Well, less of an outperformance, but a little bit of one. We are seeing a bid when it comes to crude. European equities not exactly having the same story as the United States, only up by 0. 1 . Markets actually in negative territory. The you is a little bit softer today. Christine lagarde speaks in frankfurt tonight. Weve got a policy meeting next week. The rand, a little bit of surprise from the central bank in south africa, delivering a to five basis point cut today. The big question, is there more to come . Is there going to be further rate cutting and south africa in what is a critical year for south africa . Somebody are getting absolutely pummeled today. The Canadian Company under pressure on a number of fronts on the train business and the aircraft business. Airbus a220, the ramp up to that program costing more than anticipated, and a buddy are essentially talking about walking away. Essentiallyrdier talking about walking away. Lets get some more insights on these markets and where u. S. Stocks are going next. Joining me in london, robert chief Global Equity strategist at citi. Do we get outperformance in the u. S. This year, or do we get it elsewhere . Robert i like the old stock market saying, the bull market is narrow. This bull market started 11 years ago, and it is narrowing. It is typical for the s p to forge ahead, european markets lag. So we are expect in the u. S. To continue to lead the way this year. Cheap. T europe looks the relative valuation story looks cheap. If europe has any chance, its got to be now with the kind evaluations we are seeing in the states. Robert thats one of the great conundrums of this cycle. Guy value has started to work a little bit more. Robert there was a bit of rotation, but im afraid that growth against value is making new highs, and at a global stockmarket level, the s p is the growth trade. Europe is the value trade. Guy in terms of what has ultimately driven us over the last 12 months, its been multiple expansion. Do we get Central Banks helping year . Th that this is the lower rate story going to come back and help us at any point in the next 12 months . Robert this time a year ago, we were expecting two rate hikes from the fed, and we got three rate cuts. We are not expecting that kind of help this year, but the caps are still on. I just dont think they are going to but the taps are still on. I just dont think they are going to open even more. One of the problems is if you take cheap money away, they can have tantrums. Guy talking of tantrums, people are back shorting volatility at the moment. It is pretty depressed, and yet people see it going even lower. What does that tell you about sentiment right now . Robert we think that is one of the things that has really been manipulated. Is that the right word . Affected heavily by central bank policy, which is volatility. They are essentially taking volatility out of the market that, if we were pricing things, would definitely be there. I think the lability is going to stay fairly low. Not forever. They are not going to stay with the taps as wideopen as they are right now forever, but they are suppressing volatility. Lips andsee b corrections and so on in the market. Guy the dispersion is going to stay very low, judging by that whole story. It doesnt sound what a year for active managers. Robert it is going to be very difficult. Most people are just buying s p tracker and doing very well. Guy you talked about mid singledigit returns this year. What do the tales look like and that forecast . Robert if you were going to say give me 10 swing, i would be on the upside, not the downside. One of the really extraordinary things about last year is we made 24 , 25 on Global Equities is out much flows into equity as an asset class. We did it despite fund flows. Normally, we do it because of fund flows. I think we could get that extra spurt to the market. Guy fear of missing out. Robert absolutely. Guy but Institutional Investors feel more invested in retail. Robert yeah. Areitutional investors often just the decision of retail investors. It feels like one of the grumpy us to bull markets ive ever seen in my life. Guy earnings . Expecting 4 to 5 global this year. As we saw last year, the number came down 7 , 8 . Still, the market went up 25 . late cycleare seeing increases in wage inflation. I think the risk to the forecast is generally encyclical stocks where analysts are forecasting a bit of a rebound this year. A lot of the 10 comes off of analysts expecting earnings numbers and cyclicals to be up. I think that is where the risks is. Guy where do the differences lie in europe . Robert we like the u. K. If i was going to say one value trade that i like in the world right now, its the u. K. Obviously, its had its problems. The election has cleared a few of those problems. We just see value there. What i really like about the u. K. Is that the companies are really answerable to if they trade on a low multiple continually, something will happen. Happen. K. , they will guy i am just percolating what you are saying. I want to come back to the issue of people being sucked into the market. I hear a lot of people that are nervous about the market as well. Howard marks was one the other day, talking about how this is not a time to invest. Some of the biggest investors in the world see most track record are talking about being nervous right now. Why are people going to invest rather than being put off, considering where we are in the cycle . We had a great rally out of q4 into the beginning of this year. Why would i be putting fresh money to work at this point . Robert another great old stock market saying is that markets cloud a lot of worry. Theres always something to be worried about. What you said earlier, the fear of missing out, you will start to see flows coming into equities. They might come into passive, not active funds. That is the last part of this bull market. We runt a what i call a bear market checklist. Im still only up to 3. 