tv Bloomberg Markets Balance of Power Bloomberg December 31, 2018 12:00pm-1:00pm EST
david: welcome to "balance of power," where politics meets business. marty schenker on the partial government shutdown. jenny leonard from washington on the progress president trump sees in negotiations with the chinese and evans really on senator warren looking for a big promotion. we have this government shutdown -- partial government shutdown. until now it hasn't seemed that serious. it is starting to hurt. marty: it will become prominent in the days ahead. you have a new congress being seated on thursday with nancy pelosi presumably speaker and government workers -- over 400,000 of them actually not getting paid on the next payday, which will start to bite. david: we want to go to jenny leonard in washington to talk about what president trump says is progress in negotiations with china. what does the president know that we don't know? denny: the president said he is making big progress in the talks
with president xi. the readout of that, we found out about it on twitter. chinese state media said president xi said both he and trump are looking for stable progress and the next step will be a u.s. delegation going to beijing next week and looking at what progress can be made and what kind of package and ultimately be presented to president trump. inid: do we know who will be the u.s. delegation that goes over and does that tell us about the progress they are making? jenny: it is not going to be cabinet officials. --will be the deputy ustr one step removed from the cabinet level positions and they really need to have a cabinet level meeting after this before they can present anything to the president. i would say because of ustr being the agency leading the
talks, there is a lot of focus on actually making sufficient progress on the structural issues that have been laid out multiple times by lighthizer's agency and these need to be addressed. treasury is seen as the dovish agency with ustr on the hawkish side. with of them leading the delegation, we are really looking for what does china do to satisfy ultimately ustr and the president on the more hawkish issues they have mentioned? david: and the clock is ticking on that march 1 deadline. let's stay on washington with kevin cirilli. we almost made it to 2019 without a major candidate for president, but we did not quite make it. kevin: senator elizabeth warren announcing earlier today she has formed an exploratory committee for president. progressive will be competing from the same types of
votes in the democratic primary as another likely 2020 presidential candidate, senator bernie sanders. senator warren has positioned herself well within the democratic party. she has also tried to make yourself more accessible to reporters inside the halls of congress and to the african-american community most recently speaking at an african-american community church in south carolina, a key potential political climate -- try mary state and she tried to forge alliances across the aisle including with senator lindsey boost with whom she -- to her foreign policy bona fide. david: even in her statement she put online, it referred specifically to the billionaires and corporations running the country with which she has no patience. kevin: she does not. she was able to tap into that
populist unrest. she helped create the consumer financial protection bureau and someone who routinely criticized and advocated for more transparency against large financial institutions and someone who positioned herself as someone to help win union worker votes including the same type of voters who voted previously for former president obama and switched over to president trump. in states like ohio, pennsylvania, wisconsin, and michigan, she will make her case and she has proven herself to be someone who can activate the grassroots fundraising community and no doubt of this is going to be a very expensive presidential run. david: we will talk to you later in the program. we want to turn back to marty schenker and talk about this government shutdown. we will put up a tweet from the president because it seems to be a question of what a wall really is.
it is incredible how democrats can all use their ridiculous soundbite and say a wall doesn't work, it does. it is far more immoral for people to be dying. he is not backing off. there was some question about whether it is slats or technology or bricks and mortar. marty: don kelly confused it by saying since the beginning of the administration they have backed off having a wall. it is very clear donald trump -- what he has in his mind is a physical structure. what has been working through congress is less than that. it all boils down to a really confused situation democrats say and with some validity, they don't even know what donald trump wants. david: in another administration of a different time, you would see a compromise develop and you could say it is a wall, but not
quite a wall. the president seems to have no appetite for that. it he really believe the base once all concrete wall and nothing less will do? marty: i think that is what he believes yes. nancy pelosi does not just see this as a policy issue, but a first test of the congress, a democratic controlled house of representative tenney will hold the line on this because this will color everything that comes next. inid: we have seen shutdowns past and it has usually not worked well for whoever the party is responsible. the president said at 1.i am responsible. if nancy pelosi is drawing the line, is it possible democrats would get blamed for this in the new congress? marty: by all reports, as soon as thursday, they are going to pass a bill to reopen the government with the national security funding in it. they have a strategy to make sure it is the president and
republicans who are going to take the blame. there is a danger they could overplay their hand if this shutdown goes weeks instead of days. david: thank you so much. great to have you here. it's time to get a check of the markets. we turn to abigail doolittle. abigail: take a look at the major averages, we are looking at gains in the last trading day of 2018. earlier we had gains on the year and we are looking at the worst year for the major averages since 2008. we have gains, investors buying the dip. it has been a volatile day. we see this action, at the high, the nasdaq up 1.2%. investors really buying the dip at that point. as the day progressed, nasdaq .own .2% now up a little bit. it will be interesting to see how the day ends out.
