Back now all i know is that that alarm is still its very early when it finally goes off thats hard to when your on vacation does your body clock still make your get up early 730, yeah. What is that three extra hours or something. Thats like a weekend for me. I think we both do that. You cant, after all these years. And i think ben franklin was on to something, i do im not missing anything with that latenight tv, right . And by late night i mean like 9 00. Weve got a lot to tell you about today. We want to get to the futures moves in just a second but i first want to show you how we got here. The dow dropped 390 points during yesterdays session fell back below 26,000 bond yields resumed their augustdown tuaugusdown turn the rate cut jumped sharply. Now its up to 100 in september. Thats the betting line right now. And 82 in october some people alt 55 now on recession. So i dont you guys got a feeling on that . I mean, does the yield curve mean theres a recession because is there anything else indicating that . Unemployment anything like that anything else pointing to that that we know or once again are we are we predicting that 13th out of the last four . Here on overseas you did have growth data in the uk that contracted. We have someone coming on today at 55 for here. Hell be non a little while. Ive seen 1 out of 3 thats what most people get to 1 out of 3, thats very negative if theyre 1 out of 3 for recession in the next 12 months. But well talk to the american coming on and get 12 months i think is too soon, given the strength of dont you think 55 is high for a recession over the next 12 months we had yun yesterday again, the jan any offen rule you go out jied aside and ask d think you can get another job quickly . Yes. Do you think you can get another job for more money if the answer is yes, theres no recession. What else. Kramer. Kramer has been its hes had more trouble staying positive. I think theres a lot of people you read what he says hes like look, you want me to sell everything hes not going to say that have you been following kramer i have been following kramer. Trying to stay positive, right . Hes trying to stay positive but hes been a little bit thats not jazz hands, thats just a little like a golf clap . A little lukewarm. A little back and forth. Between hong kong and argentina and everything else, we should be a sea of tranquility here but were not in this country. Especially with a debt feel e deal for two years the treasury is the actual safe haven low risk right now because any actual budget worries here at home are off the table for now. Could you ever see negative rates here i you could. Couldnt fathom it. What do you mean . I wouldnt say that weve never see it. We never say never. Whats your time horizon . Were 160 next week . I dont know heres a pick tire right now u. S. Equity futures, 82 point. We can deal with that in our sleep, right anyway, well see what happens by the end of the session. But after 389 yesterday, it puts the s p down right around 5 so 5 corrections. We always talk about them. They happen all the time and people predict them and say nothing serious, 5 . But it feels more serious when youre in the middle of it heres a look at the treasury yooelds, 164 we were close to an alltime low on the 30 year there you can see 2. 1. 1. 62 on the ten year checking the overseas markets in europe right now, it seems like there are headwinds from all directions look at where europe is right now. Weve got some weak data out of germany. And you see the german dax down close to 1 . France, germany, spain, all lower by about 1 . And look what the happened overnight in asia. The travel in and out of hong kong has been disrupted by protests again, departing flights in hong kong are now canceled for today. Take a look at the nikkei down more than 1 after having been closed yesterday hang seng down 2 . Shanghai is down about. 6 of 1 . Weakness across the board as investors look for keys in asia. We did have comments from pboc officials about saying they would keep china stable. Were also watching a data point thats become a key daily data point for the global stock market China Central bank, this midpoint for its currency. They set it weaker than the psych lodgeally important 7 mark for the fourth straight session. Its stronger than analysts were expecting but of course anything thats weaker than that 7 level its going to give investors some pause i want to pull up these specific comments from this pboc official said they said chinas going to stick to the managed Floating Exchange rate for the yuan and its committed to keeping the Exchange Rate basically stable so some conditional adjectives there that make you scratch your head a little bit about whats a managed Floating Exchange rate, joe . Means youre going weak ten if you keep putting tariffs ton. Were going to man it lower. If they go lower it hurts their own economy. Very complicated i saw the fp, i thought you were going to lead with that today the. Which story is that that the chinas winning in the trade fight against the u. S. Well, i would say within the last couple of days theres been increasing argument that theyre winning or putting us in a bit more of a box than we thought we were in even just a couple days ago. You have the farmers coming out. Theres more and more farmers are still 60 behind the tariffs. More and more news the consumers going to hurt, the Goldman Sachs report theres this push that be direction. I went to the state fair, interviewed a lot of the farmers. A lot of them say lets get through harvest and see what our yearend books look like iowa caucus is february 3rd, theyll reassess at the end of the year strong support is strong for this policy but there are a few months where financial situations can darken and perhaps people change their mind then. Time is passing and novembers coming. Winters coming. I dont mean this november, i mean next novembers coming and time is passing and china