Bloomberg Surveillance TV: September 17th, 2026

0:00Julian Emanuel: If you invest, lead a business or allocate capital, one sided views aren't enough. Join me, Brad Rogoff, the Global Head of Research at Barclays on the Flipside podcast. Each month, I go head to head with one of our expert analysts on my global team to debate the economic and market issues that matter most. From inflation and AI to equity and credit trends, each debate helps you see what headlines might miss. Find the Flipside wherever you get your podcasts. The world of business is constantly evolving and Comcast Business keeps you totally in step with secure AI-backed networking in more than 100 countries.

0:38Julian Emanuel: They're powering over 90 % of the Fortune 500 and millions of small businesses. That's a lot of muscle. And behind it all, thousands of experts answering your call at 2 a.m. like it's 2 p.m. One partner powering how business gets done for companies around the globe. When you add it all up, no one does business like Comcast Business. Small businesses are the pulse of every community. They bring people together, create opportunities, and drive growth. Chase for Business helps business owners like you with personalized guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community.

1:18Julian Emanuel: Learn more at chase.com slash business. Chase for Business. Make more of what's yours. The Chase Mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company.

1:38Julian Emanuel: Bloomberg Audio Studios. Podcasts. Radio. News.

1:47This 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 out with stocks and bonds finding their footing following the first Fed rate increase in some three years. Julian Emanuel of Evercore writing, once the Fed starts hiking, even if it was known to be coming, stocks remain volatile.

2:23Julian joins us now for more. Julian, good morning. Good morning. Volatile upmarket into year-end. Is that how you see it?

2:29Julian Emanuel: We do. We do. We think there isn't runaway upside into year-end. Our price target is modestly higher than here. But I think when you look at yesterday and today, what you've done is eliminate sort of the left and right tail fantasies of fixed income traders. So coming into yesterday, there was a very solid one and done crowd. And that was completely taken off the table by Chair Warsh. And then this morning, you know, what we realize is, yes, in fact, all the rhetoric of the last several months about 2 % being the goal is firm and it is real. And by doing that and establishing that, you've taken the other side of the equation off where we were getting clients talking about 6 % and 7 % in the 10-year yield.

3:21Not happening. You stand us down with now, the long end of the curve. We've dealt with that.

3:27Julian Emanuel: Some people that I know, and obviously you had one on the show yesterday, really see value here. And I think the fact that you are being true to trying to fight inflation here by the hike, by the message that there's likely more to come, it provides a value opportunity on the long end. Are you part of those people? Are you backing up the truck a little bit when it comes to long end bonds? Well, and I think, again, if you look at if you're in global asset allocator and you look at stocks versus bonds this year, you probably should be rebalancing a little bit. It's the stock guy saying buy bonds.

4:08That's terrifying.

4:09Julian Emanuel: Is that what just happened here? Yes, but he doesn't want to say it, which is saying people. Some people have seen value and people have a logical argument. No, but think about it. This call is more important than it's been in years because the fact is the bond market is more important for the global capital cycle than it's been in years. Because if you're taking pressure off the long end in treasuries, you are taking pressure off the long end in sovereigns. And ultimately what you're doing is you're making issuance for the hyperscalers incrementally more easily. OK, so it's a good thing for the equity market.

4:43Absolutely. Stocks and bonds. Absolutely. What do you think is the threat to this equity market? Because it has shown remarkable resilience in either direction in fixed income. Yields up, yields down. Stocks have been OK. Stocks again this morning up by eight tenths of 1%. What are the developments on the horizon that might give you pause?

4:58Julian Emanuel: Well, so again, in our mind, it's this transmission mechanism from$100 oil to yields to hyperscaler debt issuance. And the fact is, to your point, is that credit markets, which in our mind are the things to really focus on, have been very, very placid. You've had a little bit of volatility around some of these issuance announcements, but overall, very, very placid and very, very liquid. That's the biggest one. And again, for us, is this idea that even though this last quarter's results were peak rates of growth in terms of earnings, we're still on track for a very strong rest of the year and 2027.

5:49Julian Emanuel: And that ultimately, if that story stays, is positive. And frankly, the AI safety story weaves into that significantly as well. Potentially, the real tell into the end of the year is going to be the banks. And John was noting yesterday that the banks were falling out of bed in response to this decision. There are a couple of reasons why. the one that appears most salient is that when you hike rates to this degree, issuers of debt, issuers of equity, IPO potentials might sit on the sidelines and wait it out. The volatility introduces extra risk that could curtail some of the incredible capital markets activity that we've seen.

