The market has become more skeptical of these astronomical numbers. It is not rewarding semis and hardware given the fundamentals coming through. What it is worried about are a wide range of things. The market will do what it typically does: make choices.
This is "Bloomberg Surveillance" with Jonathan Ferro, Lisa Abramowicz, and Annmarie Hordern. Jonathan: Live from New York City this morning, good morning. For our audience worldwide, "Bloomberg Surveillance" starts right now. Coming into Monday looking to bounce. The Nasdaq bouncing back following the worst month this year as markets are beginning to hit the brakes on the race to raise capital. Alphabet tapping the debt market just one week after disappointing results.
This is going to be a really important test. What is surprising is they need to get this debt sale cleared. Notably, it is in Europe — if things are getting rough at home, go elsewhere. This would be the second European bond offering so far this year. It comes as Anthropic is looking to Japanese investors to support its IPO. Ultimately, these tech companies are not slowing down their capital raise; they are just getting more creative.
We have heard it a few times. An example of that in the Journal on OpenAI: looking for $30 billion, raises just $1 billion, looking for a valuation of close to 1.4.
Sources say the original $30 billion capital raise of OpenAI now has an ambitious goal of $25 billion. This comes as Sam Altman does a tour as he tries to gin up enthusiasm for his products.
Apple must be feeling pretty good, sitting this out right now. Check out the week: more earnings, tons of data, payrolls Friday, and we have the midterm elections. Is it just dashing on? Is it a surprise, 24 hours from closing out the midterms, we have the prospect of a deal on the table with Iran and crude retreating a few percentage points?
Absolutely not surprising. The Axios report, poignantly, the president had this phone call with Prime Minister Benjamin Netanyahu, imploring him to go after Iran after the midterms, and the president said he will give peace a chance. And Secretary of State Marco Rubio said he has not decided yet on those strikes. We will learn shortly whether or not the president is willing to do that. We also heard from the Iranians: they are preparing for the United States to strike again.
I'm in shock, Monday morning, crude down 4%.
I'm shocked Axios came out with something on oil. How much will this help, given a significant portion of which have already been cast? Is this going to be a clearing event, or will this be a risk-inducing event that has been in discussion? You saw a number of people get more bullish, Mike Wilson of Morgan Stanley among them. He says stocks are always up after midterm elections. People worry, then you do not have to worry about it anymore. Is this time different? That is a fair question.
If Haley Stevens was a stock, where would it be trading? Republicans building it up, Democrats probably short?
Absolutely, if that was the case. I will say, look at the latest final New York Times/Siena poll. Obviously, with polls, take a huge gallon of salt. But Democrats up in Michigan, Texas, Kansas, Maine, Ohio, have the edge in Alaska, essentially tied with Republicans in Iowa. When you look at early voting, which the RNC chair said Democrats vote early more than Republicans, but if you look at those numbers, they do not bode well for the GOP.
We will spend some time on that controversial story in a moment. Coming up, we will catch up with Ed Yardeni as equities bounce back, Sarah Kunst of Cleo Capital, Neil Dutta of RenMac. We begin with Ed Yardeni. About any research writing, AI jitters are likely to continue beyond Halloween. Nevertheless, we are sticking to our 7,900 year-end target for the S&P. Ed Yardeni says Santa is coming. Why do you believe this is not the beginning of the end for this trade?
Simply because AI is the real deal. Clearly, a lot of money has poured into the industry. The result is AI does work — it just works for the customers. It is not clear that customers are generating enough revenues for the companies themselves. But I think what is going on is actually positive. I thought we all believed that AI was coming on too strong, too fast. Now that it is slowing down, we are worrying about that. I think it is a good thing. It is a good thing that the bond vigilantes are basically regulating credit, allocating credit properly — that is a good thing.
It is also the earnings story. If you spent the last 12 months monitoring this program, the overwhelming majority of responses from people when we ask if they like this stock market, they say earnings. Is the ultimate support factor becoming a bit of a vulnerability given some of the reports over the last week?
We have had some reports disappointing, others better than expected. All in all, we looked at the weekly analyst consensus expectations last week, and they were kind of flat. They did not really lower their numbers. As a matter of fact, they are still very bullish about 2027 and 2028. The 2028 number they are using is $500 a share, which is what we have been projecting for 2029 as the expectations. So they are very bullish on earnings. They have not really pared back their expectations as a result of some of the haircuts in Google and Intel, for example.
Are the bond vigilantes throwing a kink in some of the earnings plans? You say they are monitoring the credit story. If they are doing that, jacking up the borrowing costs — we will see how much they are later today and tomorrow as we get the result of the Alphabet sale — how much does that crimp some of their forward-looking ambitions?
We have a lot locked in already in terms of their commitments to building data centers. We have got lots of backlogs that the hyperscalers can pretty much rely on, which is why they are scrambling to build these data centers so quickly. But it has been kind of the Wild West. I think the sheriffs are coming in to cool things off. The neo-clouds have been borrowing willy-nilly; now that will be more expensive and more regulated. OpenAI, as you said, just tried to raise more money than the market was willing to give it. This is all good. I have no problems with the market regulating the AI boom.
Is it better as an investor for the stock or the bonds of some of these companies?
Very good question. I think it is better for the bonds. The stocks, we still have that uncertainty about when all this spending is going to generate earnings. But to have a slowdown in the issuance of bonds, the supply of bonds by the AI companies, I think takes the pressure off of what has already been issued.
The election is tomorrow. Is it a clearing event, or will this be a new source of volatility for the market?
I got the sense from Lisa that she kind of — you can tell me if this is the case — that this was not that simple. This was a much more complicated midterm, a lot more at stake. I guess we always say that about elections. But we are talking about a radical change in the Democratic Party, and if the Democrats, in fact, gain the House, maybe even the Senate, I think the stock market has to consider the possibility that partisanship will be much worse than it has been so far. It has been heavily up to now. If partisanship is worse, it means next time we get into a government debt crisis, the next time you get a government shutdown, these events could last a lot longer and have a much more adverse impact on the government and the economy, I should say.
That will obviously be market negative. Do you think the market right now is pricing in what the polls are, which is a Democratic sweep?
Not entirely. I think the market has a bit of a contrary bent. The rallying cry as Democrats pick up the phone and talk to pollsters or Republicans don't, we will see to the extent in which that is true or not. But for the market in terms of gridlock, usually the market loves gridlock, but in this situation, we are talking about much more partisanship, and we may actually need them to get along at some point and come up with a significant, serious, credible deficit reduction legislation in the event that the bond market acts up again.
