Bloomberg Surveillance TV: September 10th, 2026

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0:56This 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. You might read of RBC joining us around the table. Mike, good morning. Good morning. Just look at those prices this morning, never mind the data, because the data is going to follow this ultimately.

1:29106 almost on Brent, triple digits on WTI. How squeezed, how cornered is this Fed into next week? This is a tough spot for the Fed. We're talking about energy prices. That's the number one concern. Let's not forget we still have tariffs on the table, which are adding pressure. That's showing up in PPI. And ultimately, this is going to pass through from PPI into CPI. Rather like the ECB, you hike once. What do you signal beyond that? What can you signal beyond that? One hike we just don't think would be enough in this case. If you really want to start to bring down the demand side of the inflationary pressures, it's going to take more than 25 basis points of hikes.

2:08The way we're looking at it is if the Fed were to go, you have to think about the labor market right now, which has really shown signs of reversing from that weakness last year when they had those insurance cuts. So at a minimum, they should be putting at least three cuts back in if their belief is the labor market's fine and this inflationary pressure continues. Usually people take a look at higher oil prices as a stagflationary shock, where in the short term it raises inflation, but in the long term it could potentially lower inflation because of the suppression of growth. And yet we're seeing yields across the board rise almost in tandem.

2:43Does that make sense to you? I think you have a lot of cross-currents going on. And when you think about the demand side, there's certainly a tailwind coming from this, we'll call it the government transfer aging of the population segment. There are things that folks, especially here in the U.S., will continue to buy. And a lot of that comes from Social Security, Medicare, Medicaid. And in particular, when you think about Medicare, all of these programs are adjusted for inflation. Social security income is adjusted for inflation. So it's really inflation protected. What's that doing? That is adding to the deficit.

3:25And so when you're thinking about the long end of the curve, you know, that's where a lot of this pressure is coming from, the realization that this is not a problem that is easily solved. Can you give us a sense of the evolution of your own thinking about whether rate hikes are necessary and how many are necessary and how quickly it's been evolving as the personnel have changed and as the data have changed as well? I mean, look, right now our base case is that the Fed remains on hold. And a big part of that is when you look at the economy, you know, I just mentioned that the kind of older cohort, you do have a younger cohort, a lower income cohort that is feeling pain already, even before this energy shock.

4:06They're disproportionately feeling the inflation shock. When you look at non-mortgage personal interest payments as a share of disposable personal income, it's about 2.5%. That has not seen significant improvement over the last year or two. And that's concerning. That's even with hikes. So what that says to us is you have a very large share of the consumer base that is relying on credit. And if you start hiking with a blunt tool, that is going to impact those folks, again, disproportionately. So there's a risk that you could really crush demand in a consumer base that is already feeling this pain.

4:43And at the same time, you have this retiree population that has very little exposure to debt and many ways could benefit from rate hikes through interest income. So it's a really difficult situation to figure out which part of that K you really want to support. At what point do you think you would have to change your thinking? What would you need to see and be like, they're going to go and they're going to hike? Well, tomorrow is going to be a big clue. We'll see how CPI looks. But a big part is what's going on with energy markets. You cannot ignore that pass-through from energy. We were talking about that truck transportation, freight transportation.

5:22That's going to bleed through into the goods space. If goods start heating up in PPI, that's going to get passed through to CPI. And we've seen that. PPI is a really good indicator when you look at the trade services margins. They've largely been positive over the last year, year and a half. That suggests there's still room to pass through higher prices to consumers. So if this is showing up in CPI, in PCE, you're going to get goods heading in the wrong direction. We think services, you know, it's come down, but you're not going to get much deflation there. Historically, you look back, you're just not going to get help.

6:00And so you need goods to move lower. And that's the problem is you're not going to get directionally the right move. Mike Reed of RBC, my thank you buddy. Stay with us. More Bloomberg Surveillance coming up after this.

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7:52to your earlier points, I mean, the market is largely fading this. I think the big question is why after the midterms and why not now? I mean, of course, Republicans control both chambers of Congress. They have a bigger majority in the Senate. They have a three-vote majority in the House. And there has been really very little effort to address voters' concerns on affordability in this Congress, outside of, of course, the one big beautiful bill, which Republicans wanted to be talking about this year. And instead, they were talking about higher gas prices and the conflict in Iran. So I think the bottom line here is it's good the market is fading this.

8:25This is not going to happen. We never saw tariff dividends, and we're not going to see a Trump dividend either. Yeah, we were supposed to see those$2 ,000 tariff dividend checks, and that would have been before the midterms. J.D. Vance was asked about this in an interview, and the interviewer was saying, isn't he bribing? And J.D. Vance was basically saying, well, we're generating a lot of revenue, so you want to keep us in power. Everyone should benefit from this incredible wealth. Are they starting to sound like the party they are trying to defeat? Well, look, I mean, I think a couple of things to unpack on that.

