To work our way through. Let me start with the Michigan Consumer sentiment index. Headline number coming through at 76 point nine, broadly in line with expectations of 77. Current conditions at 87, i had of expectations. At 75. Tions youve got the difficult situation i think the consumer has got to figure out. Do i worry about the here and now and worry about the impact the virus is going to have over the next weeks and months, or do i think about what the vaccine is ultimately going to deliver . Like the markets, i think the consumer is probably having to balance those factors out. Kailey i want to point out housing data as well. The Housing Market has been particularly strong. That does continue. A pace of 909,000, versus the estimate of 975,000. We are getting october personal spending data, and for more on that as Bloomberg International economics and policy correspondent Michael Mckee to break it all down for us. Michael michael it is may the most important number of a lot of numbers out today, other than perhaps jobless claims. Personal incomes significantly down in october, falling 0. 7 . The prior month they were up 0. 7 , so essentially no gain in any incomes. This probably fits with jobless claims. Incomes just coming over now, the breakdown on income and spending. What we want to see is whether it is weighted in salaries. Lower income. Spending numbers come in weaker than they were last month, but a little better than expected. They were forecast to be up 0. 4 , but they were up 0. 2 in the month of september. Weaker income, weaker spending numbers not boding well for the start of the quarter. T does fit the narrative we were talking about data dumps. We have a big when i date 30 eastern time. Jobless claims led the pack, lead the pack, 780,000, a lot more than the 740. 000. 83trade balance wider by billion. That is going to wei that is going to weigh on growth. Durable goods orders up 1. 3 , with capital goods orders up 0. 7 , better than forecast. We got mixed news overall, but the higher frequency indicators like jobless claims suggest a problem ahead. One otherber number, we also get Inflation Numbers and the pce index, which the fed follows, unchanged on the month. Yearoveryear, looking at 1. 2 , down from 1. 4 . 2 fed trying to get to that and over mandate is still a long way from doing that. It is kind of interesting, you talked about Current Conditions versus expectations. That is kind of the way the kind of the opposite of the way the markets are looking at it. Numbers, bad economic and the markets think things are ok, but the execution is things get a lot better for next year. Guy which speaks to this divorce between main street and wall street. Main street focusing on what is happening right now, the impact of the virus, certainly being felt by many people as we go into thanksgiving, and the markets looking through to q2, q3 next year, and pricing in the good news. That has really been driven by the vaccine news that started with pfizer and has basically been coming in every monday since then. I wonder what we get next monday . Lets talk more about that market reaction. Sarah hunt, alpine woods portfolio manager, joining to give us her take on this. It started with that pfizer news. We have seen small caps under pouring the singles are back. Underperforming the cyclicals come back. Do you think it has gone too far . Sarah everyone is waiting for a vaccine, but looking forward and saying when that happens, there is going to be so much pentup demand. People were talking about Revenge Travel because no one has been able to go anywhere. I think there will be a lot of demand, and i think people are looking at stock prices and saying theres room for these to move, but to that point, that very fast move we have had in the last three weeks may be a little bit ahead of itself given the fact that we still dont know how long it is going to take to distribute these vaccines, which ones are going to be the most important in the end because he also have different strains of covid, and how fast that means we can reopen things. To the extent that sitting here in new york on watching things shut down because it gets colder, i think there is a disconnect between what the future will bring and what we see right now. Kailey how far into the future can we realistically look . How far forward . Is it six months, eight months before the population is actually vaccinated . Does the market need to unwind a bit of what it has done in november thus far . Sarah when we saw all of this start to happen in march and april, everyone assumed that by september, things would be a little bit more back to normal. Now it sounds like the extrapolation is going on a lot further, so we have written off 2020 and i have heard people start saying that the back half of 2021 is going to be better than the front half because things are still going to be closed down, so then you start looking at 2022. We are starting to look further and further out because that is when we are looking for this great surge in demand. The fact that you have seen rotation out of the stayathome stocks and into the activity stocks, i am wondering if that is not a little too quick relatively speaking because youre not going to see any of those earnings or revenue numbers come in yet, and i think you are going to see a lot more layoffs. Youve heard it from airlines. Even the mta of new york is talking about layoffs if they dont get some sort of support. I am skeptical that all of this can be as fast as the market has reacted to it, but a lot of people got left behind in march because we assumed the markets would stay down given that things were shut down, and they didnt. They recovered so quickly and sort of a surprise. On the financial side, you are also looking for stimulus and expect in you will get a whole lot of stimulus, so you are almost back to that bad news is good news and good news is good news scenario. Clearly the focus in all of our lives on the virus, but the set a discount mechanism looking ahead. What would it take to keep that on track . Rather than looking at what could not get off track, i am wondering