Bloomberg Surveillance 12/31/2024

The market is seeing that the economy is not weak. We're getting to a point where equity risk premiums are incredibly narrow. I don't know what to expect, but I'm not really sure if markets really know what to expect. I think that creates some volatility. There's quite a lot of quite a lot of momentum still to be had, particularly in the first half of the year. As goes January, so goes the year. This is Bloomberg Surveillance with Jonathan Ferro Lisa Abramowitz and Annmarie Horden Hern. 6 a.m. here in New York, 11 a.m. in London, 12 midnight

in Auckland, New Zealand. Happy New Year to our audiences worldwide. This is Bloomberg Surveillance arm Romaine Bostick alongside Kriti Gupta. Jon, Lisa and Anne-Marie have the day off and pretty an interesting punctuation mark to what has been a phenomenal year for equity markets across the globe here. The S&P here on the US sitting on right now a 24% gain on the year and futures at least here on this particular Tuesday pointing to a slightly higher open, maybe setting us up for some sort of reckoning in 2025, not just in the stock market, in the bond

market, certainly in the currency market as well. Remain absolutely here. But we talk about the tone to end the year here. You look at the year to date gains that we've seen on the S&P, that we've seen on the Nasdaq, that we've seen, quite frankly, on all of the indices around the world. But that performance did not necessarily hold here into December and into the Fourth quarter. Those gains losses here on the month and on the quarter, as a lot of people do start to look as to what's coming up in 2025. Coming up here

on Bloomberg Surveillance on this December 31st. The conversation coming up in just a second. But John, still, it is one of the most bullish folks on Wall Street over at Oppenheimer talking about his street high s&p price target for 2025 dorway Kongo over at DWF is going to be joining us to talk about the phenomenal rally that we saw this year in gold and Conor Haeg over at ETF man on well the somewhat less phenomenal rally for coffee prices at least if you are a coffee drinker but crazy. Let's begin this hour with a quick

check here on what's going on with S&P futures as we close out a record year for U.S. equities. 57 record highs for the S&P so far this year. The punctuation mark coming on December six, of course, when it closed out right around 6090. Peeling back just a little bit from that. Looks like it is going to open the day if these futures numbers hold just below that 6000 mark. Euro dollar unchanged on the day. Your ten year yield relatively unchanged as well, Camped out around four and a half. And we're going to talk a lot

today about what's going on in the commodities space. WTI crude prices camped out right now at about 72 bucks a barrel. All right. Let's talk a little bit here about the outlook for equities, particularly as a lot of people look at this bull market and wonder whether it can continue into 2025. Price targets are coming in for the new year. And we should point out price targets for the past year. Well, they were light John's office, though, he was always bullish and he had a good eye on what he saw and what he thought we

would get in 2024. And now he's out with this note for 2025, saying that the bull market has more room to run, writing that the pivot to easier monetary policy, we believe, supports our view that the market for US equities is still mid-cycle. And he says that the technology led double digit gains of the large cap stocks over the first three quarters of 2024, likely to broaden out to other sectors styles and market caps in 2025. Please to say that John joins us right now here on the big program, kicking this off here on this

December 31st. Happy New Year to you, John. And let's talk about those forecasts going forward. What supports some of these targets? I'm seeing targets come in now, including yours, into the sixes, into the seven thousands for the S&P 500. Is this all earnings driven or are we going to see some multiple expansion as a part of that as well? A really great, great great to be on surveillance this morning with you and happy New Year to you and the whole Bloomberg team as well. I must say that with us, it's a combination. It's always you

want to see revenue growth, you want to see earnings grow. That's what matters most to the market. But I think overall, there's room for multiple expansion to play a role in here. The the private investor over the years I've been in this business for 41 years has changed a lot over the years. And with the and what has taken effect in terms of retirement planning over the course of the last 40 years in which we've seen defined benefit pension plans go by the wayside, Social Security, the amount of of income that it can provide or

what percentage it provides an individual income during retirement means people have to invest more. So we think many private investors today, instead of investing in five stocks for the actionable idea of the day, are investing much like institutions want for intermediate to longer term goals. And we think that supports higher multiples, while on the other hand, we think the effects of technology on all 11 sectors that has been shown since the financial crisis, its price is right up to date through the pandemic and now with AI in the process offers a lot of opportunity. Here

we'll see equities move higher. Well, expand a little bit here on that theme of A.I.. That was a big part of the trade that we saw in the market, certainly in the first half of the year. A lot of questions. So towards the second half of the year, about when we start to see the material gains from that on the bottom line, on the top line for that matter as well, we see that in 2025, John, I think we'll begin to see it more and more. I think this year it's been primarily the amount of

investment that has been made in AI, both from within the technology sector itself, but in the other sectors by managements that want to remain very vibrant and effective in attracting investors attention in terms of creating greater efficiencies for revenue and earnings growth. And on the other hand, we think it's the consumer is going to be a big part of the upgrade that began in This year and likely will gain some traction in 2025 and on forward. But all this stuff takes a bit of time. But for investors, you know, it it you have patients that

are diversified, know what they own, why they own it, and have right sized expectations about how different asset classes, different sectors, cyclicals versus defensive, etc. operate. This looks like a time of both opportunity and risk. And the main thing is to have some tolerance for fluctuation and a tolerance for risk that is realistic and right sized. John, how much of the bull case is dependent on capital flows from the rest of the world and the in the absence of kind of economic resilience in Europe or China? Do you see international investors bolstering the US market

maybe more so Than domestic? Gosh, you know, that's an awfully good question. I think over the years we've seen private investors from abroad increase their exposure to the US. A lot of that because of the the influence of of the technology sector with the innovation that occurs here and at the in the design stage of technology. But in addition to that, you know, the the factor is in an uncertain world. The U.S. strength of the U.S. dollar also attracts foreign investors to invest in the US, while meantime, central banks and sovereign wealth funds may actually

stay at home. Many of those foreign funds. We think it's the individuals will continue to invest for diversification in the US. But, John, you mentioned that point of The dollar, that it attracts international investors. Doesn't it disincentivize that bid? So an investor in, say, Japan, hypothetically, that maybe wanted that realm of safety or kind of innovative technology, technological exposure maybe looks at the strength of the dollar in three months time and says, actually this isn't worth it? Well, actually, we would have to say that the strength of the dollar is relative. And I think where

with the dollar strength, where it is right now, for instance, it almost disincentivize U.S. investors from investing abroad because the foreign currencies are weaker versus the U.S. dollar. On the other hand, for foreign investors, where their currency is weak versus the U.S., investment in the U.S. enhances dividends, enhances gains Because investing in a stronger currency helps your performance if you're a foreign investor with a weaker currency. When you reconcile your trades or you don't get a loss in translation by gaining in translation. I am curious, John, here, if you can talk a little bit here

about how some of the policy decisions that we're expecting out of Washington could affect the performance of financial markets. And I want to start specifically on the tariff side, because there are some concerns about the bottom line effects on corporations and obviously the inflationary effects on consumers. I'd have to say remain that the greatest concern relating to tariffs, of course, is on the traditional sense of tariffs that everybody can remember. Tariffs presaging the Great Depression at all. But the effect of tariffs during the first Trump administration and during The Biden administration, when they actually kept

many of the Trump on tariffs and even increased them, was was not anywhere near as of concern as might have been expected. We think the idea of some of the the numbers that are thrown around by the president elect in terms of what he might impose on tariffs, much of this, we would think, is part of that art of the deal approach that the president elect takes when negotiating. But the other side of it is if you consider the U.S. economy versus producing economies of all the goods that our consumers buy, both businesses, consumers as

well as individuals, we're buyers of size. And so we're a very attractive place to sell your goods to, which might mean there's more wiggle room for countries that want to sell into our country or maybe export goods to us to win our import dollars, so to speak. And we think it will be interesting to see how that works out. But we think most of the talk on the tariffs are based on on the Cabinet and the experience of the Cabinet, as well as the president's experience after having having had four years in office prior to

this. We think it'll be a more of the bark will be louder and much more of create more fear than the actual bite. And we also think that negotiations will probably work out better because countries are going to look to want to keep the U.S. as as a major source of of their of their exports. John, great stuff, as always. Always insightful all year long, and we expect that as well in 2025. Have a happy New Year. John Stoltzfus there over at Oppenheimer. A Bloomberg survey showing that right Now the average their median price target

right now for the S&P to end next year, right around 6600. The highest estimate in that survey came from the man we were just talking to, 7100, Kristie. We talk about this idea here of weather expectations heading into 2025 are going to match up in the same way that we saw with those low to high expectations in 2024. All right. Let's get you an update on some of the stories going on elsewhere this morning. Let's get the Bloomberg brief Irish against anybody. Anyone. Yara? Hi, Romain. The US Treasury Department said it was hacked earlier this

month by Chinese backed cyber attackers. The department said the incident led to unauthorized accessing of workstations And unclassified documents. The hackers gained access via a third party software provider with contracts with the government. The Chinese embassy in Washington called the claims, quote, smear attacks against China without any factual basis. Meanwhile, the Tel Aviv Stock Exchange is planning to move its trading days to Monday to Friday from its from its current operating week of Sunday through Thursday. The change will happen in early 2026 and trading will end at 2 p.m. on Fridays in order to allow

for observance of the Sabbath. The finance minister says it will align Israel with other global capital markets and strengthen its connection to the world. And football star Lionel Messi carried out an initial public offering of his real estate properties, valuing the portfolio at $232 million. The company called Edificio Ross Tower. So Sydney has been listed as a real estate investment trust. The portfolio includes seven hotels, commercial real estate and homes, but has posted losses in both 2022 and 2023. Debts to Bloomberg Brief Ramon. All right. Thanks there to you, Ira. Here's a quick check on

the markets. U.S. futures pointing to a slightly higher open here in the United station. Asia trade, though, Then on the day, a lot of markets around the world already closed for the New Year's Eve holiday. A recap of some of the big movers that we've seen across asset classes on a year to day basis. And that includes gold nearing historic gains to close out the year, Gold offers more reasons for investors to belong. Right now, when we think about the Highest risks associated with their escalations, with that fears, we think this can take prices even

above our 3000 forecast a 27% advance on gold. A conversation up ahead as to what keeps that rally going into next year. You're watching Bloomberg Surveillance. Welcome back to Bloomberg Surveillance. Futures here in the United States, pointing to a slightly higher open here on the final trading day of the year, an S&P 500. It looks like it's going to be tamped down right below that 6000 level, just a little bit shy of the all time high hit back on December six of 6090. Euro dollar relatively unchanged on the day your ten year yield camped out