8:57I mean, the Treasury is creating some revenue with tariffs, but of course, we have a massive budget deficit. I mean, we're going to be looking at 6.5 % budget deficits as a percentage of GDP this year. So there is no extra capacity to be spending, especially in the relatively good times. I mean, there's, of course, with the two-speed economy. Some people do not feel the strong GDP that we have seen. Many people don't, actually. But I think the bottom line is there is no, they don't have this, they don't have this cushion. But yes, are they sounding like Democrats? I mean, my argument has been all along that Trump could have been a postpartisan president.

9:35He actually shares many views with the Democrats, protectionism, protecting entitlements, okay with deficit spending. So yes and yes. But I think that just the bottom line here for the markets is I would fade any sort of promise on either side of the aisle that we're going to see more spending. There's just not simply the fiscal cushion to do so. How much are they going to have to spend next year, though, to get some agreements across the finish line? Well, yeah, and I do think that, and we were just talking about this, that the debt ceiling is going to be coming into on the radar, unfortunately, for all of us, because we all have to take it very seriously.

10:11Of course, no one is likely to kind of let us go off the fiscal edge, if you will. But I think the reality is, is that if Democrats take back the House, that is still very much our base case, they are going to demand some concessions like Republicans have, right? And this is the one source of leverage that a minority party has. And I do think that will look like more spending. So not necessarily Trump dividends, but it will look like more non-defense discretionary spending. That's only because President Trump is likely to push for more defense spending. We think the Congress probably will approve that to some extent, but Democrats will insist that that non-defense portion is also sort of is at parity.

10:57So I think bottom line here is ironically, the debt ceiling could lead to more spending. Don't you love this, Lisa? I mean, I'm loving this. This is why my PowerPoint presentation, I'm going to add this to my PowerPoint presentation on the deficit for the kids tonight. Ultimately, a lot of people are rolling their eyes as they talk about the deficit and some of these other issues that have been going on for a while. It seems like the political conversation among the populace is rapidly shifting increasingly toward AI. And I want to ask you about that because the message has been a bit more muddled when it comes to that from President Trump and from Republicans who are running.

11:30Right now, what is the winning message when it comes to AI and regulation, given these discussions about imminent death in the next 10 years? Yeah, I mean, this is a hard one. And obviously, the headlines yesterday don't make it easier. I mean, I think that you ask 10 voters, you get 10 different responses in terms of what they mean by AI. A lot of folks mean the infrastructure that's powering AI. A lot of them mean data centers. Others mean they're worried about privacy and child protection. And others are worried more about the existential threat than computers replacing our jobs or potentially killing us.

12:04So I think it is a complicated issue in terms of messaging. And I think what you've seen in many of these tight races is Republicans actually pivoting now to a more anti-AIM message. And so that, I think, is actually a pretty significant inflection point to your previous guest who was saying this is a lot of sort of election rhetoric and we sort of expect this to abate. Certainly that's possible. I think this is more realistic that this is getting such a tailwind in terms of the electorate. And it's feeding on so many other issues of the day. It's feeding on affordability issues. It's feeding on concerns about corporate concentration.

12:45It's feeding on inequality. And so this, I don't think, I mean, not to sound sort of hyperbolic here, but I don't think this is going away. I think you're going to see more states move to moratoriums and move to prohibitions. It goes to really the heart of what is the biggest market risk heading into the midterm elections? Is it coming from the debt and deficit side or is it coming from the AI regulation side and what that could do with curtailing earnings and curtailing some of the ambitions there? I mean, I think there's really no news on the deficit. This is why that's been sort of interesting with Secretary Besson's intervention.

13:16I mean, all of this stuff, you know, whether it's priced in completely or not, but this is, we know that we were going to be running these high deficits. We're going to be running that under a Democratic regime or a Republican regime. So I'm not sure that's really new news. So I would say the thing that's more of an imminent threat is this, you know, this local backlash. And it is real. I mean, yes, it is a political talking point to some extent, but you are seeing a lot of local municipalities start revoking permits or starting to take back tax incentives and what have you. So I feel like this is more real and more imminent, certainly, than the concerns of And next stop for this conversation is the labor market.

13:53We don't know what's going to happen, but you get closer to 28, you see hits there. Doesn't there have to be a bigger conversation about taxing capital and not payrolls? Yeah. And this is actually, I was in Australia last week. I'm sort of the Debbie Downer of messaging because I'm talking about AI regulation, but I'm also talking about exactly that, John. I think that there's going to have to be, there will be a moment where folks in Washington really have to reevaluate the way that we're looking at capital versus income. And of course, capital gains tax at a much lower rate. Interestingly, and I had forgotten this, there had been some parity actually during Ronald Reagan's administration.

14:26We had seen the capital gains rate and the ordinary income tax rates around parity. I do think that there's going to be a real focus on that. It raises revenue at a time where the U.S. government needs revenue, and it speaks to the moment. Stay with us. More Bloomberg Surveillance coming up after this.