6:29Julian Emanuel: Do you see that as a likely outcome of the rate hiking cycle that's underway? You could get some temperance in issuing, and that probably wouldn't be a bad thing, because when you think about the entirety of the cycle, what you've had over the last year and a half or so with regard to AI is a mismatch between the investment funds being thrown at the story and the ROAI and the adoption, okay? And if you slow down the issuance, you actually allow those two concepts to converge in a more meaningful way. Stay with us. More Bloomberg Surveillance coming up after this.

7:13Julian Emanuel: If you invest or lead a business, one-sided views aren't enough. Join me, Brad Rogoff, and my team at Barclays Research as we debate what's driving markets on the Flipside podcast. Find the Flipside wherever you get your podcasts. If you listen to financial news, you know a lot of time is spent thinking about what's next. The next opportunity, the next investment, the next move. But sometimes what matters most is being ready for what you never saw coming. A storm damages a second home. A pipe bursts above a collection you spent decades building. An unexpected loss puts a growing business on pause.

7:50Julian Emanuel: Those are the days no one sees coming. But for more than 75 years, Cincinnati Insurance has been ready when they do. With deep expertise, coverage for businesses, homes, valuables, and more, Cincinnati Insurance works with independent agents who take the time to understand what matters to you. Together, they help protect more than what you own. They help protect what you're building toward. And when a bad day does come, Cincinnati Insurance has real people there to help make things right. Because planning for the future isn't only about knowing what's next, it's about making sure you're ready for what you can't predict.

8:26Julian Emanuel: Let Cincinnati Insurance make your bad day better. Find an independent agent at CINFIN.com. This is the Bloomberg Market Minute, brought to you by Comcast Business. The markets faced plenty of challenges this year. Rising energy costs, higher interest rates, pushback to massive artificial intelligence spending. But through it all, stocks keep breaking records. And some analysts think they still can, with a focus on the fundamentals. Nadia Lovell is head of global equity strategy at UBS. Earnings has been good and continues to be good. And while, you know, we might be past the peak in earnings growth, we're not past the peak in earnings level.

9:04Julian Emanuel: But others like Miller-Tabak strategist Matt Maley say those challenges could eventually lead to a downturn. Whenever we see a significant rise in bond yields like we have and a significant rise in oil prices like we have, the stock market always or pretty much always ignores it for a while. And Wall Street may be starting to take notice. A recent Citigroup index shows more analysts cut rather than raise their earnings forecasts for corporate America for the first time in more than five months. That was the Bloomberg Market Minute brought to you by Comcast Business, one partner powering 90 percent of the Fortune 500 and millions of small businesses.

9:40Julian Emanuel: When you add it all up, no one does business like Comcast Business.

9:52So here's the latest this morning. The Federal Reserve taking on inflation with the first interest rate hike since 2023. The committee signaling more monetary tightening to come. The former New York Fed President Bill Dudley writing a 25 basis point hike is too small to have a meaningful impact on economic activity. Bill joins us now for more. Bill, welcome to the program. Before this decision you wrote in your column, you said the case for a hike was crystal clear. Is the case for another hike just as clear?

10:20Julian Emanuel: Right now it is, unless the data changes pretty dramatically. Kevin Warsh basically said that he needs to make financial conditions less accommodative, probably pushed them into the restrictive side. And he hasn't told us how much you need to do to do that. But judging by the reaction of financial markets, he hasn't really accomplished that yet. I think that he also signaled that this is probably the first in a series by talking about removing a dose of accommodation. That implies that there's more doses to remove forthcoming. And if you look at what the federal funds futures market is pricing in, they're pricing in three or four hikes over the next, you know, over the next six to nine months.

10:58Julian Emanuel: So the market certainly expects that the Fed's not done. And that makes sense. If financial conditions are accommodative, that's causing the economy to grow at an unsustainable pace. You need to do more to make financial conditions less accommodative to restrain economic activity. You know, what's interesting about the Fed's forecast, it's sort of the immaculate disinflation. If you look at the summary of economic projections, growth doesn't slow, unemployment rate doesn't rise, yet inflation magically sinks back to 2%. I think it's going to be a little bit harder than that. Bill, do you think we need the demand destruction?

11:30And what kind of level rates do you think is necessary to get that demand destruction, to get inflation back to target?

11:37Julian Emanuel: Well, it's hard to know because, you know, it depends a little bit on how financial markets react. I agree with Kevin that financial conditions are really the way of judging the stance of monetary policy because that's how monetary policy gets communicated to the economy. So if the stock market ignores the Fed's tightening, if the bond market ignores the Fed's tightening, then there's more for the Fed to do. Did you think that Kevin Orsch did a really good job at this press conference? Or do you think that he should have illuminated a little bit more kind of how he was thinking about the path forward?

