Episode summary
Equity Push as Bond Yields Rise | Bloomberg Surveillance
Bloomberg Surveillance
· · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Monica DiCenso, David Doyle, Joe LaVorgna, Michelle Meyer
Summary
The episode focused on a market backdrop of rising bond yields, sticky inflation, and a still-resilient consumer. The first guest argued that many wealthy clients are still holding unusually high cash balances, but that cash is losing appeal as inflation stays elevated and investors should be adding selectively to risk assets, real assets, infrastructure, and even hedge funds. She also said gold remains a useful diversifier because of central bank buying and dollar diversification, even after a strong rally.
The economics discussion turned more hawkish. A guest from Macquarie said the U.S. economy still looks solid, with strong consumer spending and an AI-driven capex cycle, but he also argued that technology itself is now adding to inflation through software and semiconductor prices. He said 4% U.S. inflation could show up later this year and that the Fed’s next move may ultimately be a rate hike, not a cut.
A third guest, a former White House economist, said yields can rise because of higher inflation risk premia, more Treasury supply, and supply-chain disruption that looks like a “mini covid.” The final guest from Mastercard said consumers remain nimble, using price comparisons and AI tools to find value and re-route travel spending toward destinations like Dublin.
Key takeaways
- The first guest said clients still have about 20% of assets in cash and should consider gradually shifting into risk assets, real assets, and infrastructure.
- The Macquarie economist said tech is contributing to inflation, citing computer software and accessories at 14% year over year and semiconductors up 25% to 26%.
- He also said U.S. inflation could reach 4% later this year and that the Fed may be forced toward a rate hike if the data keep firming.
- The former White House economist said higher yields could reflect a higher inflation risk premium, more Treasury supply, and a market that has not fully priced supply-chain stress.
- The Mastercard economist said consumers are still spending, but they are using AI and value-seeking behavior to shift travel demand and manage higher prices.
Notable quotes
“something around 20% of assets is actually still sitting in cash. Some of my larger clients that it's even greater than that”
“I think that just reflects the desire for many people to add to risk assets on some kind of pullback”
“If you look at at things like computer software and accessories in the consumer price index, that has historically been about minus 5% year-on-year”
“So, you know, we've been well above too in a lot of these components. The super core that the former chair Jay Powell likes looking at, it's been running about 3 and a half%”
How the episode opens
Bloomberg Audio Studios, podcasts, radio, news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Uh Monica uh Denzo joins us now uh head of global investment strategy JP Morgan private bank. What are fancy people doing with their cash?
I don't know about fancy people but I can tell you what my clients are doing with their cash. Uh balances are actually still pretty high. Um if you look like across our entire platform, something around 20% of assets is actually still sitting in cash.
Some of my larger clients that it's even greater than that. And I think that just reflects the desire for many people to add to risk assets on some kind of pullback. We just haven't had a prolonged pullback.
We've had volatility, but it hasn't been very long lasting. So I expect as we move through the summer, maybe if we get a few more bumps, you'll see some of that move into the market. And then I think as we move towards the back half of the year, I think people are just hoping that we get through all this turmoil in the Middle East and some of these headlines.
Um the problem is, you know, when it feels good, that's generally not the best time to invest. So you probably should be sticking a toe in now. How how concerned are your clients about inflation?
I know it's, you know, this inflation that we're seeing out there, it impacts the lower end of the K-shaped economy, perhaps a little bit more than the higher end, but I'm guessing you're getting some phone calls.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai upside
- inflation pricing
- bond yields
- equity markets
- travel demand
Companies and tickers mentioned
- JPM
- MQ
- MA
- JPMorgan Private Bank
- Macquarie
- SMBC Nikko Securities
- Mastercard
Watch the episode
Watch “Equity Push as Bond Yields Rise | Bloomberg Surveillance” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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