>> the fed is at the risk of losing confidence. they opened the door for the conversation of rate reductions too soon. >> there is more inertia to inflation than the fed is getting credit for. >> rate cuts are being pushed back for the right reasons but they are so coming.

>> everything is waiting for certainty but i don't think we will get it. >> the fed would like a scrap of certainty about what they will do later this year. >> this is bloomberg surveillance jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city this morning, good morning, good morning, the third hour bloomberg surveillance begins right now. bank of america's home here in midtown manhattan. your equity market is a little bit softer. if i could capture the last two hours on this program in a word, is bullish the word? lisa: i don't know if it's enough, it's quite bullish. it's really quite optimistic. the ultimate question is -- does this challenge the idea of restrictive and can it continue? what will drive the next leg it will not be nvidia which we saw yesterday and that was the. jonathan: let's go through this

piece by piece and what it could mean for the bond market. what the bond market is telling you and what the equity market is screaming is the equity market so far is screaming a strong gdp. if you look at the bond market, we are replacing the front end just like that in a couple of months and the equity market is done nothing in the face of that. it feels the stock market so far seems comfortable with rates repricing higher. lisa: some would argue this is the reason why decedent underperformance and small caps new seen underperformance in certain utilities or areas that are interest rate sensitive. we are not hearing companies are having trouble borrowing. we are not hearing that individuals are having issues with 40% more cash in terms of their savings than they had in 2019. put this together and it raises the question, what is the pain

threshold for rates? is it 4.5% on the 10 year? is the fed going to test that at a time or doesn't seem they have conviction that inflation is cooling is much as they like. jonathan: i just find this stat amazing. medium value of savings and checking balances are more than 40% higher from 2019 across all income levels. lisa: and they are not going down materially. jonathan: they are stable. lisa: that's one of the biggest takeaways. this was supposed to be happening, taking what your savings. they said the cash coming into people's balance sheets on lower income households are increasing significantly because there is a real income issue. where are the cracks? i'm not seeing that area jonathan: i think policy is the worry and maybe not from monetary policymakers but from the policymakers elsewhere. when you listened to brian

moynihan, if you miss that conversation have a look. pick out the part in mergers and acquisition. we are not seeing less because their worries about the economy, there is worries about the deal getting done. a client can even entertain the prospect of doing the deal not because they think it's bad business but because they are worried about being left to hung out to dry for 12 months to work out whether it will be approved. lisa: take that a step further -- how much are we living in an area of fiscal dominance and fiscal policy dominance with respect to what's allowed in the money going into balance sheets. how much is the fed trying to fight against a fiscal dominance that is all-encompassing? it's been understated by a lot of people to fully embrace what that means and how much cash is going into the economy. jonathan: got to find some time to go through this bank of america fund manager survey. global growth especially --

expectations, all high with optimism all across the board. but not euphoria. jonathan: we will hear that word in a moment. lisa: please define euphoria. jonathan: we will get to that compensation a moment the let's start with the price action, s&p 500 is lower 0.4%. the bond market is stable on a big move higher over the last week. we are getting into the 4.30's all over again. lisa: what is that threshold that becomes a pain points? stocks have chugged along despite that and the only hiccups have come buy the rumor, sell the news, the leather jacket, the godfather of the ai industry, woodstock, aia. blah,blah, blah. jonathan: nvidia has replaced apple. whatever.

next 60 minutes look like this. why they think markets in this market rally will broaden beyond big tech and we will talk about the word euphoria as well. looking ahead to tomorrow's fed decision. why clients are staying mindful of geopolitical risk. we begin with our top story, tech giants are leading stocks higher thanks to ai euphoria. thank you very much for being with us. >> thanks for having us.

>> i think this is our first time on tv together. it's exciting. jonathan: let's talk about the constructive miss you both share. where are you seeing euphoria right now? >> i think euphoria is driven by themes at this point so it's ai. everybody owns the ai place. if you look at positioning, there is a lot of building euphoria around discovery and gl1 so there is the medic euphoria bay vp look at the actual allocation of fund managers, pension funds are at the lowest level of equity -- public equity exposure we've seen since the 1990's. this is not a market like 1999 where everybody is telling you to back up the truck on all equities. they say back up the truck on a few equities like mega cap tech in some pharma but there is no brought -- widespread euphoria in my view. the positioning says things different than the survey data which is also important.