behind the volatility for the nasdaq and the s&p 500, take a .ook at the faang trade we have facebook lower on the day and apple lower on the day. amazon and netflix higher on the day. facebook on pay for its worst ipo'ed.ear since it amazon and netflix actually higher. despite this, we have interesting action if we hop into the bloomberg. if you can believe this, up about 9% overall on the year. from a technical perspective, doing something it has never done before. these are weekly candles for the faang trade. in peak, the 50 -- pink, the 50 week moving average. testing the 100 week moving average and trying to hold onto this support.
the series of lower highs and lows may suggest in 2019 we could see faang trade go down to test the 200 week moving average. that's close it with a look at the havens. on the quarter, not surprising. the 10 year yields lower, telling us haven bonds are rallying. we have the yen higher despite the fact of the dollar is higher and take a look at the vix down a little bit. on the quarter, it is spiking tremendously. on the year, the vix having its biggest annual spike higher ever. david: remember when we could not get it above 10 and now it is pushing 30? thank you so much, that is abigail doolittle. aming up, we talked to strategist the president says the fed should be listening to of wells fargo. this is bloomberg. ♪
david: this is "balance of power " on bloomberg television. i am david westin. >> here is what is happening. it democrats will move quickly to try to end the partial government shutdown when they take control of the house this week. they will extend funding for the homeland security department for february 8. the bills have a very good chance of being rejected by the republican-controlled senate. in russia, there are reports the government detained a u.s. citizen suspected up spying. paul whelan was reportedly apprehended during an espionage operation last friday. the u.s. embassy has yet to publicly offer any reaction.
paris is appearing for new year's eve celebrations. the so-called yellow vests demonstrators issued calls on social media for marches on the capital and other french cities. they are angry about rising taxes and emmanuel macron's pro-business policies. the u.n. food agency is threatening to suspend some aid shipments to yemen, issuing the ultimatum to rebels for not investigating in stopping the theft and fraud in food distribution. the u.s. -- u.n. warns it would .ffect 3 million people a four year civil war has created the worst humanitarian crisis. global news 24 hours a day, on air and at tictoc on twitter, powered by more 2700 journalists and analysts in more than120 countries. this is bloomberg.
david: the federal reserve is not lacking for people with advice about what it should do next. over the weekend, it was mohamed el erian saying the fed needs to do two things in 2019. >> show it is more sensitive to markets and what is happening backse, the risk of spill to get a better feel for what is going on. the fed has to realize it cannot keep a really important policy tool on automatic pilot. it needs to be more sensitive to what is happening and i think the fed can regain control and stop these self-inflicted wounds. david: we welcome a senior global strategist from st. louis. happy new year to you. let's talk about what the fed will do or should do in 2019. let's take what mohamed el erian
said about showing sensitivity in the markets. i think he is talking about rate hikes. is he right? scott: we as well as the street thought jay powell would be much more sensitive to what the markets are telling the fed and what the markets are saying. i would say october, that speech was disappointing. certainly the press conference after the last meeting was disappointing. i think the market has been overall not pleased with jay powell's seemingly lack of sensitivity to markets. david: i want to give you some credit. back in october, you were picked up on by the president of the united states who tweeted a quote saying if the fed backs often starts talking more dovish, we will be right back to 2900 target range we have had for the s&p 500 and gave you credit and said -- you were on the program at the time. it is too late now because december came and went and they
hiked again. is it possible for the fed to get back to that world? scott: we felt if the fed would be a little more dovish, it would be positive for the market. i think in the economic club, the new york economic club speech the chairman gave, after that on december 3, we traded inside that target range. fomc meetingsee -- came, the market was not happy -- while the fed was more dovish than before, the market priced in after that new york economic club speech so much or anticipated a meaningfully more dovish statement and tenor from the fed and did not get it. the fed in 2019 is, i think, going to be more sensitive. they drug john williams out to try to alleviate the issues with