12:07Julian Emanuel: I think he did a much better job, but he was still very, very guarded. No follow-up questions. The answers were very short. Didn't really answer the question about where's neutral in terms of a neutral federal fund rate. I think it's an odd concept not to have a view of whether monetary policy today is easy, neutral, or tight. I think you need to have some framing of where you think the federal fund rate is today in terms of whether it's providing positive impetus or negative impetus to the economy. So certainly much better, but still very, very guarded, very, very constrained. Do you have a sense that neutral is significantly higher?

12:45Julian Emanuel: I mean, that was sort of the implication when he said that they're removing some of the accommodation. Or do you think that that phrase was just a commentary on last year's 75 basis points of rate cuts? Yeah, I think neutral is higher. I mean, it's higher because we have this huge AI investment spending boom that's pushing up the neutral rate. That's increasing the demand for capital. Now, if the investment spending boom comes to an end, then the neutral rate will probably drop back down. But for the time being, as we're spending hundreds and hundreds of billions of dollars on these data centers and the chips to fill them, the neutral is going to be higher.

13:17Julian Emanuel: And the Fed's got to take that on board. Bill, we often reflect on a conversation that we had together coming out of the pandemic. I believe it was 2021. Maybe it was early 22. I remember it was with Mohamed El-Erin at the time as well. and you made the case this Fed might have to go to five, which just sounded crazy at the time because I think we were still close to zero. And they went to five and they had to go further. And Bill, it didn't cause the pain that the Fed chair at the time was talking about in Jackson Hole a couple of years later once he got there, the pain that was required to get inflation back to target.

13:48But what is it about this economy? You've alluded to some of it, but what is it about this economy that can withstand these interest rates? Because it's the resilience that has surprised so many people in the face of what this Fed has been doing?

14:00Julian Emanuel: Well, I think it is financial conditions. So we've had huge wealth gains in the stock market, which supports people's spending who have hold equities. Obviously, it's not very good for the people at the lower end of the income distribution that don't have that benefit. And the AI boom. I mean, I think the AI boom is sort of an exogenous factor that's pushing the economy along. And I don't think the spending on AI is particularly interest rate sensitive. I don't think if the Fed hikes 25 or 50 or 100, it's really going to have much to change the trajectory of AI investment spending. That's going to be driven by the returns on that investment.

14:33Julian Emanuel: And that's going to be determined not to tomorrow or next month, but over the next few years. If you can't influence it, why do anything, Bill? Because you can't let inflation get ingrained above 2%. The Fed's gotten away with something over the last few years. If you told me five years ago that inflation would be above the Fed's target by a meaningful amount for five years, I'd be very concerned about the credibility of the Fed. But the Fed's managed to maintain that credibility. People still believe that the Fed will push inflation down to 2%. But you can't stretch that out indefinitely, especially at a time when the economy is performing fine, the labor market's very much in balance, and all the risks are on the inflation side.

15:13Julian Emanuel: I think the worsening of the situation, the war in Iran and the uptick in oil prices, and obviously diesel oil prices in particular, you know, basically raise the stakes for the Fed waiting. Bill, do you think that we would be talking about rate hikes if oil prices weren't where they were? It's possible that we might not. You know, it really depends. You know, as Kevin Warsh talked about, you know, it's really the distribution of prices increases that we care about. It's really about the pass-through of oil prices into other things. But I think the increase in diesel prices is really important because it's going to affect things like airfare.

15:48Julian Emanuel: It's going to affect things like food prices. It's going to have a lot of knock-on effects. It goes into transportation costs. So any good service that has to be trucked around the United States, that has to embody that cost. So it's not just going to be in the headline inflation rate. It's going to start to filter into the core inflation rate as well. Stay with us. More Bloomberg Surveillance coming up after this.

16:13Julian Emanuel: If you listen to financial news, you know a lot of time is spent thinking about what's next. The next opportunity. The next investment. The next move. But sometimes what matters most is being ready for what you never saw coming. A storm damages a second home. A pipe bursts above a collection you spent decades building. An unexpected loss puts a growing business on pause. Those are the days no one sees coming. But for more than 75 years, Cincinnati Insurance has been ready when they do. With deep expertise, coverage for businesses, homes, valuables, and more, Cincinnati Insurance works with independent agents who take the time to understand what matters to you.