I have to say you're talking pretty gloomily for someone expecting holidays around the corner. Where is Santa in all of this?
In earnings. I guess what I've learned over the years is it is amazing how well the U.S. stock market and the U.S. economy do, despite Washington. Sure, the headlines coming out of Washington, more often than not, are not all that bullish. The government meddles a great deal in the economy and that can have an impact on the stock market. Yet, somehow or another, because of all the working stiffs out there trying to make things better for themselves, their families, and their communities, the economy does well.
Ed Yardeni, still bullish going into year end. Let's talk about some of the earnings. I called it cherry-picking season, so let's pick some cherries — wilted ones. Caterpillar numbers were OK, the stock got hammered. Intel missed, obliterated, worst rout in four decades. It is not just earnings, it is expectations. And expectations, at least where the market is pricing things, perhaps not half of themselves. The earnings story has not.
Slight beats didn't even get it done. You wonder what it means for Apple. Those shares up 27% so far this year, simply because they are not the AI darling. Can that persist, given they actually have to deliver some earnings under a new CEO?
Have to deliver earnings under a new CEO with a brand-new phone that is getting a ton of pushback and criticism. I saw more of it this weekend. People are fed up. They do not like it. To Face ID, and I am seeing tons of reviews coming out that people are like, you do not realize how much you miss Face ID until it is taken away from you.
Apple earnings up later. Let's get you an update on news worldwide with your Bloomberg Brief. Vonnie Quinn has more.
Oil following a report President Trump is looking to give diplomacy with Iran more time before he resumes strikes. According to Axios, Trump told Benjamin Netanyahu he wants to let negotiations play out. Anthropic likely to fall short of an investment-grade rating, report, the Fitch writing it is no longer on track for the top rating and is likely to receive a high junk rating immediately following its debut. Elon Musk searching for a backdoor into the U.S. wireless market. SpaceX reportedly in talks to buy Boost Mobile or gain access to its network. According to the Washington Post, the move comes after Verizon, T-Mobile, and AT&T all turned SpaceX down. The deal with Boost would give Musk a foothold in a market worth $25 billion.
Cracks appearing in the Democratic Party. [Clip] I am a proud Democrat, and I am endorsing Mike Rogers for the United States Senate. I am just less interested in the politics of it all than in the policy of it all. Up next, Ed Mills of Raymond James. Live from New York City this morning, good morning.
Check out your week ahead. Tons of data, a sprinkle of earnings, Apple coming up after the close, midterm elections in the next 24 hours. A source of volatility or a clearing event? How many guests have we asked?
Almost every single one. It is a clearing event in which we will actually have an understanding of the composition of Congress, what can get done. The major thing for the markets will be next year and the debt ceiling. But potentially a source of volatility because there are reports the president has been willing to reengage with kinetic activity and have another round of strikes on Iran following the election. That is different from the Axios report yesterday, but it is reports we have seen from last week.
Over the weekend to move. The report from Axios. Outside of crude, the other thing to look forward to: quarterly refunding announcement. That is one to watch for this bond market.
Arguably even more important, because this is the Treasury Department's chance to significantly reduce issuance of 20-year and 30-year debt. They did not work to say they would buy a couple more each particular buyback session. It really could help if they decide not to issue long-term debt. At the same time, it means any kind of near-term interest rate increase becomes that much more relevant to the overall debt picture, which already looks concerning, based on the fact you're probably going to get gridlock, means the deficit is probably only going to grow.
The tech sector doing the hard work for Bessent. A bounce on the S&P, higher by 0.5 percent, Nasdaq up 0.8%. 30 basis points lower across the curve through October. 2s around 4.60, 10s sub 5%.
Does the Treasury Department need to respond given the fact that tech has done a lot of work for them? It will be interesting to see whether Secretary Scott Bessent wants to address a structural problem the same way Janet Yellen did, the same way he criticized back in the day.
Do not know what the outcome of the midterms will be. You may be talking about $5,000 checks going out. [Laughter]
That is probably pretty much not happening.
Let's look at the politics. Cracks appearing in the Democratic party. [Clip] My name is Haley Stevens. I am a proud Democrat, and I am endorsing Mike Rogers, because we have to stand with the country. I do not think about Haley Stevens. I think about the people who are not those two. I am less interested in the politics of it all than in the policy of it all. Michigan Congressman Haley Stevens breaking from her own party, endorsing Republican Mike Rogers over Democrat Abdul El-Sayed.
A lot going on here. There is a policy divergence between these two individuals. Also the fact that she lost — she thought this was going to be her seat to win, with the astonishment behind her. At the same time, these are two millennials with massive egos. She waited until the last moment, even though she told her party that I am going to make sure I continue to support our Democratic winner. Does it matter, is what I really care about. And at the end of the day, what happened to the Democratic candidate yesterday? According to Politico, El-Sayed raised $2.2 million since Stevens endorsed the rival. That is a huge problem — not only does she go out and it looks treasonous with her own party, but also it is backfiring.
Ed Mills writing, while the midterms may remove election uncertainty, the outcome will likely not remove policy uncertainty. Ed joins us now for more. A couple of things to do here. We talk about whether it is a clearing event or a source of volatility. Can we start with the race in Michigan? What do you think the outcome will be?
It's messy. Democrats would have loved to avoid this. But what has happened is the odds in betting markets have come up for El-Sayed. We saw polling that this race may be moving even more in his direction. If Republicans are able to get Mike Rogers elected, that makes it, instead of four seats Democrats have to pick up, five seats Democrats have to pick up. It could be the difference maker in a majority. But I get the sense it kind of seems to be backfiring. It does seem as if Democrats are rallying around El-Sayed even more here. Importantly, more than 2 million people have already voted in Michigan, and probably the voters you would have moved on this are the high-propensity Democratic voters, who maybe had a little concern about El-Sayed. They probably already voted. At the end of the day, this is a lot of drama, good for conversation, but probably did not change the outcome of this race.
Why has this been a mess from the very beginning?
Because Haley Stevens thought she was going to win. There is a huge issue in terms of support for Israel that is playing out within the Democratic Party. This is something we are watching quite closely for the 2028 election. If El-Sayed does not win Tuesday or tomorrow, I think you will get a more moderate Democratic candidate for 2028. If he wins, the progressive portion of the party says we can win anywhere, including states Trump won, and that Democrats will be pushing for a more liberal candidate when they choose their nominee over this next year and a half.