5 or four red flags out of 2018 out of 18. Guy so youve got to stay fully invested. Robert until you see these emerging signs of euphoria, of which bigger inflows is one, i would stay invested in this market. Guy so the rally at the back end of last year doesnt feel like that euphoria, like this kind of melt up . Years it should after 11. Ipos and lots of m a. I cant see it yet. Guy in terms of the sector story, do you want to get tech feels like a safe haven right now, which feels crazy. The defensive names within the market feel very expensive. Here in europe, youve got the likes of nestle. They feel superexpensive. If i want to stay invested but get a little closer to the exit, where do i go . Robert thats one of the interesting things. I would look at Something Like nestle the other way around. Nestle is excessive relative to the rest of the stock market, probably the most it has ever been in europe, but it is the cheapest relative to bonds. If you are an asset investor, you are coming out of the bond market. If you can get negative one in in bondu can get 1 yields and 2 in nestle, its a good deal. They might look expensive relative to the stock market, but relative to defensive assets elsewhere, they look pretty cheap. Guy stick around. Still got more to talk about. Robert buckland, chief Global Equity strategist at citi, is going to stick around. Lets check Global Markets with kailey leinz. Kailey in the u. S. , it is definitely risk on. In the u. K. , a little less so. The ftse down by 0. 5 . In the u. S. , all three major accurate is all three major averages are at record highs. You have every sector within the s p 500 higher today. Take a look at the dow, up 177 points, continuing that climb above the 20 men thousand level. If we happen to the terminal at gtv and take a look at the dow over the past few years or so, this isnt the first round milestone we have seen recently across the 27,000, 28,000 level in 2019, and now more than 200 points above 29,000. Whats led the dow are some of its biggest heavyweights. The likes of goldman sachs, apple, visa, mcdonalds have all seen gains of 6. 5 or so, and we will see if they continue to lead the dow towards the 30,000 level. Of course, there are some other stocks moving on the day. I wanted to go look at chip stocks. Taiwan semiconductor is well off the highs of the session, now up just about 0. 4 , but fourthquarter profits top to highest analyst estimates. First quarter outlook also really strong. 5g a big part of that story. This is a bellwether stock for the industry, leading its peers higher come of the likes of micron, western digital, and andy, all up and md,e than two per and a all up around 2 today. A remarkable week for the big banks. Goldman sachs, bank of america, j. P. Morgan, they have racked up more than 20 billion of profit in the fourth quarter. J. P. Morgan really taking the cake on that one. Guy absolutely. Amazing that they came out of the gate so strong, and everybody else had to fall behind it. On the program, you may be wondering where vonnie is. She is getting ready for an exclusive conversation with phil hogan, the new eu trade commissioner. He is in the u. S. I suspect hes having quite a tough time of things. Vonnie is going to find out exact a what is going on. That conversation is at 6 00 p. M. New york time, 11 00 p. M. London. Next week, a number of key interviews coming up from davos. These are the names weve lined up for the Global Economic forum. We will talk to the mall next week. Its going to be a great week. This is bloomberg. Guy from london, im guy johnson. This is the european close Bloomberg MarketsBloomberg Markets on european close on Bloomberg Markets. Lets get the first word news with ritika agrippa. With ritika gupta. Ritika chief Justice John Roberts will be sworn into preside over the impeachment trial. Senator Mitch Mcconnell says it will fully get underway next tuesday. The Government Watchdog Agency says the white house broke the law when it withheld money appropriated by congress for ukraine. Turns out there was a late Holiday Shopping rush in the u. S. Retail sales rose 0. 3 in december. For between 19, the overall value of retail sales increased 19, the overunny for 2019, the overall value of retail sales increased 3. 6 . Credit card stocks are among the big gainers. Companies like visa and mastercard moved a step closer to gaining access to the chinese payments market. Commodity markets got some numbers on chinas commitments to buy farm products. Still, some doubts about the deal remain. In russia, authorities are nuven to make that a mere putin are moving to make Vladimir Putins after a reality, one day he shook up the government and asked for a constitutional overhaul. Tot could allow him stay in power after his term of office ins in 2024 of office ends in 2024. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Guy thank you very much indeed. We are back with robert buckland, chief Global Equity strategist at citi. Lets talk about emerging markets. Ritika talking about what is happening with russia. That market has had a good run. You see emerging markets is broadly neutral for the year. How much is that dependent on the dollar . Robert we upgraded them from underweight at the start of this year. Part of it is a view of the dollar being weaker this year. Dollar, onea weak of the ways to play it is outperformance by emerging markets. Another way to play it is underperformance by japan. So we moved japan to underweight, e. M. Up to neutral. Guy where do you feel about china . Robert ive got a neutral call on china within the emerging mix. The overall economy is still growing, so you still want to bes of that, but there are always a few issues about why the chinese stock market is not quite as good as the chinese economy. Thats been an issue for many years. Guy is the trade deal having an effect on that view . If so, what . Robert i would play improving trade deal conditions through taiwan and