Kevin Gordon of Schwab, Jose Torres of Interactive Brokers and Geoffrey Yu of BNY discuss Europe’s fiscal risks, Fed policy, AI productivity and U.S. market strength.
What Kevin Gordon said
Written from the verified transcript and checked against it. Every figure links to the moment it was said.
Kevin Gordon of Schwab Center for Financial Research discussed European fiscal and social issues, contrasting weak nominal growth in Europe with stronger US growth. He argued the debt picture is not new and that pushback on Europe rests mainly on growth underperformance. On the Fed, he said the jobs report swing is not a core factor; inflation remains in the driver's seat, making upcoming CPI data most important. He noted the jobs report gives some breathing room for an October decision, but labor has not been a core issue year-to-date, and an Atlanta Fed adjusted measure shows wage growth picking up modestly. Regarding markets, he described a bifurcated market where the average S&P 500 member is at a 14% maximum drawdown over two months, yet the market is near all-time highs due to tech ballast. He suggested a compression in bond market volatility could help lift the rest of the market, with earnings season as a possible bridge.
Key takeaways
Inflation, not jobs, is driving Fed decisions; CPI data is most important to watch.
Average S&P 500 member is at a 14% maximum drawdown over two months, yet market is near highs.
The jobs report gives the Fed some breathing room for an October decision, but labor is not a core issue.
Atlanta Fed adjusted wage measure shows wage growth picking up over the past two months.
Numbers and commitments
Figure
What it refers to
Type
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14%
Maximum drawdown of average S&P 500 member over past two months
Of the Fed, we're also going to hear from five Fed officials across the week. And on the earnings front, we have a full call sheet where we look at the topics driving the trading day ahead. The crew members today: Kevin Gordon of Schwab Center for Financial Research, Jose Torres of Interactive Brokers, and Jeffrey Yu of BNY. It's great to have all of you here. Kevin, I'm going to kick this off with you. And actually, I'm not going to kick this off with what we're seeing in US markets. I'm going to kick it off with what we're seeing in Europe right now, how closely you're watching that.
Yeah, I do think this is a good example of, you know, fiscal concerns and social pushback kind of maybe melding into one crisis. And in particular, you know, it's not something that's terribly unique to Europe. I mean, we're seeing it very much in the US in terms of larger deficits, you know, structurally high deficit spending, concerns about debt growing over time. But I think the difference and the important distinction is just the nominal growth environment and how strong it is in the US versus how weak it is in parts of the world like Europe. So I do think that that's probably the bigger differential. The debt picture, you know, is not something that's new. It hasn't just cropped up recently. But I think some of the pushback against Europe is mainly resting on the growth side and how maybe rare it is to see stronger growth outperformance there versus a region like the US.
Well, I think also in Europe you've seen a lot higher inflation that's also been driving interest rates north. Also, you have a much more restrictive regulatory regime that's also been curbing growth, like what Kevin said. Ultimately, though, Morgan, I don't think it's a headwind for the US. I actually think more money would migrate over to us here in America. You're seeing the euro weakness also have an effect, and I think you're seeing yields here. Lower yields have a lot of different paths to sink from here, namely core inflation at 2.3%. You saw the non-farm payrolls miss, a lot of disinflationary details in there as well: cooling wage pressures, higher unemployment, higher labor force, and increased evidence of AI adoption, which hopefully is a boon for productivity in the months to come.
Yeah, I do want to get into that a little bit more in just a moment here. But Jeffrey, first, I would love to have you weigh in on all of this, especially as we do, as Jose just mentioned, have the euro at a 17-month low versus the dollar right now.
Well, I would agree with both of them, Kevin and Jose. It's really one of those stories whereby what is the optimal policy path right now? People want fiscal reform but don't know how to push for it. And now with higher yields. And in some sense, we've always wondered why the ECB, the European Central Bank, would be hiking rates in this kind of environment. Yes, they are focused on inflation, but it's a bit of a constraint towards growth as well. And now we are seeing that come to a head. So the US does have high nominal GDP growth. So you can even make a clear-cut case that even though the US has deficit concerns, it can grow its way out of it. Whereas in Europe, on top of fiscal issues, politics is a factor as well. This morning, Spain has just called a snap election. So that's another political thing to watch out for in the months ahead.
Yeah, I mean, Jeffrey, Spain obviously in focus this morning, but in general, just a lot of chatter. We've been talking about it throughout the hour. This idea that France right now is the problem child, especially when you see, you know, government bonds at a higher yield than Greece, for example, which had been the problem child before now.
So whenever people say, oh, it's too hard to get out of debt, I do say, look at Greece. It's been heroic in every sense of the word, their fiscal consolidation. Now France's issues are not new. The deficit has been expanding. Even last year, ABCD has highlighted these issues. Now there are reforms coming through. We do think that fiscal consolidation will come through. But I think the market is now looking six to seven months ahead into the election next year. They don't know what the shape of the next presidency will be. But looking at the main contenders, it's possible that fiscal largesse could continue to feature. So that clearly is featuring. But do not underestimate the phrase, whatever it takes, they will make this work. Joint issuance will happen. They will consolidate around that to make sure that the euro survives.
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Gordon, K. (2026, October 5). Morning Call Sheet: Europe, Fed policy and AI test markets [Interview transcript]. CNBC Television. CEOInterviews.AI. https://ceointerviews.ai/interview/3012843/
MLA
Kevin Gordon. "Morning Call Sheet: Europe, Fed policy and AI test markets." CNBC Television, 5 Oct. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/3012843/.
BibTeX
@misc{gordon2026_3012843,
author = {Kevin Gordon},
title = {Morning Call Sheet: Europe, Fed policy and AI test markets},
howpublished = {Interview transcript, CNBC Television. CEOInterviews.AI},
year = {2026},
month = {oct},
url = {https://ceointerviews.ai/interview/3012843/},
note = {Speaker-attributed transcript with timestamps}
}