Will that help or hurt in 2028?
It depends on who runs. There will be those on the progressive side who say it will help them because they are choosing a candidate voters are excited about, and enthusiasm matters. The more moderates will say, when you put up a candidate like that, they underperform. El-Sayed would probably underperform a general Democrat. Clearly too early to know.
How much would that kind of win repel that type of policy in Washington, D.C., in the case that is a blue wave?
Our general view is we are looking to see some of the outcomes of this election in terms of the narratives. Often times in our elections, look to different states and candidates and say, how did they win? El-Sayed was one of the first Democrats who came out against data centers. Then we look to other races, Ohio and Texas. If the narrative comes out that to come out against data centers and Democrats win in areas they do not usually win, that comes out of the policy. But Republicans may have a chance to take out a lot of the leverage Democrats have over the next two years, that is a huge issue for the next two months in terms of who is actually the winner from a market perspective, different sectors, and what you can see in a Democratic sweep in certain sectors surging, only to have all of that reversed if Republicans do reconciliation in the lame duck.
How much do any potential policy shifts matter, calling that President Trump will likely call himself the veto president should there be some sort of Democratic sweep?
I would look at two things. What happens on must-pass bills? Democrats will have leverage. Things that Donald Trump does not want to do today, he may be forced to do. And what happens if there are veto-proof majorities for certain things? If you were to put tech restrictions on China that would affect equipment and semiconductors, there would be a veto-proof majority tomorrow, even with a Republican House and Senate. Democrats will probably get more aggressive on that. What happens if there is an AI incident? Things that seem impossible today are an inevitable issue when something happens. If there is a crisis, Donald Trump might say he has that veto pen, but it is unclear if you will actually get to use it if there are enough issues out there or enough support to get it across the finish line.
You do not think it is a clearing event, you think it is a starting gun — for what policies specifically?
Take everything you know about a lame duck and throw it out the window with Donald Trump. I think it is more a wounded bear scenario. I do think we will get more executive actions. I would not be surprised if we wait until after the AIPAC summit to get military strikes going again in Iran, because Trump wants the opportunity to sit down with Putin and Xi. I do not think it goes away, I think it gets delayed. Do they raise the debt limit? If they raise the debt limit, then everything Democrats won on health care, the changes done in reconciliation, what they want on clean energy, on food assistance, that might go away. Arguably, beyond the election, the next most important thing is what the lame duck does. If they increase the debt limit and do defense spending, that would be a huge difference in terms of how the market reacts initially to a midterm versus what actually will happen.
Ed Mills of Raymond James, thank you. Stocks back up 0.5 on the S&P, up eight on the Nasdaq. Tech getting hammered in October, tech down close to 7%. As tech starts to slide, we have seen a move in yields. The outlook for tech is sinking, then the outlook of the economy in the minds of many will be compromised. Two-year yield reset around 4.6. 10 is around 4.91. Lots to talk about: the risk aversion in the equity market being one, the data being another, the Fed being one more, and the aspect of keeping crude elevated, at least not this morning.
The interesting thing is bond yields have not been correlated as closely to prices over the last couple of weeks. It has, to your point, been driven by AI trade, and maybe less issuance will cause less competition for capital and less growth. The GDP numbers did not suggest growth was slowing down. You saw the fastest pace in growth for a quarter going back a year. We will see ISM data and we are getting a list of jobs data. How much do we take back some of the moves we have gotten?
ISM is one of the big sources of volatility in the bond market. Three hours away from the cash open, 6:30 Eastern time. Isabelle Lee has more.
We have to start with Amazon. Shares are gaining after an upgrade by Phillip Securities. The analyst says despite the massive AI spending, investment should benefit the company in the long term and strengthen its market position. The price is $330, which implies a right... Intel, last week, the stock saw its first drop in over four decades, going back to 1982. Investors blamed a slowdown in PC sales and supply chain concerns. EchoStar shares are up nearly 5%. Elon Musk talked to the largest carriers in the U.S. to access their networks, and most apparently turned him down. One potential is shaping up, and that is EchoStar. If the deal pushes through, Elon Musk, it could lead to an acquisition. Stories: Alphabet tapping the euro debt market. Elsewhere, Blackstone telling investors that Anthropic may not get an investment-grade rating following its blockbuster IPO. Major credit agencies are guiding toward BB or above. OpenAI raised less than half of its $30 billion target this funding round.
What do you do when you are facing the potential you could struggle to raise money? You go to the Middle East and see if anybody wants to fork over some cash, which is where Sam Altman has been. I think this is really telling. Is there the same appetite in the Middle East to commit money at a time where they could be bracing for some sort of retaliation? This has been a linchpin. Maybe they are not as interested, let's head to South Korea. We want to buy it, we are going to do so many great things with it. Where does he get the money? Ultimately, that's why I think it is so interesting with the likes of Anthropic going to Japan and Alphabet going to Europe — they are looking for all of the pennies.
I did. It was so offensive.
Exactly. Your memories are not worth my memories.
They want to be the center of the world when it comes to AI. The question obviously for everyone else is maybe they are going to invest in these companies, but are our companies going to want to go to the Middle East to be one of their main hubs, given what's going on in the conflict right now?
OpenAI and Anthropic are top of the pyramid or bottom of the pyramid, depend on how you look at things. These companies have raised a lot of capital and have massive spending commitments. Anthropic, we should spend more time on that — they have hundreds and hundreds of millions, billions of capital commitments over the next decade or so. An investment-grade credit rating is critical to be able to raise that capital. Hearing that story over the weekend just shows how much this market is beginning to push back against some of these demands, and even the agencies themselves are coming along for the ride.
If Anthropic does not have that rating, it's not economic for them to go through the financing of some $750 billion they plan to spend on compute. There are so many question marks. The question we keep asking: how pivotal are the IPOs to the overall tech story and the overall spending plans of all of these companies?
These guys have major plans. Let's stick with OpenAI. Sam Altman going on a world tour. [Clip] That's OK. I think we are now seeing the potential of something much better. It feels much more like a new renaissance. Altman securing investment deals in the UAE. He also made a surprise visit to South Korea over the weekend, looking to expand partnerships with Samsung. Sarah Kunst joins us with more. Do you think the money spigot is slowly closing?
I think it has been, and I think there are a couple of reasons for that. The Middle East has a lot on their plate right now. It's not only what is happening with the U.S. and AI, but I also think there is cooling demand. Everybody who wants to invest in these companies has been investing now for years at multibillion-dollar valuations. I don't know how much more exposure they need.