what they say versus what they do is sometimes very different. i think the risks are sitting outside of the public market. look at where the credit cycle actually unfolded. it was in private credit and private equity and i think those of the areas, regional banks are working out their problems. i think that's where you are seeing the sort of credit issues really bubble up. jonathan: how concerned should we be? it feels like we moved beyond what happened last year for the banks? >> i think the regional banks are still in an area where it makes sense to be very selective. we are positive on small caps this year but in financials, that's an area where larger banks have looked better than smaller banks. there is still opportunity in the regionals. i think this is a market were stockpicking makes sense. our analysts have done a lot of work here. the environment this year has gotten more optimistic for banks given everyone was expecting a recession going into this year and now we are not expecting a

recession. i think the backdrop for m&a good pickup of we potentially see an easier regulatory environment. we will see how the election goes in commercial real estate is an issue but it makes sense to be selective and be a stock picker this year. that's an environment where there is a lot of opportunities. lisa: does that mean it's all priced in those credit issues we have heard? >> i don't think it's all priced in. in pockets of the market especially when you look at the broader backdrop within small caps, credit sensitivity, refinancing risk, there is a lot of issues that have rates continue to move higher or stay high, these are areas that are a lot more credit sensitive and we could see areas like real estate that may be haven't moved as much. for the overall market like for small caps, they have largely priced in some of the credit risks. they were pricing in a recession, they're pricing in

manufacturing recession, they were pricing and tighter credit standards. i think we are in a backdrop where these continue to ease, there is more upside in that segment of the market. lisa: it's fascinating to hear you talk about how it's not a bad moment like 1999 for all stocks, just some stocks. it sounds like you might want to keep backing up the truck and those stocks because they are not as susceptible to rates remaining high for people getting cold feet and realizing that there is some weakness in some pockets. >> i think that's fair. i see large caps as safer until we start to see the fed really cut interest rates. where we are now is an environment wheweare pricing in three or four rate cut -- rate cuts this year? if we don't get them, i think that's the risk for some of these more credit of sensitive areas like real estate and small caps at large. i think there is a lot of smaller companies that are economically sensitive that can

do well in this environment. the thing i like about the s&p 500 is a lot of the really risky stuff drifted down in market cap. you are starting to see the s&p almost get higher quality by attrition since 2022 when the fed started cutting rates. if you look at cre exposure of the large-cap banks, it's a tiny sliver versus where we see it elsewhere. when i think about what you said earlier about this policy having given consumers and corporate's a long runway of making money on their short duration asset base and locking in long-duration liabilities, i think that is what we are seeing in the s&p 500 and the average u.s. consumer. those of the areas where he think we can press this. even if the fed does not that interest rates, there is still

relative health and gains in those cohorts. jonathan: why do you think we been comfortable with his repricing of interest rates higher? why are we comfortable with hot ppi prince. what is that about? >> the s&p rallied and parts of it rally because the s&p 500 is now a different animal than what it was in 2007. half of it is asset light and has positive net cash in the biggest sectors of tech. i think it's a very different credit cycle. this is where we need to pay attention is where has credit been extended, who borrowed and who will be hurt by a rising interest rate cycle. we are starting to see that but i think that's what unfolds over the next few years. jonathan: leadership has been narrow particularly last year. you make the point that the small caps tend to outperform following periods of narrow leadership. what is that trend? >> we've seen both small caps

tend to outperform and we expect the equal weighted s&p 500, we see opportunities there as well. we are in an environment where the market was led by these very narrow themes. some of these mega cap growth stocks and now you are at a point where positioning is starting to turn more positive on economically sensitive themes. we've seen inflows into small caps for the last few months but positioning is very light. these things run in cycles of small versus large cap leadership, these longer cycles tend to last about 10 years. investors from 2013-2020, small caps underperformed now the average multi-cap manager is about 40% underweight small caps in their portfolio. i think this is a point where you are starting to see more interest in the theme, the economic data and macro economic indicators are turning off the bottoms. that tends to be a positive environment for some of these areas of the market your average

fund manager is under to like small caps or cyclicals. lisa: it sounds pretty bullish. there is some risk if the fed keeps rates where they are. it's not necessarily the same kind of conviction used to have, why? >> i can answer that. for me, it's because there is more high conviction, bullishness on equities. not all equities but pockets. those are the areas you want to watch. how much do these ai plays have to be earnings from here in order to continue to go up? that's where i worry and i firmly believe we could see a correction in those areas of the market and we could see a 5% pullback in the s&p 500 which has been the strata benchmark for the last almost 20 years now. i think those of the risks. outside of these themes, there is a lot of dry powder for real