the chairman's press conference. in 2019, i think you will see the fed take a slightly more dovish tone and they are going to react to this data. for right now, the markets still pretty nervous the fed is going to make a move. david: when we talk about hawks versus doves, we typically talk about interest rate hikes. what about the balance sheet? when you look at what is happening in the equity markets the latter part of 2018, how much of it was rate hikes and how much was taking liquidity out of the marketplace by reducing the balance sheet? scott: the balance sheet reduction was a big part of it, certainly. of that term, that is absolutely what the stock market did not want to hear. once again, john williams tried to alleviate that nervousness a
little bit too little too late. if the chairman would have talked more like john williams talked, the market probably would have been more positive as far as the fed goes. the balance sheet situation, we don't want to hear it is on autopilot. notably in reality, it is on autopilot. david: if we do say the fed will make a decision month by month on the balance sheet, doesn't it make it more of a political football? there was a lot of controversy especially for conservatives when they ran up that balance sheet because they said, you should not have that big effect in the marketplace -- big of an effect in the marketplace. it puts them right in the political spotlight. scott: that is what we do not want to happen. the fed has to remain independent. for us, clearly the chairman has
mentioned on several occasions they are not influenced politically. we don't want them to be influenced politically. they need to do what they feel they need to do. they have a dual mandate. the fed has to try to maneuver it within a $20 trillion economy, try to find tune that economy. -- fine tune that economy. david: how concerned mike the markets be at the prospect of president trump meeting with chairman jay powell? there are reports to set up a meeting for them to exchange views on monetary policy? scott: one would hope any president, not just president trump, but any president would from time to time have some contact with the chairman of the federal reserve, meet with the chairman because the president wants to understand from our main monetary policy people what
is going on, what is there view. right now i think a potential meeting has taken on a different kind of light because of the president voicing his opinion, which i think jay powell as -- is taking as just another opinion. there may be a lot made out of an actual meeting. from our perspective, that would not be a surprise. we would hope the president is in contact with the fed chair not seeking to influence the fed chair, but seeking to understand where our federal reserve and the people who are making policy decisions, where they stand and why they are doing what they are doing. david: thank you so much for being with us. that is scott wren from wells fargo. jay powell will be appearing with janet yellen and ben bernanke for a joint interview at the annual meeting of the american economic forum in
david: you are watching "balance of power." i am david westin. president trump has touted the stock market as a symbol of his success. it doesn't look like quite the symbol at the end of the year as it it in the beginning. abigail doolittle is here to take us through what turned out to be a difficult year in the markets. abigail: president trump was happy to address the gains for the market. it to my knowledge, hasn't been talking about the recent tumble. sums up the year we have had. here we have the major averages and we see through september 30 we did have the major averages all higher, a continuation of
the bull market of the last decade. this16 and 2017, then come first quarter, the bidding of october, take a look at the moves. this is what we have seen from the dow, the s&p 500 tech index, the nasdaq along with the small-cap russell 2000. very bearish action on lots of uncertainty around trade, the fed and in that third quarter we had the profit outlook for 2019 shaved down. all of this left us with annual declines, the worst since 2008. this is in the bloomberg looking at the annual moves for the dow, the s&p 500, the nasdaq down between 4% to 7% on the year. the worst decline going back to 2008. in 2008, the annual declines were closer to 40% so this has
more of a reflection of the bull market. it will be interesting to see what 2019 brings rate as for the isst decliners, this extraordinary. cody down 15% after they bought proctor beauty. l brand down 58%. victoria's secret continues to stumble. mohawk industries put up a string of bad quarters. ge down 57% on the year as that turnaround simply doesn't take hold. finally, david, beneath the surface of all the noise beyond the corporate profit outlook is the fact the fed has been tightening and that has had a big move on the 10 year yield. out of january we see the 10 year had been backing up as the fed had been on the normalization course. as the markets have gotten more volatile, we see the 10 year yield in the fourth quarter down to 2.73% ascloser