Not just OpenAI, but Anthropic is receiving pushback too. When we touched on the story, what would happen if they don't receive an investment-grade rating?
That is sort of no man's land. One of the ideas is it feels like they kind of want to be too big to fail, but the reality is they are not. We can get compute elsewhere. These Anthropic, OpenAI, SpaceX — these are not necessarily even the leading models. You have names like Meta and Gemini who are in this race and can afford to be in this race because they have real businesses that are sort of funding a lot of this, whereas these newcomers don't yet.
What happens to the overall tech ecosystem if the Anthropic IPO does not go very well, or it can't IPO, and OpenAI scraps their IPO altogether?
I don't know what would happen if OpenAI scraps their IPO, because this is not a cheap company to run. They don't have a lot of runway right now. It is unclear how they are paying their bills into the next 12 months if they struggle to raise this money. So, I think they will have to figure something out. But the reality is that there is so much money, particularly in the venture side of things, that is tied to the idea of we are finally going to get these returns, happy days are here again. And if that doesn't happen, I do think that you will see an even bigger slowdown in funding to venture capital funds, because a lot of LPs want and need their investments back to backstop what's going on in the public markets.
Is that a bear case or a bull case for the likes of Alphabet and Amazon?
They are not a monolith. I think particularly for names like Alphabet, it will be good. I think for Amazon, it is more neutral. With AWS, they need customers too. Microsoft, I think, is the big question mark. It feels like they were perceived ahead with some of their early OpenAI investments, and now they are sort of just there. It does not seem like they are doing a ton internally on AI. They have cooled on their relationship with OpenAI. I think that there is the big question mark of that legacy group, but certainly Microsoft has had AI booms.
How are you thinking about the midterms? I know people joke when they say nationalize SpaceX, but it helps to know they are a government service provider. The president spoke earlier today on a podcast that was released that he asked to protect Elon Musk and SpaceX from Democrats. Do you think this could happen?
Their friendship is complex, and we know that. I think the reality is we are going to know in the next couple of days what the next year or so is going to look like. I don't know that Trump will have the ability to protect Elon Musk. I think that we all know there are hundreds of millions of reasons why he's incentivized to, but that can change. They go from friends to enemies really quick. There is a question of what Elon is so worried about being protected from. That's what the big narrative has been. I am curious to see the investigations that are causing this amount of worry for him.
Less so on Elon, do you think Democrats are going to try to nationalize SpaceX?
No, I don't think that's the goal right now. Under Obama, SpaceX got its reason for existence, which was, hey, we are going to have NASA do less and have private contractors do more. I think that there will be a focus on trying to broaden it out a little bit, I think for Blue Origin or other sort of up-and-coming companies in this space, because Elon has made it clear that he does not mind yanking the chain, and I think Democrats are going to be less excited about that than even Trump is.
Let's not bury the lead. It's not SpaceX, it's Starlink. They want to control Starlink. This is about furthering their goals geopolitically, and that's become more controversial over the last few weeks, given what's happened in Ukraine.
Yes, because the Ukraine reports and the reports on whether or not it was Trump or Elon Musk — the fact of the matter is the Starlink they were using was starting to operate on a much lower level and not really to the premier level it has been.
I don't think the controversy has gone away.
Some Republicans might be happy with what Starlink has done over the past few weeks. This is not going away soon.
Sarah Kunst is saying people are joking, but if there are already hearings, we are seeing Democrats saying if we win, this will be one of the first invitations we have, and that is to bring Elon Musk in front of us.
Sarah Kunst of Cleo Capital, thank you. This story is going nowhere. This will be a conversation for a long time.
How much of this is behind the reason why Elon Musk has donated about a quarter of all Republican donations this midterm cycle? There is a lot at stake, and I think he recognizes that.
Let's get an update on news worldwide with your Bloomberg Brief. Vonnie Quinn has more.
The U.S. is closing in on a trade deal with Canada. President Trump telling that an agreement is very close following talks with Mark Carney. Mark Carney said both sides will work on a mutually beneficial outcome. The FBI saying North Korea was responsible for stealing more... authorities say the actors converged, stolen assets. Binance said it will help support the full impact of the losses. Mbappé's games pulled off the air in China.
I think we have said everything that needs to be said about that story. Let's move on. Anybody watch Formula One over the weekend? Up next on the program — on the data. [Clip] The information we receive will help us determine where we want policy to be. And at every turn, good or bad, our job is to get monetary policy right. Up next is Neil Dutta of Renaissance Macro. You are watching "Bloomberg Surveillance."
Equity futures up by 25 on the S&P, up by 0.8 on the Nasdaq 100. A massive effort to raise capital taking place, not just from the Treasury — we will hear from Treasury in a few days' time — but also corporate America. Microsoft's $25 billion bond offering last week, Meta, SpaceX's debt deal, and Alphabet coming to market. In Europe, Lisa talked about it, these guys are looking to suck it dry.
Investors are saying no mas, we have a lot of tech that we are trying to diversify. Maybe in Europe, they don't need so much diversification. Alphabet and Microsoft, two very different stories. Really, the pricing on this Alphabet deal will be so important because Microsoft is the gold standard. It doesn't have the same hair on it.
Second time in Europe just so far this year. Not surprised to see the demand. Genuine AAA credit, raising money for the first time in a debt market since 2017.
2017. This is not exactly — they are the tale of two cities. Alphabet is not so.
Under surveillance this morning, waiting on the data. [Clip] We have made clear our readiness to act as circumstances require, and we have shown our willingness to act. The information we have received over the coming period will help us determine where we want policy to be. And at every turn, good or bad, our job is to get monetary policy right. Here's the latest this morning. Investors gearing up for a busy week of economic data and Fed speak, seeking fresh clues on the central bank's next move. Neil Dutta writing the Fed refers to — as strong and inflation is elevated. Neil joins us for more. Why wait until December? Why didn't they move just last week?
That's a great question. I have no idea the answer to that. Yeah, I think what they are basically trying to do is sort of pace the market and not allow expectations to kind of get away from them. So, they are trying to lock in with kind of an every-other-meeting type approach. And I think the best rationale you can say is they wanted to remove a dose of accommodation in September, and they did just that. A dose was removed. That does not mean financial conditions are tight or have tightened sufficiently to bring inflation back to the Fed's target. That means there is still more work to do. Guiding markets to an every-other-meeting timetable actually undercuts the tightening of financial conditions. You've kind of compressed volatility to some extent if you do that. I frankly prefer a more open-ended approach. But, that's where we are right now.
