tv Bloomberg Markets Americas Bloomberg March 23, 2018 10:00am-11:00am EDT
julie: we're going to start with breaking news on a new home sales for the month of february. that is crossing bloomberg in just moments after we had durable goods orders eating estimates wrote -- beating estimates earlier today. in largely inming line with estimates but 618,000 is the annual pace of new home sales in the amount of fish month of february. -- in the month of february. the january level was revised higher to 622,000. there was a month over month .6%.of nonetheless, relatively stable when it comes to new-home sales. this does not tend to be a market-moving number, but just helping us understand the overall. abigail doolittle is with us to get a check in the markets about
half an hour into the trading session. abigail: relatively small moves after yesterday's excel off. you have the dow and the s&p 500 slightly to modestly higher. tech-heavy nasdaq down fractionally after yesterday's big selloff, the worst basis february 8 -- worst day february 8. today what we're looking at is the chip sector falling out, down more than 1%. let's look at the movers. micron is down 6%. that is really the culprit. they beat earnings. citigroup downgraded shares to neutral. the stock price to perfection. they just didn't deliver, and that is weighing on the entire space. let's hop into the bloomberg and 05.e a look at g #btv 368
this is a six-month chart of the weekly moves. relatively small moves that help the s&p 500 and the other averages con. in january, big gains. nowh saw -- whipsaws, and we're looking at another week of declines. the nasdaq down the most. russell 2000 in orange down just 2.8%, outperforming the other major averages. of course there is domestic companies, shery, that receive more revenue from the
u.s. let's affected by a potential trade war. doolittle, thank you so much for that. the trade conflict between china and the u.s. escalated with beijing announcing its first retaliation hours after president trump outlined rush terms on $50 billion of chinese -- fresh tariffs on 50 going dollars of chinese imports. thehina's decision to hit
u.s. with tariffs of its own is a warning shot rather than a full-blown counterattack. asia wants to avoid a trade what record make tackling issues like -- trade war that would make checking issues like get more difficult to sto. china also says it is unafraid of a trade war with the u.s. if tensions continue to rise. american soybean exports, tech companies like apple and intel, and aircraft maker boeing could be targeted if china decides on
a more aggressive response. the nuclear option would be selling of its holdings of u.s. treasuries or devaluing the yuan. at thisseems likely stage, but china has no shortage of tools at its disposal. tom mackenzie bloomberg, beijing. shery: for more on china's response, let's bring in china's ambassador to the u.s., cui tiankai, was with us from washington. a messenger, thank you for --
ambassador, thank you for your time. tom mackenzie was describing options that china could be waiting at the moment. are you prepared for more action? ambassador cui: well, thank you. we are clearly against any unilateral protectionist moves. we do not want a trade war with anybody. we are trying to avoid one. but if a trade war is forced on us, we have to fight back. shery: how are you prepared to fight back? allssador cui: we will take the measures necessary. you have already seen the announcement made by the chinese minister of commerce, and you will see what we do next. shery: what areas do you believe, ambassador, for cooperation between the u.s. and china? ambassador cui: i think there is great potential, and indeed,
good prospects for cooperation between china and the united states but the key is that both sides have to take a cooperative and constructive approach. confrontational one will not help anybody. besides, a lot of accusations made at this time are not supported by evidence. for instance, chinese laws protect intellectual property rights. businessdy to help any but it is note -- there is no evidence provided. it helps nobody to make sweeping accusations. china there are laws in that when foreign firms have to work in china, you have to transfer some of the technology know-how which was one of the points that the trump administration is fighting against. do you believe there are no areas of cooperation when it comes to intellectual property
theft or allegations of it? ambassador cui: there is no law or regulation in china that would force technology transfers. there is no such law. and i think businesses will only make the deals they believe are good for them. but if they have any complaint, they should resort to chinese law, and we will help them. shery: the u.s. trade representative has yet to come out with a list, a finalist of items, and they will do so in the next two weeks. do you expect any concessions or coordination on which items could be included were left out? -- or left out? ambassador cui: we always believe that any disputes, any differences between the 2 countries should be worked out by dialogue and consultation. but we certainly will not yield to any threat, coercion, or intimidation. the sort of u.s. actions,
will they have any impact on china's support dealing with north korea? well, i think: these two issues are different ones. at the same time, if anything is the that would undermine broad mutual confidence between the two countries, it might affect other areas. but we will have to wait and see. shery: those areas include foreign policy? see whatr cui: we will is done by the u.s. side, then we will decide. shery: bloomberg news also reported that china could be considering cutting back on its purchases of u.s. treasuries. that would be an economic action. without also be included in your thoughts -- would that also be included in your thoughts? ambassador cui: we are looking at all options, and that is why we believe any unilateral and protectionist moves would hurt
everybody, including the united states itself. and it would certainly hurt the daily life of the american middle class people and the american companies and the financial markets. shery: how will other economies that depend on chinese trade be affected by the latest u.s. actions? well, you see, in today's world, economies are very closely interconnected. so there is really a community of shared interests among different economies. for instance, we have some surplus from a trade surplus with the united states, which is quite big. we want to cut it down. i think there is agreement between china and the united states that it has to be reduced for the benefits of both countries. at the same time, we have huge deficits with other countries. most of our neighbors we have deficits with.
