Bloomberg Surveillance TV: September 21st, 2026

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1:38This 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 rising as oil retreats for a fourth consecutive day. Eureka Hoffman-Bachandi of UBS writing, Equities have more runway but less room for error.

2:12Earnings and broader leadership can drive the next leg higher. Eureka joins us now for more. Eureka, good morning. Good morning. Why positive and constructive on broader leadership here? We see strong economic growth ahead. Governments are spending, corporates are spending, and the consumer is spending. And these are three strong forces. We have the largest economies in the world on fiscal stimulus mode. U.S., China, Germany, and Japan. We have AI capex now at 2.5 % of U.S. GDP. We see it going higher globally to 1.2 trillion next year. And then we have the consumer resilient. We saw retail spending up again, months over months, and even higher when you take out or just focus on the control group.

2:56So very strong backdrop for growth. And that drives equity more so than rates. A rate hike is not a headwind. They are a headwind, but it's the rate of change that matters. We see one more hike ahead. It may be more, but certainly we haven't seen yet a cycle that is akin to 99, right? We saw 1.75 % in less than a year. That would be a different game. This won't be painless. The message from the Chicago Fed President Austin Gorsby earlier on this morning, if there is any pain, when do you expect it to show up? So we think these rate hikes are not going to take off from the equity rally. We think that the equity market and growth is going to be so resilient that 50 basis points or maybe even 75 are not going to derail.

3:41Don't see it in small caps don't say indiscretionary at the sector level of size? We have to watch certainly the consumer, especially the lower income consumer now with the level of rates and also with the level of diesel prices that you just mentioned. But we don't think it's enough yet. Again, corporate demand remains strong. The AI capex boom, we may still underestimate. I just spent last week in Silicon Valley. And there we see also that one thing that was surprising for me is how quickly AI now is transcending into the physical world. We've been very focused on headlines around science breakthroughs these last few weeks, but now we also see massive progress in robotics.

4:21And that is yet another source of demand for semi-cap and semi-small broadly. Can you build that out just a little bit more? You've come back from the West Coast. We spent the last week on the East Coast here on Wall Street discussing the potential end of humanity. I know that was a conversation in Silicon Valley. It started there. Their willingness to spend, Can you really lay that out for us? The prospect of a couple of hikes from the Federal Reserve. Most people have come on the program and said that's not going to make a difference. The hundreds of billions of capex that they're still driving and driven to do, we still underestimate that?

4:53I do think so. If we think about, again, starting with the science breakthroughs that we were able to solve problems that we haven't been able to solve for over 200 years in a matter of hours. Number one, right? We have a lot more that we can be doing on math, on biochemistry. So I think the breakthroughs that we are seeing and the ROI of those is so large that it's very difficult to slow the spend. And then as we go to robotics, when we have now humanoids that are going to be able to do many more tasks, much more cheaply, those are all very, very strong ROI propositions. So again, it's very difficult to think that demand is going to be the issue.

5:32The question is more, could there be bottlenecks, physical bottlenecks, that are going to slow us down? Certainly could be capital, but unlikely at these levels of rates. Potentially it's power. You know, there are other things. Humans, the physical world can't move exponentially like AI can. So that's something to watch for. Or is it politics? The government starts to slow these companies down? It could be politics. We certainly have already seen now leading up to the midterms that there is more concern about permitting. It's a very bipartisan movement. We have about 200 plus now data center projects permit being delayed because of politics.

6:12So that is one factor. But that may also pick up again after the midterms. So we'll see. I think the most likely thing is probably physical constraints such as power. We in CIO foresee about 100 gigawatt of shortage just in electricity in the U.S. by 2030. So that is more likely to be a slowdown factor than probably politics. You don't seem too worried about rate hikes hitting equities, even small caps. But what about the fact that you stay here, the oil staying power, not the spike? We're seven months into this war and we still see elevated energy costs. That on top of rate hikes, what does that do for some of these smaller consumer-focused companies?

6:56I'm not saying there couldn't be some stress on these smaller companies, especially those that are leveraged, for sure. The question is still whether the aggregate demand is strong enough to withstand a whole economy that is then going to benefit also from economic growth. It could be still quite narrow going forward, but we think the AI benefits will accrue to all parts of the economy. And maybe one other thing, we talked about the broadening at the beginning, that might still be underappreciated is how much AI is disruptive to the digital incumbents. I think that's where we maybe differ from others, because if you think about what already AI coding has done to software, we think something similar could happen with agents to the internet.

7:41So, again, these large-cap names that have dominated the markets for so long, in our view, are not necessarily the winners for the next decade. I know you can't do single names, but people's imagination are going and they're thinking of mag-7 names now. How do you manage that risk? We think you should be invested in atoms over bits. So, more the physical economy than the digital economy. Because that, at least, is in the short term more resilient to AI. But with every technology we have seen this over the last decades comes new leadership in the market. It's very unlikely that the same names are going to be the ones that are dominant in a new wave of technology disruption.

