Episode summary
Inflation Data amid Equity Push Higher | Bloomberg Surveillance
Bloomberg Surveillance
· · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Andrew Szczurowski, Ira Jersey, Matt Wittmer, Nelson Yu, Emily Roland, Chad Brown
Summary
The morning discussion centered on a hotter-than-expected PCE print, a weak personal income number, and how markets are digesting the combination of slowing growth and persistent inflation. The host and the guests argued that the bond market is already doing some of the Fed’s work, with higher short-term yields reflecting tighter financial conditions and a sharp move in inflation expectations. The tension was whether the data points to a temporary soft patch or something closer to stagflation.
Fixed income managers said the 3.8% PCE rate keeps the Fed on hold for now, especially with oil rising and wage growth still running above inflation but real incomes looking vulnerable. They emphasized that long rates are being pushed by more than inflation alone, including global fiscal concerns and war-related energy shocks. One guest said the market is pricing a prolonged pause rather than imminent cuts.
Equity managers struck a more upbeat tone. They argued that earnings remain strong because of AI-related capital spending, fiscal support, and a broadening of the AI trade beyond semiconductors into utilities, industrials, and other beneficiaries. A trade-policy guest then shifted the conversation to the new global trade war, arguing that tariffs, stockpiling, subsidies, and export restrictions are now part of a strategic contest with China, not just a tariff story.
Key takeaways
- The bond market is signaling tighter financial conditions and higher inflation expectations, with the guests pointing to a 3.8% PCE reading and elevated oil prices.
- One fixed income guest said the Fed is likely on hold until the war ends or the labor market changes materially.
- Equity strategists argued that AI-driven capex is supporting earnings growth and spreading across sectors beyond the biggest chip names.
- A guest said concentration risk is real, but the AI trade is broadening into utilities, industrials, media, and health care.
- On trade, the guest argued that the U.S. must fight a strategic trade war with China using tariffs selectively, plus subsidies, stockpiles, and export controls.
Notable quotes
“you got a nominal GDP Andrew, but you got a new mix of lower GDP and persistent inflation”
“the bond market's actually doing some of the work for the Fed. They're tightening financial conditions a little bit”
“It's AI, AI, AI, and some fiscal support as well”
“The right trade war today is recognizing that China's playing a fundamentally different game than the United States and every other major Western economy out there”
How the episode opens
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We start strong here with special coverage and this is Ira Jersey joins us with Morgan Stanley. I mean you got a nominal GDP Andrew, but you got a new mix of lower GDP and persistent inflation. How does that change the application of new money into the bond market?
Look, I I think that when you look at what the bond market's pricing in for for Fed and and Central Bank policy, you see the bond market's actually doing some of the work for the Fed. They're tightening financial conditions a little bit. At the same time obviously the stock market's rallying and spreads are tightening in credit.
Um but those two things are kind of offsetting each other. I I think one of the reasons the Fed doesn't have to be too concerned with inflation is you talked about that personal income number which was 0% month-over-month. at something like Atlanta Fed wage tracker, it's wages are tracking 3.6% uh wage growth year-over-year.
We have 3.8% uh personal PCE price price inflation. So that those are negative real wages. This is something that price increases aren't sustainable on a real basis if either the consumer's going to have to tap their savings or they're going to cut back on spending.
And I think that's why the the one thing the Fed has going for it right now.
It beautifully frames it folks. I can't say enough about that analysis of the Atlanta wage tracker. Ira Jersey, thank you uh for joining us here with this key economic data with uh Morgan Stanley.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- pce inflation
- equity bull run
- interest rate strategy
- earnings growth
- trade war
Companies and tickers mentioned
- MS
- AB
- MFC
- Morgan Stanley Investment Management
- Bloomberg Intelligence
- Allspring Global Investments
- AllianceBernstein
- Manulife Investment Management / John Hancock Investment Management
- Peterson Institute for International Economics
Watch the episode
Watch “Inflation Data amid Equity Push Higher | 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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