investors are looking for that haven. the work function in the bloomberg suggests the fed is likely -- unlikely to raise rates in 2019 so the normalization path in question. the 10 year yield is still higher on the year. haven bonds on the year are lower. david: we have yet to see if the fed takes the advice of mohamed el erian. thank you abigail doolittle for that review. at 2018 is ending the way it began, with a government shutdown. over 400,000 federal employees working without pay. how will it all end? this is bloomberg. ♪
major step towards a presidential run. give her anhis may early edge in fundraising and organization. she's as american families are under attack because the politicians are bought and paid for. doubling downp is on his decision to a drug u.s. forces from syria. efforts to stop never-ending wars a should not come as any surprise because he campaigned on this issue. aftereets come one day lindsey graham said the president may be open to changing his strategy. beeny 20,000 people have killed in syria this year. a human rights monitors says that is the lowest death toll since the conflict broke out. fighting has called in parts of the country where the president's forces continue to gain territory. just over 60% of syria is under his control. brexit appears to be stirring up
british demand for irish passports. more than 98,000 britons have applied for passports this year, up 22% from a year ago. ae irish passport is seen as shortcut for retaining the right to live and work in europe. britain might lose that right once the country leaves the e.u. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm uma pemmaraju. this is "bloomberg." david: thanks. continues as the partial government shutdown enters its 10th they without progress. -- 10th date without progress. it is all about a wall. john kelly said the administration had given up on a solid wall months ago, to be honest, it is not a wall. often times, he will say barrier or fencing. steele has tended towards slats.
this morning, president trump disagreed, tweeting -- a wall was not abandoned. the shutdown, we welcome our political panel in and from philadelphia, joe watkins, former aide to george herbert walker bush. i'm going to put you on the spot. what is it about a wall? >> it is a matter of who is defining it. people,e lots of democrats and republicans, who are not comfortable with the the border while the president has talked about. when people like john kelly or others give him extra room to change that earlier definition, it means he can take it. the president will tell his base he is not moving.
, ofremarks of general kelly lindsey graham, give the president room to change his story. david: let's turn to you. is there a danger that nancy pelosi is overplaying her hand? she has dug her heels in. but she is not that out of line with most americans are in one sense, that there does not seem to be a stomach wall being built as part of our infrastructure strategy. it does not substitute for good immigration reform and that is what is important. dying,u have children this is the first time you've seen this happening in 10 years, you should not be talking about a wall as opposed to a humanitarian approach to immigration reform.
i am not so sure the words are going to land the way she wants in certain parts of the country but we should not be focused on dome, likeven the kanda, whatever you want to call it, there is no substitute for getting back to sound immigration reform and technology to do more than a wall would ever be able to. david: there is a term i have not heard of lately -- daca -- whatever happened to the dreamers? now, it is all talk about a wall. world int back to a which the parties can find some sort of immigration reform? world, itperfect would be great to see the parties come together. that would be a happy day for everybody. , we have a news
congress coming in and the to notge will be necessarily spend their focus on investigating the current president and working on legislative reforms. my guess is with the newfound investigative powers that democrats will have, it is going to be hard to investigate the subpoena, to hold hearings on the president and his administration. of theessing that a lot early part of next year will be spent learning about those. david: go ahead. basil: the one thing i do not want to see is democrats get tied down to constant investigations because that takes opportunities away from us talking to voters about policies they care about. we spend a little time getting through the shutdown.
