Bloomberg Surveillance TV: October 6th, 2026

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This 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 Hour. We begin this hour with stocks adding to gains as the tech-heavy Nasdaq sits at fresh records. Greg Bowdle of BNP writing, there is no sign of a slowdown. More visibility on guidance and CapEx into 27 could create a fat right tail into year-end.

Greg joins us now for more. Greg, good morning. Good morning.

I don't hear that discussed much at all. I imagine you don't either. A lot of people are talking about the risk to the downside into year end.

Do you see it differently?

There are a lot of risks out there, which is one of the reasons why we think we should respect the right tail. Because people that we speak to have taken down risk because they're worried about the midterms. They're worried about deficits. They're worried about bond yields. They're worried about AI issuance. There's a whole kind of wall of worries, some of which are very tangible and real. But we also are in a very fierce earnings bull market.

People might find it difficult to reconcile all-time highs with you saying people are dialing back risk.

Make sense of that for people.

I think you have to look a little bit under the hood. So there's two things. One, all-time highs is quite a kind of dramatic statement. But the market is not that much higher from where it peaked in May. And we are in a very strong environment for earnings. Also, it depends which market you're looking at. Because you could go further down the market cap spectrum to things like the smaller mid-caps. Things look far less rosy there.

And when you talk to people, a lot of people are concerned about everything bad that can happen, although sometimes when I bring it up, they roll their eyes at me. I am curious whether you think that ultimately it is gas prices coming down that could be the catalyst for that broadening out, maybe an outperformance of some of the laggards and maybe a stabilization in some of the tech names.

It's one of the things that could help. It's probably necessary, but not a sufficient condition. I think there are a long list of reasons why we've seen long-end yields higher. Gas prices are definitely a part of that. But I think when we look at the earnings backdrop, it's very strong, and the epicenter of that is still large cap tech.

When we think about having long-end rates at highs, rate volatility at highs, it's not obvious that that's a good environment for some of the more old economy cyclicals and smaller cap companies.

What part of this right tail risk comes from the idea of the United States being increasingly a haven amid turmoil elsewhere?

I mean, that's always naturally something that provides a bit of a bid to U.S.

Assets.

But I think when we think really about right tail risk in U.S. equities, it's really an earning story rather than a risk story.

You mentioned the midterms as being something that continues to come up with clients as you're on the road. What exactly about the midterms are clients so worried about?

I don't think people are that worried about the midterms, but it's more when you look out to the calendar at the end of October and the end of November, there are just an awful lot of catalysts. So, we have the busiest week for earnings last week in October. That's also the week when we get the FOMC. The week after that, we have the midterms. So, people are struggling to navigate those confluence of catalysts. We don't think the midterms is going to be a big risk event for equities, but it's just another thing to worry about against this backdrop of higher rates and essentially a long list of things.

Looking down, though, to 2028, do you think potentially the midterms will offer up a little bit more insight on where policy is going when it comes to AI? Do you expect your clients worried about things like moratoriums and the slowing down of data centers and things like that?

So I think those are the type of things that people worry about. And clearly, some of that can also be done on a more local level. So that is the one topic which is a bit more live for risk assets going into the midterms. I think people struggle to trade or structure a portfolio for 2028 when it feels like we're in a different market cycle every three months.

If there's upside risk into year-end, where's the leadership coming from?

I think it has to come from large-cap tech.

It continues to come from tech.

Exactly.

So, our view is that we think there could be a very fat right tail for some of the kind of earnings leaders for tech. But we're also worried about some of the more rate-sensitive parts of the market. So, we are not making a big bullish call on equities. We're making a call on more rotation and dispersion. And we think this massive outperformance of tech versus things like small and mid caps that we've seen over the last six weeks can continue.

So their spread can get wider. People have got their doubts about that. They always point to negative breadth and say that means the market's got to catch down to where breadth is.

Why do you see it differently?

I'm just not sure that's necessary. We have a kind of two-speed economy where we have corporates seeing the strongest earnings growth that I've ever seen in my career. And then we have a bond market that is dislocated and is going to cause issues if we stay at these elevated levels for old economy, traditional cyclicals with more challenged balance sheets.

You know, to that point, one of the reasons why NVIDIA was up so much yesterday and really led the gains was because of Hanhai or Foxconn and their results that came out significantly above expectations. Where do you think the market and analysts on Wall Street are still underestimating the earnings in the tech universe?

The thing which is interesting is if you look at Q2 earnings and what you saw post Q2 earnings, you saw analysts take up 2026 earnings estimates. And they didn't take up 2027 as much. So that means the implied earnings growth actually went down a little bit. I don't think that's a reflection of people's actual beliefs. I think that's just behaviorally how analysts act. When we go into Q3 earnings, which will be the back end of October, we will get more guidance on CapEx and earnings expectations for 2027. And I think that's what the market will trade off.