growth. when you listen to the institute and candace talk about the indicators we track, it sounds like this is more of a gdp story rather than an earnings story. lisa: in a gdp story, don't bigger companies have an advantage structurally at a time where they can invest in technology and invest in some of these small near-term investments even as they lock in their longer-term obligations? dom chu ultimately get small companies disadvantaged in a new way that's different from the past? >> there is some of that but if we are in a capex cycle, a lot of the domestic smaller companies are the ones that benefit if a large make cap is spending especially some of these companies reassuring and bringing back manufacturing to the u.s.. that's a longer-term thing that will benefit the cyclical domestic smaller companies in the u.s.. jonathan: i always ask you this,

is the biggest risk still upside risk? >> to the s&p? i think so. jonathan: i can't believe you've never done this together. thank you very much and thanks for having us. up next, nvidia looking to extend its ai dominance. >> the industry is being transformed not just hours because the computer industry, the computer is the single most important instrument in society today. jonathan: that conversation up next, live from new york city, this is bloomberg. ♪

how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance. xi-chun, xi-chun, xi-chun! you've got more options than you know. book now. jonathan: live from new york, one hour and 12 minutes away and

the stock market looks like this. equity futures are mostly negative this morning, down by zero 5% with yields virtually unchanged. nvidia is looking to extend its ai dominance. >> the industry is being transformed, not just hours, because the computer industry, the computer is the single most important instrument of society today. fundamental transformations in computing affects every industry. jonathan: here's the latest -- nvidia inventing a new ai processor designed called like well. the ceo promising it will be industry changing technology. bank of america global research is weighing in on the ai craze writing --

he joins us around the table now. >> good morning. jonathan: i will go full doomsday. the end of aspiration, incredibly depressing. where is this going? will it be better than the world i just described? >> thanks for including me. jonathan: you don't have to thank me for that. lisa: good morning. >> if we take a step back, the way we are looking at how ai changes virtually everything we do is it's probably the third transformational wave we are experiencing. the first one was the microprocessor. that to microsized access to computing power. everybody got a pc or they have a notebook and a smart phone and the 1990's, you democratized access through the internet rouser to information. in the 70's, access to computing

power in the 90's, democratized access to information. even though ai is about 70 years old, really the genai technology has to microsized access to intelligence. that's the real change. now that you have access that data scientists used to have, you can use intelligence straight from your smart phone leveraging in those ways. we think we are only in 1995 of this buildout. as somebody who covered parts of the internet back in the 1990's, i've watched the cycles and there are definite parallels with the buildout and we are only 15 months into this buildout as my colleague has talked about. it will be years because there are different stages for that. jonathan: we've got to identify winners at different stages. identifying who the ultimate

winners were in thatperiod was difficult so you bought everything. what is the best approach now, how do you think about who wins each cycle? >> if you think about the stack of technology for ai, the first and you have to do is will these models to you can leverage the ai having applications. that's what you are seeing now. you are seeing the chips, the servers being bought and deployed. at this point, the models are still growing. the buildout is still happening because the applications we want to use on top of them are not where we want yet. the average intelligence is probably a 15-year-old intern. it's great to have an infinite number of 15-year-old interns but you definitely want something more intelligent over time. you still need more processing power, you need to upgrade the models in the models are benefiting the chip companies,

the server companies but also the public cloud company is where the models are sitting. that's why we like microsoft, that's why my colleague likes amazon because those guys are benefiting because they are hosting those models. that's very different from the internet. in the 1990's, the internet was built using debt. all of those telecom companies raised all of this debt. the companies that were doing applications on top of that had no monetization models. when that stopped, those companies went bankrupt. what's different here is these models are being dealt out of cash flow of the public companies, not debt in the private companies are using equity. lisa: are we facing the other times? this is basically where we are at. to put a bow on all of this, there is a belief that some of

