Bloomberg Surveillance TV: October 16th, 2026

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1:15JPMorgan Chase and Company. Bloomberg Audio Studios. Podcasts. Radio. News.

1:28Rick Wurster: This is the Bloomberg Surveillance Podcast. I'm Jonathan Farrow, along with Lisa Abramowitz and Anne-Marie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9 a.m. Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business App. We begin this hour with stocks finding their footing. Keith Lerner of Truist writing, investors love-hate relationship with tech continues.

1:58Rick Wurster: We remain long-term balls, but this tech reset likely has further to go. Keith joins us now for more. Keith, welcome. Where in the equity market do you see further downside from here? Yeah, well, great to be with you. I guess it depends on when we talk about the equity market, as you mentioned, which equity market, because, you know, right now we're seeing the average stock move up and, you know, we're seeing this rotation from tech. Just an interesting start for you all. You know, last month, there were only two sectors up in the S &P, tech and communication services. When the S &P made a new all-time high, there was only one sector that was up, that made a new high, which was tech.

2:34So what do we see in this month? 10 out of 11 sectors are up and one sector is down. That one sector is tech. So that's kind of going back to this love-hate relationship during this bull market that started in 2022, late 2022. You know, tech has more than doubled the S &P, but it's had five double-digit pullbacks during that time as these kind of concerns come and go. So I think tech is still the primary driver of this market over time. I think it's going to take a further rest. And in the meantime, it's anything but tech is working. I think we like health care. I think small caps are likely to have a bounce here.

3:07I think the Equal Weight Index is likely to have a bounce. But I think it's a bounce over weeks. maybe a month or two, but I think money eventually will come back to tech in our view.

3:16Rick Wurster: Is that a bet on small caps or a bet on bonds? A little bit of both. I mean, think about this. Going back to what I said, last month, everyone was talking about how bad the breadth was of the market, that the only thing that was performing was tech. So you had a really healthy reset. Most of the equal weight index, a lot of financials, industrials, were down 5 % to 10 % while tech was holding up. So you have an oversold market beneath the surface. You had a reset in valuations, a reset in prices. And now you're seeing that rotation into other areas that were beat up. So it's almost, the way I think about it is tech was the last man standing or woman standing.

3:54And so we're bringing the leaders down and this rotation is allowing other areas to kind of bounce here. And those rates moving down, as you mentioned, helped out. It's interesting. A few years ago, people thought as interest rates moved higher, that was bad for tech. But what we have seen is if you overlay the tech's relative price with the 10-year, it was outperforming more as rates were moving higher because people were looking at that as macro headwinds on the 10-year. So now as rates have kind of pulled back a little bit, these other areas that have been pummeled, including small caps, are now getting a bit of relief.

4:28So I think, again, I think that continues. But ultimately, if this bull market is intact, which is our view, you know, we think money eventually does rotate into tech. So I think it's due for a rest after a 20 % gain and really just outperforming by a wide margin the rest of the market.

4:43Rick Wurster: Yeah, Keith, just on that relationship, I've made the argument that tech's leading rates, rates isn't leading tech. Tech's been pushing rates higher because of the CapEx build-out that's fueled much, much hotter nominal GDP in this country. What's curious to me for this week is that we started to see some yield curve flattening come back into the market at the same time we started to see wider credit spreads as well. From my vantage point, That's the market starting to think about the consequences, the negative consequences of a hiking cycle over at the Federal Reserve. How are you thinking about that with regards to the CapEx build out in the tech sector?

5:14Yeah, it's fair. You know, Jonathan, I look back at these five pullbacks in the tech sector over the last few years. And each one of them have had one or two factors with it. One is with all this cap spending, are we going to be able to turn it into profits? And the other one, we're higher rates. So I think, I mean, to be fair, like, you know, the old saying is either the Fed murders, the business cycle. So we have to be, you know, we have to be realistic that that is a risk for it. But I would say at the same time, I mean, if I look at the earning estimates for technology sector at large, up the forward estimates up 18 percent over the last three months, not seeing any change there.