around that four and a half level. A lot of speculation about where we go next up or down pretty. And I don't know what next year if the big story is going to be about that Market, the bond market and maybe commodities. What could potentially drive markets worldwide next year? Yeah, I'm sure we're going to see a little bit of all of that, given especially that currency story we were just talking about in the last block there with John over Oppenheimer, talking about this idea that if you're looking for a haven and the dollar serves

that role, well, there's gold as well. That might be the story for next year. Absolutely. And we talk about gold. It has had a phenomenal year, a 27% gain year to date. Right now, our futures pointing to a slightly mild gains here on a daily basis, but that's still going to set it up for the best year in at least 14 years. One of the best performing commodities Certainly in the metals market here. And a big question right now about some of those historic gains that's under surveillance this morning. Gold offers more reasons for investors

to belong right now. And really what I think the dominant driver has been is this structural support from central bank buying. This is really the primary driver and the safe haven notion that hedge against inflation, we think goes on top of it. In fact, when we think about the highest risks associated with fear of escalations, with that fears, we think this can take prices even above our 3000 forecast. And we continue this conversation about gold continuing that tear up 27%. And as you just heard there, some of that driven by monetary policy easing, some of

that driven by rising geopolitical risk, some of that driven by central bank purchasing. You put that all together, you get the gains for the year. But what about 2025? Darwin, Congo Over at DWC, he's writing in his recent note that his forecast for gold for end of year 2025, it actually reflects a view that we still see a rise but at a more modest pace. Da Wei is of course managing director over at DWC Investment Management and joins us right now to talk a little bit more about this. Ryan. And I mean, we talk about

how high and how steep that chart was for a good portion of the year. Some of that, of course, has leveled off Darwin. And I saw back, I think it was in maybe September, you guys did kind of reduce your general overweight stance just a little bit here. Where do you stand right now? You stay neutral on gold, you go back Overweight or you underweight it. Right now we're neutral and we anticipate we'll go back over way again in 2025. We do see the price our forecast right now for the end of the year, 2025,

at the end of $20,500 for gold, adjusting down from the 2940. The big part of that adjustment is we changed our view regarding where the terminal rate will be for the Fed at the end of September into October. And we saw the peak for gold price touching near 20 $800 per ounce. And that really reflected the view that the Fed will cut to a terminal rate near 3 to 3 and a half percent. Since then, we've seen much more conservative, hawkish views from the Fed with potential return on inflation. And that's the key for us

in terms of where the Fed will go from here. At this point, we see more likely the Fed terminal rate to be around 4% three and that's why we adjusted our gold forecasts and said there's a lot of uncertainties and we think those uncertainties will make gold more attractive for investors. Well, that's what I'm curious about, though, too. I mean, we kind of have to break this up as to why certain people buy gold. For some people it is kind of that protection against risk. Obviously, you have to deal with the inflation implications of holding

something like gold as well. And then of course, you have a lot of other purposes, people allocating to portfolios here what is going to be the dominant driver, do you think, of buying and selling of gold next year? I do see gold as an asset class is a diversifier will be a key theme for 2025. We think equity markets are up Significantly. Gold performance has been very strong in 2024. Equity markets certainly have done sure as well. And we've seen the rise of fixed income market as well. In 2025. We do anticipate market uncertainties, policy

uncertainties come into being and the situation, the talk of tariffs and how that might impact global trade. All those type of risks could potentially change the valuation for the equity market and also for the fixed income market is if the Fed stays hawkish, potentially, we may see your curve actually steepen further. Actually, we may see higher yield from here as well. Those type of factors, I think really makes investment very decision, very difficult. We believe goal would be the best, best Place to hold value against the background of the potential market resets in 2025. Sadoway

We talked earlier a little bit about the bull cases for gold. There was talk about the bear cases specifically, given that so much of the rally in early 2024 was driven by retail demand in China as an alternative to some of the own kind of property crises that they had in that part of the world. We're now seeing a flow of stimulus from China. We're trying to see the Chinese consumer get back up on their feet. Does that help or hurt the case for gold? Well, that's a very interesting question. I think the strong demand

that we saw from Chinese individual investors came at the early part of 2024. And during that time, we've seen the property market really perform very Poorly. At the same time, equity market in China was also performing very poorly. That lack of consumer confidence, as well as concern about how to protect the investment, really made Goole very attractive. Since then, I think the interest from investors might actually have shifted across China. What would you like about gold? And I think this was mentioned earlier in the segment as well. Central bank buying has been very strong. Only

23 was an exceptional year. 24 has slowed down somewhat. But the big difference was Chinese PBOC did not participate in go buying in the second or third quarter. But if you look at the data from first and fourth quarter where people see has engaged in buying gold, the pace of buying for central banks actually Matches 23. If that were to continue and we anticipate that trend to continue, actually I think vitalization to continue, that will be a very strong floor support. Gold price. Daria, I have to ask you a little bit of a left field

question here. So many people say that the very cases for gold inflation, risk protection, the uncertainty of 2025, especially with the new administration, are the same reasons that you would buy, say, Bitcoin, for example. Could the rise of Bitcoin and what you've seen in this year undermine the case for gold or even provide an alternative to gold? Is that a viable argument? It's certainly an argument. And we've seen some editorial data that would suggest maybe some individual Investors certainly have shifted their interest from gold to other digital currency and Bitcoin being the biggest beneficiary of

that. That being said, I think the perception of gold versus Bitcoin still very different in terms of value and in some cases I think also use of Bitcoin in particular, we see a lot of people concerned about the legitimacy of the coin, especially when it comes to potential financial crimes and so on. Those concerns for institutions and central banks will not change. I think for a certain part of the market they will always consider the gold as the quote unquote gold standard for value preservation. But we don't anticipate that pocket change. The individual consumers, on

the other hand, investors on the other hand, I think that trend will continue to change and benefit Bitcoin. We do have a positive view on Bitcoin as well, you know, forecast and that's that's really very much driven by just increased demand we see from particular U.S., U.S. portfolios. All right. We've got to leave it there. Bitcoin right now camp down right around that 94 100 level spot, gold 2600 days away. Kong managing partner over at DWC talking about that 27% rally that we've seen in gold futures slightly higher here this morning on the final trading

day of the year and a big set up going into 2025. We're going to talk about commodities a little bit later because believe it or not, gold was not the best performing commodity this year. That belongs to cocoa, that belongs to coffee. That conversation coming up in just a Bit. Of course, if you want to find the best and brightest minds in the world of finance, you're going to find them right here on Bloomberg Surveillance. A whole host of interviews have taken place right in the studio all year long. And we're going to recap some

of those when we come back. A sit down with San Francisco Fed President Mary Daly. Highlights from that recent interview coming up next. You're watching Bloomberg Surveillance. Welcome back to Bloomberg Surveillance. US futures pointing to a slightly higher open here on the final trading day of the year, December 31st here in the United States, 3/10 of a percent higher, a punctuation mark, a somewhat middling punctuation mark, if you will, on what has been a phenomenal year, a 20% plus gains for both the S&P and the Nasdaq this year. The Russell up about 10% on the

year. The Dow up about 12 to 13% here, of course, the biggest gainers on a year to date basis. Well, you're going to find that in the max seven. They are responsible for almost 70% of the gains this year in the S&P 500. Under surveillance this morning. We want to take a look here at the U.S. Treasury confirming that it was hacked earlier this month by a Chinese state sponsored actor that breached the department's third party software service. Now, the hacker gained remote access to certain Treasury workstations and various unclassified documents. Clearly, this is one

of the most read stories on the Bloomberg terminal. Not only questions here about this particular hack, but for how long it's been going on and sort of what this means for the relationship between the U.S. and China. And we've already seen that come, of course, to a little bit of a pinnacle here where the Chinese embassy in Washington is already saying this has become just the latest in a series of accusations from the American government to the Chinese government that this is something that they use cyber warfare. At the end of the day, of course,

denying that this had any part in it. We should really point out, though, this Chinese hacker at this moment, from what we know, is not associated with the Chinese government. We're still waiting on details around that. But remains this is something that is bringing a little bit of a scare factor given that the contractor that they talked about beyond trust is also U. Utilized with contracts for about $4 million with the likes of the Department Of Defense, the Veterans Affairs Office and several others. You know, it should be pointed out the U.S. actually raised this

issue apparently back during those meetings in Lima, Peru. So this is something that, of course, the U.S. is known about now coming to light here in the public and raising a lot of questions about just what information the Chinese did obtain. Meanwhile, in other news out there, President Joe Biden has announced a $5.9 billion aid package to Ukraine, and that includes more than billion in direct military aid and billions more in budget support. Now, this announcement comes ahead of an expected policy shift with the incoming administration of Donald Trump, who is set to be inaugurated

on January 20th. And this is an interesting development Critique because obviously we've seen the Biden administration try to rush through a few sort of last minute funding and aid supportive measures for Ukraine before Biden leaves. I assume with the expectation that these things won't be supported by President Trump. Yeah, about 1.9 billion of that total, about 6 billion coming from that presidential authority, that drawdown that actually takes out US stockpiles isn't additional say military aid is coming from a US stockpile and this is the scare factor. Oman. I'm sitting here in London and this is

what we talk about almost every day, this idea that in January, come January 20th, suddenly NATO's some of these European nations really have to increase some of that defense spending. They can't rely on that American support and and not just defense spending for Their own countries, but defense spending for Ukraine as well. You can see Biden doing anything. He can help. But come January 20th, I don't know much more of what he can do. Yeah, it's been pretty clear here exactly what Trump plans to do, at least what he said on the campaign trail. And

of course, the blueprints coming out of Project 2025 does not necessarily bode well for that fight treaty. And of course, a lot of this, at least here in the U.S., is actually being pushed by, you know, what we are calling over here the first buddy, basically the man who kind of helped get President Trump elected. Elon Musk, has now turned his attention to Europe and specifically Germany. And in fact, just a little bit earlier, we heard from German Chancellor Olaf Schulz denouncing not by name, but basically making a mention of Elon Musk In his New

Year's address for Musk support of the country's far right party in the upcoming elections. This is the AfD. Musk has repeatedly praised the party, writing an endorsement in a German newspaper earlier this week. And of course, we should point out this is a relatively far right wing party in at least three chapters of that party are designated as extremist organizations within Germany here. So a little bit of a tit for tat here between I don't know if we call him a lame duck president there in Olaf Schulz and Elon Musk, of course, who had outsized

influence over the U.S. election greeting. Yeah. I think it's fair to call him a lame duck, especially given that we have those German elections February 23rd, I believe, in 2025. And and just for our global audience, the AfD Party. Yes, it's far right. But they're also advocating for things like getting rid of the euro, pulling apart from the EU, had a very vocal conversation interview with our very own Oliver Crook right here in Europe, talking about the fact that the EU is to blame for Germany's economic woes. So we'll see if that has some legs

in 2025. All right. A story to watch here among a lot of stories that we're keeping an eye on today. And we go back to some of the stories from earlier this year, the unknowns surrounding the Fed's path forward in the new Year, projections ranging from more rate cuts to potential hikes. We had a sit down with San Francisco Fed president Mary Daly on Bloomberg Surveillance earlier this month. Here's what she had to say. It's about the data. It's always about the data. For me, we don't know what the incoming administration is going to do.