the broadening out of the equity rally will stem from productivity gains tied to artificial intelligence. are you saying it's too soon and it will take years before we see it percolating to the rest of industries or are you possibly seeing the democratized access to intelligence making a world better? >> over time, i think it will make our world better. i think expectations were that things would get better immediately. it will take time because what has to happen is corporate adoption needs to take a deliberate approach because they have to understand the models. if you are regulated, you have to explain the biases within the models because -- before you can use them so we will take a few years. we had the number one research team on the street. i surveyed our analysts to figure out exactly what they thought their sector would benefit from ai over the next three years. on average, we expect a 250

basis operating margin improvement which is $65 billion annualized savings for the s&p 500. over 100 billion dollars of savings per year globally. that could be conservative because that was a survey done a few months ago without all of the applications that are coming out now. we definitely see it hitting over the next few years so it won't be a straight line up but we definitely see the line moving up area jonathan: everyone says it's depressing my commentary. the way i think about it is that better for whom? brian set your seat a moment ago and we talked about how less labor-intensive each additional dollar of revenue is. if the same for these companies adopting this technology, there will be a lot of people without jobs. lisa: the people that they have are paid more because the actual workers were able to meet the challenge at hand were smarter than the 15-year-old intern are able to get paid accordingly while other people struggle to

be employed. that's the dichotomy we are talking about. jonathan: thank you for this discussion. beyond the depressing story of ai. i don't think i'm alone. coming up, record housing data in housing permits. our guests will react to the economy and the federal reserve tomorrow. ♪

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jonathan: the last slate of economic data going into the federal reserve, some housing starts and building permits coming up in a moment. let's start with price action, equity futures on the s&p are negative across the board. we are -.5 percent on the s&p 500. down .8 on the nasdaq. a little bit lower on yields this morning. let's cross over to michael mckee. mike: good morning. we were expecting a rebound in housing starts and we definitely got one whether it proves that the number of holes in the crown in february, 10.7% increase to a

over one million annual rate for housing starts. building permits are up significantly. 1.9%. that's from a decline of 0.3% the prior month. looks like homebuilders are gearing up for a spring selling season. this is an interesting number that we expect to keep going up because there is not enough houses for sale. it's not so much that but when we get more housing for sale from the existing home market. it got some smarty economists than i that you can talk to about it because it's a question of interest rates at this point. jonathan: it's sort of an upside down world, rates have gone up but supply has been constrained and supply has going higher. can you make sense of this mike: mike: for us? one of the problems the fed faces is normally, they would bring housing down and people

would sit and wait and when they cut rates, people would go out and buy houses again and then prices would rise. in this case, because so many people luck into very low rates, prices are rising because there's nothing on the market to buy in the fed is not able to have the same kind of influence it has an interest rate sensitive sectors of the economy, this is the biggest one. lisa: i'm struck by the fact that we did see a rebound but it was even bigger than people previously expected. this has been the theme that it was 1.50 2 million. when you look at this, what does that suggest to you about how economists continue to lowball some of the growth and some of the desire to keep building and expanding? mike: it depends on the numbers you look at. the ism number suggest we are seeing some manufacturing business slow down. the thing about housing is there

is a big built-in demand. a lot of people want to buy houses and there is not enough houses for sale. what these numbers may suggest is that the supply chains from building materials have gotten a lot better. and that builders are able to find workers to follow through on their building permits. this is one category, the new home construction area where things have gotten a little better than have been expected. jonathan: we've got to leave it there, looking ahead to the federal reserve. equity futures on the s&p 500 are a bauer out from the opening bell, they are negative. joining us is michaelgaipin alongside his colleague. great to see you both. >> thanks for coming to one bryant park. jonathan: thanks for having us again. can we talk about the recent economic data? can you point is something that demonstrates we are sufficiently

restrictive at the federal reserve? >> it's tough. as mike was just saying, if housing is your typical suspect, housing did react, activity did slow down but maybe not for the reasons one would expect. i think you can point to bank loan growth is another area that has responded to higher rates but outside of maybe loan growth and housing, it's difficult in my view to find sectors of the economy that had obvious interest rate effects. jonathan: are the longer variable legs superlong? >> we are starting to see some impact on retail sales as long? the last couple of print and soft and what was more notable for me was the downward revisions. it usually looks like four of the last five months of retail sales were somewhat weak. we are seeing some moderation there but so far it's offset by strong services consumption but we will have to see if that continues. lisa: we've spoken to one person after another and everyone is