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16:22The Apple's new CEO introducing the highly anticipated iPhone duo, along with other product upgrades. Gene Munster of Deepwater Asset Management writing, I expect Apple to outperform big tech over the next week as the significance begins to sink in with investors. Gene joins us now for more. Gene, welcome to the program. Inevitable first question then. What is the significance about this? What are people missing? I think people are missing the consumer demand for content from the time you get up in the morning to the time you go to bed is insatiable. And that means it sounds like kind of an odd place to start, but the reality is that bigger screens make those content experiences richer.

17:02And most people, as we kind of fast forward, when they think about a foldable phone, they think they don't want one. There's no need. It's a couple percent of the global smartphone market. and what I did what I thought going into the event we knew what was going to happen uh credit Bloomberg's Mark Gurman I mean just his coverage in predicting what's going to happen is uh spectacular so we knew about that but I had this is probably my fourth or fifth most important topic the foldable foam because I just didn't think it was going to resonate but the piece that I think missed people are missing and I missed initially was that if you look at the fit and finish of this, the thickness, the quality, the crease, that bend in the middle, it's very hard to pick up on.

17:47If you put that together, I think this device is actually going to probably account for 10 % of overall iPhone revenue. Now, going into the event, I thought it was going to be something like 5%. And so that kind of accounts for 5 % of the business. And so, So, I mean, at the most basic level, John, I think what people miss is that even though this is a big price point, most people, I think, or many people are going to try to find a way to get this to work for them. And, again, I think it can account for 10 % of iPhone sales. So this is big news for Apple. In particular, it's been a decade since they've come out with a new product that was AirPods back in December of 16 that people really cared about.

18:33Vision Pro didn't do that. And so that's why I think that this is such a big deal, not only for the numbers, but also for the innovation side. Gina, I don't pretend to have visibility into the future, especially when it comes to technology. It's a massive blind spot for me. And I'd love you to provide some insight into how you think this plays out. I view this now as the vehicle for the potential software shift further down the road and the capabilities of AI that I just can't even imagine at this point. How do you think this might complement the future software upgrades we might see from this company?

19:05So you're picking up on something that they hinted to on the event yesterday, which is this idea that a new form factor, and really what this is is 50 % bigger than the largest current, the Pro Max, that that opens up kind of a new canvas for app developers. And so what you can do, the types of applications when you have a device like this, just opens up new potential. Why that matters is that these new applications are going to become increasingly agentic. And that's this whole concept of personalized AI, the ability of the machine to understand personal context, but also do work for you. That's why Meta was up 7 % yesterday as they talked about these agents that actually get things done.

19:47But this device is unique because since it is bigger, you're going to be able to build new applications around that. I think when you put all this together, when you put kind of the duo in combination with what Apple is doing around their whole new Siri, I think what it positions Apple is to be the best positioned company when it comes to personalized AI, a whole theme that really hasn't started. What that means is people are going to buy more Apple devices and probably pay more for apps longer term. How much, Jane, can we take a look at this display and John Ternus's first news conference where he released a big product as really a John Ternus era versus the continuation of Tim Cook?

20:30Well, this was a Tim Cook product. I mean, this is something that they've been working on for the past decade. But I think what I think stood out, I mean, the biggest event yesterday related to Ternus was even before the pre-record started, he addressed people in Steve Jobs' theater. And he did just a really good job of emphasizing the excitement that he has around future products. And that's typically a well-traveled line for Apple is we're really excited about future products. But he said that in the midst of really downplaying what they were going to announce yesterday, kind of focusing really on that future.

21:04And so from my perspective, it's John Ternus is less about the foldable iPhone, more about ultimately what's going to come. And go back and credit Mark Gurman here, just to put into perspective how good he is, is that everything that was announced yesterday, he predicted. But he's also gone out and predicted what John is going to announce next year and even in 2028. And I think what you're going to see is a family, more family of AI-powered devices, this concept of devices that are listening all the time. We got a little bit of a preview of some of those features yesterday. This is a big deal in terms of how humanity thinks about how they interact with the world and how these devices capture audio.

21:43That's another big theme that I think Ternus is going to be aggressively going after. Gene, who's the biggest competitor for Apple right now? Is it the likes of Samsung and Google and the Pixel, or is it the likes of Amazon and Meta who are trying to break into this space too? I mean, mathematically, it's Samsung. If you look at the global market share, the iPhone's just over 20%. and Samsung has about 60%. So mathematically, it is Samsung. But when you think about, this is the unique part. This is why Apple trades at such a premium and will continue, I think, to go higher, is that if you look at just how tightly their products are together, yes, Samsung has individual products that line up with what Apple does, but none of them really fit together as well as Apple does.

22:25And then you put the services on. And I recognize that sounds like kind of the company talk, but that's the reality of something. So I would say in another way, I mean, really, Apple kind of stands alone when it comes to kind of fitting all this together. And in a world where we're increasingly bringing inputs from all of our devices together, that idea of tightly fitting together, I think, is going to become increasingly an advantage for Apple. Gene, always fun to hear your insight, particularly on this company. Thank you, sir. Gene Minster there of Deepwater. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics.

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