The Chair came really close to saying the market was doing some of the work for them. To what extent do you think the market is doing some work for them?
That's a little bit. I don't know if it's enough to substitute for a hike yet. When you look at stock prices, they have basically flattened out. You have seen some widening of corporate credit spreads. But of course, interest rates have come in, and maybe that, all else equal, that's a loosening of financial conditions. I think there is something to that. But is it enough to actually stop rate hikes altogether? I think that is sort of premature. And of course, the data is going to drive a lot of this. Does anyone really think that the underlying trajectory for inflation is moving one way or the other based on financial conditions right now? I have a difficult time accepting that.
Do you think the labor market is currently not as much on the radar?
It might be on the radar, just not in the way they think. The risk is, of course, given how low continuing extended unemployment claims are, there is a risk that the unemployment rate comes in a little bit. You could probably talk me into rates. What is the surest sign of tightening financial conditions? It's a rising unemployment rate and slowing inflation. We don't really have that in the economy right now.
Who are you listening to the most? There is this discussion that the troika is alive and well. John Williams will be speaking. How much more importance will anything he says have on markets?
I don't want to offend anybody, but I don't think his view carries that much weight. He's like John Taylor anyway — he's fallen in love with his model. He's been way too sanguine on inflation for way too long. And I think the person to watch, frankly, is Lorie Logan. So when she's telling me why she believes she's skipping, she thinks the hikes are likely — I think Lorie Logan is a far more useful, if you are a market participant and you want to try to play the Fed speak or try to understand where this is going, Lorie Logan is a much more useful person to listen to than John Williams.
Do you think forward guidance is dead then, at least the way we've known it from the troika?
No, I don't think forward guidance is dead. Look, I think that there is some merit to listening to them. But, you know, I think — Warsh has given a blunt form of forward guidance. He told you he wants to achieve price stability.
Is Neil getting soft? I don't want to offend anyone.
That's your mandate. He said I don't want to offend anyone, but he is so stuck to his models that he's not worth listening to.
Where do you think they believe sufficiently restrictive might be?
I think a good pass is they might undo all the insurance cuts from last year. So, they cut 75 basis points last year. And I think a reasonable first pass is they undo all of that. And that's kind of where I'm at. The issue is whether inflation is still sticky, let's say in February and March. I suspect that it will be. And I suspect the Fed will be revising their expectations for inflation at the March FOMC meeting. And when that happens, I would expect them to start hiking a bit more. I could see a scenario where you have another, you know, let's say a total of four or five rate hikes.
That's a really big call. I'm wondering, especially given the fact the market has taken a hike off the table, what do you think gets them to four or five rate hikes? Especially given the fact the market is not pushing back against fewer.
I think what's going to get them is the data. If inflation — look, it's all conditional. If the Fed believes core inflation will fall to 2.5% and we are currently running 3 to 3.5%, as that happens, that will ultimately mean that you have to revise that inflation forecast. And so the fact that they have inflation at 2.5% is why they have the funds rate where they have it. So, if you push up the inflation forecast by half a percentage point, maybe in March, then I think that will mean they pencil in additional rate hikes. That's how I get there. You are going to get one in December and you have another one in March. I think you should not rule out the possibility of having, you know, back-to-back moves at some point in the second quarter. That would not surprise me. That's how I'm getting there. It's all conditional in the forecast. If you have unemployment at 4.1, 4.2, but it's in the high threes in March, and you have inflation at 2.5 right now and it's going to 3, what do you do with that? I don't think stay on hold is what they can come back with.
Good to see you. Since when was he worried about anyone else's feelings?
It's always the two-to-three-year rolling feud, and we will get there eventually.
The mandate is still there. Very helpful.
Up next, Jordan Jackson, Jessica Taylor, Ajay, and Earl Davis. Corner. [Clip] This is a strong economy. Right now, we are not seeing a whole lot of weakness. We see inflation falling in the beginning of next year. How broad and sustained is inflation going to be? I'm wigged out over the whole Fed and interest rates. This is "Bloomberg Surveillance" with Jonathan Ferro, Lisa Abramowicz, and Annmarie Hordern. Jonathan: Live from New York City this morning, good morning, good morning. For our audience worldwide, the second hour of "Bloomberg Surveillance" starts right now. Equity futures bouncing back from a big monthly slide, higher by 0.5% on the S&P. Nasdaq up by three-quarters of 1% after dipping more than 6% in the last month or so. 2s, 10s, 30s going into a big week stacked with economic data and a CoreWeave funding announcement. 2s around 4.60. That quarterly refunding announcement will come Wednesday. In between, lots of economic data from today, ISM, into Friday, payrolls, and midterms sandwiched in between.
This is going to be a massively — not to mention the earnings coming down the pipe. The question of what will be the most market-moving event: the election, maybe a risk-clearing event, or the quarterly refunding announcement? We have seen Treasury Secretary Scott Bessent come out and try to redo some of the long-term yields on the margins. People say his efforts have failed; the only way they can affect is on the issuance side.
In politics, a huge event because what happens this week may impact financial...
Markets. The question we have been talking about is whether this is a clear and present danger for financial markets or a new source of volatility? If you listen to someone like Ed Mills, and you potentially have President Trump be not a lame duck but a wounded bear, it could be more volatility when it comes to foreign policy. I understand what Axios is putting out there, but there are a lot of people still very concerned and preparing in the region for escalation after the midterm elections.
Off the back of the Axios report, which was expected by many, crude down by 4%. To take a step back and think about other stories in the mix. On the radar over the weekend, one from Anthropic, or other from OpenAI. Big part of the equity market builds on the spending commitment of those two companies. OpenAI not raising as much money as they wanted to raise and at the valuation they wanted, one. Two, Anthropic with major spending commitments and indication from Blackstone they may not get their investment grade. May be a high level of junk. What that means will be a big issue heading into the IPO.
Ground zero, no man's land for them, given the fact their whole financing apparatus depends on them having that investment grade rating. We have already seen less than investment grade companies get locked out of the debt market entirely at this point. Are we starting to see wobbles or just anxiety, or are we seeing a fundamental puncturing in the AI story? And I really think Alphabet's fundraising operation in Europe will be important for that.
Play altogether, there has been pushback. The amount of capital raised in the last week, it was a dominant story for us last week. Whether it was Meta's massive capital raise, whether it was Microsoft cap and the bond market heading into the weekend, SpaceX, Broadcom. We are talking hundreds of billions of dollars. And you are seeing increasingly uneven access to capital. Some of these companies, Microsoft, can receive the capital they want, other companies are struggling.