so this is a good illustration world supply chain in the . people have to be careful when they take action. it might hurt everybody, including themselves. shery: the trump administration is asking beijing to cut the annual trade deficit with china specifically by $100 billion. are you looking at plans on how to do this? i think we agree that the deficit will have to be cut, but we have to look at specific sectors, specific products, and you see, we in china are ready to buy more, much more from the u.s., but is the u.s. ready to sell more to us? we still don't know yet. i don't think it is helpful to set an arbitrary number as a target. we have to look at the specifics. shery: so you are waiting for specific u.s. demand. who are you talking to right now in the government, and what do them to ask from you,
and what can you give to the american government? actually, there is ongoing conversation between the two governments. that is why we don't quite understand why such a unilateral action is taken. shery: i think they believe right now, not only within the united states, but also within other countries, is that in many fields like steel, aluminum, and intellectual property, china has not been playing fair. demand out there for -- a lot of demand out there for a level playing field. how do you respond to that? ambassador cui: actually, we are not the largest exporter of steel and aluminum to the united states. we are not. we only have a very small portion. that steel you said and aluminum -- having said that, steel and aluminum tariffs will impact you.
how will you do with the overcapacity? ambassador cui: i think there is overcapacity in many countries. we have to work together on this . it cannot be solved by just one country, by china alone. if it cannot be solved by one country, when do you plan to take your issues to the wto? ambassador cui: you see, over , we are atar capacity. hopefully other countries will do the same. we always believe in and are committed to the multilateral trading system. we are trying to strengthen the multilateral trading system. hopefully, others will not do anything to undermine it. shery: what about proposed new restrictions on investment from china that the treasury secretary is going to look at? how will this impact chinese companies and your relationship with the u.s.? ambassador cui: i don't think good economic or
political sense. such restrictions are not based on very good reasons, and they are not helping the american economy. hurt americanably towns, cities, and states. they will hurt the local economy. they will cause jobs -- job loss for americans. i don't think these things will help anybody. shery: ambassador, thank you very much for your time today. china's ambassador to the u.s., nkai, with the latest response or tariffs imposed on china. ambassador cui: thank you. julie: imported interview. let's get to "first word" news with taylor riggs. taylor: president trump says he may veto the spending bill passed by the senate early today. that could lead to a government shutdown. the president is unhappy because the bill in his words, "abandons
the undocumented immigrants known as streamers." it does not fully fund his border wall with mexico. last month john bolton set of preemptive u.s. strike on north korea would be legitimate. now he will be president trump's national security advisor. the president said bolton will replace h.r. mcmaster next month. for his hawkish views, and had openly campaigned for the job in recent weeks. in southern france, police say to people have been killed and a dozen wounded in a hostagetaking in a supermarket. there is a report from a french news agency that police have shot the gun man. french prime minister says all the information suggests that it is a terrorist attack. and in russia, the central bank cut interest rate and signaled that it made move faster to cut rates again. the bank of russia cut the one- week option rate to 7.25%.