You know, new administrations, no matter when they come. Always put a slate of programs together. And really, as a policymaker, I look at I want to see the net net effects once I see clarity about what those policies will be. So I was focused on the incoming information and what it means for the outlook. And today, I feel like we've got policy in a good place. The economy's in a good place and we're prepared for whatever comes before us. What happened in the past three months that caused the Fed and perhaps yourself to be much

more concerned about the stickiness and inflation? Well, the data happened and you look at The data and what's happened is that, you know, there's two things that have occurred. First of all, the the economy remains in a good place and the risks to the outlook are equally balanced between a risk to inflation or a risk to employment. That's where we wanted our goals to be. And we adjusted policy when we had confidence that inflation was heading down and we adjusted policy some more to ensure that we have a balanced labor market that continues. So that's

where we are. But then the data on inflation have been coming in a little slower. I wouldn't even say sticky or stalled. I would say the progress is just slowed relative to what we had wanted. But that's a typical pattern. It's bumpy as you get to the, you know, from 2.5 or 2.8 to 2. It's just a bumpy path at this. Okay. Yeah, go ahead. At the same time, some people were wondering if there was the stickiness and I'm looking right now at, say, the Cleveland CPI now and it actually has ticked up for the

month of December. From November, there was this question, why did the Fed cut at all? Sure. And I know, again, I'm going to reassert that it's bumpy. You know, remember, earlier in the year, we had two months of data and people said, oh, my gosh, it's accelerating. And then we had it come down. So inflation data, you can't you can't focus on one month or two months. The most important thing for me was that we needed to recalibrate policy. I saw this as a close call. You know, I was 75 enough to be the recalibration

we were looking for right size policy to meet the economy we Expect. Or do we need more? Ultimately, I determined that the 100 basis points was really the right level. Now I feel we've got that recalibration phase behind us and we're in the next phase. And the next phase is really looking at the incoming information. We could return to a more typical pattern of gradualism for the Fed. You know, we've been we've practiced that. Were you with a lot of uncertainty, You you adjust the policy rate, then you wait, watch fully and you see what

transpires and then you make further adjustments. That's the phase I think we're now entering from September. The expectation in the markets was going into every meeting that you'd be cutting. Has that changed now? Should the expectation be that you won't be doing anything at any particular meeting? And from that question flows? Second question, what are the criteria that you need to see to decide to go back to cutting rates? Well, as you saw from the ACP, the median projection is to rate cuts next year. So that's already not every other night in every meeting or

every other meeting. That's two rate cuts. I was very comfortable with that median that makes sense to me. But we have to remain agile. I mean, you know, the thing that's got us here is being resolute to achieve our dual mandate goals. Price stability was our focus when inflation was very high. The employment has come into the frame so that we're focused on both. But then we also have to be agile. You know, the world is uncertain, so we pencil in two and you know, as that estimate or that projection gets further from when we

made it, the accuracy of it probably falls. And so we're just going to continually take in more information, consider it. And every meeting your listserve should think about this. Every meeting is live from the standpoint that you're debating, you're discussing, you're thinking what's the right level of policy. But my projection is that it will take much, many fewer rate cuts next year than we thought. But I'll watch the economy and see if that works out. When we went into the cutting cycle, you were out front in saying you were concerned about the labour market and

that we needed to make sure that we didn't lose the gains that we had. Now, at least coming out of Chairman Powell's press conference, it sounds like the focus has shifted to inflation again. Are you comfortable with that as this new phase that he's talking about? Well, I think of it as a new phase as well, and I would characterize it slightly differently. I would say that for a long time, a persistent amount of time, protracted, we were focused almost entirely on inflation. That's because the labour market was quite robust and inflation was seven, six,

five. That was the right way to focus. Then the labour market came into the frame. That didn't mean we turned our focus totally to it. It just meant that after a long period of focusing only on inflation, we were now focused on both. I think that is still the case, but I See policy is already in that position where it's supporting both the policy. Restrictive is going to continue to bring inflation down and is going to do so in a way that doesn't strangle the labor market, break it, and then give people lower price, lower

inflation, but take their jobs. And that's not what we're trying to do. We're really working towards that soft landing. Maria, you've used the word we a lot when you talk about what's happening at the Federal Reserve. We've had some people who were quite critical of the Federal Reserve and Chairman Powers performance specifically in this news conference. One excuse that was given was that maybe he was struggling to reflect the lack of a consensus on the committee. How much diversity of thought disagreement is there on the committee? You called it a close call for yourself, But

was there some disagreement on the committee at this meeting? Well, you know, I'm not going to speak about the entire committee when I say we. I stay focused on are the things we all agree on, which is price stability and full employment on our efforts to get there. You know, what I would offer is that we have, in my mind, a healthy level of discussion and disagreement. You know, you don't want an FOMC that thinks exactly alike. And I believe that what people are looking at is the fact that now the world is more uncertain

and people are debating and bringing in their views. And that's appropriate. When it was a pandemic and there was only one direction to move interest rates, we had to do it quickly. It was obvious. Everyone agreed when inflation's high, There was no disagreement. We're all marching on. Now, you should expect more disagreement, more differences of opinion. But they're always framed to the same thing. How do we get inflation to two and restore or keep full employment? When I hear the world is more uncertain, a lot of people hear, Well, that's not about the data. That's

about the incoming administration. I would disagree. Why would you disagree? Because we have a variety of risks that are the ones we always deal with. Right. The the housing inflation. Right now, there's a a substantial housing imbalance in the United States. The models in our data and our past experience all say housing inflation Will come down. But we are uncertain about that. Right. It hasn't come down as quickly as the models would have predicted. And so that's an issue. The labor market and consumer spending and growth are much faster and stronger than people would have

predicted at this point, given the tightening we've done. There's a lot of uncertainty about the natural rate of interest. Where's the stopping point? And then, of course, there's geopolitical risks. The risk to global growth, that's going to be the backdrop. And then you have a change in administration. So I would say this level of uncertainty is is normal in the sense that we've had all of those things going on. And it's not as excessive uncertainty as after the pandemic, the financial Crisis. Those were really big periods of uncertainty. So I think if you're a central

banker, you just get used to uncertainty and you manage it. San Francisco Fed President Mary Daly speaking on Bloomberg Surveillance just a little bit earlier this month. A lot more coming up on the big program this morning. A closer look at the price of chocolate, the price of coffee sitting at record highs. What does it mean for you and what does it mean for traders? You're watching Bloomberg Surveillance. Welcome back to Bloomberg Surveillance. A quick check on the markets. Trading is down around the world. A lot of markets in Asia, including South Korea and Japan,

are closed, as are several markets in Europe, including Over there in London excuse me, in Paris and a Germany under as we talk about the here in the U.S. and a slight bid that we're seeing into U.S. futures. The S&P futures up about 3/10 of a percent. A potential punctuation mark on a 20 plus percent rally on a year to date basis. Euro dollar, relatively unchanged, belying the strength that we saw on the dollar this year. A 7% rally versus its main basket of peers. A ten year yield camped out around four and a half

percent. Brent crude prices up about 7%, 7/10 of a percent on the day to 7151. And we should point out that big rally we saw on natural gas futures yesterday about a 13 to 14% rally pulling back just a little bit today, down about 4%. And that is where we start right now at this hour. A closer look at commodities under surveillance this morning and the outlook in 2025. We talked about gold a little bit earlier, but how about cocoa futures up more than 170% on a year to date basis. Best performance going back to

1960, record high here, surging on renewed supply fears, and that's driving the most active cocoa contract in New York to make its biggest intraday jump. Going back to me, we should point out, coffee futures also higher as well here, heading for what is going to be yet another record high for those commodities going to hack. Joining us right now, Eddie, an f man looking ahead, writing that the outlook for commodities is going to remain well, sluggish next year due to a potentially strong U.S. dollar unless China stimulus changes That demand. I'm pleased to say that

Conor joins us right now to talk a little bit more about that outlook. And I think we have to kind of start, Conor, with actually what drove these phenomenal gains in prices this year. Was that just about the supply demand dynamics? Was it about geopolitics? Was it about whether what? So for the two top performing commodities, coffee and cocoa, yes, it was definitely supply demand dynamics and which in turn is all about the weather. So with coffee we had extreme drought and extreme dry conditions in the two major producing countries, which is Brazil and Vietnam.

And in Cocoa, we had not necessarily directly weather related issues, but certainly the supply side where we had, you know, poor yields in Ivory Coast and In Ghana related to disease and, you know, all trees and yes, a little bit of dry weather. Recently, the harmattan winds in the West African region have come a bit early. So that sort of causing and problems to the crops. I think a combination of massive supply problems have definitely hit both cocoa and coffee, which means we've got really tight deficits for numerous seasons in a row now. And so

kind of I am curious about this idea of sort of how sort of the market sort of adjusts to this, because you look at the trajectory of prices, how fast they went up here, and we know all the collateral requirements and other things like that. It's caused a lot of discord, a lot of issues for a lot of the brokers and the dealers out there. Is that volatility? I mean, irrespective of where prices go, is that volatility that we saw this year going to be repeated in 2025? Yes. The short answer is yes. And the

reason for that is because stocks are very, very tight, whether it's exchange inventories or actual physical stocks, both at origin and also at the destination, the importing countries where most of the consumption is happening. Stocks are ridiculously low on a historical level. So when you don't have that buffer, ultimately what happens is price has to give. So you get extreme volatility because you haven't got that necessary cushion that you need. And what's worse is that these trees of both cocoa and coffee, they don't plant not annual crops like soybeans or wheat, where when you have

a good price, the Farmers will respond. They plant more the next year and you get a good immediate supply response, unfortunately, with cocoa and coffee. The supply response is very lagged. So you're going to see in response to the current high prices, you're going to see a lagged impact maybe in a couple of years time of late, you know, early a year to 18 months. So you're not going to get that supply comfort coming earlier. And that's on the supply side. On the demand side. You're also not going to see an immediate contraction in in