Is this just a blip or something that structurally challenges the ambitions of these companies? Nobody has a good answer. We have the likes of Morgan Stanley, Deutsche Bank upgrading their view on equities, saying this will be a buyable dip. You have other people saying I'm out. You can see that in the credit default swaps, in the options trading.
If you are sitting in the index, you are thinking what dip? The dip is beneath the surface. Coming up, we catch up with Jordan Jackson of JPMorgan with stocks bouncing back ahead of another busy week, Jessica Taylor of the Cook Political Report as Democrat Haley Stevens and Republican Mike Rogers, and Earl Davis of BMO with Alphabet dipping double digits. Following the Nasdaq's worst month of March of '25, Jordan Jackson calling the recent slide a buying opportunity, writing the AI sell-off is overblown, the fundamentals have not cracked, the market is punishing cash flow, not demand, and that is a question about timing and financing, not proof the AI trade is broken. Jordan joins us now for more. Does the capital market pushback lead to cracks eventually?
It is really all about timing. You are getting basically a 25% discount on these names relative to where they were earlier in the year. A lot of the risk valuation is getting priced into the market. You are seeing cracks with spreads and even the CDS market was -- I think it is more so a timing issue. When you look at customer receivables, demand forecast, pretty good visibility out to 2028.
Let's go beyond 2028, because you will start to think about that soon. If these companies are compromised in their ability to raise capital, is there a risk for other companies?
Are the markets higher from now and then we get into 2028 and start to get more wobbles? I perhaps think we are a market higher a year from now versus lower. I think a lot of the risks are essentially in the price. And, look, for some of the semiconductors, I'm seeing customer orders out to 2029 and 2030, so there is bubbling up demand even further out. It is a question of how quickly can we monetize entering these into profits? Cloud revenues are up 50% across hyperscalers. Search did just fine, it is just not meeting relative to expectations. As these bars continue to get set higher and higher, it will be difficult to assert, giving markets a reason to punish some of these names.
If Anthropic fails to get an investment grade rating, is that a roadblock?
Road bump. Financing and higher markets will be 300 to 400 basis points more expensive in the investment grade market, so certainly a road bump. It's going to be a bit of a challenge for sure.
I guess what I'm trying to get at is let's say some of these IPOs do not go so well, the frontier models do not hold the same profitability promised that some people expected. How crucial is that to the overall AI trade? How much does that reduce momentum to the overall trade versus just allowing the biggest players to be bigger winners?
It is absolutely crucial, but let's size this up. Are we talking a 30%, 40% global financial crisis? Correction? I don't think so. Maybe an additional 5% to 10% in that trade. The bigger question will be the technicals. Everything else is tightening. It will be the weakening of financials in terms of market volatility and them being tied to IPO activity, and it will be on industrials and materials earnings as we know a lot of that spending is impacting those parts of the economy as well. Also, perhaps this is a bit of a tailwind for duration. What we are seeing now is positive correlation between bond yields and the AI trade. You can't really be bullish on AI and be bullish on duration. Perhaps if we get a little bit of weakness, maybe the long end is the one area you can camp out.
Do you think the AI trade will have to slow down because of what is going on with politics and potentially a Democratic sweep?
I think so. Democrats have already put forth in bills around consumer safeguards, third-party watchdogs, potentially AI excise tax. All of these things are bubbling up. If you get a Democratic sweep in the Senate and House, we could start to see more and more of regulation coming to the forefront. That creates a cloud of uncertainty around the trade itself. But, look, we have to again size this up in terms of what is at risk and is this ultimately a buying opportunity? Given where valuations are, the earnings backdrop we expect, even if valuations do nothing and earnings are realized, you are still looking at modest appreciation.
You are saying ignore the politics?
Ignore the politics, yes.
[Laughter] I think there will be a lot of pushback in terms of not just individuals going to Congress but the specific jurisdictions that are voting on whether or not they want data centers, they want moratoria.
The history says come ignore the dip, buy any reason to believe it may be different this time?
If you look at the fundamental backdrop, no one is calling for a recession next year. You have consumers still powering economic growth. If we are looking at four consecutive years of double-digit returns in the equity market, you have this effect that will continue to support upper income households' spend. Big question in terms of what the markets will do. I think the Fed still has one or two more hikes in the chamber and then they are done.
What convinces you it is one or two and then done? What is getting that call?
First, if we think of the initial spike in oil prices April and May of this year, those effects will start to roll and be in the Fed's favor second quarter next year. Mechanically, we could see year-over-year inflation beginning to come down. We still anticipate a bit of stickiness, but this does not appear to be a hyperinflation economy. On balance, over the course of next year, inflation can gradually come down to the Fed target. It is a question of how patient the Fed will be.
Neil Dutta throwing out five.
Jordan is like absolutely not. I think most people would agree with him. I do not think many people are calling for five hikes, except for Neil Dutta.
If you look at the Fed, there is no Fed governor or bank president forecasting policy rates above 4.5%.
Well, the Fed thought they were cutting at the start of the year. Things change quickly for them.
But who is my market leader? Not take me to your leader, but the idea of what exactly is a forward leading indicator among with the uncertainty with oil prices, the AI trade that has underpinned so much of the market? The thing that Neil Dutta said that was shocking was the idea of a sort of 3.-something high, and suddenly start to see wage --
Tech's ability to raise capital would be my lead indicator. It looks more compromised as the weeks go by.
Does that bring some sort of downturn in the economic growth, simply because that has been something like one third of GDP coming from the AI trade?
To Jordan's point, that breathes life into that story. The relationship between equities and bonds a feature in the last month or so. 2's around 4.60. A special thanks to Jordan Jackson. Let's get news worldwide. With your Bloomberg Brief, here is Vonnie Quinn.
Oil falling following a report President Trump willing to give diplomacy more time before strikes on Iran. According to Axios, he told Benjamin Netanyahu he wants to let negotiations play out. OpenAI raising $1 billion in his latest funding round, falling short of its $30 billion. The Wall Street Journal reporting the company now hopes to raise $20 billion, putting its valuation at $3.25 trillion from $4 trillion. Marvell and Lumentum combining. It is expected to close in the first half of 2028. Marvell holders will own about 67% of the combined company, focusing on the AI buildout.
Thank you. Up next, a Democratic defection. United States Senate.