policymakers are trying to get the level of borrowing costs between six and 7%. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i have taylor riggs. this is bloomberg -- i am taylor riggs. this is bloomberg. julie? julie: coming up, president trump's busy week in washington, with the west wing shakeup and a government shutdown may be back on the agenda for lawmakers. from new york, this is bloomberg. ♪
on the agenda for washington. president trump is threatening to veto the spending bill passed by congress this morning. by the latest, we are joined toulouse on a written about from the white house. all of his spokesmen have emphasized over the last 24 hours that he would sign the bill. this is an unpredictable president and we have seen that members of his and administration and cabinet have talked publicly about policy, and then the president some sort inof terms of making a public sin and that is in opposition to what members of the administration have said. members on capitol hill are taking this very seriously. they are trying to figure out whether they need some short-term measure to keep the government-funded for a few days as they try to come to an agreement. numbers of the white house are trying to figure out whether the
president is serious about me telling this bill from which they said just yesterday was a good bill that funds his priorities, the compromise where the president got what he wanted and democrats got what they wanted. but on balance they said it was a good feel that the president would sign. now the president is saying that he is considering vetoing it, so it is difficult to know what will happen in the end. obviously the president has publicly expressed his concerns with the bill, and he could veto it, which could lead to a government shutdown. shery: a lot of this has to do with the fact that president trump did not get enough funding for his wall. a few million for fencing, 1.6 for borderlars security. but really this is a fraction of what he was asking for. he wanted $25 billion for the wall to build on the southern border. number of different
restrictions would make it difficult to build the type of all he wants to build. this is the last best chance he would have to get any funding at least this year within this congress, because this is the last major spending bill that is going to pass out of this congress basically between now and november. members of congress will be on the campaign trail trying to get reelected. there is a strong chance that democrats could take the house happens, thethat president says goodbye to the idea of getting money from taxpayers to get his wall. , thanksoluse olorunnipa for joining us. we did not even get to the shakeup at the white house, john bolton coming in to nsc. shades of the bush era. hrry: we were hearing that mcmaster was out and now it did happen. it is thought to be a snap decision by toluse:. now time for the biggest -- snap decision by trump. now for the biggest business
stories in the news right now. target and kroger are discussing a possible merger. the talks began last summer about a partnership. now the reports said that the committees are trying to decide if the merger is the best option. together target and kroger had $195 billion in revenue last year. glaxosmithkline has dropped out of the bidding for pfizer's consumer health care business. blackstone was said to make an offer. it added up to $20 billion. now the company says any acquisition must meet its for returns. apple wants to return to its roots in the education market. next week the company will introduce new low-cost i hads and education software. the goal is to impact students and teachers from microsoft and google. it will be the first time apple has had a product launch geared towards schools since 2012. that is your "business flash was quite a bit. still ahead, we will bring you a
for etf friday. fears of a potential trade war and facebook's doubtful as the trading crowd family. here is the senior etf analyst at bloomberg intelligence. obviously, we have seen tutors and volatility in the market over all of this. which etf's might be most exposed? >> i see this is a minor freak out, nothing too major. the other s&p 500 etf, that is seeing $11 billion in outflows this weekend. i'm still trying to figure out what exactly is going on. there has been a lot of fog in
the flows because of tax season and rebalancing, but i think a lot of these outflows are probably legitimate, and idv has become more liquid. i think it is being used more by institutions to do liquidity sleeves and short-term cash acquisition. maybe some of the institutions were doing selling, hot money. it used to be my go to, but it is possible it is becoming more of a hot money tool. then you saw outflows in the typical favorites. good news, there was a ray of light, volume was only $40 billion. a couple of weeks ago when we saw a real calamity, it was trading $70 billion, $80 billion, double that. when you see $40 billion, that is meh, nothing too major. julie: we have charts of some of these flows -- eric: blood left flow. julie: pretty dramatic trade here. on a relative basis, it is still
falling, but not falling by nearly as much. eric: remember, when trump won, people thought all caps were the way to go. small caps don't have as much reliance on exporting. that is going against the grain there, although small caps obviously have import goods and that could hurt them. be careful with visas hedges. it may or may not just these as hedges. be careful with these as hedges. it may or may not go up. that is the duration of 20 years. these are seeing a little bit of action. t but they are shaky as hedges. julie: real quickly, what about facebook? eric: facebook is another thing triggering hot money. it has maybe about an 8% weighting in facebook.
