Bloomberg Surveillance TV: September 24th, 2026

0:00If 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. When you're a business owner interested in expanding to new markets, there's a lot to consider and countless questions to answer before making the call. The most important one being, are you ready? That's where ChachiPT comes in. Give it a goal, add your files, and ask chat to help you map out different scenarios for the future of your business. So when growth is on the table, you've got an expansion plan ready to implement.

0:38Get started at ChachiPT.com. For big business, AI opened up a world of promise, but that world of promise turned into a world of pain. Cost spiraling, data trapped, security and governance risks multiplying, and ROI out of reach. That's why enterprises turn to Boomi to connect data, apps, and AI, helping them operate securely, efficiently, and at scale. Boomi turns a world of AI pain into a world of AI gain. As Boomi says, we got you. Head to boomi.com. That's B-O-O-M-I dot com. Bloomberg Audio Studios. Podcasts. Radio. News.

1:24This 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 lower and yields at multi-decade highs. crude resuming its advance. Oseng Kwan of Wells Fargo trimming its year-end target to 7 ,700 from 7 ,950, writing oil, has also been in the driver's seat for both stocks and bonds.

2:04Oseng joins us now for more. Oseng, good morning. Morning. What's the downside here? Still 5 % to 10 %? Yeah, that's what we're penciling in. And I'm usually in the camp that the level of interest rates doesn't really matter. It's really the volatility of rates. But if you look at the equity allocation today versus bond allocation is 72 % versus 28%. It's at the highest level since 1969. And if you try to estimate what the fair equity allocation should be based on the cost of equity and the 5 % interest rate, that number should be around 60%. So that 12 percentage point gap, that's the widest level since 1969 again.

2:40And that gap has usually explained how the S &P is going to do versus the risk-free rate. And if you assume like a 7 % EPS growth over the next five years per year, that basically, that 12 % basically implies 0 % access return on top of that 5 % risk-free rate for the S &P. So that's a pretty negative setup for equities overall. Let's talk about where we got to that negative setup. Is it because stocks are so good or bonds are so bad? It's really because of the allocation gap between the two. Stocks are good. It's inflation protected. Earnings are still rising. But we're no longer in the 2%, 3 % interest rate environment.

3:24We're firmly about 5 % now. So the allocation right now is not reflecting the 5 % interest rate word. And I think that's the risk, really. You put out a chart that I thought was fabulous last week talking about how equity allocations versus bonds are the highest going back to 1969 at about 72 percent. And ultimately, this is what we hear from everybody. Overweight equities, what are bonds doing in your portfolio? They're not a ballast anymore, and they weren't providing enough income to justify them versus stocks. Are we getting to a place where bonds are becoming competitive with stocks in a very real way?

4:01Do you see that in allocations in a meaningful way? I think so, at least a little bit. People who are hesitant to go into bonds are really worried about inflation and fiscal deficit as well. But if you're really worried about inflation, then you could go into TIPS. So I think there are some ways to sort of reallocate your assets, not just in equities, but in more diversified ways. And equity valuation isn't crazy, but it's still pretty elevated. And it's everyone's consensus that earnings are going to continue to print 20 % or 15 % plus. Our view is that earnings are elevated. Everyone's over-earning right now.

4:45If you look at the 10-year EPS cycle, by next year, we're going to have one of the strongest 10-year EPS cycles in history. That's only been surpassed by the 1950s bull market after the World War II. And 2027 EPS is expected to be about 42 % above the cyclically adjusted EPS based on our calculation. So, you know, everything that we're seeing is showing that earnings are likely cyclically elevated, which argues for lower multiples going forward. Let's just say oil prices come down. Let's say they come down by$10 to$20 per barrel. Does this whole thing change and suddenly you become bullish in stocks again?

5:26I think that's the bull case. The war ending or oil prices collapsing. and just purely based on how stocks have been trading versus oil. If WTI falls to$70,$75, then the S &P could potentially test$8 ,000. And hedge funds have degrossed quite a lot over the past two weeks, and we've seen massive regrossing Monday and Tuesday. But I still think based on positioning, I think the paint trade could potentially be higher from here in the near term. But I also wonder who's going to be the incremental buyer other than hedge funds because I think retail's tapped out. In the first half of the year, we were very bullish on retail flows because of one big beautiful bill.