demand to, you know, address that supply demand imbalance. And that's because, again, there's very inelastic demand for both coffee and cocoa. People are not ready to give up their cup of coffee. People are not ready to give up their Chocolate. It's a small luxury that they're willing to pay. And so that inelastic demand means, again, you have no movement on the supply demand in a hurry, which then leads to volatility, as we made mentioning. I can certainly relate to not giving up on the cocoa and the coffee, but going to talk just a little bit

about it from a from a trading perspective here. I mean, the last time we saw these moves and various agricultural products, it was almost from a lot of macro tourists, a little bit of a hedge against inflation. Could that if we do see an uptick next year, still play that role? Yes, I think that's something that seemed to be growing, you know, in a very small sort of from a small point a way, I think what we can begin to see is the hint of Inflation being very sticky and not having disappeared and if anything,

resurging. Now, if that starts to take off in a bigger way, then you can't you could start seeing the world and particular traders becoming more aware. Okay. So if we have inflation again, what do we do in that context? Commodities can suddenly become an interesting asset class again, because as you know, commodities are a very good asset class as a hedge against inflation. Certainly we saw that in 2020, 2022, just after the Ukraine war, when everything went up, whether it was energy or food, you saw commodities as a complex pick up. Now, could we see

a repeat of that? Potentially, but nowhere near an extreme, because obviously we're not seeing double digit inflation. We're going to see more of a sticky inflation, which is definitely lower than two years ago, but higher than what the central banks would like. So if that's the case, do you want to put money into commodities? I think people will pick and choose. I think things like gold might be a good option because that's attracting safe haven demand and there'll be no shortage of uncertainty in the macro environment and only five others will be pick and choose

based on their supply demand balance. So I think again, some of the soft some the soft commodities will do well because of the weather issue. You could start seeing some of China's stimulus starts to pick up. I think certainly some of the metals could do well arguably in 2020 by 2030 for some of the metals overran their fundamentals. I think copper rallied more than they Needed to. Then it took a hit when they realised that China's economy is not as strong. But if the stimulus starts to become better than expected and longer lasting, then maybe

the metals could do better. I'm a little bit concerned about grains. I think grains I think look very well supplied and I think in the environment of tariffs and trade wars with China particular, you could see the CBOT futures for grains and soybeans remain pretty under pressure. So coming out when when we talk about this, I mean, I can I follow your fundamental narratives on if there is an inflation uptick. These are some of the assets that that could benefit. Is there a risk, though, of folks that aren't maybe used to this kind of commodity

trading or the volatility you mentioned to Romaine as well, almost hurting the way some of these prices Work in our trade? And I specifically reference some of the moves that we saw in 2021, in 2022, because so many people who don't traditionally trade commodities ran to the asset as that hedge. Do you see a risk of that happening in 2025? I think we will not see a rush to commodities like you saw in 2021. And I think big reason for that is because the dollar is very strong commodities and the US dollar are have a

natural inverse correlation. So the fact that we're going to 2025 with a very strong two year high in the US dollar index, and my opinion is that the dollar will remain strong in 2025 because of Donald Trump, president elect's policies, policies which will put inflationary, which in turn would be supportive, a stronger dollar. If we do have an environment, then I think it's going to be difficult for Commodities to outperform. So I think that will be the biggest headwind for commodities, generally speaking. And so therefore you will not see a broad based increase in the

commodities asset class as a whole. But as I mentioned before, I think people will selectively choose which markets to go into. You know, even oil today, you know, it's been pretty stable for 2024 as a whole. But if Iran were to see increased sanctions, Russia, too, then suddenly oil could be an interesting one due to geopolitics. You know, this year weather did really well despite numerous tensions around the world in the Middle East, in particular, oil to and its strike. But Iran could be another issue if supply were to be impacted. They're going to have

to leave it there. Wonderful stuff. Going to hack over at EDF and man closer look here at the commodities space sitting on losses in the energy space. But some of the metals, particularly in the precious metals space and in some of the soft commodities with regards to cocoa and coffee having phenomenal years. A lot more coming up here on Bloomberg Surveillance. A conversation up ahead about valuations with Brooke made of Evan's May wealth. And we're going to talk to Jason Baumgarten. I don't know if you've been taking a look at all the CEO departures that

we've seen this year. But Jason, going to have some perspective here on whether we see a repeat of that in 2025. Pavel Molchanov We have in a conversation up ahead on renewable energies, and if you bought luxury real estate in Florida, you probably bought It from one of our next guests. All that and more coming up next right here on Bloomberg Surveillance. The market is seeing that the economy is not weak. We're getting to a point where equity risk premiums are incredibly narrow. I don't know what to expect. I'm not really sure if markets really

know what to expect. I think that creates some volatility. There's quite a lot of quite a lot of momentum still to be had, particularly in the first half of the year. As goes January, so goes the year. This is Bloomberg Surveillance with Jonathan Ferro Lisa Abramowitz and Annmarie Horden Hern. 7 a.m. in New York, 1 p.m. in Paris, midnight in the Fiji Islands. Happy New Year to our audiences worldwide. This is Bloomberg Surveillance Romaine Bostick in our world headquarters in New York. Kriti Gupta Over in London. Kriti as we take a look here at financial

markets closing out what has been a phenomenal year. The S&P headed for its fifth straight quarterly gain and that's going to cap a 24% rally on the year. You put that together with the rally we had last year. The best back to back years right now, at least for U.S. markets going back to 97, 98. It's a pretty decent stat. I think what's fascinating is in just the last couple of hours, it feels like the sentiment around the markets have completely changed. Wrote me when I came in for our morning shows here in London. The

markets were down and they were down hard. You've seen the sentiment just completely evolved in the future story. Now it's deep in the red now certainly into the green. And it's kind of interesting too. We talk about kind of what sort of led this rally. We talk about the start of the year. Certainly here in the U.S. it was all about those big tech companies. Some of that was a play on technology, but a lot of it, as you know, pretty was a play really on fundamentals, on cash, on profitability. But then we saw that

rally broaden out here in the US, and then now it's kind of narrowing once again here, Kristie, towards the end of the year. I think what was so surprising of this year is that even though I think we were expecting so much of that concentration was that you mentioned that the real shock to me was how the market sold off Around the Fed story, the fact that so many Fed cuts were actually priced in when I, like you, attributed it to, say, the Trump trade or the broadening or even the economic resilience you saw in

the data. But there were still so much of that monetary policy baked into a market that maybe didn't need it. And monetary policy was a big part of the story. This year could potentially be next year, even if the Fed doesn't do anything. That in and of itself could be a big story to a lot. Coming up this hour, a conversation up ahead in just a second with Brooke Mae over at Evans May Wealth on why she says the market might actually be overdue for a correction. Now we're going to talk with Jason Baumgarten over

at Spencer Stuart on the record number of US chief executives who Left the corner office this year. Pavel Molchanov over at Raymond James is going to be joining us to talk about his outlook for oil and renewable energy as well. But let's begin this hour with a closer look at stocks which are on track for their second straight year of 20% plus gains. However, ten stocks, just ten stocks accounting for more than 59% of that advance. Going back to the S&P bottom back on October of 2022. New York University finance professor as what the motor

and spoke to Bloomberg a little bit earlier here about the narrow breadth that we've seen in this market. Have never seen a group of companies carry a market for as long a period as the Mag seven. The MAG seven companies alone, if they were a market, would be the second largest equity market in the world after The US equity market. These companies, at least most of them, are cash machines. I have never seen cash machines as lucrative as these companies are, and I don't see the cash machine slowing down. And we go from one of

the brightest minds in finance to one of the other bright minds in finance, and that is Brooke Mae over at Evans May Wealth. And Brooke, I do want to start off with what Professor Damodaran was talking about, kind of two sides of the coin here. On one hand, you don't want to see this tight concentration on the market. On the other hand, we're talking about a tight concentration of companies that are just kind of just pumping out cash at levels that we've never really seen. I don't I can't really think of any real parallel other

than going back to the robber baron era at the turn of the last century. Absolutely. You know, when you look, though, at, you know, stretched valuations, which there's been a lot of criticism of in the S&P 500, a lot of those a lot of those higher P's are attributed to those top ten stocks. And when we look at their earnings growth rates, they're strong. So that's what you want. You want companies that are growing their earnings that can justify those higher p e ratios. When we looked at the big tech going into 2024, earnings were

expected to be up 28%, whereas the other 493 names were only expected to have earnings growth around 7% going into 2025. The narrative has changed. Big tech earnings are expected to be up about 21%. But the other 493 names earnings are expected to be up 13%. So we are seeing a broadening and Participation. And we think that, you know, if you peel out those those top ten names, the p e ratio that you have on the market is is much more reasonable and in line with the five and ten year averages. Well, that seems to

suggest that we could see a meaningful extension of this rally. And that doesn't necessarily mean we won't see pullbacks or even a correction in between. I am curious as to what you think the biggest risk for this market will be next year. Environment. That's that's good to be an investor. We've got low unemployment. We've got deregulation on the horizon. We've got an economy that's growing. And so our base case is that the market will do well based on the broad economy. However, there are quite a few factors that we're looking at. Some of them are

policy related, and I think that that's another reason why the Fed's going to be cautious. We want to wait and see. President Trump has been very vocal about what he likes, what he what policy initiatives he wants to take. And there are some concerns around what tariffs might mean for the economy or what deportations could mean for the economy. So we're ready to pivot if it looks like there are factors at play that might be somewhat of a bit of a speed bump for the market. Brooke, if I can ask you a more sector specific

question, especially around the policy story. I mean, I feel like a key part of the Biden administration, the Biden trade, if you will, was the CHIPS Act and this massive move you saw in the chip sector or not, that just wasn't just driven by the A.I. Story or the tech story, for example, but actively was because the federal government was granting funding to so many of these companies Intel, Micron, etc.. You saw that in the Trump trade as well. Almost. Biden unwind from that sector. Is that the right approach when it comes to how you

stock pick here? What sectors the federal government funds at the end of the day? Not necessarily because that can change. And, you know, we're looking for companies that have long term sustainable earnings growth, the ones that we like right now in media, Broadcom, Taiwan Semiconductor, in the hardware space, you know, we think can continue to do well regardless of subsidies. That said, we are shifting the share of focus more towards companies who have also embraced AI, but are doing it from A software standpoint. And they've been able to to show their customers and their clients

that they can they can be accretive to their earnings and help grow their business with additional services and products. So we're looking at companies also like ServiceNow and Salesforce that are using more of the software side in addition to the hardware. So, Brooke, some of the companies that you just named, they have one other thing in common is that they're all sitting on a lot of cash on their balance sheet. A lot of the tech companies are as well as a more long term investor. How are you thinking about cash on balance sheets? Is that