5:53And I do think as we move into the end of the month and we have these big hyperscales that still have really strong growth in core businesses, including the cloud, I think investors will get a bit more comfortable. But what it tells me, Jonathan, is the marginal players, the ones that are dependent on leverage and the debt markets, is really where there's more problems. And we would be – I hate to use this word because everyone says high quality, but I would be up in quality with companies with big balance sheets right now. When it comes to the hiking cycle, though, as Jonathan was alluding to, what did you make of what the Fed chair had to say?

6:26Are you just basically starting to think that October is truly off the table and this is a story for December? Yeah, and that is a base case. The market's pricing that in. As you mentioned before, Anne-Marie, we've had some of the big hitters on the Fed basically coming to the market and providing their forward guidance in some way. So I think really as we think about the next few weeks, it's really going to be about all earnings. If our view that the tech bull market is still intact, you're going to want to see some strong earnings with these big cap stocks at the end of the month. And you want to also see how the rest of the market is dealing with these higher interest rates, higher diesel prices as we get further into the earnings season.

7:04So I don't think the Fed is going to be front and center. Of course, rates will be on the long end. And then really it all comes back to the earnings, which we've been calling the North Star of this bull market.

7:14Rick Wurster: Keith, Microsoft, Google, October 28th. 28th. Do you think the developments this week are an argument to buy into some of those names? Yeah, we still like overall the Mag 7. It's funny, I was getting a lot of calls like, what's going on with this tech sell-off? Well, we had a tech sell-off in semiconductors, but the Mag 7 earlier, or maybe over the last week, made a new high. So it's curious how much panic sets in. And obviously, there's a lot more damage in semiconductors and some of these marginal players. But I do think the MAG7 in particular are going to likely still outperform, and I still think there's some runway with that.

7:51And, you know, the technology sector as a whole, I mean, we're trading around the 20.5 multiple right now, and the premium to the overall market is about 9%. That's one of the lowest premiums we've seen for tech over the last decade. So, all in all, to your question, yes, I would still stick with the bigger players within tech.

8:10Rick Wurster: Stay with us. More Bloomberg Surveillance coming up after this.

8:40expand, you need a clear view of the landscape before making any decisions. ChatGPT can help you prepare. Connect your Google Drive, point to relevant files and reports, and ask chat to research competitors, industry forecasts, and market signals. It can turn the findings into a strategic deck in your team's template that you can review before presenting to your leadership team. Growing a business is ambitious, and ChatGPT can help you do it with confidence. Get started at ChatGPT.com.

9:15Rick Wurster: Let's stick with CoreWeave and talk about those difficulties. The NVIDIA boss, the CEO, Jensen Wang, downplaying concerns about the company's borrowing costs, saying, quote, its strength is improving every day. As a measure of CoreWeave's credit risk climbs to an all-time high. Dominique Toublant of Barclays writing, I think still elevated rate volatility and concerns about AI-related funding needs could continue to pressure spreads in the near term, especially with valuations still historically tight. Dominic joins us now for more. Dom, good morning. It's good to see you. Good morning. Let's just review the week because it's been quite a week in your world.

9:46What's been happening? A short week but long in events, right? What's been going on? So what's been going on, I think a bit of a sentiment shift here locally. You've seen all these bonds moving a lot on core wave, going to levels that are distress levels. You saw the CDS there going to quite wide levels. There was not really any strong, hard news around Kowe that made you change your mind. There's some headlines like you discussed, but otherwise not a ton. So there's a couple of things that happened. I think that some headlines, some tweets, whatever, changed a little bit the sentiment. The bonds moved a lot.

10:20And what I learned from my traders on Wednesday, some people got kind of stopped out. So I think you exaggerated the move. You saw yesterday recovering a little bit on the bond side. So is it some, you know, calming down a little bit here? But nevertheless, if you have to fund yourself at 15%, it's expensive.