I actually do not think about Haley Stevens. I am just less interested in the politics of it all than in the policy of it all.
Weekend. Up next, Jessica Taylor.
Our attempt to go into failed. Your week, something we can all talk about -- ISM this morning, PMI as well. This data has been hot, and when it is red hot, it moves the bond market, so look out for that. Later, Apple in the mix. Coverage here on Bloomberg. Wednesday, this is the main event for many of you, quarterly refunding announcement Wednesday. Payrolls on Friday. Bramo, the sneak peek of our estimates for Friday leading estimate, 65,000, up from 29,000. Unemployment still around 4. 4.2% or 4.1% this year, next year, the year after that.
Neil Dutta had a provocative take in a number of ways, but the most provocative aspect was the labor market. He sees it tightening in the labor market. This has been one of the big question marks. Wages have been just barely keeping pace with inflation. Ultimately, is it a self-perpetuating inflationary cycle? If that changes, really changes the story.
He was picking his favorite Fed speaker. In the destination, I can understand how Neil is thinking about that. All we have been doing since our last meeting is increase the likes of Williams into the next meeting. It's about the next meeting. If you hear from Williams, if they're talking hiking, they will hike, if you hear from skipping, they will skip. Here, that is how people will look at his speeches.
This market is trained to look for guidance. They got guidance last time, so that was great and they will look for guidance again from Jefferson and Williams. We will hear from Williams after the report Friday.
A bounce back on tech. The Nasdaq higher by 0.8%. Let's talk about the politics. A Democratic defection.
My name is Haley Stevens. I'm a proud Democrat, and I am endorsing Mike Rogers for the United States Senate because we have to stand with the country. You know what I am saying? The 9,999,998 people who are not those two. I am just less interested in the politics of it all than in the policy of it all.
Michigan Congresswoman Haley Stevens crossing party lines, endorsing Republican Mike Rogers over Democrat senatorial candidate Abdul El-Sayed.
There's a lot going on in this race. There is a huge divide on policy, also to be egos. You have Haley Stevens, and Congresswoman there. We have interviewed her on this show. Some people are saying this is just sour grapes, but at the last minute, which is why a lot of people in her party feel betrayed. The crux of the matter is, if you look at the New York Times polls, it has not changed anything. I had a check with them in her camp, is this real, is it AI, and they said it is real. Prediction markets moved slightly, but all of that has reversed. Not only has Abdul El-Sayed gone up in prediction markets, he has also brought a lot more money after she defected.
Here is a take from Jessica Taylor at the Cook Political Report. She writes, if enough Democrats skip the ballot or split their ticket for Rogers, there could be an outcome that goes against the national mood, but El-Sayed likely has a slight edge in this final stretch. Jessica joins us now for more. A surprise for many over the weekend. Does it change things for you?
I am not sure it fundamentally changes things, if nothing else because a lot of people already cast their votes in Michigan. More Republicans are likely passing their votes on election day, and they will vote for Rogers. I am looking for Black turnout in Detroit. If that is soft for El-Sayed, that is where we could see a movement, with Jewish voters in particular. But this has been one of the most acrimonious races from the start. It was still a surprise when Haley Stevens completely crosses parties and sort of stabs her primary opponent in the back there.
I think she felt slighted when she was disinvited to what was supposed to be a unity event at a Black church with Jim Clyburn. But to go and do something of this magnitude, it really speaks -- there is questions of the influence of her fiancé, who is Jewish, because he already said he is voting for Mike Rogers. I've talked to a lot of her staff in the last few days. They are befuddled and really upset at her. We saw her chief of staff leave. I talked to some of her former campaign staffers. The fact that she would vote for a man who she repeatedly said is just a rubber stamp for Trump is really hitting them wrong.
I am curious where this leaves her in the lame-duck session. Does she vote with Democrats or across party lines?
I think she will be unwelcome by her Democratic colleagues, except for maybe the other Michigan delegation, Hillary Scholten, who represents Western Michigan. But I think she will not be very welcome, especially if El-Sayed loses narrowly, and if this could hinge on Senate control. I doubt, for this very short time, she changes parties, but her future in Democratic politics, I think, she has imploded that for now.
The New York Times Siena polling last night, the last iteration of polls before election day, Democrats are currently up in Michigan, Texas, Kansas, Maine, Ohio. They also have an edge in Alaska, and basically Iowa we are seeing a tie. Is this showing the same case for you?
I think some of the polling, if this has moved in the last few weeks, and the last week or so, in Democrats' direction. I have seen closer internal polling from both parties in some of these races. But it largely tracks with the tossups we see there. Iowa, of our seven tossups, that is the toughest for Democrats right now. That mirrors that. I've heard increasing Republican pessimism, particularly on Kansas, the state of the race Roger Marshall is running there. But we are also watching those states in the lean Republican column, Nebraska, South Carolina, and our likely column, Mississippi and Florida. We should get early results, particularly in South Carolina and Florida, that should tell us if the margins are closer than expected, if Democrats are in redder states.
Wednesday, the 2028 presidential elections will kick off. What will the message be to both parties, coming from this election, and how predicated is the tone of this particular election cycle on what happens Tuesday?
I think both parties have some soul-searching to do. But Republicans are the ones in power, so voters want change. In the two-party system, change means Democrats. Democrats should not over-read a win Tuesday night as an endorsement of everything they stand for. If they can put forward affordability issues and make some meaningful changes, with having control of the House and Senate, that could go a long way with voters. But they still have a Republican White House, so what they can do is limited. For Republicans, if they are shellacked, as the word Barack Obama used when they lost 63 House seats, it should prompt movement in MAGA. But it could have major implications for those looking to succeed Trump, primarily Vice President JD Vance.
What do you think we will see in respect to debt reduction? I realize this is a little self-serving. [Laughter] Does anyone care about the deficit?
I think voters do, because they view it as driving up rates and different things. This was something we saw in the Tea Party movement in the 2010s. But the Trump White House has not moved the deficit. They've increased spending, in fact. Republicans go back to being the party of smaller government and wanting to cut waste, waste in government spending? We will see.
I imagine Bramo waking up in the middle of the night in sweats. [Laughter] The deficit!
It will happen when they're forced by the bond market. You have a president of the United States basically telling voters if Republicans win they will give a $5,000 check.
The fact that we laugh and we talk about the deficit --
I am not laughing at the topic, I am laughing at the source of the question. Certainly not what I was laughing at. Jessica Taylor of the Cook Political Report. I think we know how Democrats will respond. If they believe the message that is successful is coming from the far left, then the primaries will reflect that. The Republican aspect of this is more interesting. If there is a shellacking, how will they respond to that? Will they rally to the president? Will there be a legit primary into 2028?
