Episode summary
June PPI and the US Eco Outlook | Bloomberg Surveillance
Bloomberg Surveillance
· · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Steve Chiavarone, Ted Mortonson, Win Thin, Jan Szilagyi
Summary
The guests argued that the U.S. equity market still has room to run because earnings growth is outrunning the rise in valuation, while bonds need higher yields to compete for capital. The first guest said the market is in a secular bull trend, with earnings growing around 9% year over year and margins expanding faster than expected, so investors should buy dips rather than flee froth. He also said longer-dated yields likely need to drift higher and the yield curve should steepen.
The technology discussion focused on how AI demand is reshaping hardware spending. One analyst said enterprise capex is only up 4% while component costs are up 25%, creating pressure on software renewals, memory, advanced logic, and data-center power systems. He highlighted semiconductors tied to defense spending, plus names exposed to 800-volt data centers and optical networking.
The macro view was more cautious. The economist said GDP growth is slowing, inflation is decelerating at the core, and the Fed is likely to stay on hold for now, even though higher nominal and real yields are a concern for housing and credit. A later guest said AI is already useful in investing, but most funds are still using it in limited, low-stakes ways because they worry about accuracy and hallucination.
Key takeaways
- The first guest said stocks still look supported because earnings growth, not just higher multiples, is driving the rally.
- He argued the bond market needs a higher yield to compete with equities and said longer rates likely should drift higher.
- The technology analyst said enterprise capex is rising only 4% while component costs are up 25%, squeezing buyers and boosting hardware pricing power.
- The economist said slowing jobs data and softer core inflation argue for the Fed to stay on hold, not hike soon.
- The AI guest said most funds are still in an experimental phase, using AI for low-stakes research rather than key investment decisions.
Notable quotes
“I think bonds ultimately have to offer a higher yield to compete for capital”
“I think what you've seen is that while the multiple has has moved up, right, and we're trading at 20 21 times multiples on a long-term, the earnings have have supported it”
“enterprise capex um is only up 4% year-over-year and component costs are up 25”
How the episode opens
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Steven Shiveron with us right now. Confederator members are thrilled that he could join us uh this morning. He is exquisite at asset allocation.
I'm going to be exquisite. I got a 511 30-year bond. Most people don't look at the 30-year bond because they have no gray hair.
You have no gray hair. The 30-year bond matters. What does a 511 30-year bond signal to you?
I don't think it's high enough. I I know that sounds kind of crazy. I mean I I think what what what you're seeing you know it's you it's interesting that conventional wisdom is that um you know stocks might end up having a bond yield problem.
I think bonds have a stock problem. I think in order to compete for capital with earnings growing you know what could be 22 to 25% this quarter with margins expanding at probably the fastest rate in any of our careers. Gray hair, black hair, brown hair, whatever color hair you want.
Um, I think bonds ultimately have to offer a higher yield to compete for capital. And so I I I I don't think we're in a on the verge of a kind of Fed hike cycle here, but I do think the yield curve needs to steepen. I think longer yields probably need to drift higher.
And I think it's okay. I think it's a reflection of higher growth. So what have you seen?
We we're going to get some Morgan Stanley numbers today. We got a ton of bank earnings yesterday.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ppi
- fed call
- equity market outlook
- tech rotation
- ai investing
Companies and tickers mentioned
- FHI
- Federated Hermes
- Baird
- Bank of Nassau
- Reflexivity
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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