Episode summary
Inflation and Bonds Amid AI Concerns | Bloomberg Surveillance
Bloomberg Surveillance
· · 50 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: David Katz, Dana Telsey, Ross Mayfield, Wei Li, Winnie Cisar, Libby Cantrill
Summary
Hotter-than-expected September wholesale inflation and solid retail sales framed the morning’s market move: yields jumped intraday, then eased as traders focused on the weaker retail sales control group and what the data implied for growth and Fed timing. The host and guests argued that the report strengthens the case for higher-for-longer rates, but not necessarily an immediate October hike, with December still seen as the more likely meeting for action. The broader read was that inflation is still sticky while the consumer remains surprisingly resilient.
The conversation then turned to AI and portfolio positioning. One guest said investors have become too concentrated in mega-cap AI winners and need to focus on quality, balance sheets, and income. Another argued that bonds are back as a portfolio allocation, with the front end of the curve preferred and the 60/40 mix still useful, though private markets matter more than before.
Retail and credit themes ran through the rest of the show. A guest on consumer spending said upper-income demand remains healthy, while big-box retailers are benefiting from assortment changes and activation. On credit, the view was that AI-related issuance is being absorbed, but spreads are widening and interest coverage is coming under pressure, especially for lower-rated issuers. The final segment shifted to the midterms, where the discussion centered on affordability, state-level AI regulation, and the likelihood that politics will create more friction for data-center growth.
Key takeaways
- The host and guests treated the hotter PPI and CPI prints as support for higher-for-longer rates, but not enough to force an October hike.
- A guest at Matrix Asset Advisors said investors should avoid chasing day-to-day volatility and instead keep costs low and stick to a long-term plan.
- A strategist at Baird Private Wealth said the AI trade is becoming more selective, with quality megacaps favored over speculative names like CoreWeave.
- A strategist at BlackRock said bonds are back, the front end of the curve is preferred, and more bonds make sense even as diversification benefits have changed.
- A credit strategist at CreditSights said hyperscaler and data-center debt is still being absorbed, but rising rates and pressure on interest coverage are worsening credit conditions.
- A guest on public policy said state-level politics are likely to slow AI buildout, with more moratoria and restrictions possible after the midterms.
Notable quotes
“What the book focuses on is the old way. We think setting up a long-term plan, sticking to that plan, trying to keep cost low is the best way to increase wealth”
“there will always be times when it doesn't work, but for long-term investors, having a 6040 or 7030 asset allocation is going to allow you to grow”
“Wholesale prices for the month of September are out and they show a month overmonth increase of 0.8% much hotter than expected”
“we think that from an investment perspective, you want to take a longer term view”
“I think the big ones will and I think the big ones will continue to catch a bid”
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.
I am laughing. It is a jewel folks into the economic data here in a moment. Just out smart investing in real life from two grizzled pioneers of the business.
David Katz, Steven Weinberger. I love what you've got on page 167. It's the husband, the wife.
They're at dinner. They're having wine and candlelight. It's beautiful.
He's on the phone. And to think if I hadn't been if I hadn't been having dinner, I might have missed this wonderful investment opportunity. Boy, does that sum it up as well.
There's an old way that we used to do this. What does David Katz say is the new way to do investment if I'm not picking up the phone at dinner on an investment opportunity?
What the book focuses on is the old way. We think setting up a long-term plan, sticking to that plan, trying to keep cost low is the best way to increase wealth, not getting obsessed with the day-to-day volatility. Uh, and it's really a guide on how to do that.
Are we overdiversified today? Are we doing too many things? Steve Balmer bought Microsoft, said that's it. That's what I'm doing. Are we overdiversified? — Well, certain investor portfolios that might have 20 different funds are over diversified. But you'll also see right now you were talking about the AI implosion. A lot of investors put a lot of eggs in that AI basket and they're a little bit too concentrated. So there's some sort of balance in between.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- inflation
- ppi and cpi
- bond yields
- global equities
- midterms
Companies and tickers mentioned
- RW
- BLK
- Matrix Asset Advisors
- Telsey Advisory Group
- Baird Private Wealth
- BlackRock
- CreditSights
- PIMCO
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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