The president will double down on his policies, but it will put the likes of Secretary Rubio and Vice President JD Vance in very difficult positions, if they are already in 2028.
Assuming that is the end result of all of this. Up next on the program, Ajay Rajadhyaksha on why the bull still has room to run.
Tell me about our deficit. That question is always ready, right?
I want to make the deficit happen. Ultimately, that is what is going to be the real game changer, not necessarily Treasury.
The people, where are they going to come from? What is going to be the issue that finally puts that on the agenda?
Honestly, rates that go much higher than where they are.
Much, much higher. Problem. Then it gets real. Then it gets real. Excited.
People care about the deficit. I can make fetch happen. 100%.
See what happens with the French debt market in the coming months.
Especially given the downgrade they got over the weekend. The French put them on negative watch. Does this ultimately make it much more challenging for them? I don't know.
Okay, let's talk about stocks. Indulging Lisa for a moment.
On the Nasdaq, higher by three quarters of 1%. Going to talk about this relationship with equities and bonds. Where tech goes, yields follow. We have been talking about this for a number of months, and the relationship established itself in a bigger way over the last month. Shifts down for four straight weeks. 10-year yield down for four straight weeks. A decline on 2s and 10-year yields over the last month. 10s around 4.92%. I wish it was about the deficits we could have the conversation for you, but it is about big tech on the way up and on the way down.
Completely giving a bit of a breather to the Fed. I am curious about the bid to long bonds as a result of the decline of the tech trade. If it does not work out, you end up with -- that has been the linchpin for growth. We have seen the fundraising plans go on. If the prospect of returns goes up again, how quickly does this reverse? Ultimately, have we seen some fundamental shift or is this a blip given what we have seen in terms of AI?
We will have that conversation in a moment with Barclays. Isabelle Lee has more.
Just a few moments ago, Marvell announced a deal to acquire Lumentum in an all-stock deal. It was halted but is now back trading in premarket trade. This is one of the biggest tech deals, raising infrastructure to power AI. Marvell reported earnings that modestly beat expectations and we have an outlook higher than estimates. Let's take a look at EchoStar back in focus after reports that Elon Musk is trying to build a business. Musk talked with the largest carriers of wireless phones in the U.S. to access their networks that apparently all turned him down, but there is one potential. That is EchoStar. This is the parent of Boost Mobile. You are seeing the stock higher by 7%. Shares are rising 2% in premarket trade for Okta. It got a bid to join an exclusive club. You see investors cheering that news.
Thank you. Thanks for the update. Some of the biggest stories worldwide. Alphabet ticking off its second sale of the year after wiping out half a trillion in equity value. A seven-part offering with maturities ranging from two to 19 years. Elsewhere, Anthropic no longer expected to get investment-grade credit rating immediately following its IPO. The AI lab is more likely to wait to raise future capital. Finally, OpenAI raising less than half of its 30 billion target. The Wall Street Journal reporting it secured $1 billion in its latest round, valuing the company at $3.25 trillion, a drop from the expected $4 trillion.
It is the slow drip, drip of the pushback you are getting from investors, the frontier model, the tech story in general. How is the trade hinged on frontier models? That is a question we will not get a consistent answer to. How much an implosion of one of these IPOs could potentially undermine some of the confidence.
Look at the report that the next few weeks, OpenAI will try to raise more money, go to family offices, high-net-worth individuals. There are obvious reasons why you see Sam Altman popping up in the Middle East this week. The problem as it is coming up at a time when everyone is concerned about the AI trade and huge competition weeks before Anthropic is about to IPO.
The success, the spending commitments at the heart of the capex buildup. At the heart of the decision to spend money at other companies, including Oracle which got news a moment ago.
Oracle filed for a mixed shelf offering. Looks like there will be $10 billion in debt, possibly $10 billion in equity. Oracle committed to capping incremental capital market raises, so this will not be a $500 billion in debt and equity raise. They are hoping to keep their debt levels even and continue to do it with equity, this model.
These companies as a group are building up a lot of infrastructure capacity to benefit and feed Anthropic and OpenAI. That is the story right now. The success of those two companies underpins a lot of what takes place elsewhere.
There are two schools of thought. One school of thought is these go away, all of a sudden the prices just implode in terms of what types of computers are available and what the demand and supply actually is. On the other side, people are saying it will get consolidated with the biggest players so it will not actually go away. It will just migrate from Anthropic to Microsoft. Again, we don't know.
Let's stick with tech. The Nasdaq 100 aiming to bounce back after its worst month in nearly two years. Another key round of earnings headlined by Apple after the closing bell today. Ajay Rajadhyaksha writing, what we are witnessing is structural uncertainty about the AI buildup expressing itself through episodic panic. This looks more like a test of nerves than the end of the bull market. How do you draw a distinction between one and the other?
It is hard, and I was telling your colleagues I am a little more nervous now than the last two times I have been on this program.
A couple of things. What is the Google earnings numbers and some signs that existing numbers -- the numbers are fine. I'm talking about the very edges. It still makes me nervous. There is no sign at all of the hyperscalers pulling back one bit. That is not a negative per se. I will put the question back to you. If a hyperscaler came out and said this cycle ends and we are cutting back on our capex for 2027, I guarantee you the pullback in AI names would have been much worse than we have seen. My big problem is two questions. The ROI on this capex spend, whether it is justified or not, will not be known for several quarters, and for several quarters we will not have a clean handle on the building of compute oversupply versus demand.
For the most part. Everything away. If you continue to get that, and so far let's not forget the S&P 500 is down less than 2% for the month. It is scary when one name loses half a trillion. The average large-cap in the S&P in the month of October had a reasonable month.
That said, your note sounded really positive like you are buying, and then you come in and say you are really nervous it could all go south. Can you square that circle?
Yes. Because saying I am staying on the sidelines is a cop-out. Pick one side or the other. I have just been more aggressive with hedges than I have in the past. Tail hedges. I don't care about a 10% pullback. Those pullbacks are fine. I care about a 25% pullback. So much depends on the AI trade now. It is driving the construction sector, the labor market. If it is truly turning around, which I do not believe, and if that is a question that gets answered in the next year, S&P will not be down 2%.
No, it will be down significantly more. In other words, buy tech and tail hedge. What is a tail hedge? 30-year Treasuries, gold, your go-bag?
