eventually some of the party caved in and agreed to a general election. He has been around for decades, a celebrity, journalist. He knows how to work media in a way theresa may did not. He is incredibly popular with the couple of strategies. One of those is i am going to get brexit done. That remains to be seen. We will find out over the next year. Eu on thell leave the 31st of january and we will enter a transitory period which is largely the same of what we are now. He said himself a law that bans any ministers from extending that deadline. That is when we do not know if he has brexit done. Vonnie given that boris got such a large mandate in the election, will there be celebration in the election on february 1 or will it be a divided nation on february 1 . Ben has been understaffing for over a year to undergo renovations. That is going to end. We are expecting that. Half of the country voted for brexit and just under half of the country did not vote for brexit. They voted to remain in the eu. Despite Boris Johnsons big win , when west election look at the breakdown of numbers, it was about the same. After the country voted for Boris Johnson and the other half voted for a second referendum. Systemplicated electoral means he managed to get a big majority even if he did not get a big majority of the vote. The answer is half of the country will celebrate and half of the country may be in morning over the end of a strong relationship with the european union. Vonnie what is the future for britains other parties, the labour party, the liberal democrats, who flamed out in this election . The dup in Northern Ireland . Jess a big question about what the future of the labour party is going to be. ,fter 10 years in opposition they have still not managed to win power. In fact they saw the worst result since the second world war. Now in 2020, labor will be electing a new leader. There will be a fight of whether to keep on with the hard left that Jeremy Corbyn has been promoting or go for a more centrist politician. We are already starting to see that play out. We have a couple of those politicians put their hats in the ring so far, people like rebecca long bailey. There are lots of other people goingg and lots of rows on. Weve been hearing about them looking at trying to change the election. Vote does notone necessarily equal one seat. Different seats have different strengths. How could they change that when they a