knows that you mentioned, look, you mentioned iowa and mention farmers. Iowa. You know ways down south. I had a corn dog, but luckily there were no cameras around did you see candidates do not have a corn dog at the iowa state fair, do not have a corn dog. That was the one thing that came out again and again and again. I saw it on the news again last night after i had read the actual article and then i thought, wow, i just the pork on the stick is a much safer photo op. Its just not a thats rule number one, i saw the article that rule number one if you ever are dont eat a corn dog. There was other things. Someone got a smoothie. I think john kerry got a strawberry smoothie and they were mad at him for not getting something fried while youre in iowa its very and all this is going to play out. Thats exciting for you. Whos starting to change my front runner you think that warren you think warren is i think that warren has i dont know whos got a chance anymore. I dont know you want to talk about Something Else i want to talk about hong kong because its moving markets right now and then we can talk about or not. No, im very question dont need to. We havent talked to each other in a long time breaking news in hong kong and i want to get to this. Protesters flooding the airport a little over an hour ago checkin for all depart are flights has been suspended members of the public have been advised not to come to the airport. We have a report from be ins matt bradley at the hong kong airport. Reporter well, there were thousands of people here this morning and now thousands more in just the last couple of hours. And there used to be downstairs in the arrivals hall, now theyve migrated up to the second floor and theyre occupying the departure halls. You can see all of these youthful protests wearing black, holding up signs theyre trying to block people from checking in for their flights. Theyve taken luggage care sells an arranged them back here throwing them around its an attempt to shut down one of the Busiest Airports in the world for the second day in a row. Hundreds of flights have been canceled in the could have a devastating effect on hong kongs economy it also could be an invitation to beijing to intervene. Theyve been gently but firmly rattling their sabers across the border imflying in no Uncertain Terms that its only a matter of time before they might take matters into their own hands the other day they used the word terrorism to describe what they thought was going on around here that could create a pretext for them to intervene. Matt bradley, nbc news, Hong Kong National airport. Youre looking at the futures there. Dow looking like it would open down about 71 points continuing concern but how if this becomes an everyday event, at what point this goes back to the idea of at what point zt pla show up on the scene if the pla shows up on the scene, whats the response from the rest of the world . Maybe thats the worst Case Scenario the question is that on the table or off the table you see the trucks lined up at the border. The longer that they sit there and the bigger the buildup, the more images come out on social media and so i think thats part of whats stoking the tensions is that you realize how ready they are right you realize that the protests are no longer even about what they were about two or three weeks ago. Its now a very different discussion. Yeah. And all we have do is talk about it and, you know, we know that they blank us out. They immediately take us off and get a blank screen we hear from eunice all the time i think this is something that she, i mean from you think trumps juggling russia and all this other stuff over here, this is a serious thing for him to be dealing with at the same time you may be dealing with a weaker economy too. But its interesting to hear what the driving force that results is does the and that is something that the markets are really focused on, trying to figure out is does the pressure from hong kong make president xi more likely to do a deal because he needs to deliver does it make the president instill patriotism and nationalism in Mainland China . Force him to show that he is strong against domestic pressures and have the opposite effect thats what we dont know yet. They said the two issues are completely unrelated the white houses statement yesterday said they are going to continue to look at this as a china issue. But ive decided on toothpaste out of a tube is the hardest you cant unscramble an egg, thats another good one. But if this gets arab springtype sentiment in china and that starts i dont know if that really moves to Mainland China o china or not but dont you think the writing is on the wall that you cant stay as an autocratic state forever . One of the reasons why social media is banned in Mainland China is because they dont want images of Something Like this to create to amass a group of demonstrators like this. But economic progress for the masses in china is what at least has kept that other sentiment under control to some extent you need economic progress and if that starts being harder to come back given the trade war, then i think, you know, the were to related. I dont know coming up, a potential recession signal that weve seen this, the yield curve obviously predicting 13 out of the last four recessions on the tenyear and twoyear moving closer to inversion. Well talk about the next or the rate chart next and portfolio opportunities. 