here it is about 6%. the etf's that the most, facebook has the biggest allocation. twitter has been a bigger contributor to the performance. not a good week for social media in general. julie: twitter targeted by israel in terms of regulations. eric balchunas, senior etf analyst at bloomberg intelligence, appreciate it. coming up, a conversation with minneapolis fed president neel kashkari. rateed announces interest hikes just this week. this is bloomberg. ♪ mom, dad, can we talk?
this is "bloomberg markets ."let's get "first word" with taylor riggs. abigail: cap -- taylor: china says it is not does not want a trade war with the u.s. but is not afraid to fight one. the move came hours after president trump imposed tariffs on $50 billion of chinese goods and limited china's ability to invest in the u.s. tech industry. the foreign policy hawks have the upper hand in the trump administration. president trump is replacing national security adviser hr mcmaster with john bolton. bolton says the u.s. has a legitimate reason to make a first-move to strike against north korea. he will be joined by nominee for secretary of state mike pompeo, who supports regime change in north korea and iran. the justice department has charged and iranian hacker network and widespread data theft scheme. the hackers targeted hundreds of companies and universities. they are said to have stolen
trade secrets and other data the islamic- resolution regard. uigedemont another politician have been charged with rebellion. it has to do with their declaration of independence from spain last year. iugedemont fled spain in october and has been living in belgium. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. shery? shery: taylor, thank you. first meeting as federal reserve chairman will be a source of discussion at the forum underway in new york. the annual event others some of the top financial months to share their expertise and outlook with college students. we will send it to kathleen hays , who is at the event with neel kashkari. kathleen: it is still really a privileged to have someone like
neel kashkari speaking to us today, especially at a fan you like this. venue you will be in a room where you ask questions and get what is on his mind the economy, finance, and a little bit more about neel himself and how he got to this position and what he is aiming for now i will tell you a few things about neel. the health set up and run t -- he helped set up and run tarp during the financial crisis. he ran for governor of republicanon the ticket. he started his career as a tech analyst at goldman sachs in san francisco after studying engineering and working as an forneer, went to wharton his mba. he is somebody with a very diverse and interesting background. with no further ado, i want to get to the news of the week,
because the federal reserve had a very important meeting. markets around the world and other central bankers as well. part of it was expected. open not justor to two more hikes this year but three. that is the controversial. was theprised people rate hike for the next two years. are you on board with the decision? neel: thanks for having me, kathleen. thanks to all for having me. i supported the decision because it represented continuity. janet yellen was the federal reserve chair. her term concluded and we have the new chair in jerome powell. the move is continuity with what the federal reserve said it was going to do. all our colleagues are trying to balance the dual mandate of stable prices and maximum employment. personally, i think we have a ways to go before we achieve our objectives.
