A second term. Kim davis caused an International Uproar when she stopped issuing marriage licenses and 25th in 2016 after the u. S. Supreme court struck down a law four people global news 24 hours a day global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im emma chandra. This is bloomberg. Vonnie it is noon in new york city, 5 00 p. M. In london and 1 00 a. M. In hong kong. Welcome to Bloomberg Markets. Vonnie here are the top stories on the lubricant from around the world that we are following. U. S. Stocks are falling for the first time this year as investors are corporate earnings. U. S. Dollar strengthening after three straight weekly declines. Part of our exclusive conversation with ubs ceo, where he is seeing opportunity and risk in 2018. Shery the travel nightmare as new yorks john f. Kennedy airport continues. Flooding causes more flights to be delayed. Will this incident give President Trump next to push to keep the structure problems . We are vonnie halfway into the monday trading session the second week of the year. The first full week. Abigail the first full week of 2018 for trading. We are looking at the first set of declines for the major averages. We have the nasdaq slightly higher. He dow and s p both down the nasdaq, up ever so slightly but even so we already have alltime record highs for the dow and the nasdaq. Big gains we saw last week some of the best week for the s p and the nasdaq december of 2016, extending in todays session in a small way. Investors are perhaps taking a breather after the big move higher. Down more than the other major averages about one quarter of 1 . Lets dig into some of the small cap laggards. Down more than 50 after the companys neuroscience drug failed. We also have go pro down 19 after the action and adventure camera maker did cut its fourthquarter revenue guidance by about 28 to 340 million. Also reducing the workforce. Afternd busters down 21 they cut their fullyear forecast after a week december. Where we do have some strength, retail. Some retail winners on the day, taking a look at kohls. The shares are higher by 6 . They upped their forecast for earnings by seven to 10 . The Holiday Season was strong for them online and in stores and thats to be carrying through for some other retail related names. They own different brands such as timberwolf and others bord sporting brands three of yu were mentioning the dollar gain. A rough 2017 for the dollar. We are seeing a bright spot, perhaps. 4726, the last year all of the red lines, declines for the in 2017. Out 9 the worst year for the dollar index since 2003. Up more than one quarter of 1 . With rising yields in Economic Data coming in, we may see more gains ahead. The s p 500 is hitting the pause button today after its best week in 13 months. Corporate earnings are back in the spotlight after the success of the tax bill fueled rallies at the end of 2017. James swanson, chief investment strategist, says investors should proceed with caution. He joins us with his recession checklist. Thank you for joining us. Where are the biggest risks for this cycle going to come from . James they are going to come from margins. Everyone thinks profits are really good but if you look at the smaller Cap Companies in the broader indices, the profit story is not as widespread as commonly thought. I think its going to come from the earnings side of it and its going to come from the fact that prices in these markets are extremely high by historic standards. Thats the essence of my cautionary tale. Vonnie we had Jeremy Clanton writing in the guardian, a melt off before we see any of this apocalypse. Do you agree them might be a melt up first . James theyre certainly could be. Im telling our clients youve been through a market thats in up 3. 5 times what it was eight or nine years ago. You have been through a long year of thele, 19 Business Cycle, the longest ever is 10 years. Unless you believe weve abolished the Business Cycle i think preservation of capital as new money comes in and you get this tax break with your pay year of the Business Cycle, the longest ever is 10stub, should you throw it o the market and pursue growth . I would say be more cautious with every new dollar. We are seeing signs of late cycle and that is what concerns me. James bullard does not think we would see a recession anytime soon. Certainly not. Everything is fine right now. How are you going to play this to 2018 . Are you going to raise the policy rate to the point where you are willing to have a completely flat yield curve or inverted juncker . Shery how the markets play next. Ear, or this year in fact james the mention of the yield curve is a striking one. The bond markets tell us a different story from the stock market. The stock market says every thing is fine but the bond market keeps tilting the other way and yields keep trying to fall even with good news. We are getting signals even from some of the most important markets that all is not going to be as good in 2018 as it was last year. Sign ofthats another caution. Take a listen to what the bond market is telling us. The credit market and equity arket around the world, from price to sales point of view, in the top 10 of historic readings, that to me is enough to be, lets pull back. Does not mean a recession is going to hit us right away but no one seems to see recessions before they come. Take a look at chart 3192 on the bloomberg, for our viewers, the fact is we have had an economic best we have had a long economic cycle. What you are saying is you dont think we could be the longevity of the 90s cycle anymore . James thats right. Heres another reason im concerned. If you look at ppi readings, around the world, these are sort of milk prices in the pipeline, rising faster than consumer prices. Which tells me there is not a lot of Pricing Power in the system probably because of internet and