10:37Rick Wurster: Yeah, to see that debt go from par four months ago to the 70s, you've got a problem if you're moving that fast. Did you see those difficulties migrate to other parts through high yield and up into investment grade? So there was a little bit on Wednesday, right, in terms of don't touch what's going on. Let's see where the dust settles. So we saw a little bit of that. But again, yesterday, the tone was significantly more positive. Everything on the IG side, for instance, all the hyperscalers trading way off the wides of Wednesday or Thursday morning. So it felt better yesterday afternoon. And I think you saw that across pricing across many different...

11:13Rick Wurster: There's a phrase we've heard lots on this program. I keep repeating it. People will come on. You've heard it a million times, too. The CapEx build-out is not rate-sensitive. It's rate-insensitive. We're seeing evidence contrary to that with some of these issuers. So that's absolutely right. So you have to differentiate between the quality of issuers, right? The cohort of issuers is very, very different. You have some of them that have absolutely incredible cash flow machines. And for these, the funding cost is okay. They're operating marginals very high as well. Diversified businesses, right? The biggest hyperscalers.

11:46You have others that are very concentrated. They are more levered. And so they are more sensitive to what the market is doing. So they are more sensitive to exactly what the story looks like in the short term. So you really have to look at the difference between a high yield neocloud company or Google, Meta or Amazon. This is very, very different company.

12:03Rick Wurster: Given the marginal role they have in the CapEx build out, is there a risk of contagion from difficulties there to issues elsewhere? I think what you will tend to see is if a higher beta company tends to do badly, you have a little bit of contagion to the next highest beta if you want. But there are very, very wide ones who widen the sentiment where people step in relatively quickly. That's what we tended to see yesterday. The reason I ask these questions is because I think it's important to try and understand where do people believe there is safety where there might not be? It's always an important question to ask yourself in credit.

12:37Rick Wurster: Where do you see that pocket of risk may be where people don't quite appreciate it? So that's, you know, altogether, if you look at within the high risk, because again, I would look across the beta, the leverage structure. But if you take a step away from this, what is the macro situation right now? We have the Fed hiking. We have higher real rates. So that's half of the funding that the companies credit like to use. But usually they save themselves if there's more growth on the earning side. So companies that have now less access to funding or more expensive access to funding and the companies that have a hard time to grow the top line, that's where I think the pressure can be.

13:17And you see that right now, right? the CCC companies are trading wider than north of 1 ,000 basis points. So it's not fine and dandy for everybody. It's an environment that can be challenging if you yourself are not generating revenue.

13:29Rick Wurster: Is GDP still hot? Hot nominal GDP has been a theme for this program. I'm not going to argue with that. But when I start to see flatter curves and wider spreads, flatter treasury curve and wider credit spreads, I do wonder what the market's starting to signal. Is that just a risk off, about a risk aversion, or is something else happening? I feel more like a sentiment situation. Look, for instance, in investment rate, the index at 83 basis points. Historically, the median is 130. So we are still at very, very tight spreads. If you look altogether away from the hyperscalers, look at the cyclicals.

13:59They are trading very tight as well. A bit too tight in my perspective. The risk reward is not quite where it should be. But it's just an indication that the market is absolutely not worried about the macro and the earnings. We'll have earnings, as you said, in the next couple of weeks, particularly from some of the hyperscalers. That might change the picture. If we have as good earnings as we had last time, it's going to look pretty good this time again.

14:19Rick Wurster: You said parts of IG were trading maybe too tight. Can you say the same thing about high yield? The spread's a lot wider, but historically, 320 is not a big deal. That's correct. But we saw a very large decompression this year. If you look at investment grade, about 5 basis points wider, the index. High yield is 55 wider. That 11 to 1 is much larger than what you usually see. So I think what's happened there is a couple of things. So first, triple C's have continued to widen. but also since mid-September when we have started to have treasury yield moving faster, the move index being higher, we had some people who had gone into double Bs, the higher quality part of high yield, to get a little more carry, maybe moving a little bit away from it and being a little more safe in the lower rated high grade maybe.

