Episode summary
Fears Grow of Extended Conflict in Iran; Oil Halts Advance | Bloomberg Surveillance
Bloomberg Surveillance
· · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Sebastien Page, Kelly Kowalski, Frances Donald, Jay Pelosky
Summary
The episode centered on how rising oil prices, higher long yields, and renewed Iran conflict fears are reshaping the rate and inflation outlook. Sebastian Page argued that the move in the 10-year yield is unusually tightly linked to oil, saying markets are underestimating the inflation effect and the possibility that war also widens deficits. Kelly Kowalski said the bond selloff has pushed yields into an uncomfortable zone for equities and that September looks seasonally difficult, with markets increasingly priced for a September hike after Jackson Hole.
The guests mostly viewed the Fed as less important than the underlying earnings and capital-spending cycle. Page said investors may overestimate the Fed’s direct impact when AI capex and corporate earnings remain strong, while Kowalski said the AI trade is shifting from training to inference and enterprise workloads. Both suggested the trade is broadening beyond the largest names, with small and midcaps benefiting from valuation support and greater participation in the AI ecosystem.
Frances Donald pushed back on the idea that energy alone explains inflation, saying many CPI categories are still running hot and the labor market is tight because supply is shrinking. Jay Pelosky framed the market as a global spending cycle across Asia, Europe, and the Americas, and said the U.S. Treasury market is being tested by both war risk and policy confusion.
Key takeaways
- Sebastian Page said the 10-year yield’s correlation with oil is above 80%, making the inflation channel from Iran risk impossible to dismiss.
- Kelly Kowalski said yields in the 4.75% to 5% area are uncomfortable for equities and that September could be a grind.
- Frances Donald said 50% of the CPI basket is still running above 3%, so energy is only part of the inflation problem.
- Kelly Kowalski said AI demand is shifting from training to inference, with enterprise agentic workloads becoming the key driver.
- Jay Pelosky said the market is in a global growth long cycle driven by AI, defense and climate spending.
- Sebastian Page said small and midcaps still offer a valuation advantage and are increasingly participating in the AI trade.
Notable quotes
“we tend to overestimate the impact of the Fed when we have 3 trillion 1 trillion a year expected of annual spending for the AI trade”
“The bottlenecks are moving. The AI trade itself is quote unquote broadening”
“50% of the items in the CPI basket are running above 3% probably with more to come”
“we are believers in what we call the TPW or tripolar world spending super cycle”
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. yields ticking higher and that kind of is one of the challenges for this market in a world with global interest rates higher.
It's not just the US folks, it's around the world. What does that mean for global stocks? Well, one of the folks we can chat with is Sebastian Page.
He's co-head of Global Investments and CIO of this little shop down in Baltimore called Tro Price. One of my all-time favorite spots. Some really smart people down there over the years I've worked with.
Sebastian, what are the conversations you're having with global investors here who are saying, "Hey, rates higher for longer. What does that mean for various asset classes out there? How do you think about that?
Paul, thank you. And first of all, I'm dreaming of the day where you'll refer to Troll Price as a big shop. We're at 1.9 trillion. We're we're working on getting to big. Paul, um, everyone's talking about my biggest and best client for like 30 years. They That's how good they are, folks.
I know. Thank you, Paul. Look, everybody's talking about rates and long rates, and the main question is, why are long rates rising? You could say maybe because of growth and productivity. You could say maybe because of inflation. You could say maybe because rates are rising in other countries. You could say, well, it's this wonky term, the term premium, and we don't really know how it's measured, but maybe it's that. Or you could say it's the deficits.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- iran conflict
- oil prices
- market outlook
- economic outlook
- portfolio management
Companies and tickers mentioned
- TROW
- RY
- T Rowe Price
- MassMutual
- RBC
- TPW Advisory
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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