50 of s p 500 Companies Carry a higher yield than the tenyear treasury we go to break and heres the biggest winners and losers specifically in the dow. Treasury yields ticking over with a tenyear and twoyear getting closer to inversion. We have the global head of rate strategy at td securities. The Portfolio Manager at jp morgan bank. And the strat strategist at John Hancock Investment priya, were you near tv . I was talking about you. Thank you. Were your ears burning . I didnt hear that. You have a recession model and its based on the yield curve at 15 . It is, yes. On theyearold curve youre at 55 do you take anything else into account or is that fully what your recession forecast is based on so we have multiple models. We have an economic model so thats based on initial job claims, et cetera. Then an eco model. I have to say if theres one Single Market indicator that you can look at to predict recession it should be the e curve its saying the yield curve sin verted so its not that good an indicator. I would argue its a good indicator because its Global Growth is weak thats actually forcing the fed to ease. I would argue the fed has gone from being all this preemptive to now potentially behind the curve. The curve is flat evening. So the lawman is telling you the fed is not doing enough. So if the fed does not come in and say were going to zero if need be, i think essential lirp the market is telling you theyre not doing enough its a signal of weak Global Growth which we think feeds into essentially u. S. Weak growth plus the fed not, you know, essentially doing enough so i still think its a very good indicator i mean, the market continues to essentially bull flat. The model is dlors 60 now after i ran it this morning. Putting all that together, in the next 12 months you expect a better than even chance that the United States enters into negative gdp to drop in gdp . Yes i would say, you know, whether its negative, whether were officially in a recession. I understand. But our forecast for gptd next year is below potential because we just find it very hard to see how Global Growth can be this weak and the u. S. Can be this island of prosperity we dont see any fiscal stimulus so the fact that Business Investment is weak, thats the first sign that Global Growth is having an impact on the u. S. The Global Growth is next. Youre nodding at all of that all that put together and you come up with quality Growth Stocks is that what you should do with the backdrop sp thats the core. High return on equity, good Balance Sheets, focussing on the Balance Sheets within the United States is your best opportunities. The way that were doing it, though, is were bar belling it with infrastructure equities in the is an undercovered asset class that we think will gain a lot of traction in the last 12 months given the background that she just outlined. You agree theres going to be a recession in the next 12 months or 60 chance you in that camp we look at the leading Economic Indicators from the Conference Board which includes the yield curve. Thats probably going to go negative in the next three months its at about 1. 5 yearoveryear if it continues the current trend it goes negative typically, on average recession starts five months after it goes negative jack, you its a similar outlook but its what you do now the fixed income, high quality within equities and the u. S. Is still the best game in town. Jack, you, as a rule, thought that growth was going to be slow this year anyway. Yeah. And that stocks might not to do as well as theyve done but, the fed has changed that dynamic for you and valuations remained high. Valuations went from very average to high. And over the past month they have come back to a richer than fair but i think relative to the cost of capital, relative to the tlat we know get from the fixed income markets, stacks are more reasonably valued. I do think that we can think theres a tradeoff when you think of the herla rates would suggest theyre more valuable that theyre equities off the growing income, thats more valuable but you have to balance that a bit with the idea that Interest Rates decline because of the uncertainty of what the ability to generate a dollar of earnings will be. Now, i think the fed has shifted from being really the price setter for the world tock a pri to being a price taker. And thats something ive had thats different with 30 years in the markets and only having 10 gdp tied to growth, i think i could be vukt constructive on the u. S. Story. We were supposed to have an earnings recession it looks like well have a little, very modest but still some earnings gains year on year when all is said and done. After all this, one of the quotes in your in your note is that your yearend view is not really affected at that point. But i couldnt find your yearend view anywhere whats your do you have an s p yearend view . I do not have a number. But i entered the year that wed be up 8 to 10 . 8 to 10 . I was 20, i was wrong i like to be wrong frequently when markets do twice as well than what i thought. I feel like were finish the year and theres still a few months left in the year for your outlook to come true. I know. Or to be really wrong. Yeah. Either way i thought last year we would be up by ten, we were down four. Year before that i thought we would be up ten and we were up 20 so you average that out. Stick with that ten it sounds like they pay you for that . They pay me for being right, to the for my s. A. P. Foreca p f. Coming up on squawk box, well get a new read on Small Business latest numbers coming up next. And shares of uber hitting an alltime low well talk tech and recent ipo performance straight ahead you guys played your hearts out. You played your hearts out all season. Uh. Unfortunately weve gotten a bit of bad news. To whom it may concern, due to budget shortfalls, the panthers Baseball Program ballard softball vikings basketball we regret to inform you that due to budget shortfalls, the tigers basketball program. Is indefinitely suspended. Wait, whatre you saying . All the work that we put in . I wish it wasnt so to whom it may concern to whom it may concern to whom it may concern to whom it may concern to whom it may concern to whom it may concern to whom it may concern to whom it may concern every kid deserves a chance to play welcome back to squawk box. The National Federation of independent business is out with its latest confidence report kate rogers joins us