How do you understand the idea that a lot of companies are trying to limit AI-related expenses and aren't necessarily seeing their profits grow nearly as quickly as the expected profits at some of the big tech companies? It seems like, sort of to John's point, this dislocation can only continue so long.

Yeah.

And I think that's one of the challenges is understanding how long that could go on. How long do you have to invest before you see the fruits of those labors? And I think those things are very, very hard to forecast, which is why I keep coming back to earnings as the core driver. I think those stocks that have the strongest earnings growth and have seen valuations compress, if you get more visibility out another year and you continue to get upgrades, those are the places we would focus on positions.

Are banks part of the tech trade or parts of the cyclical trade?

I personally think they're part of the cyclical trade. Obviously, there's going to be elements of tech that are going to creep into every sector. But I think the banks are not obviously, for me, the place that I would go as an epicenter of a tech earnings bull market.

Stay with us.

More Bloomberg surveillance coming up after this. Under surveillance this morning, promising a payout.

If the Democrats win, you will have an economic depression. If the Republicans win, you will each have $ 5, 000 in your pocket and economic success for our country.

So here's the latest this morning.

The President Donald Trump doubling down on his pledge to deliver checks if Republicans win the midterms. Voters remaining concerned about higher costs just four weeks away. From Election Day, George Pollack of Signum Global writing, we had expected over the past few weeks for longstanding factors favoring the GOP to allow the Republicans to regain their advantage. We now believe there is likely to be a Democratic sweep of Congress.

George joins us now for more. George, good morning.

Good morning. What's changed? What's led you to this conclusion? So firstly, we.

Expected the summer polling to shift to fall polling, where we see Republicans really gain an advantage. In 2022, for example, when Tim Ryan was facing off against J.D. Vance, he led in the summer polling. And then once we got to the fall, J.D. Vance never again struggled in a poll against Tim Ryan. That hasn't materialized. If anything, Democrats have either expanded or maintained their leads in states like Texas, in states like Ohio, in states like Maine, in states like Iowa. Secondly, we expected the GOP spending to have an impact. I understand that the GOP spending has different ad rates because it's not coming directly from the candidates.

But the basic idea was if you spent over half a billion dollars saying these Democrats are not suitable for these red seats, the Republican and lean Republican voters would come home.

They haven't come home.

And finally, Democratic candidate quality, Mary Paltola in Alaska, Josh Turek in Iowa, James Tallarico in Texas, has been strong enough to overcome Republican structural advantages in these heavily Republican states.

In these final weeks, we saw some funding dry up in places like North Carolina. Pretty much they think that Tillis' seat is going to flip to Democrat. Where are they trying to put the money right now in the final weeks?

So that's a great question.

Because actually yesterday, one part of the Republican institutions just stopped spending in Texas. They suspended $ 3. 5 million of spending because... They now have to compete in Kansas. They now have to compete in Nebraska. President Trump and Majority Leader John Thune are going to South Carolina. There's 28 days until the election. They're not going to South Carolina because they want to. They're going to because they see weakness. That means they're triaging in states like Texas, which they really shouldn't need to be. But they have no choice. So they're shifting funds to Kansas. I think they've now shifted $ 14 million in the past couple days to the state, which is historically Republican.

It's Iowa. It's Maine. It's Ohio. It's Alaska. And look, they have the.

They have the obvious fiscal advantage, but they don't get the same rates. And also, as we saw over the weekend, if you were watching the Jets versus the Bears, Ken Paxton's having national ads because there's no inventory left in the state of Texas, so you can only do national ads, which is much less effective.

I also am pretty sure I heard a national ad yesterday about Sherrod Brown for Ohio. That is reaching New York. When you look at all of these potential flips, it's about 10 or 12 states. Which are the top three that we should really be watching ahead of the election?

Look, I think Texas is going to flip.

And I've been long reluctant. I've been saying there's no way we get a blue Texas. But James Tallarico has now led 21 of 23 polls, the two polls he's led.

People thought this was Beto O'Rourke, though.

Correct.

But Beto O'Rourke never led a poll, was never consistently leading in a poll. And if you look at the average of Beto O'Rourke, he was on average anywhere from four to six points down against Ted Cruz. And also, while Ted Cruz has his folks who don't love him, he's not Ken Paxton. And moreover, in Texas itself, Ken Paxton's polling shows the internal that The race hasn't changed in three months.

I'm sorry.

There's been close to probably $ 300 million spent. I don't believe that there's been no change to that race in three months. Beyond Texas, I'm looking at Alaska. Alaska is a pretty unique political state. Look at the Speaker of the House. It's an independent coalition. It's not the typical. state that you would expect, a Republican state. It's been greatly impacted by Diesel. It's been greatly impacted by Doge.