one of the things that surprised us throughout the recovery is the unemployment rate fell from 10% to 1.2%. growthd've expected wage with the market getting starter, and we think we are coming close to maximum employment, and all these americans come back into the job market, suggesting we're not really at maximum employment. the thing i'm focused on is looking at wage growth. we are trying to assess supply and demand in the labor market. you want to assess supply and demand in the market, start looking at the price. wage growth is not really accelerated much. that tells me there is some slack in the labor market. i want to see more wage growth. when i see more wage growth, i will have more confidence we are approaching the 2% inflation target and then i will be more supportive of rate increases. kathleen: you did support -- neel: i was not a voter. kathleen: i know, but jay powell said, just to catch you up, not all of the 12 district presidents rotate the vote will
lesser president of the new york "i don'tat he says is pay attention to who is a voter. i listen to the arguments." what did you argue for? neel: if i had been sitting in the chairman's see what raise rates because we told the markets we would raise rates, sake it istinuity's important. i look at the objectives and the data i don't think he itself supports rate increases at this point in terms of achieving the dual mandate objectives. i would like to see more which would then have more confidence that their is an of slack in the labor market. then i would support more interest-rate increases. at deen: ok, let's look ots. the fomc every three months of jake's -- updates their forecast for gdp growth and inflation. this is the time we hike interest rates, cut, or not. the consensus was
was going into 2018, three rate hikes is what we need. but we have had tax cuts and a lot of stimulus. did you raise your dot? drink some of them forward a little bit in light of the fact that there is a lot more fiscal stimulus now and more spending than there would be six months ago. i brought might have a little further forward. the big open question is what do all of these fiscal packages mean over the long-term. that is totally unclear. is it going to change the growth trajectory of the u.s. economy? will it lead to more productive investment and higher capacity? we just don't know. does that lead to a long-term, faster growth rate?we don't know. kathleen: if you move your dots forward, do you have more than two hikes this year? neel: i will not get into my
specifics. the dots are anonymous for a reason. kathleen: ok. one of the things that thousand people -- if you believe that tax cuts will boost spending, although maybe more for wealthy people, because as officials pointed out that is where they are heavily weighted questions taxt whether the corporate cut will spur business spending, because that depends on a lot of things. neel: sure. kathleen: cost of capital is just one. meanwhile, we have retail sales negative for months. -- they look at every number that comes in and say what is gdp going to do this quarter. it is down under 2% now. in what could look like a pause, the fed is moving ahead towards tighter policy. some people still want more rate hikes. very narrow division between three and for now. neel: we get so much data -- if
you turn on bloomberg tv, you get so much data every day. we have to look at this but not overreact to short-term movements in the data. one of the things i focus on other 12-month inflation measures -- are we going back to our 2% inflation target, looking at wage growth, inflation expectations. the data moves around quite a bit. data that you articulated for the last month is what it is, but i think we are looking at the next year, the next two years, and then over the longer run. kathleen: do you, neel kashkari, in the data, all the information you get from people across her district, are you seeing signs that wages are rising enough to make a big difference in inflation this year? neel: no. the most common conversation i have had with firms -- i've said this many times -- what is your biggest challenge? we can't find workers. ok, are you raising wages?
they say no. what then you are just whining. you want more of something but you are not willing to pay for it, that is called whining. until i hear businesses say we are raising wages to attract workers, then i know that they are serious. i don't want to overreact to one jobs report, that the 300,000 number comes into the payroll report, the last one and we need 100,000 120,000 jobs a month to keep up with population growth. for the economy to create 200,000 jobs or 300,000 jobs, we are using up slack that was somewhere in the economy. that is remarkable, and that is happening at a time of modest wage growth. imagine how workers are going to respond if wage growth picks up. we will see more people get drawn into the job market. this is the most important determination we are trying to make, in my opinion, how much of slack is in the labor market. i think the headline has been at rate
pretty good proxy for slack in the labor market. i think that gauge is broken because of the financial crisis. a lot of people have given up and are starting to reenter the labor market. i want to ask you about another big piece of news this week, president trump putting tariffs of up to $60 billion on chinese exports. the chinese are responding in and we saw and u.s. stock market yesterday, the asian stock market selloff overnight. things are studying today -- steadying today. until now most officials have downplayed tariffs. this is something that raises the spectrum -- many people are saying these words quite seriously, trade war. can the fed shrug off a trade war? what does it mean for the economic outlook? neel: of course not. if there were a full-fledged trade war between the u.s. and
china committee would have a negative impact on the u.s. economy and global economy, and we couldn't shrug it off. mean, i understand -- i think i understand what administration is trying to do, because for 20 years we have been in a conversation with china saying, hey, you should be responsible stakeholders, it is in your interested to be free traders. i think we learned that china is going to do whatever china is going to do. a long wet work for want and they will do what they are going to do. i think the administration is saying we want to show we have recourse. the danger is that it goes down very bad path and it leads major economies into a trade war. i understand the desire to try to have a level playing field in terms of free-trade around the world. were the effects of an actual trade war discussed at the fomc meeting this week? neel: chairman powell talked about this at the press conference in the context of -- we are always looking at one of the upside scenarios and downside scenarios that could
surprise us. six months ago we were not talking about trade as a downside risk to the u.s. economy. now it is a downside risk. i don't think we have a good sense of putting probability on it, but it is something we have to pay attention to. kathleen: is the biggest risk, oh, inflation? is the biggest risk financial instability? -- the chinese stock market selloff a lot of volatility in the u.s. around the world. not anything like that now, but it seems to me that this is something that could impinge on the path, but in terms of are you looking for something to change the path, what is it? neel: all the things you set are reasonable cases and we would have to look at it. my guess is it would be a shock to confidence. confidence is enormously important to the u.s. economy.
