Episode summary
The Fed Hikes Rates | Bloomberg Surveillance
Bloomberg Surveillance
· · 44 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr
Summary
Markets are reacting to a new Fed hiking cycle, with the discussion centering on whether higher short rates and a more credible central bank help or hurt risk assets. The host and guests argue that the market’s immediate support is coming from lower long-end yields and a pullback in oil, even as global central banks move in different directions and Brent still sits near $100 a barrel. One guest says the bull market is intact, but the road ahead is likely bumpier as investors digest tighter policy.
A major theme is fixed income. One guest says the 10-year Treasury around 5% looks reasonable in a nominal-growth economy running above 6%, and argues that the Fed hike helps keep inflation expectations anchored and supports bond credibility. Another guest adds that long-term yields may not fall much from here because the economy is strengthening and corporate bond issuance can crowd out demand. The message for investors is to expect volatility, but to focus on coupon income and stay selective.
On equities, the guests say the year’s huge earnings growth is probably past peak, but still strong enough to support stocks into 2027. They favor large-cap value, financials, and energy over crowded growth names, while warning that AI and hyperscaler spending may take longer and cost more than the market expects. In the broader geopolitical segment, Robert Hormats argues that U.S. alliances are weakening and that the U.S. needs a more coordinated strategy on China, Iran, Russia, and AI risk.
Key takeaways
- The host and a guest say the Fed’s credibility is helping stabilize markets even as hiking cycles make the road ahead choppy.
- A guest at Charles Schwab says a 10-year Treasury yield around 5% is reasonable if nominal growth stays above 6%.
- The guests argue that peak earnings growth is behind the market, but 2027 earnings can still support equities.
- One guest says large-cap value, especially financials and energy, looks more attractive than crowded growth trades.
- Robert Hormats says the U.S. is weakening alliances and should pursue a longer-term strategy on China, Iran, Russia, and AI risk.
Notable quotes
“The bull doesn't die, and we don't think it dies now, but the road ahead is bumpy”
“the most important feed through for the last number of months has been the 10-year yield”
“No, we're not going to because think about it. We're in the 40s, maybe close to 50% year-on-year growth last quarter”
“I think 5% seems pretty reasonable”
“the economy is going to be fine”
How the episode opens
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And for all of us with gray hair, including Julian Emanuel, Everore ISI with us, I got eight ways to go to start this off. And I'm going to start with ECB raising rates. This country that the Damian Sassau world raising rates, the United States of America raising rates, and London just said no, the city just said no, the Bank of England just said no.
The dynamics now hearken to tensions of long ago. Should equity investors be worried about these new tensions? — Well, look, the the data tells the story. You know, when global central banks are hiking, the you know, stocks have a more difficult time. The bull doesn't die, and we don't think it dies now, but the road ahead is bumpy. uh and and look we've had convergence divergence uh around central bank uh trajectories for a very long time now and it's more rare that like a Japan and the US would be on the same
Is this a different Thursday morning for the big banks of America — It it is it is and and if you actually look at it you know the big banks outperformed massively until several weeks ago — And and have been correct ing because frankly when you look at uh at trading volumes they've been off. Um but again, you know, when we think about where the Fed is taking us as uh as we heard at the top of the hour, credibility's been restored and you cut off the concept of six or 7% uh on a 10-year yield, which clients had been discussing with us over the last
How did that happen?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed hikes rates
- economy
- financial markets
- investment outlook
- macroeconomic conditions
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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