what could keep going. I am wondering if we start to see a tick up in bond yields. That would be a signal that Value Investors are looking for to continue this moment of. This momentum. Lisa i think what would sarah i think what would keep where this momentum starts to come from. If you see continued fiscal areulus, Central Banks still basically being stimulative and will stay that way, so to the extent that you havent seen the drop off in the cyclicals because a lot of them rearranged their Balance Sheets and productions to meet demand in a better way then historically, were typically any slowdown the sector shows negative earnings across the board for quite some time, the companies have done a much better job keeping their own house in order, and you have seen not the kind of collapse used to see when cyclicals had a problem. If you continue to see stimulus and people look forward to a big jump in demand, i think some of those stocks will continue to perform. My question really is if you dont get the kind of earnings or any kind of guidance, how does that play out as you get further along . In 2020, no one is giving you any guff for not giving guidance, but as you go forward, people will be looking to see what can you do when things get better. That is maybe were tensions rise. Kailey you mention fiscal stimulus, and the large expectation is that when the biden adminstration does eventually take the helm, a big fiscal stimulus package will be coming, but we also face the prospect of divided government, and therefore that package may not be as large. How do you square that idea . Sarah even if you get divided government, we are down to just the two senate races, so it is not going to be as divided as it was before. You dont have as much of a majority as you had before. I think the question is going to be can they tailor something that gets people across the threshold to say it is so important to do this that the absolute things we were arguing about a few months ago dont come into play. To the extent that blue states like new york or having some fiscal issues, some of that may end up being support for those. I think thats also why the market reacted favorably in the way it did because it saw that the impasse on what the individual states need is going to be less of an impasse Going Forward. That is the argument the market seems to be making here. Even with divided government, i think you are less divided than you were to start with, and i think that gives room for some compromise that the market will continue to like. Kailey maybe some traffic, not necessarily gridlock. Sarah hunt of alpine woods will be sticking with us. Coming up, the Worlds Largest maker of Farm Equipment sees higherthanexpected earnings for the year ahead. We will discuss what the spells for the broader economy. This is bloomberg. Kailey live from new york, im kailey leinz, along with guy johnson in london. This is bloomberg markets. While deere is projecting higher earnings for the year ahead, it was helped by costcutting and surging prices. How much of this is idiosyncratic to cost cuts, and how much can we read through into a broader recovery and machinery . Brooke i think a little bit both. Agricultural machinery has been in a slump for years now. A pandemic phenomenon. It just made it very difficult to justify the purchase of a tractor. These are expensive pieces of equipment, but you are starting to see demand pick back up again. Part of that is just farmers are working with the in more than a decade. Youre starting to see some of those agricultural purchases from china come through, not quite as much as promised under that phase one trade deal, but that is picking up substantially. You could expect in a biden adminstration were tensions to ease, deescalate a little bit. That does help on the visibility front. As you mentioned, a lot of this is also deere. They have been cutting costs and investing in technology. These are highermargin products they are selling. They are no longer trying to just cater to anyone and everyone who wants a tractor. They want differentiated products that they can charge higher prices for, and the pricing was really the biggest factor in that outsized operating profit beat in their agricultural sector. Guy the connected tractor of the future. Lets talk a bit about the relationship between tractor sales and commodity prices, and whether or not there is a link between a tick up that we see at deere in the survey cycle at deere and the start of a cycle that will lead to higher commodity prices. Brooke i mentioned we are seeing purchasing activity from china. Some of that is linked to their hog population, which was decimated by that african swine fever. They are looking to rebuild that, and you do need crops in order to feed those hogs. We have seen weather conditions in places of south america. The other factor here is once the economic recovery does start to grab hold from the pandemic, that should support demand Going Forward as well. Certainly there is a link factoring into Farmer Confidence and being able to spend again on some of this equipment. You have a lot of the fundamental dynamics looking a lot more attractive for Companies Like deere than they have in a while. Guy have a great giving. Thanks for your time today. Really appreciate it. Lets broaden it out. Still with us, sarah hunt of alpine woods. What should i read into what we are getting from deere, what i am getting from the industrial sector more broadly . What is it telling me about where i want to be putting money to work right now . Sarah i think brooke made some really good points. We had a surge in a lot of heavy, expensive equipment before 2008, 2007, and you had that crisis in 2009. There was a lot of big, heavy equipment that went into the world that we then had several years where that was not the case. So you do have a cyclical positive situation going on now that is also a catch up to the last several years because even though the Financial Markets were doing fairly well over the last several years, a large part was not doing quite as well. I think there is reason to be optimistic, and