technology. That is telling me you will not see the yearoveryear Profit Growth in the next two quarters you have been seeing and thats another reason for the market to be disappointed, particularly from high levels were looking at now. Vonnie where do you look for sanctuary . James there are a lot of things you can do. There are parts of the equity market that are more defensive than others. Some of the higheryielding sectors like the real estate actor, utility sector. There are bond markets that even dont gety are rich, beat up only go through downturns. You have much less volatility than you do in equities. With new money, always be diversified. Dont not be in stocks. Slowly bring that down if youve been overexposed to equities. Gage it back to highgrade corporate bonds. Shery does this mean we wont see three rate hikes next year . Not four as some economists have upgraded the forecast. James i saw a forecast that says were going to get six rate hikes next year. We dont know how this system can handle that. That is a lot. Vonnie whose forecast was that . Its not yours, surely. James it is not mine. I was a three to four is in the cards year. We dont know how this that will behave. We dont know how this that will behave. A new fed chair in place. We dont know what the effect of 25 basis points, 50 basis points, is on consumers or businesses. Theres more federal debt, more consumer debt. Its got to be a delicate balancing act. I dont think youre going to see four or five rate hikes. Shery some analysts were saying they could delay the first rate hike and see what happens. James, thank you for your time. Up, bittering breakup perhaps. President trump is continuing the attacks ons he been in and republicans in washington are rushing to pick sides. Is there a future in the party bannon . Dan shery this is Bloomberg Markets. Onnie it is me or him President Trump giving an ultimatum to his team after Steve Bannons fiery comments. His surrogates came out in full force. Their choice was clear. The president s tweets reaffirm the plainspoken truth. A selfmade billionaire revolutionize reality tv and tapped into something magical thats happening in the hearts of this country. No one questions the stability of the president three of i speak with the president multiple times a week. He did not become the president by accident. The president is engaged. He understands the complexity. He asks difficult questions of our team so he can make good form policy decisions. There is a level of genius to his personality as it relates to his marketing, insights. When i worked with the president and people around them, hes been an active coming gauged and effective leader. Vonnie lets bring in shannon pettypiece. So many surrogates out there yesterday and this morning as well in full force talking about things like what is going on magically in the heartland of america and so on. Is this a defense a defense of the president or an attack on steve bannon . Shannon yesterday it was a defense of the president. You did not hear much talk about steve bannon even sort of in the interview,er miller kept coming back to the president and his intellect and calling them a genius. The white house has not traditionally been great with getting surrogates out there, getting them on messaging, getting them on message, a cohesive viewpoint coming out of the surrogates. This is one of the more effective times they have had at actually getting surrogates on message and rallying around the cause. We did not necessarily see this in health care but we are seeing this now when you have an issue like the president s mental stability coming into question. Shery what is Steve Bannons place in republican politics now . Shannon it is certainly changing and ethnic it was changing before. I dont we had a clear idea of what Steve Bannons position was going to be before the book came out. He was trying to lead this antiestablishment insurgent movement. Now he has lost his backers financially in a lot of cases. I would not count him out yet. I dont equate seen the last of steve bannon. He does have a following on this nationalist movement that existed before he was aligned with President Trump. There are signs that will exist after. Vonnie with the president we can look at Approval Ratings for as much as they are worth. We know they are in the 30s. What would Steve BannonsApproval Ratings be where he did take on a fresh candidate . He had a bad loss with the roy moore election. That does not mean he would lose the next time, right . Shannon it certainly does not. That election could be looked at as an and normally. An anomaly there were unique situations around that election. The gauge will be 2018. Hes been talking for months about mounting candidates to take on the establishment. People aligned with Mitch Mcconnell and paul ryan. Anyone in washington is considered establishment figure, at least almost anyone. How successful is he . We are going to see in the republican primaries and we will see when we get a sense of the quality of the candidates he and his allies are able to put up and the money backing them. Vonnie that is the key question. Did not need money for President Trump. President trump managed to get publicity all by himself. With the midterms, there will need to be money spent and right now there is no backing for steve bannon at least. Shannon not necessarily from a big financial billionaire but we dont know who could step in to fill the void and we dont know what the Grassroots Movement is going to look like. When we talk about the house in smaller districts where things can be swayed by even a few hundred votes in some of these races, Grassroots Movement can really come into play. I think just losing big financial backers now does not necessarily mean hes out. Look for who could come fill that void and what the Grassroots Movement is going to be like. Vonnie