In short
How American football’s strategic ambiguity (not tipping run/pass, disguising blitzes) maps to financial markets, where uncertainty is high but investors may not be compensated enough.
Guest backgrounds
No guests are interviewed in this episode; Andrew Sheets (Morgan Stanley) references prior discussions by Matthew Hornback and Vichy Troupetor.
Key claims
Markets price about a two-thirds chance of a Fed rate hike next week, but Jackson Hole remarks by Fed Chair Warsh are ambiguous (“sufficient speed,” “underlying inflation,” “work to do”), so Morgan Stanley forecasts the Fed stays on hold (close call). AI hyperscaler spending could exceed $1.3T in 2027, but financing mix is unclear. Energy ambiguity: oil/gas disruptions and Russian refining issues lead to raised forecasts (Brent $100/bbl, European gas 88 euros/MWh).
Notable examples
NFL second-and-seven pass vs run; Jackson Hole quote parsing; $1.3T AI spending; Brent and European gas forecast increases.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOThe Popularity of Football and Its Strategic Complexity
0:45 to 2:24
Exploration of football's immense popularity and the strategic ambiguity involved in the game.
“Not tipping, whether it's a run or a pass.”
Ambiguity in Financial Markets and the Fed
2:24 to 4:00
Discussion on the Fed's rate hike uncertainty and its parallels to football strategy.
“There's an increasingly rich menu of options for financing across public and private markets, from investment-grade bonds to asset-backed securities, from direct financing to guarantees.”
Ambiguity in AI Financing and Energy Markets
4:00 to 4:24
Insight into the ambiguous financing in AI and the uncertain dynamics in energy markets.
“We continue to expect record investment-grade supply this year with wider spreads as a release valve and prefer collateral-backed assets over unsecured corporates.”
Investor Implications of Ambiguity
4:24 to 4:50
Analyzing how ambiguity affects investment strategies and demands for compensation.
“But when the range of outcomes is wide and the price of uncertainty is low, we think investors should demand more compensation for it.”
Transcript
Automatic transcript. May contain errors.0:00Andrew Sheets:Welcome to Thoughts on the Market. I'm Andrew Sheets, Global Head of Fixed Income Research at Morgan Stanley. Today, what American football can teach us about the value of ambiguity. It's Thursday, September 10th at 2 p.m. in London.
0:17Andrew Sheets:I really like this time of year. It's a little cooler outside. There's the excitement in the air of a start of a million new school years. And of course, it's finally American football season. Of the top 100 U.S. television telecasts in 2025, 90 were football games. In an increasingly divided world, with an increasingly fragmented ecosystem for content, this unanimity is stunning. And while many factors explain football's popularity, one that I've come to appreciate more with time is its strategic complexity. Especially the value of ambiguity. Not tipping, whether it's a run or a pass. Disguising whether and where you're going to blitz.
1:00Andrew Sheets:Coaches work hard to keep their options open until the last possible moment. And as we enter September, this strategy is not just confined to football. Take the Fed. Markets are pricing roughly two-thirds chance of a rate hike next week, about the same chance that an NFL team passes on second and seven. Part of that uncertainty comes from exactly how you parse Fed Chair Warsh's comments at Jackson Hole. Chair Warsh said the Fed needs to be confident that underlying inflation is moving towards its objective, quote, clearly and at sufficient speed. Otherwise, it has, quote, work to do. This was generally interpreted as a move closer to raising rates.
1:43But was it?
1:44Andrew Sheets:What is sufficient speed? What counts as underlying inflation? And what does work to do actually mean? After all, if inflation is better in the second half of the year, as our economists expect, this framing could just as easily justify no action. We forecast the Fed to stay on hold next week. It is, admittedly, a close call. Then there's ambiguity in AI financing. The numbers here are enormous. Morgan Stanley analysts forecast more than$1.3 trillion of spending among the six largest hyperscalers in 2027, a 60 % increase from the record-setting levels of this year. But how all this gets financed?
2:27Andrew Sheets:That's less certain. There's an increasingly rich menu of options for financing across public and private markets, from investment-grade bonds to asset-backed securities, from direct financing to guarantees. The spending seems likely, but what form it takes and how much it impacts other markets is more ambiguous. My colleagues Matthew Hornback and Vichy Troupetor discussed some of these ambiguities and their potential effect on Treasury yields earlier this week. Finally, ambiguity clouds the energy market. Some analysts are optimistic that oil flows are finally normalizing in the straighter Formuz.
3:05Andrew Sheets:We are not. Coupled with major disruptions to Russian refining capacity, we've now raised our fourth quarter forecast to$100 per barrel for Brent oil and 88 euros per megawatt hour for European natural gas. Across these three themes, some of this ambiguity is intentional. Some simply reflects a wide range of possible outcomes. In football and in markets, keeping your options open can be valuable when you're calling the plays, but it's less attractive when you're being asked to price them. And that, for us, is the issue. There is plenty of uncertainty. We're not sure investors are being paid enough for it.