It's been greatly impacted by the Jones Act waivers. Mary Peltola is also not your typical Democrat. She has a brand that goes beyond the national brand. I think it's, what, Faith, Freedom, and Family, and she advertises on her website that she owns over 100 long guns.

Not exactly the modern Democrat. But this is exactly the point, right?

I mean, this isn't Democrats winning. This is individuals who affiliate with the Democratic Party that are winning.

How do you expect, if.

There is some sort of Democrat majority, to change the Democratic Party in terms of the composition of who ends up winning?

See, that's a great question because look what we saw happen in 2022 when Democrats overperformed expectations and the Biden administration and Democrats in Congress were saying, okay, things aren't that bad. We actually are doing well. We're actually pretty well liked. The biggest risk for Democrats is even if they perform well in 2026, It is not a referendum on their policies. It's not a referendum on their ideas.

It's a referendum on the president. For 2026 and 2028, I view those two as very disconnected, other than maybe Keisha Lance Bottoms winning in Georgia to enable John Ossoff to run for president. But beyond that, reading 2026 in Democrats and the 2028 Democrats, I think, is a very dangerous thing to do.

Do you have a sense, though, reading 2028 in terms of the issues that are going to galvanize voters and, frankly, how different the issues are, depending on what age cohort you're going after?

So I was listening to your previous guest talk about AI. The concern for me is AI and data centers. The concern right now is really focused on environmental and cost. We're not even at AI yet. If you look at most polls, the top five concerns are those. Six is really the concern about AI. That's only going to intensify as we get more hugging face incidents and similar things like that. So I do think AI will be the 2028 election. But I think it's going to continue the trend of affordability because American voters want everything as cheaply as possible and don't want to suffer. And look, We've lived in a world where Jimmy Carter said you have to put on a sweater because energy is expensive. Well,

Americans today would not accept that logic.

You mentioned 2022.

I remember a similar conversation heading into 22, that the Biden administration was deep underwater and that the midterms would be a referendum on that administration because of affordability. Things change and things change quickly. You sound quite confident. What gives you pause, though? What's the one race, the one poll that's giving you pause at the moment that thinks maybe it won't go the way you're describing?

I think the biggest thing that's giving me pause is I have to rely on the state of Texas flipping. And, you know, Elon Musk is there. Greg Abbott is there running for a fourth term. Gina Hinojosa is a strong nominee for Democratic governor.

But She came out of nowhere. She's more progressive than the most.

And Republicans do not want to lose Texas, both because of funding purposes and because of energy purposes. They don't want the home of U.S. energy to go Democratic. That would be a huge indictment of the party. The fact that I have to say Texas is going blue gives me pause. But again, I have the confidence to at least put it in a note and put it out in public.

What about Republicans flipping Democratic seats? I'm thinking of New Hampshire.

Of course.

Look, if we were talking in 2028, I think in Michigan, Minnesota, and New Hampshire, Democrats would be in trouble and the story would be you have nominated comparatively weaker nominees and you've cost yourself seats.

That is absolutely the fact.

But I think in 2026, in this midterm environment, even considering Minnesota's scandal about spending and things of that nature, which perhaps Lieutenant Governor was not the strongest nominee because she's most strongly associated with that, I think those lean voters, those soft Democrats, soft Republicans say, OK, Michelle Tafoya, OK, John Sununu, OK, Mike Rogers in 2028, we would have gone with you.

2026, we just want a Democratic Senate.

You said something that a source recently said to me as well. The Democrats' biggest risk is winning big in 2026 and blowing it in 2028 because they will view it as people like their policies, not a referendum on Trump.

Correct.

Do you think if we get what you're envisioning for 2026, we're going to get more of a progressive left as the presidential candidate for 2028?

That's a really great question. I'm actually pretty optimistic we're not going to get the progressive left candidate. I think where the progressives are going to truly be an issue is in 2029. That's when I think we get the equivalent of the Democratic Green Tea Party. I think as long as President Donald Trump and Vice President J.D. Vance are in office, are running, you are going to see that the enemy becoming the unifying factor for the Democrats nationally.

And I would expect someone more like John Ossoff, for example, who both codes as progressive and moderate, has taken votes on things like Israel that are popular, has taken votes on things like immigration, like the Lake and Riley Act that code him more moderate. And I think he's going to do well in Georgia, win by probably 10 points.

Black Democrats in Georgia will be his biggest validators. And as long as Keisha Lance Bottoms wins the governor's race, he will be a favorite.

You think those kind of policies will win a Democratic primary? Yes, I do.

I think because Democrats at this juncture will be so focused on just winning and taking back control after four years in the wilderness.

I think they will. I think John also will still have the ability.