bullish this morning. retail sales my piece off but for the most part it's really good and then the economists say there is a little bit of weakness. is that enough? we had one bad retail sales print but otherwise people are being discretionary? is that suggest we are sufficiently restrictive? >> as mike said, it's tough. it's a question of supply and demand. what we experienced in 2023 was a very broad supply shock from the labor market, from supply chains healing and by definition, when you get pop a positive supply shock, you'll get above trend growth and disinflation at the same time. where do we stand on that and if those supply shocks go away, i think we will get a clear picture of demand under the hood. some of the work we suggested suggest demand is cooling off a little bit but there is more ways to go. lisa: is this enough to give the fed confidence that there is

some kind of true disinflationary trend other than just comps that were nice for a couple of months? >> the premise to your question i think it's saying does the fed need to do more to bring inflation down or is supply enough? do we need restrictive policy to get sustainably to 2%? most people would say policy is moderately restrictive. it's doing something but there is russian of how much. they are complementing that by saying we are getting this helpful booth and supply and that is what's bringing inflation down. the combination of the two i think gives them confidence about the overall disinflation trend. rates at some point should move lower. the lack of competence is about when does the window open, windows the data tell them it's ok to start? there is little uncertainty about when to start but i think confidence the overall disinflation print is there. jonathan: your call is june,

what is special about june apart from the fact that it's not march? what is special about that month and why is that the month for so many people on wall street? >> the data aligns a little better in june in terms of year on year rates of inflation being we think that subjective levels --jonathan: are they going to focus on year-over-year and not month over month? they have said we had a good six-month run and we need more evidence. i think that has shifted us all to looking more to year on year. the other reason i was a june as opposed to may or july as if you think your cutting rates every other meeting, i think you want to align those policy decisions on meetings where you release new projections. i think that puts all of us on june as opposed to may or july. jonathan: the chairman talked about needing more confidence. based on the evidence we've seen between the last meeting and the one we are about to see tomorrow that this chairman has lost or

gained confidence? >> i would say less confidence around the timing but still confidence on the overall disinflationary trend. jonathan: you can sense and that news conference last time around that he wasn't white comfortable talking about the overall disinflation trend anyone to know whether and avett was due to one off factors. when you look at the trend for goods inflation, is that worry justified? >> we got one month of goods inflation after several months of outright deflation so i wouldn't say that's a good sign yet. if you want to be concerned, jonathan: i want to be concerned. [laughter] >> one of the things areas there is this question if you do it from a month by month perspective of whether goods deflation would slow down or and before housing started to cool off. it looks like that might be the case. it's one month of data said don't take it too seriously but that suggest you can get stuck

about 2% for a longer time. the other concern out of the january report was there is his big jump in servicesex housing and with that continue or was that a one off and it looks like that was more of a one off. lisa: there is also the question we keep raising, our financial condition can bidding to a prolonged inflation sticking in the economy? do you think it's important for the fed to push back a little bit and say yeah, if things get this easy, if anyone can borrow enough stock markets are doing great, if you see mortgages start to come back to the fore and you get have a percentage point drop in the rate, do they need to do that to bring this a little more in check? >> i think they need to keep financial conditions restrictive. i thanks rallied too much from their perspective from the october/november time to earlier this year. i think they know if we are

going to start and easing cycle at some point, financial conditions will ease so they can't have their cake and eat it too but i think they need to keep financial conditions restrictive on average and i think they are. our proprietary indicators are showing they are restrictive but not as restrictive as they were in prior cycle peaks. if they are getting a supply-side rebound, that should be enough. to your point, they would want to lean against whatever is excessive easing lisa: lisa: and financial conditions. how is this restrictive? >> that's a good question. >> he gets all the hard questions. >> the fed would be way more concerned of the markets are not pricing the amount of cuts the fed thinks is appropriate. that was the case earlier this year when markets are pricing six cuts and that was clearly not with the fed had in mind. once the markets pricing a reasonable number of cuts like three this year or 2.5, then

whatever that implies for equities spreads, don't think they want to get involved in that. they don't want to be in the business of managing risk so they are reasonably comfortable now and probably weren't at the start of the year is why the pushback was more aggressive. jonathan: let's finish on the playbook for tomorrow. let's go to projections, it only takes a few policymakers to go from the median drop to 2. is that what you expect tomorrow? >> no, we expect them to stay at three cuts but to close call, it only takes two people to move up in order for the fed to go from 3-2 cuts. do you want to signal that? what are the implications of that? if you can't justify a cut by june given the base effects will be less favorable for the rest of the year, you might not have a leg to stand on to start cutting until early next year. that might be a reason to get going now unless you are