if there was a trade war and a major shock to global confidence, i think he would see that manifest itself not only in equity prices, but also in bond the cost of., and financing for businesses would grow up and that would have an effect on economic growth. kathleen: you warned -- maybe you changed your mind on this, but as recently as december, you said fed rate hikes could help tip the economy into recession. now we see this uncertainty and the other risk. is the risk of recession higher than it was? neel: all of the metrics we look , the risk is very low. but let me tell you, it is always low until it isn't. don't take a whole lot of comfort on that. these indicators are not that helpful. i think there are risks to the upside and downside.
we had a strong wage with number in january that the markets reacted to. if there are trade imbalances, that is a downside risk. the risks are probably about even right now. why does the u.s. dollar keep getting weaker? we have had strength the last 24 hours. meanwhile, the trend has been fed hiking rates, dollar has been weakening. why? what does this signal to the fed? neel: we are not sure. i have a great team of economists at the minneapolis fed -- they say ask us anything else, but where currencies are going is the hardest job they have. it could be moving around for a lot of reasons. it could be that markets don't forecasthe rate-path that the fed is putting out there. if you look at where the fed fund futures are, they are forecasting a shallower path. currencies end up moving not just based on what central banks
to but what they do relative what people think they are going to do and how the expectations change. trying to unravel that is quite complicated. prices, it oil helped the fed reach the 2% inflation target. they feel that double put juice in the will put juice economy. at the same time, higher oil prices, higher gasoline prices, heating oil prices, that is her pocketbook. how are you doing that? neel: all of these things move around, and we have sophisticated economic models -- and the board staff in washington, especially, was many different scenarios on if this or that happens, what is the feedback loop to the economy. if something happens in europe, we are not doing monetary policy for the benefit of your or asia. we are sitting it for the benefit of the united states of
america and the citizens we work for. that we recognize that when we move monetary policy in the u.s., it will have effects globally which can rebound back to the u.s., and we try to model that loop. we look at all of these things and try to make the best assessment we can, given that the data is imperfect and often has a lag in these things often work in conflict with one another. kathleen: one of my colleagues pointed out to me the obvious, but still, you hike the fed funds rate above the rate of inflation this week. we have positive real rates for the first time in a decade. -- isnetary policy tight monetary policy tight now? too tight? a concept we focus a lot of our attention on is the neutral real interest rate, the interest rate that balances savings and investment in the economy. we can estimate where we think it is right now, and there are a range of estimates. it is probably very close to zero. this is set for the past 30 years or so, gradually
declining. this is fed by broader macroeconomic forces such as demographic trends. advanced economies are having fewer kids that in the past and the populations are aging. it is set by productivity and technology development. we are trying to assess this all the time. my guess is that monetary policy is close to neutral right now, but there are a range of perspectives. some argue we are somewhat accommodative. i think we are probably pretty close to neutral and if we keep raising rates, we will provide tightening to the economy. we don't know for sure. that is what makes this challenging. kathleen: it certainly is. one more thing -- i want to give a shout-out to my colleagues -- one you know very well, one of our bright econ fed stars at bloomberg news -- in terms of ,he idea of inflation transitory factors have been holding it down, the target is 1.7,he headline number,
core food and energy, 1.5. we have been at work below 2% once in five years? neel: for longer. kathleen: or longer. is it transitory, or -- we have been listening to bloomberg's kathleen hays speaking to minneapolis fed president neel kashkari. among other things, he says the fed cannot ignore a full-fledged trade war if that is indeed what ends up happening. coming up, the threat of a government shutdown feeling the spotlight yesterday's trade jitters. president trump considering the veto of a spending bill that would keep the government-funded. from new york, this is bloomberg. ♪
