Episode summary
The Fed, Rate Hikes, and AI | Bloomberg Surveillance
Bloomberg Surveillance
· · 30 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Steven Major, Alicia Levine, Jay Goldberg, David Rosenberg
Summary
The discussion centered on whether the Fed’s current hawkish turn marks the start of a sustained tightening cycle or just a one-off adjustment. One guest argued that the move in 10-year Treasuries from below 4% to around 5% already reflects the market pricing in hikes, not a rising term premium, and said yields could be nearer 4 than 6 a year from now. He also said real yields around 3% are attractive for nominal bonds, while TIPS would be vulnerable in a risk-off move.
A second guest said higher yields are a normal feature of a more industrial, post-GFC economy and that the equity market can still grind higher even as multiples compress. She said the market should expect dispersion rather than broad index leadership, with real assets, materials, and commodities favored in a nominal world where inflation stays above 2% for longer. She also argued that AI spending is still a major driver of GDP and that investors should keep their Mag 7 exposure despite the debate over guardrails.
On semiconductors, an analyst said the sector is in an unusually strong upswing but still cyclical, and repeated a sell or underperform view on Nvidia because expectations are high and the stock is already sold out. A final guest took a more dovish view of inflation, saying housing, labor, and money metrics do not support a sustained inflation breakout and that nominal GDP should decelerate rather than accelerate.
Key takeaways
- One guest said 10-year Treasury yields could be nearer 4 than 6 a year from now, implying room for a bond rally.
- Another guest said 3% real yields make nominals attractive, but TIPS would be exposed in a risk-off selloff.
- The BNY CIO said higher yields do not end the bull market, but they do compress multiples and favor a more dispersed equity market.
- The BNY CIO said materials and other real assets look appealing because the economy is in a nominal, post-GFC regime.
- A Seaport analyst kept an underperform view on Nvidia, arguing that sold-out supply and high expectations limit upside.
- David Rosenberg said housing, labor, and monetary data do not support a sustained inflation breakout and that nominal GDP should decelerate.
Notable quotes
“I could see one hike and then next year we could we could be back into the easing mode”
“I think just buying the index because some will work very well in this environment”
“In the end you keep the holdings. You keep you keep the holdings and you have to do you can't start picking sectors here”
“I think it's just going to underperform the the rest of the semis the rest of the AI complex”
“I'm in the I'm in the Waller camp”
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. Steven Major joins us now with all of his heritage on the Pacific Rim in London and now of course global macro adviser at Tradition.
Stephen, you have called for a lower regime retirement. I'm going to go to Yan Hatsius at Goldman Sachs who makes clear, yeah, you may get rate increase, but we're not going to get three, four, five rate increases. And that this is a not idiosyncratic, but oneoff move to a higher rate regime.
the shocks will recede and we'll get back to Stephen major lower rates. Discuss that.
Yeah, it it could be a one and done, Tom. So, if if you if you perhaps looked at the Fed chair's view of inflation, he he would share what many people say about the near-term inflationary inflationary impulse that comes from the AI and and the the infrastructure buildout, all this kind of stuff. uh but but but his view would be that in the longer run and this is going into next year you start to get some of the disinflationary uh pressures coming through um back in February of this year before the the war in this region uh started that was on the 27th of February uh the yield on 10year treasuries was below 4% and the market was implying three cuts here we are uh six seven months later we've got 5% 10ear yields and three hikes so one thing I say is that you've had a a six rate hike move in the space of six seven months.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed rate hikes
- bond rally and falling yields
- equity market outlook
- ai anxiety
- us consumer economic anxieties
Companies and tickers mentioned
- NVDA
- Tradition
- BNY
- Seaport Group
- Nvidia
- Rosenberg Research
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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