16:52Julian Emanuel: Together, they help protect more than what you own. They help protect what you're building toward. And when a bad day does come, Cincinnati Insurance has real people there to help make things right. Because planning for the future isn't only about knowing what's next, it's about making sure you're ready for what you can't predict. Let Cincinnati insurance make your bad day better. Find an independent agent at CINFIN.com. This is the Bloomberg Market Minute brought to you by Comcast Business. The markets faced plenty of challenges this year. Rising energy costs, higher interest rates, pushback to massive artificial intelligence spending.

17:30Julian Emanuel: But through it all, stocks keep breaking records. And some analysts think they still can with a focus on the fundamentals. Nadia Lovell is head of global equity strategy at UBS. Earnings has been good and continues to be good. And while, you know, we might be past the peak in earnings growth, we're not past the peak in earnings level. But others like Miller-Tabak strategist Matt Maley say those challenges could eventually lead to a downturn. Whenever we see a significant rise in bond yields like we have and a significant rise in oil prices like we have, the stock market always or pretty much always ignores it for a while.

18:05Julian Emanuel: And Wall Street may be starting to take notice. A recent Citigroup index shows more analysts cut rather than raise their earnings forecasts for corporate America for the first time in more than five months. That was the Bloomberg Market Minute brought to you by Comcast Business, one partner powering 90 percent of the Fortune 500 and millions of small businesses. When you add it all up, no one does business like Comcast Business.

18:32Julian Emanuel: Running a small business takes everything you've got. But with Chase for Business, you're not alone. They bring together local support and a broad range of resources to more than 7 million customers. With a deep understanding of your day-to-day needs, they provide products and guidance built to help you thrive. Right now, earn$500 when you open a new Chase Business Complete Checking account for new business checking customers with qualifying activities. Offer expires January 21st, 2027. Chase Business Complete Checking has the flexible tools you need to accept payments, make deposits, and manage your finances with confidence.

19:06Julian Emanuel: Learn more at chase.com slash podcast biz offer. Chase, make more of what's yours. Fees may apply to Chase Business Complete Checking Accounts. The$500 offer is available for new business checking accounts with qualifying activities through 1-21-2027. Eligibility and qualification requirements must be met. Additional restrictions may apply. Please speak with a business banker for more information. JPMorgan Chase Bank, N.A. Member FDIC.

19:36Ed Yardeni of Yardeni Research cutting his year-end target on the S &P to 7 ,900 from a street-five 8 ,400, writing the risk of a downturn have increased. We've raised the odds of a bearish outcome from 20 % to 30%. Ed joins us now for more. Ed, welcome to the program, sir. You've dialed things back just a bit, slightly less bullish. What's weighing on you heading into year-end? Yeah, well, the key point in terms of what I've changed is I'm thinking it's going to take a little longer to get to 8 ,400. I don't think it's likely to happen by the end of the year now. I think it's more likely to happen by the middle of next year.

20:137 ,900 is still obviously above where we are now, so it would still give us an awfully good year of returns. But the issue for me is geopolitical developments have deteriorated. The war in the Middle East has escalated, and we're looking at higher for longer oil prices and higher for longer oil prices increase the odds that But some of that inflationary pressures from energy will spill over into core prices, as Bill Dudley, your interview with Bill Dudley, excellent interview, indicated. And then in turn, we have not a one-and-done situation here with the Fed. We've got a situation where we're likely to have another one or two increases this year.

20:59And then the bond market's concerning. My friends, the bond vigilantes, have kind of gone wild all around the world. And I'm particularly concerned about the unwinding of the carry trade in Japan. The U.S. officials keep putting pressure on the Japanese to increase their interest rates at a faster rate, which makes sense from a macroeconomic standpoint. But unfortunately, we may find out that this leads to more unwinding of the carry trade, which means hedge funds that borrowed in Japan at very low interest rates, when the yen was getting weaker, now we'll flip around and say, you know, that financing is just too expensive now, too risky.

21:45So Ed, you gave us three things to think about there. Let's unpack them all. So you said geopolitics and what happened with oil. You talked about what it means for monetary policy and the spillover to the bond market. Can we just stand on the first one? Does the first one inform the other two? How dominant is the situation in the Middle East? And to the people watching this at home that have become desensitized because it's gone on for seven months and they don't think it matters anymore, what's your message to them? Well, look, we're back at 100. And everything was just hunky-dory when we came back down to about 80 or so a few weeks ago.

22:17But the problem is that everybody thought that this war in the Middle East would be over pretty quickly, especially at the beginning of the war when the leadership of Iran was decapitated. I thought the same thing for about one day. Then I thought about it again. And I said, well, wait a second. The IRGC are professional terrorists that are basically running a country. And they've got praxis all over that neighborhood. they're not going to give up just because they're getting bombed from the air. Military history shows that that just doesn't work. You need boots on the ground. And so here we are in a situation where we're approaching the midterms, and Iran has a great incentive to create more havoc to keep the price of oil up because they obviously would like Trump to lose his majorities, Republican majorities in the House and the Senate.