that is important to get people back working. wrongdoing, that should be investigated, that we do that. as joe suggests, we have these powers and use them and spend the better part of a year going through this, it puts us in a similar position the republicans were in. we are going to bring people in and not talk about how we are helping voters. david: i want to come back to what the new congress is going to look like. you served in the white house. at what point is their pressure on the white house and president to change his position and get the government open? is he focused on getting reelected? aboute has be concerned 2020. he has other challenges, the legal challenges. he does not have the benefit of both causes -- houses being on
his side. he has a democratic house led by skillful people. nancy pelosi is skillful and effective. he has got the republican senate. the senate will be looking to see whether he has the leverage to get done what he wants. they may be more or less willing to support him because of their own need to be reelected. you may see some republicans pulling away support or more hesitant and their support for the president based on how they see things going. has to figurep out how to work effectively with democrats to get the government open and to see if he can get something done with infrastructure or key issues, immigration reform and others. david: handicap for us if you will, the risks of being
responsible for the shutdown. the shutdown has not seemed severe. we are over 400,000 employees without pay. it could get worse. in whicheen situations the party that is responsible is punished. clip fromng to play a president trump talking to chuck schumer in which he said it would be his fault. >> if we do not get what we want, one way or another, whether through you, i will shut down the government. i am proud. i am proud to shut down the government for border security because the people of this country do not want criminals and people that have problems and drugs pouring into our country. david: the president is proud of shutting down the government. if you are a republican congressperson or senator, how does that resonate?
the american public want to punish the people responsible. the next election is not until 2020. i'm guessing the government shutdown of 2018 is not going to be a key issue. it is not going to be something that elects anybody. it is not going to be the biggest issue. they need to get the government the president needs to be focused on how does he control the agenda and that is hard with democrats in control because it is harder to spin that that it is the fault of the democrats things are not getting done. david: in the 1990's, we had the reverse. speaker ofpublican the house and newt gingrich shut down the government and voters did remember. they punish republicans. have to worryosi she will turn into newt gingrich? basil: does she get to some
resolution quickly. she could get into the business ofrunning the house, all these other issues we have been talking about for the last year. by the time we get to 2020, folks will not remember the shutdown. there may be another by then. what they will remember is does government work for them, is it run properly, are democrats managing the car properly? if not, that is what is remembered. david: both are sticking with us. we will get their thoughts on the biggest political hurdles in the year ahead for this new congress. that is next. this is "bloomberg." ♪
david: you're watching balance of power. i'm david westin. a new congress will convene thursday, with a solid democratic majority in the house. how will this congress differ from its predecessor? our political roundtable is still with us. joe watkins in philadelphia. i will turn to you because the democrats have the house. what issues can we expect this congress to address? beyond immigration? voting rights, gun control will be at the top of the agenda and i do feel there is going to be movement towards taxation. there is so much coming from the left for what the trump white which was support the wealthy and corporations. there will be tax reform. it will come down the line. i think we are going to have to
find a way to address that. the candidates from the left are talking about that on the trail. there is going to have to be parity legislatively. david: is there any prospect of getting that through both houses ? you have to get the signature of the president? will: i do not think there be much traction in the senate and it will not get signed by the president. they look like they have to address the issue of their base, climate change is another issue. they have to contend that not just with an electorate moving to the left but there are house members pulling the leadership to the left. they have to look like they are doing something. david: let's talk about something that might get traction and that is drug pricing. there are thoughts the democrats could agree with the president. do you hold out hope for action
on drug pricing? joe: i agree with everything you said. there is hope. i am not hopeful myself. i am not hopeful a lot will get done. challenge becomes getting mired in the politics of the day. in the last year, we have seen so many issues. if you asked somebody to list their top 10 years of -- top 10 items of the list, they would have a hard time because there may be 30 or 40 stories that came out and major issues. i would not be surprised if 2019 is the same with democrats in control of the house and trying to flex their muscles. also, you have the challenge of democrats that would like to be the nominee for president. that is going to have an impact
on what does or does not get done. you have a elizabeth warren who announced her committee even though the boston globe said she would not be a unifying candidate. hope at have a lot of lot is going to get done. we might see movement on infrastructure. drug pricing? i am not confident we are going to see a lot get done. basil: i was going to talk about infrastructure. that is the one issue democrats and republicans have talked about that we could see movement on. there is money for it. a lot of theether distraction is going to take us further way. that is one issue that there is bipartisan support for. ,avid: what about the politics are they better off showing the american people that they got something done or are they