comfortable starting next march. for all of those reasons, we think it stays at three but it will be a close call and that will be the big focus. jonathan: what would you look for? >> we are on the same page for that. it's a close call. i think you will get a big upward revision and growth, maybe around 1/8 and we think pc gets revised to 2-6. we think there is enough time between now and june to say let's look at the data more and not prejudge it but it's a close call. lisa: they don't care about spreads and micromanaging them when they do well but they care when they are doing badly. we are talking about a fed put all over again come are we not? >> you want them to be consistent? [laughter] jonathan: were trying to figure out how symmetrical this is. there is a belief in the market that there is an asymmetric stance at the fed that if growth is strong, they won't respond but if it's week, they will cut.

what we are trying to figure out whether that tempers their ability to retain that option of saying we will cut if the economy weakens and we won't hike if it gets stronger. >> on top of that, there is a symmetry of an average inflation target and you are only responding to shortfalls of employment from its maximum level. another reason to ignore what's happening on the activity side. >> on that subject, we get asked a bit about the downside risk and i think the big downside risk is if you can cut this year and you get to your inflation is still sticky, things slow down and you don't have the fed put. we've been aligned with the fed put but the downside risk is if that goes away, things could get sticky. jonathan: if the dual mandate went into conflict, how would this federal reserve handle it? >> in what sense would be in conflict? jonathan: if inflation was still

above target but unemployment started rising and threatened maximum employment. >> i think they would respond to the activity side because you would assume inflation with the lag would ultimately respond to that economic data. jonathan: would that be the assumption? >> i think so. we appreciate it. >> a week last word there but thank you. jonathan: the conversation will continue from bank of america. looking for the meeting with the threat of dropping to two great cats. lisa: is inflation a lagging indicator? is the jobs market a leading indicator and is that how they will respond? are we looking at an implicit 3% target rather than 2? jonathan:jonathan: the meeting tomorrow is a little more interesting than it lisa: lisa: was a month ago. i agree. let's look at other stories. let's get to the bloomberg

brief. sonali: hong kong has a fast-track measure for the cementing china's control over the global financial hub. the approval of article 23 completes a two decade campaign to pass local legislation protecting the chinese state new crimes like treason and insurrection carry life sentences and the measure also broadly defines state secret offenses in line with china's legislation around espionage this move -- raises questions about hong kong as a tourist destination. bitcoin slides as record daily output from the world's biggest etf token, the grayscale trust posted a 643 million dollar outflow yesterday. the most since the etf began trading on january 11 etf's overall have attracted in that 12:00 p.m. dollars which helped propel bitcoin to a peak of nearly $74,000. the filipino president said the threat to his nation from china's sweeping planes in the south china seas is growing but

argued his government's effort to assert sovereignty over disputed areas are not meant to start a conflict by poking the bear. he for -- he spoke with us a few hours before the u.s. secretary of state antony blinken. it does not serve any purpose to heighten tensions. this is not poking the bear as it were. we are trying to do the opposite. that's your bloomberg brief. appreciate it, thank you. up next, the recession that never arrived everyone was trying to figure out how this economy will perform in four months ago, people were worried about a recession and now they are not. that conversation is up next, live from new york city, this is bloomberg. ♪

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you've got more options than you know. book now. jonathan: the opening bell is 42 minutes away. on the s&p 500, equity futures are negative most of this morning and a little bit negative by 0.4% on the s&p 500. yields are a little lower on the session unlike the last week. dollar strength has been a theme over the last 20 for hours against the euro and the japanese yen. euro dollar is $1.08. lisa: if the emphasis on jay powell and whether he comes out with a hawkish tone or pushes back against the enthusiasm and markets. this will be the main macro driver when it comes to fx potential volatility which this year has not been great. jonathan: enthusiasm in this building over the last three hours has been great and the

constructive tone at bank of america is phenomenal. lisa: not only the fund manager survey showing the enthusiasm but the cash. 40%, more than 40% increase in the cash and savings people have on the balance sheets. it's not going down so why are people feeling like the consumers running out of steam. it doesn't look like that. jonathan: this economy is stronger than most people expected. the recession that never arrived. >> everybody was trying to figure out how this economy will perform. performance ago, people were worried about a recession and now they are not. they want to invest heavily and that's where you see the lack of tension. everything is solid but it has to work the next twist in the economy to get back. jonathan: the fed's two-day meeting beginning today as the committee prepares its latest summary of economic projections.

