Episode summary
Market Uncertainty Ahead of the Midterms | Bloomberg Surveillance
Bloomberg Surveillance
· · 29 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Peter Tchir, Nate Thooft, Heidi Crebo-Rediker, Ella Gude
Summary
The conversation centered on how stretched the AI trade has become and what signs investors are watching in credit, rates, and equities. One guest said investors are increasingly nervous about the amount of debt being issued for AI buildouts, with widening spreads reflecting pushback from fixed income markets. He also warned that if AI-related spending slows, it could ripple into GDP growth and lead to broader credit widening that equities may not absorb well.
A second guest argued the AI story is now much broader than technology stocks alone. She said the market is increasingly separating winners from losers based on which companies can keep spending while also turning those investments into productivity gains and return on capital. She favored beneficiaries of AI rather than the builders, highlighting healthcare, diagnostics, personalized medicine, and other sectors tied to the wider ecosystem.
The geopolitical discussion tied the midterms to inflation and affordability, with war, tariffs, and trade tensions all feeding into household costs. The guests also framed Iran and broader geopolitical fragmentation as reasons to stay constructive on energy and commodities. On portfolio construction, the final guest said higher bond yields have made fixed income more attractive again, while international equities, real assets, and gold can help diversify away from concentrated U.S. market and AI exposure.
Key takeaways
- A guest at Academy Securities said investors are getting nervous about the debt financing behind AI spending, and credit spreads are widening in response.
- The Academy Securities guest said a slowdown in AI compute spend could weaken GDP growth and trigger broader credit widening that equities may struggle to absorb.
- A Manulife guest said the AI trade is broadening beyond tech, with healthcare, diagnostics, and personalized medicine among the likely beneficiaries.
- The Manulife guest said higher bond yields are making fixed income more competitive versus equities, even as earnings still support stocks.
- A BNY Advisors guest said international equities, real assets, and gold look more attractive as diversification tools amid concentrated U.S. AI exposure and higher rates.
Notable quotes
“people are getting nervous about the amount of debt that's being issued and potentially equity that's coming out for this”
“the spreads widen out. I think people are just saying, "Hey, if you're going to keep coming with this, we might as well charge you more”
“the AI story for us is that it's a much broader ecosystem of players and the discernment between winners and losers are becoming much, much greater”
“we are in the early innings of a broader commodity cycle”
“if we don't do the spend, if oil prices stay high, will we see an economic slowdown”
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. Peter Chair joins us here.
Head of macro strategy at Academy of Securities joining us live here in our Bloomberg Interactive Broker studio. Peter, thanks so much for joining us here. What's your discussion with investors these days as it relates to kind of just the AI narrative?
A, is it a decent ROI? B, how are they funding it? What's the conversation you're having with your clients?
Yeah, I think increasingly people are getting nervous about the amount of debt that's being issued and potentially equity that's coming out for this. So, you've seen sign some push back recently in the fixed income markets. You're seeing the spreads widen out.
I think people are just saying, "Hey, if you're going to keep coming with this, we might as well charge you more and see where you're coming, which might be a response to the equity. I think there's a degree of nervousness there. And I think we've been talking a lot at Academy Securities about the potential for cheap Chinese compute to come on the market.
And we feel that's one of the biggest threats that you're seeing the Chinese chip companies get better. You're seeing their compute get better. You're seeing them catch up a little bit.
I do think they have an advantage unfortunately in energy production where they have spent more on the electricity grid going forward. So I'm a little bit worried whether these first mover advantages will truly hold and as our nation seems to be pulling away from data center compute build or the desire you're certainly running into more and more red tape.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- credit spreads
- cost of capital
- energy prices
- midterms
- geopolitics and markets
Companies and tickers mentioned
- MFC
- Academy Securities
- Manulife Investment Management
- BNY Advisors
Watch the episode
Watch “Market Uncertainty Ahead of the Midterms | 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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