better off running against each other, the president saying it is the democrats fall to nancy pelosi saying we have got to throw president trump out of office? in a perfect world, it would be about the american people. this is about politics and 2020 looms large. both sides are thinking about how they position themselves. nancy pelosi is thinking about how she positions democrats for 2020 and increase their majority .n the house republicans are thinking the same thing. trump is thinking how do i get reelected and keep control of the senate and take the house. it is going to be a poll and tug , gamesmanship going forward. basil: i would add that as well the 2018 midterm
elections, the coalition the brought that together is tenuous. we do need to be careful that we are moving in a good direction and showing voters we are doing something and not get caught up in a lot of the investigations. it does benefit us to work with republicans. it benefits republicans to extricate themselves from the president and tried to deliver for their constituents as well. hopefully, we do have this forward thinking, country first approach to governance. i would love to see it. if we could get this done, we would. the two of you are convincing me. i am buying it. let's talk about that coalition, the democratic caucus. as i looked at the midterm elections, there were moderates
that were elected. some of them did not get elected. it first bigger pelosi to pull the group together? basil: very difficult. she is skilled. thing that is of a bigger concern is you had all of these candidates in their and all of those policies have not been aggregated and it is going to be difficult for someone to do that. you have seen the tension for nancy pelosi. alexander out cost of cortez talking about this climate change committee which pelosi delivered on but which does not have teeth. , doinggoing to be making things to support the caucus in the progressive lane. i do not think they are going to be happy and that is going to
create tension on the ground and for presidential candidates looking to capture momentum. david: what about on the republican side? we are seeing with the decision on syria, with people like lindsey graham, parting from the president. how so it is the relationship with the republicans on the hill? -- how solid is the relationship with the republicans on the hill? joe: reasonably solid with the leadership in the house and senate. he has got good relationships with mcconnell and graham and others. do not be full. the statements of that lindsey graham made about syria and his comfort level after his meeting with the president yesterday give the president more breathing room. to president is always going deny and say, what i said six. -- said sticks.
kellyy graham and john give the president a little bit of breathing room in case he decides to change his position and not withdraw troops as quickly as he said. he has got a good relationship with mcconnell and others. the challenge is to work with democrats, the house, nancy pelosi, chuck schumer and not to have a shouting match, the theater in the oval office we saw in december. get some things done constructively and that is the challenge. david: we need to figure out how to get you down there in washington. director of the new york state party and the former aide to president h.w. bush. thank you for being with us today.
david: this is balance of power. i'm david westin. the white house has always been a place with turnover. long, theare sacrifices are overwhelming. sometimes, it seemed like the trump white house is prone to switching out personnel. here to take it us -- take us through a year of turmoil is kevin cirilli. just a news not congress the president is facing. it is new faces in the cabinet. ,ncluding general james mattis he is going to be replaced by the current deputy defense
secretary and the interior ryan zinke is out and the deputy is anticipated to take over there. he is being replaced by the acting chief of staff, mick mulvaney. the debte negotiating ceiling as well as that partial government shutdown. nikki haley at the u.n., a key spot in the shifting alliances worldwide to be replaced by heather nauer. that will need senate confirmation. a big reason why the deputy directors are serving as acting folks in charge of some of these is because they do not have to go through another senate confirmation hearing. david: he has got a few more votes on the senate side before -- them before the midterm election. this comes from a
in which the president does not want to after wantion's from his it -- to have detraction's from his agenda. david: kevin cirilli reporting from washington. we would love it if you would sign up for the balance of power newsletter. get the latest everyday. coming up, e merging markets on the edge. we take a look at challenges facing developing economies in the new year. this is "bloomberg." ♪ . .
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is aer or other measure comfortable both sides. the white house says president trump's demand for a wall refers to steel slats as well as technological measures. democrats are saying they support enhanced border security but not what one congressman calls a medieval border wall. president trump says there's big progress in trade talks with china. speaking with xi jinping over the weekend, both exposing satisfaction with the negotiations that were initiated after their meeting in argentina. new figures show that china's manufacturing slowdown has gotten worse. trade secretary warning brexit may not happen. the chance the u.k. leaving the 50-50 ifunion is parliament rejects the withdrawal agreement . even agreement is less than ideal is better than no brexit deal. the netherlands auth