shery: this is "bloomberg markets." i am shery ahn. julie: i am julie hyman. investors have another headline from washington factor in after president trump threatens to veto the spending bill. a really mixed picture. here to parse through the risk is jim paulsen, with all group chiefthold group's investment strategist. it seems like there's not a lot of concern being priced in about a trade war or government shutdown. what is your take? jim: we priced in quite a bit yesterday, i think. you are right around the julie, and itl,
is a long day, and i think at the end of the day, this could get more interesting towards the close today. it is a long weekend, and how impressive are investors going to want to -- aggressive are investors going to want to be? it wasn't any one thing, per se, but when you have a vulnerable market, which is what we had in the last several weeks just from high valuations and the like, and then you produce within a matter of 48 hours the fed tightening, aggressive, forward-looking fed tightening policy, then you bring up trouble in tech land with tweet from there president, trade wars, close to an important technical level with the markets, that is too much to handle. the issues we can find the inner bottom and have a better week
next week. bigger one-day moves and we get more of those with 1% swings on the s&p 500. jim, that does mean that going forward, the markets will in fact start to react to political news, economic news, as opposed to what they did last year. jim: i have noticed that as well, that that is already starting to happen more. if you go back to last year, the market was in a much better fundamental play spent this year. it is more vulnerable. last year if we had facebook trade war discussions, it might not have had near the same negative impact. haven'tr when we overvalued market, inflation worries, yields have been climbing, liquidity is to isning, it is a more -- declining, it is more vulnerable market and much more reactive to the daily news flow than it would have been a year ago.
a lot of it is very suggestive that this is still a very vulnerable marketplace. julie: do you get more defensive? in recently coalition notes you have been looking at the ratio of technology to utilities in the s&p 500. we have a chart of that mirroring -- you compare it to what happened during the dot-com era, that we could see a peaking out of technology over performance vs. utilities. utilities are tricky, too, because rates are going up. how do you position yourself right now? jim: right. i'm thinking we are in a flattish market this year, julie, and in search of a valuation level in the stock market that can support and be sustainable and have growth and inflation and pressures and the need to reset rates higher. i think that is more like 17 times earnings rather than 21 times earnings we are trading at
now. we can do that with a big selloff, which maybe this is the start of, and we break through the february lows and get really scared about the market. that could be a great buying opportunity later this year. or we could move sideways while the earnings continue to grow. if we get to $150 earnings by year end, we will be close to 17 times earnings. when i do this year is if we move up to the january highs, i go more towards conservative and defensive stocks, even though they don't have good interest rate sensitivity. if we go back to the february lows, i get more aggressive with capital sectors more aggressive stocks there. right now i have an extra, but i would still be tilted more towards the defensive sectors overall this moment. julie: jim paulsen, great to talk to you. d group chief investment strategist. still ahead white house turmoil.
ian bremmer weighs in on the white house's latest moves next hour. shery: reminder you can catch all of our interviews on the bloomberg function tv . you can watch our interview earlier with the chinese ambassador on his response to president trump's tariffs on chinese imports. live from new york, this is bloomberg. ♪ . .
julie: here are the top stories we are covering from the bloomberg and around the world. president trump threatens to veto the $1.3 trillion spending bill passed by congress, raising the possibility of a government shutdown at midnight. turn,takes a hawkish picking john bolton as his new national security adviser as he ditches moderates in his inner circle. trade tensions escalate as china heads back on u.s. tariffs. we speak with ian bremmer about why he says geopolitical risk is the highest he has seen since the 1990's. 90 minutes into the trading day in the u.s., bloomberg's abigail doolittle is here with what is perhaps a surprisingly positive picture, that we had big selloff yesterday. abigail: this is a bit of a risk on town