6:13That money is gone now. And retail participation has been slowing for the past two months. Long-onlys are fully invested. We are in a corporate buyback blackout period for the next month. So other than hedge funds, I really don't see that many incremental buyers. I think it's just going to be choppy, regrossing, degrossing by hedge funds. So we expect volatility. Lisa asked about the downside of oil, but what if we see what people were talking about in the very beginning of this war? $150,$200 potentially on Brent. Yeah, I mean, that's the real bear case, right? I think if oil hits$150,$200, I think the S &P is going to be below$7 ,000.

6:54just purely based on the relationship. And we're probably going to be talking about a potential recession almost. I think the consumer is still OK at$100. We're not calling for a recession at$100. But if oil really goes up to$150 and$200, then I think there will be rising concerns that we could be headed to a downturn. Stay with us. More Bloomberg Surveillance coming up after this.

7:25If 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. With ChatGPT, you can do more than get answers. You can get things done. When you're running a business and looking to expand, you need a clear view of the landscape before making any decisions.

8:06ChatGPT 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.

8:36The Trump-She Summit, yielding some early success. The U.S. and China are agreeing to a two-month extension to their trade truce. Diplomatic efforts continuing today with a series of events with President Donald Trump and the Chinese leader. elsewhere the energy secretary chris wright telling oil industry leaders to prepare for curbs on diesel exports sources telling us here at bloomberg potential limits are still in discussion and a final decision has not been reached and finally calls for ai safeguards growing on the world stage it doesn't matter whether people put the risk of catastrophe at 10 or 1 or 12 or 0.1 none of these levels are remotely acceptable we called for global cooperation across the world between governments to set international standards as ai becomes more capable, people must remain at the center of AI decision making.

9:21The OpenAI CEO, Sam Altman, will join several tech leaders at a state dinner for Chinese leader Xi Jinping this evening. And already there's some pushback to what we're hearing from them. The Trump Xi summit just around the corner, the president already posting on social media saying AI will be a big topic of discussion, but I want to leave it exactly where it is. Scott Singer of the Carnegie Endowment for International Peace writing, the US and China should not pursue a grand bargain. They need to do more to regulate frontier AI safely, domestically, before they can engage in international coordination.

9:50Scott joins us now for more. Scott, good morning. Good morning. Lisa asked a key question earlier on this morning. Can there be coordination where there is limited trust? I think it has to happen. You know, it's clear that this is a superstitious technology that's going to power both economies. At the same time, when you have a technology that on the one hand has so many potential benefits but also has some risks, you need to be able to manage that competition in a pragmatic way. And I think that, you know, both the president and the treasury secretary are very pragmatic and are going to need to find ways to put guardrails on the relationship.

10:25There's this difficult question of what happens if there is some sort of super bug that is transmitting through the ecosystem and you have rogue bots that are going and causing a lot of damage, releasing biological weapons. I'm just coming out with a nightmare scenario. And the U.S. wants to alert China. How would they even do it? Do they pick up the phone and say, hey, Xi, we got a problem? Do they end up sending a fax? Do they email to whom it may concern? There's a problem. I mean, ultimately, can you walk us through what that could look like? I think that this is one of the areas where the two sides can begin to have an important conversation.

11:00Right now, there is no permanent channel to discuss these AI risks. And if there were a cross-border crisis. Like, imagine hypothetically that we saw with OpenAI Hugging Face was actually a US company whose agents hacked into a Chinese company or vice versa. That becomes a pretty scary cross-border crisis. And so having some permanent channel, some ability to exchange information, and making sure that actually works with how these systems actually operate. Can I jump in? You know, you guys are talking about hypotheticals, and you're saying, can you imagine? I don't have to imagine. I don't need a hypothetical.