bank of america says -- joining us now is linzie hans. good to see you. >> great to be jonathan: jonathan: here. thank you for having us. let's start with these numbers, 2023, you added a record 37 k and clients which is up 50% versus the prior year. escome from? >> we have seen tremendous interest in clients working with financial advisors. we chalk that up to a couple of things. we look at the pace of wealth creation this country which is accelerating. it's really doubled when you look at u.s. household financial assets for financial management the past 12 years and we don't see that slowing down. you see the great wealth transfer, is not going to happen, it's happening now in the world becoming more complex, not less. the backdrop these two more in

clients realizing the value and the per professional financial advice delivered by a human being. that's jonathan: jonathan: our financial advisor. the human being aspect is important. can you talk to us about the nature of the money? is it cash funds sitting in money market funds and taking 5%? >> good question, we've seen a shift. prior to the forecourt of lesser come we saw our cash balances grow to a level that was three times prior to the rate cycle before. we started the fourth quarter seeing that cash move off the sidelines. it's going into a couple of different places like equities and fixed income, our clients tend to move into our professionally managed portfolios. or all the separately managed accounts we offer on our platform. you see in equities in clients last year lock in yields. we saw a lot of bond ladders. you are seeing alternatives like

investments. we are seeing clients wanting access to private markets as well as public and rai assets have doubled in last five years. lisa: going back to where the money is coming from, is it all the same households that are building their wealth and then able to come to you or is this a broadening net where people are earning more and able to invest a greater proportion of their assets? >> i think it's both. there is a lot of wealth creation that still is happening. businesses are continuing to be sold, liquidity is being generated, wealth is being transferred between generations. you look at baby boomers that control half of the wealth and that's an age demographic were money is not going to transfer, it already is. you are seeing all of the above and those are the clients we consider. lisa: i think about the idea that the consumers of locked-in

benchmark rates if they have mortgages or have bought a house. they are not paying that much more in interest but they are earning more not only an interest from even short-term instruments but from an equity market that's doing just fine. this is where it comes from that easy financial conditions that are these -- that these are consumers that have better spent capacity. how much is that possible to continue? do you see that is something that has legs? >> we see a tremendous amount of cash on the sidelines. that came up earlier in the programs of that money will get put to work. we look at that money moving into our fee-based platforms at a high rate. we are on pace to well exceed last year. it's really client by client so in our business, no client is created he. our financial advisors work with our clients to figure out liquidity needs and what they have to have on the sidelines and how much they should put to

work and was -- and what's the risk and the time management all that is done in a financial planning contact and most of our clients are asset allocated. most of our clients of a well diversified portfolio across equities and fixed incomes and alternatives in cash has become an asset class a grin. -- again. they say if we got a little money, we can wait and earn decent yields. jonathan: you talked about adding people. that's music to our years, not robots and ai. how important is that to you? >> 65 trillion is what we estimate assets at. this is a business that we believe is best led by human beings. you need more advisors to go up against the market place to complement the existing fa's. it's women's history month and i mentioned that for our terrific women financial and visors in the industry as well as talent

that should come into this profession. we need more women to come here and face-off against the market. jonathan: led by you and thank you for having us. >> on behalf of our collies, thank you for being here. we are happy to host you and we hope you'll come back. jonathan: if you have us. i don't know if they want is back. >> thank you so much. jonathan: a programming up for tomorrow, that's a federal reserve decision they will catch up with francis donald and their other guests. a special thank you to the whole team at bank of america at one bryant park. lisa: and their incredible bullishness to kick off fed week. jonathan: does it make you uncomfortable? lisa: of course it does but we are basking in bullish. jonathan: live from new york city for our audience worldwide, this was bloomberg surveillance. ♪

>> from new york city, i am manus in for jonathan ferro. the equity markets are selling facts follow -- all the way around. nvidia has ai a little bit lower. countdown to the open kicks in right now. >> everything you need to get set for the start of u.s. trading, this is bloomberg the open with jonathan ferro. manus: coming up, futures moving low as the central bank extravaganza gets underway. the bank of