something to be deployed or is that something to use as a as a cushion for policy uncertainty? When we look right now at CEOs and what they're telling us, The sentiment is, is is okay. It's not overly optimistic, but it's okay. And when they tell us where they're going to spend, it's in CapEx R&D. We expect CapEx in R&D spending to be up about 8 to 9% over the next year. But we also see M&A activity and share buybacks and increases and dividends to be really even more of a commitment when it comes to their

spending. We think M&A spending could be up 20%, dividend increases could be up 7%. So there's a lot that they can do with that cash that we think will be beneficial to investors and they're planning on deploying it. And just to kind of wrap this up. Brooke, I am curious, too, because we talk about the challenges for 2025, and it's obviously goes beyond fundamentals. You mentioned the policy issues here in the U.S. and obviously geopolitical issues that Frankly still have not been resolved. Do you think there's enough hedging in the market right now? This has

been a big topic, not just amongst traders themselves, but do you think amongst the long term investors, are people protecting their portfolios against those potential exposure to shocks? I don't think they are. I've been in them. I've been in the market for 25 years and I've seen the tech bubble burst. I've seen the Great Recession. And, you know, this is this is an environment where investors have made money for several years and you let your guard down. We don't see, though, right now an overextension of margin and leverage, which, you know, typically to see a

bubble burst or a big correction. You're in an environment where you don't have cash and you've got a lot of Margin. So we're not necessarily overextended. But I don't know that investors are necessarily taking a cautious approach right now. All right, Brooke, going to leave it there. Brooke may over at Evans May Wealth with anchor for her time. And Kristie, it was kind of interesting. We talk about this 24% rally in the S&P 500 this year, one and a half trillion dollars in market value added to the S&P 500. Yet there were just about eight

people who accounted for 43% of that. And you can guess who they are. It's the Elon Musk and Mark Zuckerberg and Jensen Huang's of the world. Their wealth collectively, those eight folks going up by $600 billion this year alone. You know what's surprising me, Romaine, is that their wealth affects everyone's Wealth. Three of the stock market, right? If you're talking about this bromance between Elon Musk and Donald Trump, this brings me to back when Elon Musk bought Twitter and it actively affected Tesla shares that actively affected the S&P 500. That bromance dissipates. Does the stock

market drop, too? Yeah, I mean, that's a big part of the question here. And of course, we know we talk about these sort of singular individuals and how so much of their fortunes, at least going forward in 2025, are going to be tied certainly to some of those policies coming out of the White House and favoritism, if you will. All right. Let's get you an update on some of the other stories going on out there this morning. Yahaira Jacquez standing by right now With our Bloomberg brief. Hi, Romain. Cities around the world are preparing to

ring in the New Year with celebrations highlighting local cultures and traditions. In Auckland, New Zealand, they've already welcome 2025 with a light display, recognising the city's indigenous tribes. At 8 a.m. Eastern, Sydney, Australia will ring in the new year. Meanwhile, South Korean authorities are investigating airport infrastructure at the site of the Jeju airplane crash. This as questions grow over how a concrete wall at the end of the runway may have contributed to the disaster. International safety experts questioned if the crash was made worse due to the position of the structure and being made partly of

concrete. And online ticketing platform vivid Seats might be exploring a sale after receiving takeover interest from private equity firms. That's according to sources. Vivid Seats Shares jumped yesterday on the news, but are still down more than 26% this year, as you can see. Sources say the company's deliberations are ongoing and there's no certainty it will lead to a transaction. The CEO said it, quote, doesn't comment on rumours or speculation. That's a rumour. Brief remain. All right. I think there are two hierarchies there before that Bloomberg brief and Christie, I'm not sure if you actually plan

to go out on this New Year's Eve over there in London. But there was an interesting poll here in the US showing that the majority of people, they just stay home. I mean, I think that's what I'm going to Do. Me, my dog, watching the fireworks on TV. That sounds like a dream. Romain Yeah, I mean, I guess I'm one of those people too. I mean, we are going out, but as you point out, we're not going out to night or we're actually going out in the afternoon and I'll be home well before the fireworks

and all of the festivities start. But it gets to this idea here of just how much of this holiday, if you will, is actually a revenue generator. I know there are a lot of folks that would certainly in New York would want to go out and brave the elements to see the ball drop or go out to a nightclub or restaurant, if you will, here. But there's so many people that just decide, you know, it's just not worth it. Yeah, absolutely. I don't know. I don't know about you, but here I'm learning a lot about

some weird traditions that that Europe has. I learned today, for example, that in Germany they take little lead or wax figures, for example, throw them in water, see what form they make. And that's a fortune teller of what their new year is going to be like. And I've got about 20 more of of similar examples. Oh, yeah, there's a lot over there. And of course, back here in the U.S., you know, we have our own traditions as well. And of course, as we bring in the new year around the globe, are actually closing in in

just a little bit of time here. We're going to start to see Russia actually move on to the midnight hour here. Vladimir Putin already out with the statement in his New Year's address marking his 25 years in power and what he is calling his, quote, proud achievements because Vladimir Putin going to be a key figure in the new year heading into 2025, given the war in Ukraine and his relationship with the incoming president of the United States of America, Donald Trump, when we come back here on Bloomberg Surveillance, we're going to take a closer look

at what's going on in the C-suite. We're going to dive into the reported uptick in CEO departures, record levels this year. Jason Baumgartner at the leadership advisory firm Spencer Stuart is going to be joining us to talk about what's behind the trend and more importantly, whether it continues. You're watching Bloomberg Surveillance. U.S. futures pointing to a slightly higher Open. The S&P 500 futures right now up about 4/10 of a percent. A punctuation mark on what has been a 20% plus rally on a year to date basis. Similar percentage gains for the Nasdaq on a year

to date basis for the Dow. And the Russell, you're sitting on gains on a year of roughly around 10% or so. Most markets now have started to shut down. Quite a few in Asia are already closed for the New Year's Eve holiday, some in Europe as well. As we approach the midnight hours across the world, euro dollar unchanged on the day, your ten year yield here in the U.S. camped out right around five and a half percent, unchanged on the day as well. And an up tick here, fractionally for WTI crude in New York, 9/10

of a percent to 7160 a barrel, despite the fact that on a year to day basis is going to end The year, it appears roughly on change. Of course, oil, energy and commodities, those were some of the big stories of the year. But another big story this year, and it is under surveillance and that is the number of CEO departures. Here's the latest on that. Record numbers of GS chief executives at public. U.S. companies are reportedly leaving their posts amid increasing scrutiny. Jason Baumgarten of leadership advisory firm Spencer Stuart saying it's hard to draw meaningful

conclusions about why these CEOs are leaving their jobs from broad statistics alone. But it's tenser, Stuart. They believe you need to understand the three C's, the CEO themselves, the company they were leading, and the context in which they were operating, pleased to say. Jason baumgarten joins us right now. And I want to start with that third C and that is the context as a job just gotten too hard. Well, as you know, there's a lot that can be going on in a company. And with a CEO's tenure, you can be facing enormous uncertainty from global

tariffs, a huge boon from A.I.. And so depending on what situation a company finds itself in, what is going on in the industry, and then how is the company responding? It's certainly something that matters. And context is both about the industry, but it's also about how that company has historically responded. Does the CEO have a plan and how is that plan actually seeing the results that they and the board of directors and ultimately the shareholders want to see? I am curious about these statistics. I don't think we have a breakdown exactly of how many of

these departures Were willful and and how many of these were folks forced out. But when you look at the trends yourselves, I mean, what do you get a sense of? Is this basically the board saying, okay, we need a leadership change or is this the individual CEO basically just saying, you know, I'd rather do something else with my time in my life? It's a great question. And the reality is it's all of those things and more. In some cases, CEOs are just saying, hey, this is a tough job. There's a lot more media scrutiny. There's

a lot more always on attention. There's a lot more stakeholders to make happy. And it's harder and harder to eke out performance. As your segment before showed, So much of the performance is driven by so few companies, and so it's harder and harder For CEOs to see the value creation under all of this and to have an increasing amount of pressure on them as individuals. So some are just saying, Hey, I've done well, it's time to let the next person lead. The context is changing. Let's have a changing of the guard. In other cases, the

boards are sitting there saying, we want a different rate of performance or we want a different change in direction. Whether they're doing that or they're doing that under the scrutiny of other stakeholders. We do see boards taking action faster. Our own studies and research on the topic. The faster boards take action, the more likely the company is to perform well after a decrease in performance. So it's sensible for boards to take action on the other side. Some CEOs are just saying, Hey, it's time I had a good run. I deliver a lot of value and

time for the next generation. I had a CEO recently tell me they retired at 60. They were thrilled. They were taking their first real vacation, as they put it, in 45 years. And they said they were getting their knee replaced, going for a hike and hanging out with the family for the first time, really in their professional career, because they had just been fully on 24 seven for 40 plus years. Wow. That is that is quite the run for for that person. Jason, I'm curious about the approach that CEOs use here. I'm curious about if

if the limelight is something that helps or hurts their case. I mean, I'm thinking of, say, Jamie Dimon, a Tim Cook or a mark Zuckerberg who maybe could could benefit from the spotlight, but then maybe bring about more scrutiny as well. How do you think about that? Well, we often focus on a few individuals. And the reality is there's 1500 CEOs and S&P 500 and there's 500 in the S&P 500. So a lot of executives, a lot of leaders who are trying to do this in their own companies to drive value, to drive employee satisfaction,

to drive satisfaction in their communities. All of those CEOs are under scrutiny in their own ways and chips. So they all have to think about how to yield that public persona carefully and to really make as many people happy while still delivering on the fundamental values that they're trying to deliver on for for stakeholders and for shareholders. Well, Jason, we're on a financial Network at the end of the day, so I've got to ask you a question about buybacks. I mean, this is something that has been such a point of contention for so many people

when it comes to do CEOs just want to see their stock rise at the end of the day in terms of compensation or in terms of buybacks or in terms of shareholders or whatever. How do you think about that? I think increasingly boards have to think about are they seeing the value creation they want from the CEO? And is it following the plan that the CEO put forward and that the management team is executing on if they're seeing the results? Sometimes those are interim steps, interim things, whether it's revenue increase, margin increase. Those then have

to translate in the market. But as you know, those don't always Translate right away or in obvious ways. So the board has to be that go between to see that they're seeing the results they need from the CEO and the management team on behalf of shareholders that will ultimately lead to shareholder increases. Part of that plan is to buy back shares. Then that's something they're going to evaluate. If they see that as a part of the plan that they're not as happy about, then they're ultimately going to value that as part of the CEO and