15:02So I think we've seen a little bit of that but again, what we had mid-September was an extremely compressed triple B versus the rest of the market. We kind of overshot a little bit in our perspective but we tend to see this kind of reactions time and again when sentiment changes. What do you like now that we've had that bit of a reset in credit? I do like front-end double Bs. I think there's good stuff to be done there. Look, again, the macro environment is good. The fundamentals are good. So I think you don't need to take a ton of duration risk there but there in the front looks quite interesting.

15:31We've heard that a number of times over the last few months, that's for sure.

15:34Rick Wurster: Stay with us. More Bloomberg Surveillance coming up after this.

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16:53Rick Wurster: Let's talk about the banks boosting AI protections as safety concerns build. Schwab, JP Morgan blocking unauthorized AI agents from accessing client accounts. Schwab rolling out its own in-house agent named Charlie, the company's CEO, Rick Worcester, saying on its earnings call, our ability to bring AI to our clients is what is going to power us in the future. I'm pleased to say that Rick joins us now for more. Rick, good morning. Good to see you. Good to see you, Jonathan. Thanks for having me in. I've been looking forward to this all morning. Let's get into it. Let's just start with the earnings themselves.

17:21Rick Wurster: What's keeping clients engaged into year-end? Well, clients have never been more engaged than they are now, more own equities than they ever have. It's a bigger portion of their wealth. What's keeping them interested is tax-aware strategies, fixed income, and advice. Those are three of the themes we've seen. But we're seeing record engagement, record results, and we couldn't be more happy to help them with the power of people and technology. You've got great visibility on what's happening with individual accounts right now. Can you share a little bit from the top down? Is that itch starting to manifest, materialize away from equities and into bonds, given the backup and yields?

17:54Rick Wurster: We're certainly seeing record levels of interest in fixed income. At the same time, we still see people fully invested in equities and leverage is still high. They've It's been taking more and more margin. So their trading activity remains high. There's no signs that people are pulling back from equities. But they've become a lot more interested in fixed income. And why wouldn't they with these yields? I know you love real yields. The real yield on a 30-year was 3.4 recently. So for someone retiring at age 65, to be able to lock in 3.4 % real for 30 years is a pretty good deal. For a specific demographic, it makes a lot of sense right now.

18:28Rick Wurster: 5 % in a lot of places higher if you want to take a little bit more risk. I want to talk about a different demographic. 70 percent. I saw this stat. 70 percent of new to firm households are younger generation. We're talking Gen Z and millennials. How are you attracting them? What are you doing? What's changing in the business? Well, we go to where they are. We're big on YouTube. We're the most followed financial services company on YouTube. We do all kinds of creative things on social media, like Get Ready With Me videos, where we talk about the power of compounding. And so that brings young people in.

18:59Rick Wurster: I didn't know that. Get Ready With Me, really? People do their hair and makeup and talk about compounding. It's fantastic. And it draws in a lot of young investors. And people are investing at a younger age and really engaged in stocks. It's wonderful to see because over the long term, if you're an investor, you save early, you benefit from the power of compounding, you're going to do well in your financial life. How does Charlie help them? Charlie will be a conversational assistant that will allow the client to essentially do anything they want over time via talk or text. And so it'll be the front door for many clients in the future.

19:31Rick Wurster: Can Chani talk to Muse? Well, we are blocking unauthorized agents. Tell us why. Why is Muse unauthorized? The reason is we don't want someone just giving their password to Muse and letting Muse come in and take action on that client behalf. We can't control it. The client can't control it. Something could go wrong. And who's liable? So for the protection of the client and for the protection of us, we're not allowing it. But we are creating two safe pathways to use LLMs for clients because we know they want to use AI in their investing life. They're already using it today. And those two ways are one, Charlie, our own AI assistant, who I think will be the primary way many people use AI at Schwab.

20:08Rick Wurster: And it leverages the best of the LLMs in the marketplace. The other way is we will, for all the different agents that are out there, we will create a pathway into the firm for them through what's called an MCP server. What that allows us to do is control the authentication process and also control what they can access. So we're not going to allow them to move money, but if they want to come in and see their account balances and do research, they'll be able to do that through their LLM. So it's just a much more controlled and safe environment. Brian Moynihan of Bank of America said something similar to me earlier this week.