Moreover, look at someone like California Governor Gavin Newsom or Vice President Kamala Harris. I think Democratic voters, one on the part of the women is they feel burned having nominated Secretary Clinton and Vice President Harris.

They don't want to take that risk again.

And secondly, I think as much as Democratic base voters sometimes act irrationally, they do want to win and they understand that New York or California folks aren't going to really appeal to the broad-based electorate they need to get. So I do think John Ossoff, who, for example, when he talks about AI, actually sounds like he's used a product and wasn't just briefed about it by a member two minutes previously to the speech. I think in a time when Democrats are at a loss of ideas, someone like Senator Ossoff, who has ideas and beliefs and is willing to fight for them, will be popular with the base.

Stay with us. More Bloomberg surveillance coming up after this.

PIMCO releasing its new cyclical outlook report. They're finding three key buffers supporting economic resilience in America, booming AI investment, the ability of consumers to absorb higher costs and an incremental approach for central bank policy. Tiffany Wilding of PIMCO writing, we expect global growth to remain resilient. over our six to 12-month horizon, but we may see a change of outcomes if those buffers falter. Tiffany joins us now for more. Tiffany, welcome to the program. Let's talk about some of those buffers.

There's one I've got in mind, and that's the consumer resilience. Are they in a position, is this consumer in a position to stand up to these higher prices?

Yeah, I mean, so that's one of the supports, the key supports we've seen globally. And why just not only in the United States, but the global growth has been incredibly resilient. It's because consumers have been able to absorb these higher energy prices. And really, they've done that through a draw on savings. So we've seen savings rates decline dramatically.

not only in the United States, but elsewhere. And that's really buffering the real income hit from higher energy prices. Now, of course, there's a question around how long that can last. Many consumers came out of the pandemic with better balance sheets than where they came in. But there's some sort of finite level here where if we continue to have higher energy prices, you will see a consumer that is likely weakening looking ahead.

Tiffany, how important is the Wealth Channel at the moment to the upper end of the so-called K? We've had a couple of guests come on the program and discuss the potential for higher interest rates actually helping the higher-end consumer and not hurting demand.

How do you and the team see things? Yeah, I mean, we think the.

Wealth effect is an incredibly important channel that's supporting economic activity in the United States and elsewhere.

But obviously, U.S.

Equities have had an incredible run since the pandemic over the last several years, and that has created an incredible wealth effect. I think what the interesting paradox is right now, though, is the things, the drivers that are keeping the U.S. economy resilient, namely the AI story, through investment, through a wealth effect, through easier financial conditions— are also creating fragilities because those things are interconnected. Any one of those things starts to sputter and all of them really start to become a headwind instead of a tailwind to growth.

When you think of the wealth effects and the wealth channels, higher rates, though, potentially, to Jonathan's point, might be helpful in the upper end of the K. How much is the lower end, which, to you mentioned, they're having to dip into savings to just keep up with basic bills and higher energy costs?

Yeah, this continues to be a bifurcated economy. That's absolutely right. You have the households, you know, that do have a lot of equity exposure. They own their own homes. You know, those households are doing much better, you know, than folks that are looking to get a new mortgage now. Many are out of the market as a result of unaffordability because of higher interest rates. And, of course, inflation that, you know, has continued to remain sticky, you know, is also, you know, kind of creating, you know, headwinds to these lower-end consumers. You know, and we would argue that sort of AI's story is kind of creating new dimensions to this.

There's winners and losers within that story as well. We've seen a construction sector and specialty trade sector that has picked up as a result of the AI infrastructure build-out. You know, but outside of that, we've seen the kind of white collar workforce that's been, you know, more challenged, more pressured as a result of some of the task displacement associated with AI. So this is very much a winners and losers type of environment on a lot of dimensions.

You know, that creates an outlook where you have, you know, sort of a resilient baseline, but certainly fat tails around that distribution.

Tiffany, is it fair to say the Fed and its action will just make it worse for the losers?

Yeah.

And it will be indifferent to the winners right now?

Yeah, well, I mean, certainly central banks, you know, the fact that financial conditions have remained so stable has certainly contributed to the resilience. And it's certainly possible that you could have financial conditions that become much less supportive. And central banks and tightening associated with central bank policy here is could result in financial conditions that are tightening. The central banks have very blunt tools. They cannot, you know, sort of target who they, you know, really the economy, the thing that needs to be cooled off right now is the wealth effect, arguably more of the equity market.

Central banks, you know, don't have the ability to sort of target that with their tools. You know, and so as they are tightening financial conditions in a gradual way, you know, that impacts the broader economy. you know, including both sides of the K, you know, and of course that, you know, that can be challenging for folks, you know, that are on the lower end.

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.

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Bloomberg Surveillance TV: October 6th, 2026

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