the management teams evaluation at the end of the year. Jason, I am curious though, also, I mean, we talk about some of these CEO departures in the context of those folks who are maybe just like I said, just kind of done with the job. There's kind of the opposite of that, too. You have some transition issues of Certain CEOs that, let's just say long in the tooth have been in the job for quite some time. Not to say they're not doing well, but there are a lot of questions as to what's the transition. You know,

whether you're talking about a Jp morgan, whether you're talking about a Disney, for example, as well. I am curious as to how proactive these boards are in making sure that for some of their CEOs that have been in place for a long time, that are getting to an age where you have to start thinking about who's going to come in next. How much influence they really have to make sure that there is an orderly and smooth transition. Well, listen, we do a survey every quarter called the Measure of Leadership. We asked 20 CEOs and board

members what's going on in their roles and in their companies and in the general Context. Two things that stood out to us in this last survey that we did. One, CEOs and boards were unanimous that the amount of uncertainty in the economy. Roughly 80% in both groups said it's more uncertain. The second thing is that in light of that, only about 50% of boards reported that they had robust succession plans in place. And many of them, when pressed on the topic, said that they wouldn't have multiple options, which is what we really look for, is

does a board have multiple options? The final thing that we're seeing is a real trend away from it has to be an internal candidate as a badge of success. The reality is boards should look internally and externally at their candidate pools and really make sure They're doing all of that diligence before the time comes. And finally, it takes real work and it's uncomfortable work for boards to ask these questions of CEOs, many of whom have been in the seat for, you know, the average is eight plus years, even though that's down a little bit. The

reality is, if you've been on a board for eight plus years with the CEO, you've got to sometimes say, hey, does the strategy need to change? In addition, the CEO as well as, again, that context might change for the CEO that that the prior CEO didn't have to wrestle with. And just real quickly here, are those skills still transferable? I know in the past we used to always talk about this idea that being a CEO is just all about management. If you managed a food company, you could manage an industrial company or financial company. It

was just management. Is that still the case? I think we are always seeing industry shifts, CEOs coming from one industry going to another one. The reality is that it's a slightly scarier thing for a board to do. But it can work. And CEOs who are great people, leaders who are great at thinking about how to create value and created asking the right questions. Great at recruiting talent can usually drive value as long as they're willing to put the extra cycles in to learn what they don't know and bring that beginner's mind to learn about the

industry if they are shifting industries. All right, Jason, going to leave it there. Jason Baumgarten over at Spencer Stewart, the leadership advisory firm. A closer look at the record number of CEO departures that we've seen this year, at least based on the tally that we've seen coming out of Challenger Gray. When we come back, one of the hottest sectors to start the year. That was the energy to end the year. Well, it's one of the worst performers. A conversation coming up with Pavel Molchanov over at Raymond James. His outlook for the energy sector where oil

prices are headed and where is exactly that renewable energy trade, the sun coming up over New York. This is Bloomberg Surveillance. S&P futures right now pointing to a higher open, looking to snap a three day losing streak here on this final trading day of the year. S&P futures higher by roughly about 4/10 of a percent here on this day. Well off the record highs set back on December 6th, but still punctuating the Year. There is now a gain of roughly about 24%. NASDAQ and Russell futures also moving higher here on this morning. In fact, equity

futures across the board are in the green right now. Yields across the board are lower. We should point out the volumes today are like here on this New Year's Eve. But we did find a couple of stocks worth watching here on this day with just about 2 hours away from the cash open of equities. Let's get to our morning movers right now with you hierarchy's Yara. Hi, Romain. We start with saying Gammel therapeutics. Those shares are down more than 50% in premarket after Pfizer decided to end its partnership with the company for a treatment meant

to treat hemophilia A. Pfizer is saying that there is just not Enough interest for another gene therapy option for the disorder. As for why the shares are plummeting, that's because analysts are warning that this could worsen and those liquidity issues. Next up, we have MicroStrategy. Those shares are rising 4.7% in the pre-market, and that's after the company which has been stockpiling bitcoin, said it's buying more $209 million worth. And that is less than the amount that it bought a week ago. As for why the shares are rising, well, it was part of the tech selloff

yesterday, so it looks to be making up some of that. Also, you are seeing Bitcoin bitcoin prices rising today and we know that where bitcoin goes. MicroStrategy follows and last up we have Tesla. Those shares are up some 1%. They also sold off yesterday. But look to be on the mend today even though we do have a report out that Tesla is recalling more than 77,000 vehicles in China due to software issues and even potentially even potentially faulty airbags. But something to watch out for this week is the company is set to report fourth quarter

and full year deliveries, and that is set to come on Thursday. ROMANS Absolutely. A phenomenal year, though, for Tesla, a 68% gain in that stock on a year to date basis. And MicroStrategy, just a phenomenal year, up almost 400%. In fact, one of the best performing stocks among the thousand biggest companies out there in the U.S.. We do want to turn our attention right now to the commodities space and specifically energy oil markets. Well, they're pushing higher here in the last trading session of the year. This after we got a report that factory activity in

China did expand for a third straight month. Pavel Molchanov over at Raymond James. He's looking ahead to next year. He says that, well, they're forecasting oil prices to be largely rangebound. However, the main energy story of 2025, which was also the main story of 2024, is set to be electricity rather than oil. Pavel joins us right now to talk a little bit more about that. And Pavel, let's talk about it here. I mean, if you had told me coming into this year that some of the biggest gains in the equity market would be utility and

power companies, I would have said, you're crazy, but here we are at the end of 2024 talking about utilities and power companies that continue. This continues to be the story next year. Yeah. This is the derivative trade on I. So the euphoria around a i such is what we might call the picks and shovels of the electric power industry. So the utility stocks, the equipment provider. So everything from, you know, gas turbines, wind turbines, solar panels, battery systems and also the construction companies that are, you know, physically building all of this energy infrastructure to accommodate

the boom in electric power consumption. When we talk about the building of this infrastructure and you have obviously new infrastructure coming on here in the U.S., you have old infrastructure, old nuclear plants coming back online here. Is there enough out there, I guess, if you will, for these companies to draw on? Or are we going to be facing significant shortages in power given some of the demand needs out there that we know of, At least when it comes to computing? And I. Well, our listeners do not need to worry about, you know, physically running out

of electricity, you know, at any point in the foreseeable future that that's not going to happen. What is true is that power prices are already trending up. In fact, they've been up since pre-COVID by about 25%. And we should expect power prices to continue moving higher, in part because of the additional demand from the data center buildout. And look, let's also keep in mind the geographic differences here. The bulk of the data center or the largest portion of the data center buildout is happening around Washington, D.C., Northern Virginia, Maryland, little bit into Ohio. You know,

there is not as much happening in the western half of the U.S.. There is also, by the way, data center buildout I related in in Europe, in parts of China. So this is a global story, but Northern Virginia has the largest portion. So naturally, that's where the infrastructure needs to move forward at the fastest pace. Pavel. When I first learned about how utility grids worked, I was pretty surprised to learn that you can use both oil and natural gas. And sometimes natural gas can be cheaper in utility grids as well. There's a big conversation in

the US right now about exporting a lot of extra natural gas and LNG to Europe. But if you see this data center build out in the US, do those flows get redirected? Natural gas going to Europe will be limited, not so much by the ability of American gas producers to pump as much As they want, but rather by Europe's need to import LNG. And here's why I say that since Russia invaded Ukraine three years ago, Europe's consumption of natural gas is down by 15%. I'm not talking about down 15% from Russia in that that's practically

a zero. But overall, Europe is using 15% less natural gas. So guess what that means? Less need for for natural gas from any source. You know, ask Qatar, Norway and Azerbaijan and so forth. So that's really where the constraint is going to come from. So there's no necessarily relationship between the natural gas needs of Europe or the natural gas needs of other folks in the United States versus, say, the build out. We have plenty of natural gas in North America to to do both. So natural gas will certainly play a role, particularly in the eastern

half of the U.S., to support the data center boom. Now in the western half of the country, as I said, I it's less of a factor. But keep in mind, we also need to replace coal plants that are being retired. And this is why we're going to be following an all of the above strategy for the electricity mix natural gas, wind, solar and in certain cases and with also long lead times, nuclear as well. I am curious, though, Pavel, do you think that at least here in the U.S., that government policies coming out of this

new administration will be supportive of some of those renewable energy initiatives like wind, solar, nuclear, etc.? Number one thing we need to understand About government policy as it relates to electric power is that it is predominantly at the state level rather than the federal level. Electric utilities are regulated by state level utility commissions. There is a little bit of a role played by FERC and the Department of Energy in Washington. But number one is the state level regulation. So here's an interesting fact for some of your listeners. 29 states have a renewable portfolio mandate for

electric utilities, including, by the way, some red states like Texas, Missouri and Montana. Yeah, And it'll be interesting to see whether that holds and how that interplay between those states and the federal government goes forward. I do want to ask you a much more straightforward question about the oil market and particularly about the Mobility of oil. Obviously, there are a lot of concerns about geopolitical issues and the disruption of flows of oil. You have the wars obviously going on in the Middle East and elsewhere that have also disrupted the flow of oil. Do you see

any sort of right sizing in that next year or are these sort of, I guess, issues that are going to just remain lingering for a good portion of the year? For the past 12 months, we have had two major wars Russia, Ukraine and of course, what's happening in the Middle East. Despite that, oil prices have barely moved since January 20, 24. Why? Because we also have to take into account what's going on with demand. And demand has been weaker than expected in large part because of China. So our number one question for next year Is

not so much geopolitics. It's good old fashioned supply and demand. What's going on in China with the economy and by the way, with electric vehicle sales, half of China's auto sales are now electric. That's a big deal. We're also watching the dollar, strengthening dollar, as we have seen precious commodity prices across the board, including oil. And the third thing we're watching is opaque. Opaque has been very disciplined since Covid with supply at some point in 2025, opaque will begin to unwind its production costs, which means more barrels on the market. And that may put some

pressure on the price of oil as well. All right, Pablo, Great South Pablo Molchanov over at Raymond James. A closer look here at the energy market, The outlook for 2025. We continue our coverage here on Bloomberg Surveillance to look at some of the big stories of the day going on out there. Let's get your Bloomberg brief. Your hero, Hakka is joining us right now. Hi, Romain. Mortgage finance giants Fannie Mae and Freddie Mac saw their shares jump over 30% by yesterday's close, sparked by a post from Bill Ackman that stoked optimism that the companies will

be released from conservatorship under Donald Trump's administration. Meanwhile, the US government fund created to compensate victims of Bernard Madoff announced its 10th and final distribution this week. The government paid out $4.3 billion to nearly 41,000 people schools, charities and pension plans who were swindled by the Ponzi schemer. Victims recouped an average of 93.7% of their prison losses. And Hollywood studios are seeing an end of year surge at the box office, with projected ticket sales for the year inching closer to 2023 total through Sunday. Domestic box office sales were $8.66 billion, according to comScore. The three

day weekend total of 65 million was led by Disneyland Plaza, Paramount's Sonic the Hedgehog three and Nosferatu from Focus features. Domestic ticket sales are still below 2018, record breaking 1.9 billion. That's the year Avengers Infinity War and Black Panther came out. Feels like a lifetime ago. That's true. Bloomberg brief remain. I absolutely I haven't seen any of those movies. Oh, by the way, I got to get out a little bit more. Meanwhile, you're on Bloomberg Surveillance. Coming up next, the high cost of owning a home. As we're looking into 2025, what we're expecting is that

more drivers are probably going to be volatile, similar to what we've seen, but they're probably also going to remain pretty high. And of course, there are a lot of people out there who are, I guess, concerned about the cost of buying a home. And there are folks out there who, well, don't have any concerns at all. A conversation up ahead on the luxury real estate market. In fact, if you bought luxury properties down in Florida any time soon, you probably did it from one of our next guests. That's coming up next here on Bloomberg Surveillance.

