Thrilled you are with us, the simulcast, Bloomberg Radio coasttocoast, and good morning on bloomberg television. The new york city Christmas Tree lighting tonight at rockefeller center. All of the worry we have talked about of this pandemic, death set a record level in the United States come breaking the april 29 level as well. Jon, the markets speak. Moments ago, euro out to new recent record strength. Jonathan a record high in the equity market, the unwelcome record of the pandemic. 1. 21 53 on eurodollar. Once again, it is broadbased dollar weakness. You just wonder how uncovered it will this will make the ecb and how comfortable the move in eurochina will actually keep them. I think that is key, what happens broadbased for euro against other currencies. The im looking at bloomberg terminal here. You can see that on Bloomberg Radio right now. Renminbi comes down as well, with an abrupt move. At all correlates together, and then theres this zombie, the gloom of the bond market. How do you correlate this to what we see in fixed income. ssa the zombieness enthusiasm to buy credit even at high valuations. I want to paint a picture for you. The markets are not the economy. Youve got m a going gangbusters, job cuts we got this morning from 3m. What we have is the big getting bigger and cost cutting across the board, which hurts the lower income worker, certain aspects of the economy. So i am looking at this and wondering, structurally, what aspects are going to have a scarring impact down the line that may not be felt . Tom you wonder where we are going in terms of the stimulus debate, but certainly markets on the move. Red and green we saw earlier in equity markets, and now we see it with green on the screen. Futures up one, dow futures up just two points as well, nasdaq leading the way. One more observation, and i really got to go to the landscape of the United Kingdom. I noticed that per capita, the United Kingdom death right now exceed new york city at its worst back in april and may. Theres a real agony over in the United Kingdom. Is it an agony of complete lockdown . Is that where you are heading . Jonathan restrictions. We are sticking with the tearing system. I think this is the Holding Pattern for the vaccination period all the way to spring. The Prime Minister said that himself. Tier three is very severe. Looks like a lockdown. London is in tier two. This will be the Holding Pattern that this government keeps through the winter and into spring, even with vaccinations rolling out. Theres a real worry in the u. K. Government that if we have a vaccination, maybe some people will start to step back from compliance with social distancing and those kind of things. We could see those potentially through next week. Tom we will have more conversations driving forward on this pandemic. Right now, an important conversation as we have spoken to other bulls. Morris has been at bnp paribas, and they have constructed an interesting outlook on the market. Daniel morris, you look for growth into 2021. Frame the equity market at these record levels. Daniel i think it is as much looking but what is happening beneath the index level and what we are seeing between growth and value. Equity markets are at record levels. Nonetheless, we are coming out of a recession. The economy should be bigger in nominal terms at the end of next year and it is now, so that really suggests the stock market should continue to rise and continue to reach new highs. That isnt particularly surprising or worrisome. We are paying more attention to where we want to be allocated within that market because we think there are certainly going to be bigger diversions bigger divergences between different sectors, different styles than we have had in previous years. Jonathan we are pricing in 2021. When do we start pricing in 2022 . Daniel perhaps we will impinge on the market at that point. With think about any potential for more significant legislative change. Right now we will all be focused on what we a stimulus package, how big will it be and so on. At that point, you will still have had a relatively young recovery, so there still should be some gas in the tank at that point. . Who knows . It might who knows . It might be another fear of inflation come about at this point we dont see any risks on the horizon. Lisa it is important because the future is what predicts the current gains in the stock market. It is a forwardlooking indicator. We got to keep looking forward to see what gets what. I am looking right now at markets, where the big have gotten bigger and have gotten rewarded for getting bigger. Now we are trying to see the small caps rally and catch up. At what point is this divergence too much to handle . Can the big keep doing well and allow the small ones to catch up , or is this a fundamental divergence from the economy as it is right now . Daniel you are right to focus on the dominance of the big players driving that difference in the relative return to small caps, which is been quite disappointing in the u. S. For a couple years. Small caps done quite well, continues to do well, and the way that you assume small caps should. If you analyze why that was, it really does come down to the big mega cap tech. There dominance made it most impossible for the smallcap stocks to outperform. At this point, given expectation for continued rotation into value, it should give a bit of a breather to small caps, and we also think this is where you need to be looking at stockpicking as opposed to index Asset Allocation because otherwise you are likely to be swamped in the future, again by the dominance of the big tex, and you could miss out on the potential that we think is still there in small caps. Jonathan do you want to be swamped by the dominance of big banks in europe if you buy the index . Daniel well, it is certainly what you have seen recently with an increased in Interest Rates. Point had about 25 basis swing in 10 year treasury yields. Youve had that much in the u. K. And other parts of europe, so