20:39Rick Wurster: Anne-Marie wants a person in the loop because it's unclear who's liable if the money moves and the person says, I didn't authorize it. Right. If you decide that you're going to let Muse go wild on your bank accounts, did you actually know that they were moving some of that money? And then who's liable? Well, if you gave Muse disability, then isn't it on you, not the bank? So Rick, I had some doubts about how many people would even engage if they were allowed to just outsource these decisions to an agent. Have you got any insight on how many people are willing to try and do that right now? Yeah.

21:12Rick Wurster: Here's the fascinating thing, Jonathan. In a world where people are using AI more and more every day, and it's become such an important part of their life, we're seeing very limited activity. I get a report on how many times we've blocked clients from using one of these agents in a week, and it's in the 10s and 20s per week that the big agents are being blocked. And what that tells me is that while people love AI, they're not willing to turn their financial accounts over to them just yet. How much more are you having to spend on things like cybersecurity? Well, cybersecurity is of the utmost importance.

21:44Rick Wurster: Our business for 50 years has been built on trust. And so we've got to be out in front on cyber. We're using all the frontier models, finding challenges and patching them as quickly as we can. Is that what some of the concern is around things like news? Is it just that actually you're unclear about the end user giving it that ability or potentially getting to the hands of nefarious actors? I think it's a combination of both. One, that the agent does something that perhaps was not exactly what the client intended to do. And that's a problem. And it's also a problem if that agent, if there's a cyber issue with the agent.

22:20Rick Wurster: So we just, we want the client to be the one logging in. And we want them to, if they want to use LLMs, which we think is great, do it in a safe and secure way. And we're providing two avenues to do that. But we will not allow the agents just to come in. It's not safe for the client. It's not safe for us. Uncomfortable question, if I may. You employ 34 ,000 people right now? Yes. It's a big number. Do you expect that number to stay the same in five years' time? Is it bigger, smaller, the same? Well, the power of people in technology has been what's fueled our success for 50 years. AI is already making us a lot more efficient, yet at the same time, we keep adding to our employee count.

22:58Rick Wurster: And the reason for that is there's new types of jobs that are opening up. Some are shrinking maybe, but others are growing. One of the areas where we've seen incredible growth this year is in the demand for wealth advice. So as clients become wealthier, as things become more complex, as the concentration of wealth in their portfolio increases because there's been some high-flying stocks, they want help. And so we're adding lots of advisors. One interesting thing I'd share is that 77 % of clients today in the U.S. are using AI in some way in their financial life, but more than 90 % want a human involved.

23:32Rick Wurster: And so I do think we'll have more people because our business will grow. we'll be more efficient and so we won't match the number of people to the number of accounts we bring on but because of our growth and because our our clients love people yeah we'll be a bigger firm we saw a british bank in the last week cunning advisors taking a very different approach to that question and we've even heard from another bank early on this year talking about how basically ai will mean you're going to need less individuals in the workforce because you would be replacing low-level human capital with computers.

24:05Rick Wurster: Yes, I'm not hearing that from Rick this morning. That did not go down well. Well, there's no question AI is making our people more efficient. When a client walks through the door, our client-facing representative now has a series of tools that allow them to have a much richer and deeper conversation because it's teeing up what's of interest to the client. It's looking back through past interactions and seeing what's of interest. So there's no question AI is leading to better outcomes for clients, but it's not replacing the power of a person. And I think money is an emotional topic. And being able to sit across the table from someone and have a discussion about it still remains important.

24:42Rick Wurster: In fact, when you look at our business and you look just at the financial industry generally, the channels that are growing the fastest, not just in our business but across the industry, are those where there's a person involved. The RIA industry is ripping in terms of growth, and we grow about three times faster with clients that have a personal financial consultant relationship with Schwab. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics and geopolitics. You can watch the show live on Bloomberg TV weekday mornings from 6 a.m. to 9 a.m. Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen.

25:20Rick Wurster: And as always, on the Bloomberg Terminal and the Bloomberg Business App.

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