korea. They are much more externally exposed to trade around the world. We are positive on taiwan, neutral on korea, but those are the two beneficiaries of some form of resolution of these trade wars going on. Guy davos next week. Esg as part of the conversation. The sustainability story seems to be getting momentum. Yet, we still havent nailed down exactly what it all means. Therefore, i think there appears to be some potential mispricings. The oil price and the oil stocks are an obvious one. Are there others . As you look for what you are trying to see as the opportunity this year, does esg present one . Robert we were talking earlier, i kind of got the oil price right and the oil stocks wrong last year. Guy i thick a lot of people did. Robert plainly what is happening is the stock market is looking through shortterm upticks in the oil price and starting to worry about the longterm Business Model of these companies. Ive given up on that trade. We are neutral on it. If i am bullish on the oil price, i am better off buying Oil Countries like russia. That one is still giving you some leverage to moves in the oil price. Guy stocks like bp have got fantastic dividend. In a world where dividends and yield is so hard to come by, decently elevated dividends, they dont come along very often , how many people you think are going to look at this and go, i appreciate that this is not part of my portfolio, but i need the yield . Robert thats been one of the interesting issues in this whole cycle. Low Interest Rates have triggered a search for dividend, triggered a search for yield in the bond markets. We all know that. But theyve triggered much more of a search for Dividend Growth and dividend yield. Youve been better off buying the u. S. Stock market where the dividend yield is low, but growth is high, than the european stock market, where dividend yield is high, but growth is low. Growth is a key driver of our strategy. We gave up on dividend yield some time ago, im afraid. Guy if im not into the growth thing, which some people cant get re do i robert how about this . You dont have to go right out there buying the 6 yielders. Sacrifice a bit of that. Collect 4 , which is still good, and get a bit more growth. That is how we get our clients to thing about dividend. Guy thanks for stopping by to cs here at bloomberg. Robert buckland, chief Global Equity strategist from citi. We are watching what is happening in washington, votes on usmca, plus the impeachment story. Plenty still to come. This is bloomberg. Guy from london, im guy johnson. This is the european close on Bloomberg Markets. A key vote at out a key vote about to take place on usmca on the senate floor. Lets go to his kevin cirilli. Kevin the senate is expected to vote on usmca. We are here with the Republican Rep is in think south dakota, a key member of the usmca team. How is this going to impact your state specifically . Say that if itto was canadian wheat, they would pay a premium for it. If it was not, they would not pay the same premium price for the same quality of wheat. For producers in south dakota, both spring wheat and winter wheat producers, this gives them the opportunity to compete with canadian producers, long time coming. This is worth jobs in south dakota. We will be able to now trade with canada and mexico, and it is the first in a series of trade agreements we want to get done. The china deal, phase one, was done yesterday. That was a marvelous opportunity for us. That, along with this here, we think it is going to really change the markets for our commodities for our farmers and ranchers. Kevin in terms of trade policy in the past 24 hours, it has been a monumental day as it relates to china and canada and mexico. I am curious, though, when you look at the european front in terms of where tariffs go, phil hogan was a washington, the amope trade chief, i wondering if you are concerned with europe. Sen. Rounds we know that our beef is in demand in japan and china. This is going to be huge for our producers. We want to see those negotiations back on track again. Is a real opportunity for farm producers in the midwest to share their product with folks in europe. We are very excited about the fact that as we knock these off one at a time, we are making good new trade deals. The president s right. Youve got to take these one at a time. Youve got to work them through, and it got to be towards a fair trade deal. Our producers are going to win on this one. Kevin you chair the subcommittee on cyber on the Senate Armed Services committee. As we look to china phase two, do you have a timeline in terms of when issues pertaining to National Security would come up as it relates to 5g, as it relates to huawei, which are much more bipartisan issues . Sen. Rounds they really huawei is an arm of the Chinese Government. Lets face it. We simply cannot allow them to be part of our infrastructure. When they have and the embed that throughout our communication systems, it becomes a threat to our National Security. We are going to have to take them out of all of those locations. Theres no doubt of our mind theres no doubt in our mind about that. We want free and open trade, but we are still in competition with them. Right now in cyber, they are very strong. They are basically sneaking in and stealing information. They get in and they dont necessarily tell people they are in their networks, but they are gathering information. They take it home, they disseminated among their businesses to give them an advantage. It is different from some competitors who are disrupting. China would just prefer that we not even know they are in there. Kevin can i press you want a timeline as to whether that phase two come before or after the election . Sen. Rounds we havent really discussed that with the president. We have talked about ag issues because we have to get the Commodity Prices up, and these trade deals should really make an impact. Phase two is important. I dont think we are go