to the extent that a lot of those companies have done a fantastic job working on their cash flows and balance during this time, i think there is reason to be optimistic that that group can continue to perform. Think the question is, do we get as much of a surge in demand as we would like to, given the fact that you still have these giant mismatches in the economy, in terms of where food is being produced and where it is needed, and how we are consuming things . I think that is a bit of the tension happening in the Current Situation, with an expectation that that will get a lot better fairly quickly. I think there are some tensions there, but i think you have some runway for some of that group to continue to perform. Kailey what about energy . Another cyclical outperforming in the month of november. What do you do with them . Sarah that is another sector where the Current Situation makes it very difficult to parse what is going to happen in the future. A lot of things with think about for the oil and gas market have to do with transportation. A lot of the transportation situation is not in any way, shape or form normal. Are drivingt people more, but flying less, is still not giving us what we would indicate as true demand in a lot of places. That is a difficult situation as well. I think the fact that we have so much flex capacity with on short production then we used to have makes those markets a little bit more challenging as well, but longer term, the less money we put into the oil and gas sector in terms of the companies themselves and doing exploration and of element, which they are currently not spending a lot of money, the more issues you have going further. Even though we are trying to get away from hydrocarbons, the fleet that we have globally is not ready to do that so quickly. Up with higher prices ultimately. Guy the 10 years that led up to the covid pandemic were not inflationary. There was very little inflation in the system, despite the best efforts of Central Banks. Do you think that the years after the crisis will be inflationary . Some people are starting to believe that they will. What is your take . If we are going to see more inflation, how do i hedge against it . Sarah it is a tricky question because one of the reasons you get inflation is because you have too much money chasing too few goods. In the end, we still have quite a bit of capacity for quite a number of goods. So i think you might see inflation in sectors. I think you certainly see it in health care when things get better, and people are going back to doctors and hospitals. Right now the Health Care Situation is very unusual as well because you have a lot of people staying away from the voluntary surgeries and all of that kind of stuff. You dont see the kind of Price Inflation to the extent that you might when the demand picks up. But i think the overall levels people have been looking for, technology has made so much of a difference in getting price down in some anyways that it is hard to see the type of inflation that traditionally we worry about when you see all of this money printing going on by Central Banks. I think it is much more going to be targeted to different sectors then it is going to be overall, but in the cities right now, you have rent coming down because people dont want to be in the cities. That is in big part because of the Inflation Numbers. How does that change if and when we get a vaccine and that becomes less of an issue . But we havent seen drops and rents in new york in quite some time, and other expense of cities. Empty ones are the cheap ones. Sarah hunt of alpine woods, think you so much. Happy thanksgiving. We will take a look at bonuses next and what wall street can expect. This is bloomberg. Guy from london, im guy johnson. Kailey leinz in new york. This is bloomberg markets. A possible omen for wall street. Bloomberg has learned bank of americas leaders are planning bonuses that break with trader hopes of big raises after a recordsetting run. Apparentlyutives lastng the bonus pools at years levels, i. E. Flat. Sonali basak is joining us now. I assume others are looking at the same idea. Sonali i think that is the reason this story resonates so much, because banks have herd mentality. It sets the bar for other banks to potentially set expectations lower. Remember, this is a huge divergence from what compensation consultants were expecting. They were picking traders, equity and fixed income traders, to get a big jump. More than a 40 jump across the industries for a lot of traders. This comes amid a lot of Competition Among the buy side for hiring. There is some room for negotiation here. It was a fantastic scoop by my colleagues. Is still early in this negotiation period, and the best of the best might still get paid, but this does set expectations. Kailey but bank of america is more consumer facing than the likes of morgan stanley, goldman sachs, so i have to wonder how much of that is in relation to those pressures specifically. Sonali that is something to think about. At bank of america you have brian moynihan, who knows what optics look like. He had to rebuild the banks brand after the 2008 financial crisis. A really great point that a lot of this is paying people for a wall street business that is rising while the rest of the economy is not as great. And remember, the gains moving forward for trading are not expected to be as booming as we have seen earlier in the year. For bank of america, to put this in perspective, only about 14 of their total revenue was a sales and trading at the end of last year, a lot less than i goldman and morgan stanley. Guy how high were expectations . Sonali for the compensation consultants at more than 40 gains, it really set the bar high. When you see public consultants making those kind of estimates, the top performers on the desk are going to say i want to get as much as i can hear, but remember, we knew from the beginning that that would not be the same for everybody. It couldnt be the same for everybody because the banks were still leading in other parts of the division. America, unlike the other banks, is one of the few