certainly that has benefited the with thissector betterthanexpected economic outlook. What ever estimates you had for nonperforming loans, those should come down. That is clearly beneficial for bank balance sheets. For now, the news is better. The market is focusing on that. We think that is also going to continue for a bit. To aall of this comes down belief, and we are shellshocked by the pandemic and the rest of it. As you mentioned at the beginning of this conversation, a belief in a better nominal gdp. Is this market price for the nominal gdp now, or is it priced for some wish that is out there one year, two years, or three years out . Daniel we dont think so. If you look at forward earnings estimates, even two years out relative to where they wear prepandemic, it is not like the 10 , 20 are predicting Earnings Growth relative to those levels. They are still below the levels you would have thought at the end of 2019. So the trajectory is positive. The slope is positive. That is what the markets are thinking about. But at the same time, that. 2 point two that years out, we think theres going to continue to be a recovery, and it is the marginal change that matters the most. Lisa you also talked about the importance of where you allocate your money. Where are you allocating your money . Are you jumping on the emerging markets train . Daniel we are overweight emerging markets, and we have added to japan. Within developed markets, it is u. S. And japan, with a preference for value and also for small caps. So we think theres certain parts of the market that are going to do better, certainly. Jonathan jonathan when everyone starts saying the same thing, when do you start to feel like this is priced . Daniel that is certainly what is in the back of my mind. This view that we all face shortterm challenges, but the mediumterm outlook is rosy, i think you see that reflected in the consensus view that the dollar will continue to weaken which is also our view. That is why we need to ask ourselves what is going to challenge that view that is so widely shared. Its the right question, and it is one we are certainly asking ourselves. Jonathan dan, great to catch up, sir. Same thing. Ing the at what point do you sit around a table over zoom or whatever and start saying, everyone is saying the same thing . It doesnt mean it is wrong. I just wonder where the edges going to be. Everyone is overweight em, value, cyclicals over defensive come a weaker dollar, treasury yields limited in their little break outcome of that has been the story repeatedly over the last few weeks. Tom you have just defined a bull market, where there is a rationalization each step of the way. Frankly, bear markets are the same way. But in the heart of a major bull market, this is what you get into. The one thing i would say that is underestimated here is corporations will adapt and adjust to the facts they are handed. You see that with 3m cost reductions today 3 of employment. That has been widely anticipated. What took so long . There will be many more 3mlike announcements. Jonathan that is not the kind of decision you make when we are at the top. Thats what people would say. You dont make job cuts at the top. You make cuts at the bottom. This is the start of something explosive. I dont. It is a strange time. Good morning to you all. Kit juckes of socgen at the bottom of the hour. Looking forward to that. From london and new york, this is bloomberg. The first word news, i ritika. House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer are now backing a bipartisan stimulus plan. They see the proposal from house and Senate Lawmakers as the foundation for a new round of negotiations. The plan calls for 900 billion in spending, less than what democrats want, but an increase from the number being floated by Senate Majority leader mitch mcconnell. The u. S. Has had its deadliest day yet in the pandemic, according to Johns Hopkins university. The number of fatalities went over 2700 for the first time. Meanwhile, hospitalizations set a new mark, going over 100,000. The u. S. Has we strip to travel visas for millions of members of chinas communist party. Members andlow their families to obtain visas for one month. Previously they were able to obtain tenure visas. Opec and its allies are making progress in talks on oil output cuts. That increases the chances that todays meeting can salvage a deal after failed negotiations earlier this week. One delegate tells bloomberg discussions are now focusing on proposals for gradual easing of output cuts over several months. Ups trying to keep from being overwhelmed by the holiday rush. Ups is temporarily restricting some packages it takes from big retailers such as nike, gap, and l. L. Bean. 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. Im ritika gupta. This is bloomberg. China will not stop if we step back from working with the world. If the rules of the future are becauseor are suspended of the way that relationship evolves, america will be stronger, not weaker. Jonathan a key topic going into a new administration and a new year. That was the former u. S. Treasury secretary speaking live on bloomberg tv and radio. For our audience worldwide, this. Bloomberg surveillance heres the price action as we count you down to jobless claims 12 minutes away. Equity markets, alltime highs. Highs of the year on the s p 500. Highs of the year on eurodollar. 1. 2147 on20 17 eurodollar. The highs respond with the market, and the lows correspond with the lows of the market. In the bond market, unchanged on , 0. 