11:34It happened. It happened with a virus five years ago, six years ago. We had a pandemic. Did we learn anything from that about coordination with the Chinese? I think that you need to build the infrastructure for coordination early. You know, you need to have the channels and have some idea of what information you're going to share at what time and build in domestic guardrails. You know, I think a key lesson here is to make sure that you are doing enough, you know, whether it's pandemic preparedness, whether it's AI safety, domestically to make sure that you are doing this precisely because it's in.

12:04your own interest. I think if China were to look back at this now, I don't think that COVID was favorable to their economy or their society. I think everyone would have wanted to redo with that one. Brammo, as soon as you said it, I was just thinking, well, we saw that. A virus did escape. Totally. I remember speaking to officials from China who said it was contained and it was going to be fine. But this is exactly the model. And it was exactly where I was thinking in the idea of, well, they didn't want to let on that their economy was potentially going to weaken significantly. They didn't want to show vulnerability, just to the same extent that both nations don't want to show how advanced they're getting and they don't want to show vulnerability.

12:39So how, given that backdrop, do you get communication to prevent some sort of catastrophic event like the one that we just had six years ago? I think it has to rely on enlightened self-interest. I mean, the economic devastation in the long term was so real for both countries and the social instability for both countries was so real. And so it's going to be hard to get sort of a more concrete idea of what specific information needs to be shared. But I think, you know, let diplomacy play its course. And for now, having some channel where as you're seeing some spooky things, we have reports coming from independent third-party evaluators that explain what we're seeing in the U.S.

13:18Being able to actually have a channel where we're sharing key insights without going really deep into the technical details that are much more sensitive, making sure that both sides understand some of the symptoms that are going to be similar potentially across both countries is going to be really important. As we continue this analogy towards what happened with COVID, China was part of the World Health Organization. We had a body that was supposed to help monitor all of this and actually help economies and citizens around the world. That didn't really work, did it? Well, I think that right now both sides are building up domestic infrastructure to test and understand what the risk landscape looks like.

13:56In the U.S., we have the Center for AI Standards Innovation. This is a super important body whose job is to make sure that the government has visibility into the risks. We have independent evaluators who are increasingly empowered by the companies and others to go in and monitor for these risks. And so, you know, China is beginning to build this sort of similar infrastructure now and how they engage with each other internationally is going to be important. And I think that this is just the most pragmatic way to actually make progress on this key issue. I think we all hope this time we'll do it the right way.

14:29Thank you, sir. Stay with us. More Bloomberg Surveillance coming up after this.

14:38With Jatchi BT, you can do more than get answers. You can get things done. When you're running a business and looking to expand, 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 ChachiPT.com.

15:15A business gift is never just a gift. It's a thank you, a milestone, a moment of appreciation. It's a message about how much someone matters and what your brand stands for. At 4imprint, you'll find thousands of customizable options, like premium apparel, branded drinkware, tech, totes, and more, each chosen not just for function, but for meaning. You can tailor every detail, your logo, your message, your presentation, so your gift feels personal and on-brand. And with expert support, dependable service, and thousands without a setup fee, creating something thoughtful doesn't mean making it complicated.

15:50Every order is backed by 4imprint's 360-degree guarantee, so you can be 4imprint certain it'll arrive exactly as expected, on time, and with the care your brand deserves. Because when the moment matters, the right gift speaks volumes, and the right partner makes it easy. Explore gifting with purpose and certainty at 4imprint.com. For imprint. For certain.

16:16Under Savannah's this morning, strong growth fueling a bond market sell-off. The economy is very strong. And what I would say is we saw the PMI numbers, strongest, the purchasing managers agreement index, strongest since 2021. We will get to the other side of this Iran conflict. the energy prices will drop and you will pick your purchasing power back up. I want to see Besant quoting new orders. Get on Fox and Friends this morning and quote new orders. How about ADP? Why not? Yeah, I mean, honestly. Make it happen. Let's get to this bond market. Ed Hosseini of Columbia Threadneedle writing, the Fed will have to work harder to squeeze excess demand out of this economy.