8:19Are you de-emphasizing a market cap index level approach to investing in equities? We would probably prefer equal weight over the S &P weights, but we also want to play offense. So we have in particular three portfolios that we are focused on, one on AI, one on electrification and longevity. So we want to be invested in the largest, biggest structural opportunities over the next decade. But we want to be diversified in those geographically, sectorally and also structurally. And that's the way that we are recommending our equity exposure is, you know, with these big structural trends, you have that diversification built in.

8:57So it's about playing offense and defense for us. Stay with us. More Bloomberg Surveillance coming up after this.

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10:04we've talked about diesel prices throughout this morning getting to 650 plus potentially even higher heading into the midterm 650 a gallon stateside this is rattling washington we mentioned those comments from the republican senator chuck grassley calling for a diesel embargo building on that this from the financial times the president donald trump is wrapping up pressure on ukraine to hold strikes on Russian refineries, according to a senior Ukrainian official. He's telling the FT a recent call with Zelensky was about diesel, diesel, diesel. Bob McNally of Rapid and Energy joins us now for more.

10:37Bob, welcome to the program. What would happen if America did go through with a diesel export ban? Good morning, Jonathan. So prices for diesel abroad would skyrocket. And since the northeast of the United States and the west coast of the United States price their diesel off of imports, coastal prices would likely rise, not fall. You would have an abrupt collapse in prices in Texas, Louisiana, maybe the upper Midwest. You'd have to clear three million barrels a day if it's all products, you know, one eight or one six of diesel. And for a while, you would see, while measured in weeks, you would see a collapse.

11:23But then refiners would reduce runs and prices would rise again. So you would get a short-term abrupt collapse in pump prices for diesel in Texas, Louisiana, sort of the mid-continent area. On the coasts, I don't think they fall much. They probably go higher. And the U.S. would shatter its reputation as a safe place to invest for a generation. But, Bob, we are under two months away from the midterm elections. It sounds like potentially this is on the table for the president of the United States, especially when you have Senator John Thune saying he's open to it. Right, Anne-Marie. Well, RapidN has had a 35 percent probability on export restrictions since April.

12:06We've been focused on this. This has been debated. It was actively debated when the war first started, went into a bit of a lull during the summer, and it is back. I don't know of an economist inside the administration, inside the White House, or a policy advisor who thinks banning exports of diesel or gasoline would be a good idea. The risk is the president, in desperation, may choose it to get that short-term few weeks of a lower pump price. Maybe it moves the Texas Senate race. Maybe it moves Michigan. That is the risk. But I don't know of an economist inside the administration, outside the administration, who thinks it would be a good idea.

12:48But it is a solid 35 percent with upside risk. And if we can't sort of get a cap in prices here in the next few weeks, I think the risk is that that 35 percent will go higher. Well, if diesel prices drop, won't refiners just start moving more of that into refining gasoline? And do you expect those prices to rise? Well, I think if diesel exports are banned, refiners will drop runs. They export about 25 percent of their diesel output. That'll all go away and they will drop runs. They will therefore make less gasoline. And gasoline, while we're at the end of the season, stocks are still tight. and we could get tighter there.

13:33Remember, refineries have deferred maintenance. Christmas has come early for them. They're making a killing. And so they're putting off sorely needed refinery maintenance. If the president comes out and bans diesel exports or gasoline exports or all product exports, I think refiners will say, you know what, this is a great time to shut down and get some much needed repairs going on. So I think you'd see a real drop in refined product output in the United States. And the shortage would just be intensified globally. And I can't overstate what a scramble you would have for Rotterdam and Asia, diesel and jet.

14:09Stay with us. More Bloomberg Surveillance coming up after this.

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15:52Let's turn to geopolitics. World leaders gathering here in New York City for the UN General Assembly as the ongoing conflict with Iran and the Russia-Ukraine war raise prolonged energy disruption risk. The Latvian Foreign Minister, Baiba Braza, joins us now for more here in New York. Minister, good morning. Good morning. Welcome to the programme. You're in a very, very important position in Europe. If you just look at the map, rather like Ukraine, you share a border with Belarus and Russia. Can you share with us, for a US audience if you may, Just how tense things are on the ground for you and your country at the moment?

16:24Not very tense. We have been member of the EU and NATO for more than 20 years, and we have made sure that we are safe and secure. Of course, the fact that the DOJ indicted a number of people here, also in the US, on terrorism financing charges for murder for hire, to commit crimes on European soil, to commit sabotage, to commit all types of actions on behalf of Russian state is a serious worry because we have noticed that this activity, which is subconventional activity, to try to implement Russia's goals in Ukraine but on European soil is continuing. And that's where our security services, intelligence agencies, together with the US, Europeans and others, are paying a lot of attention and making sure that those actions don't succeed.