the government on a deadline with the Government Shutdown looming shery the government deadline with the Government Shutdown looming. What came out of the dir the retreat at camp david . Shannon a totally cliche phrase of kicking the can down the road, getting us past another deadline just so we can get to one more deadline. There are some difficult issues facing republicans now that will make health care and tax reform look easy. Immigration, entitlement reforms shery a look at some of the biggest business stories in the news right now. Oprah winfrey tells bloomberg she is not running for president although she seems to have a lot of support. Isculation about winfrey sending Weight Watchers shares higher. Rekindled rumors she will run for president in 2020. Big cuts on the way it go pro. Fourthquarter revenue forecast missed estimates. The company will cut more than 200 jobs, reducing its workforce to fewer than 1000 people. Its also getting out of the drone business. It used as retailing investors u. S. Retailing investors are buying. Investors added Stock Holdings through december four and 11 consecutive month. Td ameritrade says that is the longest buying spree for Retail Investors it has on record. Vonnie Jfk International airport in new york. Will the massive flooding give President Trump more leverage to begin to fulfill his infrastructure promises . This is bloomberg. Vonnie this is Bloomberg Markets. Trump president donald outlined his legislative agenda for 2018 during a weekend meeting with republican leaders. Infrastructure, a key objective. Of the massive water main break at jfk airport causing delays, will this be next on the agenda . Is it politically feasible . Joining us is mark nick at. Were headed toward the midterm elections. Mark weve heard a lot of talk from the administration and congressional leadership that there is an opportunity to do something bipartisan. Their space to do something in 2018. We will see exactly when the rubber meets the road so to speak whether we can actually get a deal that democrats and republicans can sign off on. Vonnie what might a deal like that look like . Any ideas what concessions would have to be made on both sides . Mark the president has talked about a trillion dollar in for Structure Plan but really what the administration is thinking about doing and what we are told they will propose is turning the funding on its ear. Weve been relying on the federal government to provide funding and what the administration will propose is essentially shifting responsibility to the states and localities. The idea is the federal government does not own much infrastructure so the federal government can be a partner but really plays the best role in getting a lot more infrastructure done if it incentivizes states and localities to come up with their own funding streams and revenues to produce their own projects. The administration will propose this approach we will give you some money if you come with your own funding. The pushback we are hearing is democrats in particular say the federal government needs to do more. We are going to need a lot more in federal spending. The fight will be how much in direct federal spending can we get in the bill that democrats can support that isnt too much we dont want to spend that kind of money. Shery republicans seem keen to put forth other issues that welfare reform. What other issues could get in the way of having a compromise on infrastructure . Mark part of it is the upcoming midterm elections. Political questions about whether democrats will want to give the president any kind of victory, versus having to go districts and say we debated infrastructure but did not get anything done. I think the fights going to be over that magic number of how much in federal spending can get enough democrats on board but not cause enough republicans to not want to support the bill and leave it short of passage. Another big point of the bill will be streamlining wa regulations and environmental permitting. The bill is going to talk a lot about speeding up that process and that is something republicans in particular and democrats as well be interested in. Vonnie in the context of the conversation can i point out a wonderful view piece on this subject . Three reasons for the infrastructure bill go ahead. Supplied side reason, demand side reason and funding. Treasuries are low at the moment and it would be cheap to fund it. Thanks to Mark Niquette for joining us today. Shery coming up, activist investors had a strong 2017. We will bring a new report that examines how a company should respond to investor challenges. Vonnie all right, that is beautiful midtown manhattan. We can say that now because the snow has been removed. Shery and it is warm in here. Vonnie live from bloomberg World Headquarters in new york, i am vonnie quinn. Shery i am shery ahn. We have seen pressure from markets across the board with dow nowt now down down. 1 . The dow is falling. Energy is one gator because wti antinues to see gains above barrel. 66 . Nasdaq is gaining. The dollar gaining ground after three straight weekly deadlines. Vonnie lets get to bloombergs first word news with emma chandra. Emma thank you. Time is running out to avoid a Government Shutdown. The next deadline is january 19. Republicans and democrats are far from passing a spending bill. There is no negation on either side with key issues, immigration and the budget caps. Once againn they may once again passing shortterm spending bill. A fire on trump towers roof. Son, eric,rumps called it a small elliptical fire. Electrical fire. Boat began sinking saturday due to a puncture. The coast guard has rescued 86 people. Police in copenhagen say a gold in silver bottle with a diamond encrusted cap was stolen from a bar. The thieves appear to have consumed the vodka and dumped the bottle at a construction sit