17:00They will be looking for feedback from markets. Ed joins us now for more. Ed, good morning. Good to see you. Good morning. Is this bond market a buy yet? I think it's getting in the zone, to be honest. I think we are starting to overshoot a little bit. In terms of what we know about the demand story right now versus about 100 basis points or so of Fed hikes, I feel like we found a nice equilibrium right now where there's some value coming up. Absolutely. Just on the front end, as you think about what the floor is for hikes and where the ceiling might be, what's the range of outcomes you and the team are discussing at the moment?

17:31I would kind of ballpark three to four as the floor. That's roughly where we are priced for right now. I think it will take some sort of accident for us to not get to that level in terms of a growth accident, labor market accident. These things happen. But getting to that three to four hike level over the next six months, I think, is going to be critical. I think the speed matters as well. And then I think we get the luxury of taking a little bit of a step back. Will that do anything to counter inflation if the Fed were to hike three or four more times? This is a really good question. if the theory of inflation is we have some excess demand in the system, that demand ultimately has to be, to some extent, interest rate sensitive for us to squeeze it out over the next, again, 12 to 18 months, the answer is yes.

18:21This will take a step in the right direction. If the answer is, look, inflation is a supply side phenomenon. There are tariffs, there are energy shocks playing through. There's a number of shocks playing through that are interest rate agnostic. They may phase out on their own. The Fed hikes may just coincide with inflation coming down. We'll take that as well. It just keeps inflation expectations in the right place. Do you have confidence to go ultra-long, go into 30-year debt with yields at the highest going back to 2004? Do you think that the long end is being uniquely affected by factors that aren't going to change regardless of what the Fed does?

19:01I would say, you know, my read of the repricing so far this year is the large, vast majority has been driven by the Fed. There's been very little term premium. There's been very little in terms of the fiscal story that has changed. Now, the fiscal story isn't great, but it hasn't changed this year. I mean, the expected deficits are right in that 6 % area. If anything, the fact that growth is accelerating a little bit take some of the pressure off the fiscal story in the background. So we have a better shot at achieving a slightly smaller deficit in the coming years if that growth story stays in place.

19:38When it comes to the Fed outlook for the rest of the year, what are you expecting? My baseline is consecutive hikes through December. So even October's in play. A lot of people say you can't because of the politics, just days away from an election. I mean, I think they've given us a decent amount of history to show that they can be active ahead of elections, and that's not really good. A cut is different though than a hike. A cut is different than a hike. Absolutely. But once you embark on this process and it becomes clear that what you're doing is being reinforced by the economy, I think it makes sense to go in a pretty racket.

20:15Can we finish on market feedback, the kind of feedback they're getting from markets already and just turn to credit briefly. Any flashing lights anywhere beneath the surface that are telling them you're doing the work, this is working? The short answer in risk markets is no. Where you are getting feedback is in rates markets. So the yield curve is flattening out. Real rates are going up. So this is not a break even story. That shows you that you are putting the brakes through the rates market. And the dollar is starting to strengthen as well. So those are first steps in the feedback. A crack in risk markets, you can't really engineer that.

20:49You probably don't want to engineer it. But you do want to see tighter financial conditions. Is it sufficient just to have that tighter financial conditions just through those two channels you described? or do you need it to happen elsewhere? We're going to find out. And I think usually the way this works is it affects risk appetite. It has not affected risk appetite so far. We just never know exactly where that threshold is. But I think we're moving in that direction, absolutely. 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.

21:22to 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.

21:53independent agents to help protect businesses, homes, valuables, and more. 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 c-i-n-f-i-n dot com. For big business, AI opened up a world of promise, but that world of promise turned into a world of pain. Cost spiraling, data trapped, security and governance risks multiplying and ROI out of reach. That's why enterprises turn to Boomi to connect data, apps, and AI, helping them operate securely, efficiently, and at scale.

22:33Boomi turns a world of AI pain into a world of AI gain. As Boomi says, we got you. Head to boomi.com. That's B-O-O-M-I.com. 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. 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.