936 . More Economic Data 10 minutes away. Tom we will have that for you. Michael mckee, of course. For different claims report after some of the criticisms on the data over the last couple of days. Right now we want to digress. Withl tennenbaum with us oliver wyman. What we want to do is give you people that own the domain they live in. That is mr. Tannenbaum. He is a partner at oliver wyman. Good morning. I know jon and lisa want to migrate to china, as we heard from jack lew moments ago. I want to ask you about an assassination in iran. This is serious stuff, and the biden adminstration comes into an iranu. S. Relationship that is not trump iran frankly or bouma trump iran, or frankly obama iran. What does that look like . It is important to note that while the biden adminstration is preparing to clearly take office in january, we still have 49 days of a Trump Administration and trump allies acting around the world. I think you are certainly seeing in thetrying to box u. S. From restarting the iran deal. Iran needs to agree to reenter the deal given that they derive no benefit out of the last one. It is creating complexities in the region with some of the attacks in the last couple of weeks of iranian government officials that have been assassinated. It only further creates distance between the jcpoa, iran, and the other allies that are party to the deal. Tom i am distracted here looking at the new slow right now, and i think just because of the news we have to migrate to china, although there is so much we have to talk about. What can we do in your area financially on hong kong . Should we expect or demand that bank of america, j. P. Morgan or the others do some action on liberties and hong kong . Dan if you look at what the u. S. Has done under the hong kong autonomy act that was passed over the summer, many global banks in the market, even those operating in mainland china, have close the accounts of people at carrie lam and others. There was article over the weekend about how carrie lam was paid in cash because she cant access her bank accounts, or credit cards. So everything is in hong kong dollars. Hong kong has one legitimate trump card left, no pun intended, within the list within the last 49 days. By october of 2021, the u. S. Government has to designate banks found to be enabling the enactment of the national secured a law and hong kong, so you have a possibility that some chinese banks could in up being designated for continuing to provide Banking Services to some of these people like carrie lam and others. That obviously would drive an even bigger wedge between the u. S. China dynamic right now. Jonathan theyve got to pick a side, but this brings us something so important. We have been talking about the fx market all morning and about dollar weakness and cyclical issues. This is a. Structural issue many people think this is a structural issue. Many people think we are about to see the end of the dollar as the global currency. Carrie lam come the leader of hong kong, cant get a bank account. Carrie lam has to be paid in cash. Can you speak to that, the power still of the u. S. Dollar . Daniel if you saw what the u. S. Did with hong kong, originally the Hong Kong Monetary authority came out saying, you cannot comply with u. S. Sanctions and hong kong, only to backpedal a few months later, where you are ok if you need to comply. Theres never been a conflict of law issue like this. Theres been boycotts on restrictions against cuba from the u. S. , but a u. S. China issue is different. And again, weve heard threats over the years dating back to when i was at the treasury into thousand seven that the dollar was going to end as the global trade currency related to eu and iran activity, and it has never quite happened. I am not sure how this will shake out, but i think certainly, the u. S. Dollar and the need to trade and transact in the dollar drives a lot of the action by these global banks from china ups the ante their side, which they really havent done. Lisa i will just point out that yus point comes as the strongesthens so the since june 2018 against the dollar. It raises the question of when the pboc steps and starts to take note of the strength of its currency and take action. Daniel theres another variable that needs to be brought up. Just yesterday, the past how they build that the senate has not passed that would require chinese based companies on the u. S. List of exchanges to apply with u. S. Audit standards. So you have another issue potentially that could drive a further wedge between need the u. S. And china. Jonathan dan, ive got to jump in because we only have a minute left. Forgive me. Why did this take so long . Why were these Companies Ever allowed to list on u. S. Exchanges without adhering to u. S. Auditing rules . Why did this take so long . Daniel i think the political nature of how to engage with certain Chinese Companies knowing what the Chinese Government to view is on essentially opening the books to foreign auditors and their Domestic Companies have always been a challenge. All of the china pressure, whether it was related to the huighur treatment in china, hong kong, other issues, is weighing in. Jonathan thank you. I think that conversation underlines something so important. Whenever we talk about the u. S. Dollar, the fx market, we are talking about cyclical issues, rate differentials, monetary policy. Just because the dollar is getting weaker, it is losing its dominance in the Global Economy. It is a completely different conversation. Tom ive heard it since before i could shave. I am only shaving twice a week now. But that conversation has been out there forever. These are ebbs and flows in the markets. Theyou should watch, crown. Your grandfather is in it. Jonathan i would love to watch the crown. Coming up, kit juckes. Its down to the wire, the teams been working around the clock. Weve had to rethink our whole approach. Were going to give togetherness. Logistically, its been a nightmare. Im not sure its going to work. Itll work. I didnt know you were listening. Wannits timeight and for aerotrainer. A more effective total body fitness solution. announcer aerotrainers ergodynamic design and four patented air chambers create maximum muscle activation for better results in less time. It allows for over 20 exercises. Do the aerotrainer super crunch, push ups, aero squat. It inflates in 30 seconds. Aerotrainer is tested to support over 500 pounds. Lose weight, look great, and be healthy. Go to aerotraine