17:18But, as we have seen in Leipzig airport, where Russian agents tried to attack with an armed drone, and where they didn't succeed this time. But it can lead to casualties also in Europe or in the U.S., for that matter, as we saw from the DOJ's indictment. So we take it seriously. But militarily, we support Ukraine. We do what is necessary for Russia. Do not succeed in its blatant aggression against Ukraine. So continuing to provide that assistance to Ukraine is crucially important. So we welcome the passing of Graham Bill, making sure that sanctions on Russia are strong, that we are all united, but in the same time that we invest in defence to be able to deter and not let Russia miss out.

18:05Minister, let's talk about that investment. Almost 5 % of GDP. You're one of the biggest spenders as a percentage of GDP within NATO. You alluded to it. You articulated the nature of the threat. It's changed, drone incursions. How are you spending that money on defence? How different is the spend now? So it's in several parts. One is indeed in sort of hardcore military capabilities, which is almost 5%, as you rightly said. Sometimes it's 5%, but depending on the economic growth, like this year it's 3 % this far, which is quite substantial. So, you know, it sort of fluctuates, that percentage. But what we have is we need artillery and firepower, so we are investing in that, buying ammunition.

18:49But we also need so-called dual technology, so we invest quite a bit in various unmanned drone capacities. And that is what also returns investment to the economy. So very much our exports have been really increased through this activity on the ground. And we see it because the foreign ministry issues the strategic goods licenses, so we can see very clearly it has tripled. It has tripled what we produce. So that investment gives also benefits to the economy and the growth. And then, of course, the third part is to make sure that also regulation is relaxed because you cannot just have a civilian time regulation for the production of what you need.

19:36So making sure that both at the national level, there is more sort of leeway and faster investment in developing military capabilities, but also at European level, the so-called deregulation succeeds. So this is where with the U.S. we have very communal interests also at the European level because the U.S. also is looking for easier sort of doing business in Europe. So deregulation will help also the U.S. businesses in that respect. I'd love to get your reaction to the Polish prime minister last week talking about potentially Russia might want to test the resolve of NATO, the United States as well, being part of NATO in terms of trying to prove maybe that Article 5 is more theoretical, not practical, and maybe have some sort of drone incursion, which for Latvia could be quite worrisome.

20:25We have had six, seven drone incidents in the last couple of years, so it's not comparable to what Ukraine is experiencing or, you know, what Ukraine is doing in Russia with 400, 500 drones per night. So we should be able to deal with them. Currently, it's been done both by national efforts and allied efforts, jets taking down the drones. we are developing the whole sort of ecosystem with interception, with effectives, with radars, you know, to be able to really detect and take down whatever threat is necessary. But I think what Polish Prime Minister, UK, France, we have said that already for quite a long time, is that the Russian subconventional activity will increase.

21:14So it's not the open war with NATO Russia cannot allow itself because the wars, as we see in Ukraine, the three-day war in its fifth year, the wars are unpredictable. And Russia doesn't have that capacity and capability currently. But everything below, cyber massive attacks, hostile information attacks and operations, corruption, influence operations, sabotage, it's all leading to the same objective, to its war in Ukraine. and what they are trying to achieve in Ukraine and in the European states and the U.S. to deny support for Ukraine. To split societies, undermine commitments of the governments, split political forces by investing in the radical wings.

22:03Do you see a split right now between your partners at NATO? Well, we see that there are various political forces in various countries that are enabled by Russia. who are not supportive of Ukraine's self-defense. Which countries do you think they are? I cannot name them. I'm foreign minister, but I think, you know... Why can't you name them because you're the foreign minister? Because I don't comment on internal affairs in other countries, but quite clearly we have seen a number of movements in various countries where sort of marginal left-wing and marginal right-wing forces have been enabled by loans from Russia, by open support from Russia, but also by narratives.

22:45It's like, why should we support Ukraine? You know, it's prolonging the war. Well, no, our point is Ukraine is defending herself in accordance with the UN Charter of 51 and Russia's political objectives that it has tried to achieve on the battlefield by open aggression are not succeeding. And now it's trying to get it through the negotiations. So So that is something that we have been very clear. But also this subconventional activity, this, yes, it can be an armed attack, but it's not an open military attack. That these activities will continue. They will increase. They will be more and more sort of bold.

23:29So the security, intelligence, cooperation, the whole society understanding that these threats can increase have to be there. We saw attempts at DHL planes to be in the packages, the bombs to be put in packages. We saw attempts at the arson at Kyrstami's properties. We saw attempts to derail trains in Poland. So, you know, this can lead to serious, serious civilian casualties in our country. So we have to take it seriously. 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.

24:12to 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.

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