Welcome back to Bloomberg Surveillance. Quick check here on the markets. Futures pointing to a slightly higher open, but we should point out here, volume is going to be incredibly light as is typical years here on the final trading days of the year. S&P futures up by about 3/10 of a percent here, a potential cap to a 24% run on a year to day basis. Not much action right now going on into epic space, $0 unchanged at the moment here. And we're keeping an eye on yields. Four and a half percent is where we were probably

looking to close out the year, not where most people expected. In fact, we came into this year with expectations to be a lot lower than four and a half percent. And by the time we got to mid-year, the expectations were for us to be, well, a lot higher than four and a half percent. They split the difference, a narrow trading range. That's what you get here for the Treasury market. A narrow trading range as well continues in the energy space. Oil futures here in New York, WTI crude 71 and change up about 3/10 of a

percent on the day, unchanged on a year to day basis. Of course, energy has been a big story of the year. So too has been real estate and the potential rebound that we've seen in a lot of those markets, particularly in the high end market. And that is under surveillance this morning. The high costs of owning a home mortgage rates for really the last couple of years has, you know, bounced around a lot. But they generally stayed pretty high. And we're ending the year with pretty high mortgage rates as we're looking into 2025. What we're

expecting is that mortgage Rates are probably going to be volatile, similar to what we've seen, but they're probably also going to remain pretty high. We don't really see a lot of room for rates to fall. And despite those high mortgage rates, luxury real estate is booming. According to global luxury real estate brokerage, the agency, those home sales rose just over 5% in the first half of 2024, while overall home sales dropped about 13%. Tina Golden Tyre is joining us right now. She's a real estate agent over at Douglas Elliman Real Estate and honestly, one of

the biggest brokers down in the Miami South Florida area responsible for billions of dollars worth of sales. Dana, I would assume your clients probably aren't too concerned about mortgage rates. They're going to buy whenever they want to buy. But I am curious about their sentiment right now. Are they feeling better about venturing into these purchases, at least better than maybe what they would have been a year or two ago? Two years ago, they would have felt exceptionally good. 2022 has proven to be the peak of the post-COVID market in my neck of the woods, which

is Miami and Miami Beach. But they still feel good about making a purchase that helps them establish roots in this exceptional city. I am curious, do we talk about this exceptional city? We'd be remiss in not pointing out the huge migration of folks from places like New York as well as other parts of the country down to Miami. Some of that was because of the pandemic. Some of that actually started prior to the pandemic. Of course, we kind of call it Wall Street south now. A lot of demand for housing. DNA is the supply there.

The supply is definitely there, which makes it a better time to be a buyer during COVID. If you flew in, I would have maybe three homes to show you and you'd be making a full price offer on one of them. Now, I might have ten homes to show you. You have more bargaining power. So buyers actually feel better out there because they can have more selection and they don't have to give in to every whim of a seller. For example, there used to be this commonplace term that I would have to add into my contracts

that would allow a seller to stay back, have your money, use it to buy something else, and very rarely pay You rent. Now, as we approach 2025, buyers don't have to offer those types of terms to sellers. Things just can be more normal. Well, Diana, talk to us a little bit about maybe that dynamic Romain was talking about. I know, again, mortgage rates, maybe there's a little bit of kind of elasticity there with your clientele. But in terms of leverage, are you seeing changes in leverage that people are willing to take out or use to

finance some of those buying? So in the 440 million in sales that I did this year, zero, I had financing. Oh, well, that says something. Certainly. Talk to us about the kind of clientele, though. I mean, again, Romain was talking about from New York, too, to Miami. What about international buyers? Are they driving up some of those property prices? The biggest international buyer that I'm seeing in my marketplace are the Canadians. And we tend to loop them in as as one of us. But they are in fact the biggest international buyer for my book of

business. I love the Canadians DNA, but they're not. Yeah, they're very nice. I am curious though, too. And just going back to Miami first. I mean, I've been to Miami many times. I've been in all the neighborhoods except for one. I've never set foot over there in Indian Creek for obvious reasons. One of the most exclusive real estate enclaves in the country, if not the world here. What's going on over there? I heard Jeff Bezos right. He's building like what, another mansion? And then isn't there a property next to him that apparently somebody snatching up

for a couple of hundred million dollars? What's going on out there? I mean, Indian Creek is the sexiest destination in the country. I've had the pleasure of selling several homes there. You know, Jeff Bezos obviously has put it on the map, but Tom Brady was there before and he's always posting on his Instagram from his beautiful backyard. Oh, I sold that one. So it's really spectacular and it's like nothing else. And it is billionaire's bunker, but it's also gotten younger. The buyer for Indian Creek is no longer necessarily someone who was in their seventies or

eighties. You know, you've got plenty of owners in their forties on the island and it's an incredible place. And I'd love to take you there if you're ever in town. All right. Well, I may I actually take you up on that at some point, Dana? But before we get there, I'm curious. I mean, it's interesting you talk about the younger buyers, too. I am curious as to whether the younger buyers way we're talking to wealthier buyers here, whether they gravitate to the same neighborhoods, the kind of the older money did. I mean, you kind of

saw a big transition in New York where, you know, the Upper East Side was, you know, are basically the bee's knees for everybody. And then you had this sort of new cohort of tech entrepreneurs and other people that said, I'd rather be downtown and Tribeca or somewhere a little hipper Here. Do you see the same trend in Miami or are they gravitating to those old money enclaves as well? That's an excellent question. I never heard of that juxtaposition, but we definitely have that in our marketplace. You've got kind of the people who would choose the

Upper East Side in New York. They tend to gravitate towards Surfside Bal Harbour. You've got people who would choose Tribeca or Soho. They gravitate more towards the South Beach and south, the fifth area. And then the tap money. They love the Venetian Islands. But to also answer your question, yes, new money loves the same thing as old money. They love Fisher Island. They love Indian Creek. They love being there in their forties When it used to be only for people in their seventies or eighties. Luckily, we have enough of a buyer pool to support all

these incredible neighborhoods. All right, great stuff. And obviously you have some great insights into what's going on down there. $3 billion in sales just since 2021 alone, 450 million. It's hard to believe just this year. Congratulations on your success. We'll catch up with you next year in 2025, doing a golden ticker over at Douglas Elliman real estate here creating. And I was also taking a look one of the biggest sales that we had this year down there was actually the Beckhams, $72 million of property they purchased over there on North Bay Road. And you know

what I love about them? Aren't they British? Tell me what they wanted. You? Yeah. Oh, am I British now? I mean, technically. Look, I don't. I don't know if the British would want me, but I think it's important to keep in mind that that's not just the Beckhams. It's Lionel Messi as well. He now lives there. He's driven some of the property prices up. I hear he's potentially making some of his assets into into a rate as well. So I don't know something's going on with Miami, but then I hear so many people are leaving

for for Austin, Texas, or San Francisco or Seattle. So I don't know. Romain, what's the new Miami? I, I mean, that's a big I wish I knew I mean, I wish I had gotten in on the new Miami when it was old Miami or the new Austin or the old Austin or whatever, but it'll pop up somewhere. I was also curious, too, I mean, just kind of speaking of kind of the wealthy and the celebrities, did you know that Brad Pitt and Angelina Jolie got divorced? Which was surprising to me because I thought they got

divorced like ten years ago. But apparently this has been like an eight year long divorce process that apparently has now just been finalized and basically going down. It's one of the longest and most contentious divorces, at least according to the Associated Press. We're finally talking about the stuff I want to talk about the real news you can use, I think, Ramayan, which is basically and I think I know way too much about this custody battle or this kind of divorce than I should, because I Believe a winery was a big part of the conversation winery

that they had a joint ownership of. And I admit I have not read into the latest of who got the winery, but I hear it was a very contentious piece of piece of property. Yeah. I mean, any time you have these types of celebrities and that type of wealth and the type of assets, it's always a bit complicated to kind of sort it all out. But eight years. Oh, my gosh. All right. Really, we got a lot more to talk about here on the big program. And actually, I just want to say, I mean, Christie's

actually going to be leaving. So I just want to say, you know, happy New Year to you, Ari. Thanks for being here on Bloomberg Surveillance this morning. The final hour will be taken over by Sonali Basak, but we'll talk plenty next year, I think theoretically too. Good to have you say goodbye to her and stick with us here on Bloomberg Surveillance. A lot of big guests up ahead, including Matt Miskin over at John Hancock, Tom Fitzgerald at TD Talent and Danielle DiMartino Booth. Talk about here the future of the Fed. And how about this, a

ball drop here in New York City and of course, a focus on security. A conversation with former NYPD commissioner Ray Kelly. You're watching Bloomberg Surveillance. The market is seeing that the economy is not weak. We're getting to a point where equity risk premiums are incredibly narrow. I don't know what to expect, but I'm not really sure if markets really know what To expect. I think that creates some volatility. There's quite a lot of quite a lot of momentum still to be had, particularly in the first half of next year. As goes January, so goes the

year. This is Bloomberg Surveillance with Jonathan Ferro Lisa Abramowitz and Anne Marie Jordan. 8 a.m. in New York. 3 p.m. in Jerusalem. Midnight in Sydney, Australia. Happy New Year to our audiences worldwide. Good morning. This is Bloomberg Surveillance Romaine Bostick here in a Bloomberg world headquarters in new york, joined for this hour by Sonali Basak. Happy new year. Happy new year to you. People already celebrating around the Globe. You got big plans for tonight. I know big plans, but my parents are in India, so they'll be celebrating soon as well. So exciting to see it