23:13Julian Emanuel: Do you think that stocks are going to take longer to get to some of your loftier goals because of oil prices or because of rate hikes? Well, I think it's a combination of everything. You know, the nice thing about being a strategist is it's pretty simple. It's P-E times E. It's the valuation multiple times earnings. That's easy to do. Getting it right is the tricky part. I think the E, the earnings side, looks great. The economy is doing great. You know, I remain fundamentally bullish, but even more bullish have been the analysts because the companies have been reporting great earnings. So it's all about the valuation multiple.

23:51And as you know, as earnings expectations have increased, and I call a FIMO, a fabulous earnings momentum, the valuation multiple has actually gone down because investors are getting a little bit shy about paying for this remarkable outlook for earnings. And oh, by the way, the whole AI story has become a little bit more questionable. That's also sort of being delayed, if you will, or pushed out. And I think that also affects the valuation multiple because a lot of these AI stocks have very high valuation multiples.

24:23Julian Emanuel: I want to pick up on something else that you were talking about with John, which is the unwind of the yen carry trade. And you're concerned that it could get kind of messy if you see the Bank of Japan hiking more significantly or responding to pressure from around the world. What does that look like? What gets penalized the most in that type of scenario? Well, I think actually we've been seeing it. When you look at the global bond route, when you look at how bond yields have gone up just about everywhere except maybe in China, what I think we are in fact seeing is a significant unwinding of that carry trade.

24:59Hedge funds, as I mentioned before, they went and borrowed at close to zero in Japan, yen, got the proceeds in yen, converted them to other currencies and bought government bonds and other assets around the world. And I think that's probably one of the best explanations for why this has been a global route, because the hedge funds took the money and invested it all over the world in areas where they thought they'd get a good carry trade opportunity. And that's unwind may not necessarily be over. What are the pockets of vulnerability that you can identify this morning for a set heading into the BOJ.

25:37Where do you see pockets of vulnerability in the market as you unwind that carry trade? Where do you still see them? Well, I think the clear tracks or fingerprints of the unwind would be in a coordinated increase in bond yields around the world. That's what we've seen. So, I mean, I think the BOJ decision up ahead here and what they do will do. If they only do a quarter, then I think maybe that'll keep the carry trade from unwinding faster. But if they go and surprise and do 50, that might be more of a shock. So I think the reaction to the BOJ report will be very important. So Ed, just to get this clear, the more hawkish this BOJ is, you believe the more vulnerable the global bond market is?

26:28Yes. Yeah, and the ironic thing is our officials, especially Treasury Secretary Scott Besson, is pushing them to be more aggressive. More aggressive means they'll be raising interest rates, their short-term rate more aggressively, and that would obviously strengthen the yen, two things that clearly stimulate the unwind.

26:51Julian Emanuel: So clearly, just to sort of put a pin in this, Ed, you don't think that this is a good time to be applying long-term bonds ahead of that Bank of Japan decision? I wouldn't do it right ahead of the Bank of Japan decision, no. But I think, let's see what happens after that. I do think that looking out six, 12 months or 10 years on a 10-year bond, 5 % is going to turn out to be a very good return. But for now, I'd like to sit on the fence the way the tenure is sitting on the fence. It's just kind of sitting in that 5 % fence. This is the Bloomberg surveillance podcast, bringing you the best in markets, economics, and geopolitics.

27:31You can watch the show live on Bloomberg TV, weekday mornings from 6am to 9am 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.

27:48Julian Emanuel: Quick question for you. How much of your day is spent typing? Email, Slack, notes, prompts to chat GPT? Whisperflow is a voice-to-text app. Instead of typing, you talk and it types for you in any app on your Mac, Windows, iPhone, or Android. It takes out the ums, fixes the typos, and the result sounds like you wrote it, four times faster than typing. So the email that used to take two minutes now takes 30 seconds. Whisperflow is free. Download it at whisperflow.ai. That's W-I-S-P-R flow dot A-I. With ChatGPT, you can do more than get answers. You can get things done. Whether you're leading a big project, planning an elaborate trip, or trying to balance work and life, ChatGPT can help.

28:30Julian Emanuel: Give it a goal, plus things like files, notes, or project plans, develop a trip itinerary with daily updates, or create a prioritized schedule so you can spend less energy sorting out the details and more on bringing your biggest ideas to life. Get started at ChatGPT.com.