3:47Andrew Sheets:A close-call September Fed meeting, adverse seasonality, and very low levels of expected volatility leave us positioned for higher volatility across macro markets and cautious on mortgage-backed securities. In credit, we think all of this issuance is a question of price, not capacity. We continue to expect record investment-grade supply this year with wider spreads as a release valve and prefer collateral-backed assets over unsecured corporates. And with oil a risk to both stocks and bonds, our U.S. equity strategists think that energy equities offer an attractive hedge. Ambiguity has value. But when the range of outcomes is wide and the price of uncertainty is low, we think investors should demand more compensation for it.
4:33Andrew Sheets:Thank you, as always, for your time. If you find Thoughts of the Market useful, let us know by leaving a review wherever you listen. And also tell a friend or colleague about us today. The preceding content is informational only and based on information available when created. It is not an offer or solicitation, nor is it tax or legal advice. It does not consider your financial circumstances and objectives and may not be suitable for you.
From the publisher
Our Global Head of Fixed Income Research Andrew Sheets discusses when markets may not adequately compensate investors for uncertainty around themes like Fed policy, AI financing and energy supply.
Read more insights from Morgan Stanley.
----- Transcript -----
Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Global Head of Fixed Income Research at Morgan Stanley. Today, what American football can teach us about the value of ambiguity.
It's Thursday, September 10th at 2p.m. in London.
I really like this time of year. It's a little cooler outside. There's the excitement in the air of a start of a million new school years. And of course, it's finally American football season. Of the top one hundred US television telecasts in 2025, ninety were football games. In an increasingly divided world with an increasingly fragmented ecosystem for content, this unanimity is stunning. And while many factors explain football's popularity, one that I've come to appreciate more with time is its strategic complexity, especially the value of ambiguity.
Not tipping whether the play is a run or a pass, disguising whether and where you're going to blitz. Coaches work hard to keep their options open until the last possible moment. And as we enter September, this strategy is not just confined to football.
Take the Fed. Markets are pricing a roughly two-thirds chance of a rate hike next week, about the same chance that an NFL team passes on second and seven. Part of that uncertainty comes from exactly how you parse Fed Chair Warsh's comments at Jackson Hole. Chair Warsh said the Fed needs to be confident that underlying inflation is moving towards its objective, “clearly and at sufficient speed.” Otherwise, it has, "work to do." This was generally interpreted as a move closer to raising rates. But was it? What is sufficient speed? What counts as underlying inflation? And what does “work to do” actually mean? After all, if inflation is better in the second half of the year, as our economists expect, this framing could just as easily justify no action. We forecast the Fed to stay on hold next week. It is admittedly a close call.
Then there's ambiguity in AI financing. The numbers here are enormous. Morgan Stanley analysts forecast more than 1.3 trillion dollars of spending among the six largest hyperscalers in 2027, a sixty percent increase from the record-setting levels of this year. But how all this gets financed, that's less certain. There's an increasingly rich menu of options for financing across public and private markets, from investment-grade bonds to asset-backed securities, from direct financing to guarantees. The spending seems likely, but what form it takes and how much it impacts other markets is more ambiguous. My colleagues Matthew Hornbach and Vichy Tirupattur discussed some of these ambiguities and their potential effect on Treasury yields earlier this week.
Finally, ambiguity clouds the energy market. Some analysts are optimistic that oil flows are finally normalizing in the Strait of Hormuz. We are not. Coupled with major disruptions to Russian refining capacity, we've now raised our fourth quarter forecast to one hundred dollars per barrel for Brent oil and eighty-eight euros per megawatt hour for European natural gas.
Across these three themes, some of this ambiguity is intentional. Some simply reflects a wide range of possible outcomes. In football and in markets, keeping your options open can be valuable when you're calling the plays, but it's less attractive when you're being asked to price them. And that, for us, is the issue. There is plenty of uncertainty. We're not sure investors are being paid enough for it. A close call September Fed meeting, adverse seasonality, and very low levels of expected volatility leave us positioned for higher volatility across macro markets and cautious on mortgage-backed securities.
In credit, we think all of this issuance is a question of price, not capacity. We continue to expect record investment-grade supply this year with wider spreads as a release valve and prefer collateral-backed assets over unsecured corporates. And with oil a risk to both stocks and bonds, our US equity strategists think that energy equities offer an attractive hedge.
Ambiguity has value, but when the range of outcomes is wide and the price of uncertainty is low, we think investors should demand more compensation for it.
Thank you, as always, for your time. If you find Thoughts on the Market useful, let us know by leaving a review wherever you listen. And also tell a friend or colleague about us today.