happen all across the globe. I do feel sentimental. Well, I mean, always like this. I never really stayed up in the night cause I you know, I'm you know, I'm one of these early birds and I go to bed early. But we are going out this afternoon, are going to my whole family's here. I'm going to have a little bit of fun and and then hopefully I can get to bed before I will be in bed. The minute after the clock turns to the new year. All right. Well, a lot of people in bed, we

should point out, volume is liked here in all US markets here with just about an hour And a half until we get to the cash session. Let's check in on our futures right now. Stock futures are up about 2/10 of a percent on the S&P. Similar moves, quite frankly, on the other futures as well. The Dow, the Nasdaq and the Russell 2000. An interesting punctuation mark here for a market that is sitting on some really sizable gains. The S&P finally headed for its fifth straight quarterly gain, 24% rally on the year that matches the gains

we saw last year. It was also about 24%. That's a best two year gain going back to 97, 98. Certainly a historic run we've really seen here. But we remember what happened in 97, 98 going into the new year. You do have some jitters. The S&P 500 breaking those three days of losses, significant sell off. Just yesterday, if you told me we'd be sitting here in the last day of the year and the ten year yield was more than ten basis points lower than where we saw it Friday, tremendous bond market volatility in addition to

the stuff I think about where it was at the beginning of the year or even a year ago. And it's kind of interesting, like what is the most surprising story? Was it the record moves in stocks? Was it kind of the non record moves in commodities? Was it what we saw in the Treasury space? Was it just the VIX and the fact that it did nothing this year or frankly, Bitcoin 100? Would you have put that on your bingo card after tax? Oh wait, we ready to stop talking about Bitcoin early this year and then

all of a sudden they're brought back here, of course, now sitting on a 100% gain on a year to date basis, 100% gained the previous year and got a lot of folks thinking they can match those gains here in 2025. Certainly everyone setting up for a new administration as well. And while there are some jitters in the bond market, you saw Bitcoin really tearing off the heels of this idea that the SEC will be a little lighter. We'll see. Everyone's preparing for inauguration. We're 20 days away. A lot of catalysts out there that could move

the markets. A lot to talk about in this final hour of Bloomberg Surveillance. The madness going over at John Hancock, going to be stopping by on why he sees limited upside for the S&P after three straight years of gains. John Fitzgerald over at TD Cowan is going to provide his 2025 outlook for the airline industry. In fact, airline and travel stocks have had a phenomenal year. I'm going to talk to former NYPD commissioner Ray Kelly about keeping everybody safe as the city of New York gears up for those big New Year's Eve celebrations. The ball

drop. Have you ever done the ball drop in Times Square? I have not. I've watched it safely from downtown or uptown, wherever I've lived at the time. Yeah, I'm out of the city this year. I was fortunate enough to actually see it before all the security really ramped up before 911, before Oklahoma City and all that, where you can just kind of come back and forth what year. Thank God that I'm older than I look. Sonali Basak So that's going to keep That close to the vest here. Will not be going out tonight. But for

all of you out there braving it, we wish you the best. We begin this hour, though, with equity futures sitting on modest gains. Stocks hoping to snap a three day losing streak here on the final trading day of 2024. The S&P having a wonderful year, a blistering year. The index up about 24%. Matt Miskin of John Hancock seeing a limit, though, to further gains writing there. It's going to be hard for equities to stomach. Much more upside. While we still prefer US equities based on the better fundamentals we recognize, the magnitude of outperformance in 2024

is not likely to be replicated. Matt joins us right now to talk a little bit more about that outlook in. Matt, maybe we don't see the same gains we saw in 2023 and in 2024, but should we expect at least some meaningful gains in 2025? It's certainly possible, Romain, but what we're seeing here is heavy. Is the crown really for U.S. equity leadership and U.S. economic leadership. Frankly, after a certain stint like this, where U.S. economy has just blown past most global economies, the US dollar has strengthened a lot. So it's up about 6% in

2020 For a stronger dollar makes us less competitive on a global basis. It helps actually bring down inflation because we're buying stuff from abroad, but it is difficult to stomach for economic purposes. Then rates have been higher. So we have high quality bond yields, ten year yields higher on the year. That's a bit of a slowdown and there's massive expectations out of the US economy and markets into 2025. So the earnings estimates for 2025 for the S&P 500 are still about 15%. So there's a lot of optimism. One of the biggest assets, the S&P 500

and US large cap stocks have had over the last several years has been conservative and more kind of bearish sentiment. The sentiment dial has been turned up significantly, too, in 2024. We think that's becoming a bit of a liability as we walk into next year. Well, that's what I am confused about here. We talk about how crowded some of these trades are. We talk about the lack of hedging that we're seeing in the equity space and the idea that you have valuations, at least for some of these companies at at least by historical standards, would

be Stretch. I know there are some people that want to reinterpret history, but what do you do in that situation? Do you reallocate? Do you stand by your conviction that maybe some of those stocks can go higher? What? Yeah, momentum is not a fundamental factor and momentum was the number one way to outperform. The only way to outperform, frankly, in 2024. So what is momentum? It means you look at the best performing stocks of the last 6 to 12 months and you allocate the most of those. So basically chasing performance was rewarded in 2024. But

to your point, Ramy, there's other things that drive stock markets, whether it's valuations, whether it's earnings, and that's those parts of the market Have been left behind this year. And there's a bit of a dogs of the Dow type formula where usually the worst performers can sometimes become the best performers in subsequent years. This year ending this year, this the dogs of the Dow kind of mantra looks more realistic as a potential turnaround or catalyst into 2025 because we are so stretched on the valuations. We're at about 22 times on for the S&P 500, the

highest in history, at least the last 30 years has been 24. Not. There's about 9% upside we can get on valuations. Earnings estimates already great dividend yields are the lowest in history. So to your point, it's hard to eke out gains in the more expensive stuff, the better value stuff come around. Sir, why do you believe that in the essence of when you see sell offs Happening, you're seeing a lot of babies thrown out with the bathwater here. And if you believe that maybe some of these underperformers can come back next year, how much of

a risk is there that just risk appetite alone goes along with it? Yes, that's the tide lifts all boats in the risk appetite. But what we're seeing, look is into next year, there's just hard to get more valuation upside on the other parts. It's not necessarily calling that they're bad companies, that they're they're going to see this really bad performance. It's more just saying the multiples can expand and more like mid-cap stocks and small cap stocks. First, large cap stocks internationally also has been really a tough performance here. European equities are only up about 2%

in US dollar basis. They're very cheap still. So what we could see is just a rotation or even I would say downside protection because the valuations are so much more attractive. So those are the types. We're just trying to manage risk the best we can. And frankly, the high flyers don't look good to us because of the valuations and part of the value space that's deep value. The earnings aren't as good. We're trying to buy quality at a reasonable price as our military into 2025. So then is the best way to hedge the equity market,

in essence, the equity market, because if you're looking at the volatility in the bond market, is that really a place to go hide? We think it will be into 2025. Inflation is likely to come down. Inflation is the nemesis of that bond Market. Inverse correlation, really, that hasn't been around till the last year or two, but inflation has come back a bit to end the year. We think that's more sentiment driven. We do think that comes back down into 2025 and really it goes back to housing. I mean, we were going to get some housing

price data today. We're really dialed into mortgage apps, housing price data. Housing made up about 60 to 70% of the inflation narrative over the last several years. If that can slow down into 2025, inflation comes down, Bonds acts like bonds again. And if that happens, a balanced portfolio really can look much better from a diversification benefit standpoint into next year. Matt, I want to go back to something you just said. It was kind of startling. Maybe one of the great things about having a Bloomberg terminal in front of me is I can kind of check

everything on the fly. But dogs of the Dow, they were dogs all year long here. I mean, I was just taking a look at the dogs coming into this year. We're talking about underperformance by about, what, 25 percentage points relative to the S&P 500. Just to use that as a comparison, and I'm looking at some of the ones that will probably be the dogs going into next year. I guess the ones with the highest dividend yields like Verizon and Chevron, Amgen and Johnson Johnson, to say the least. I mean, some of these names were the

same dogs coming in this year. And I am curious as to whether this is also about sentiment and attention. If all the attention is on tech and AI and other things like why should I expect anyone to really embrace a health care stock or even just a consumer staples stock or a telecom stock? Yeah, So momentum, like I said, was the best performer and all the other other factors did not work. So you had to chase performance. If this is not a year of a rotation, it's got to be the 1990 all over again. So

there's only been three other times where there's been double digit R sorry, 25% back to back gains like we're looking at here. Potentially. The only time I went three years in a row was in 1999. So we're going to have to kind of bring out the popcorn, watch, maybe some Jurassic Park or friends or we're going to have to get our nineties culture back. But 1999, you've got to be careful what You wish for, because if we do get that third year where it's just book. Sorry, another moment. Go ahead. Yeah, it's good. Be tough

because then you've got to be careful what you wish for, because then we got the last decade after that. So we would start to peel back that momentum trade and rotate into higher quality but value parts of the market. I mean, one thing though, too, about was a comparison with the nineties and a lot of people will make this comparison, which is the idea that in the nineties you were dealing with a lot of companies that just did not necessarily have the fundamentals to support those valuations. We talk about a market and I checked that

this morning, 70% of the gains, the point gains in the S&P 500 attributed pretty much now to about nine stocks, Basically the Mac seven and a couple on top of that. But all of these are names that are just cash monsters and Nvidia Apple Amazon, Brock on Mehta Tesla Microsoft Alphabet Jp morgan Netflix those are winners man. I agree. No, we've been overweight tech. We've got that. But it's just hard to see the same kind of return stream that we've gotten out of them into next year. You know, you can only do outsized return. There

is reversion. The mean over time, usually with markets and we are in the most concentrated market in history by a huge factor. So 40% of the market is just in those top ten stocks. And I'm talking about the S&P 500. That's never happened before. It's never even been close to this high before. So reversion to mean would suggest that at some point those trillion dollar mega-cap companies have already built in the valuation to those great cash flows. I'm not saying, look, we've got it in the portfolio. We've got a bit of an overweight relative to

other parts of the market. Yeah, but going into next year chasing it doesn't make a lot of sense to us. Finding other opportunities across the portfolio, other asset classes makes more sense in our view. Matt Miskin over at John Hancock. Happy New Year to you. We'll catch up with you in 2025. And personally, it's kind of interesting too, to see how the market rally has changed on a year to date basis. Ten of the 11 S&P sectors higher. But when you look at on a month to date basis or even a quarter date basis, only

three are in the green and that's communication, discretionary and Technology. Some of the dogs of the S&P are expected to be dogs of tomorrow or the winners of tomorrow. Think energy, for example. A lot of people riding on that trade heading into the Trump administration. One of the surprising performances on a sector basis this year was.