Episode summary
Equity Rally Post-FOMC | Bloomberg Surveillance
Bloomberg Surveillance
· · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Seema Shah, David Katz, John Mickletwait, Molly Pieroni
Summary
The guests framed the post-FOMC market as one still powered by strong earnings, but increasingly sensitive to the Fed, inflation, and geopolitical shocks. Seema Shah said the conversation with clients has swung back to interest rates after months of relative calm, and she argued that policy uncertainty could drive volatility into year-end even as headline CPI eases to around 4.2% by year-end. She said structural forces, especially AI-related capital spending, could keep inflation above 2% through 2027 and leave the Fed on hold, though the risk of a hike has risen.
David Katz argued that the market’s biggest crowded trade is now AI semiconductors rather than the broad AI theme. He said chip valuations have outrun fundamentals, while small caps look attractive after years of underperformance and could benefit if rates drift lower and the economy improves. He also said the market looks rich at 23 times earnings and that investors should prefer lower-risk short duration, including the 2-year at a 4.2% coupon.
Molly Pieroni said the rally can continue, but only until it does not, and stressed that value still exists in overlooked names such as Samsung and U-Haul. Across the discussion, the common theme was caution without outright bearishness: the market may keep advancing, but the guests repeatedly warned against chasing it at current levels.
Key takeaways
- Seema Shah said the market is again focused on the Fed, and she sees headline CPI at around 4.2% by year-end with inflation still above 2% through 2027.
- David Katz said AI semiconductors are the crowded trade and warned against adding new money to chip stocks after a sharp rerating.
- David Katz said small caps look cheaper than large caps and could outperform if interest rates trend lower over the next two to four years.
- David Katz said he prefers short-duration bonds, calling the 2-year at 4.2% a better risk-reward than taking credit or duration risk.
- Molly Pieroni said the rally has been impressive but investors should not chase it here, and she still sees value in names like Samsung and U-Haul.
Notable quotes
“the main conversation is of course around the Fed. That that has to be the the key conversation”
“we do think that there's structural inflation. It's going to come down further through 2027”
“we think if you look at the next two to four years of interest rates ever start trending lower, economy starts to pick up, small caps are selling at a much more reasonable valuation”
“We would not be throwing new money into the chip area of AI right now”
“We think so. You know, the you still have the Iran conflict going on in terms of there they possibly a resolution, but you have problems this weekend again with closing the straits”
How the episode opens
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Um let's start off strong here. Get his thoughts about where we're going on these markets. Seema Shah, chief global strategist at Principal Asset Management.
She's based in London, but she's getting ready to do like a a Midwest America trip. Good for her. I mean, East Lansing, Michigan.
I have a soft spot in my heart for East Lansing. Uh the state capital of Michigan. Des Moines, Iowa, another great uh town.
Seema, thanks so much for joining. You you you're giving us a little time here in New York City. What's the conversation you're having with your clients as you come through the US and meeting with your clients these days?
Yeah, look, thanks for having me. Um so, the main conversation is of course around the Fed. That that has to be the the key conversation.
And actually, it's interesting because what we had seen is that over the previous 6 months, there really wasn't a conversation about the Fed. No one was talking about interest rates. Uh and now, of course, that conversation is completely turned on its head.
Questioning about inflation, whether rate hikes are coming, and then of course, if the market can digest that.
So, do you think Kevin Warsh's biggest change is more policy or communication? Or maybe both? — I think it could be both. I mean, I think communication is obviously at the moment, it is the key one. And we did see that actually without the communication, the market puts more emphasis on the dots, which is the exact opposite of what he wanted.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- equity rally
- post-fomc market momentum
- us and global economic outlook
- value in a bull market
- uk political resignation
Companies and tickers mentioned
- Principal Asset Management
- Matrix Asset Advisors
- Bloomberg News
- Yacktman Asset Management
Watch the episode
Watch “Equity Rally Post-FOMC | 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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