Bloomberg Surveillance TV: June 16th, 2026

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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amerie 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 six to nine am 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.

Stocks hovering at fresh records as investors await the first policy decision under a new regime. Victoria Fernandez of Cross Global Investments writing, we believe there is still room to run even if we get higher rates. As long as earnings and margins remain strong, the market can digest a rotation of leadership.

Victoria joins us.

Now, Victoria, where else do you see this market having more room to run?

Yeah?

Well, I think when you look at the rotation that we've seen, we saw those high momentum, those high beta names really come back over the last week, and so other areas have started to pick up a little bit. You saw it in some transportation, you saw it in healthcare, you saw it in some energy names. Obviously we've seen energy names come back a little bit based on the information of the last few days, but it's still not

Not necessarily specific sectors.

The names that are going to be able to run are those that have those positive factors like good free cash flow, good profitability, like return on equity, looking at strong earnings yield right, not just earnings growth, those high growth names, but relating that to pe So, I do

Well, Victoria, one of the things that you point out that one should be cautious on. It's clearly not outright bearish by any means, but is the consumer. What are you seeing that's leading you just to be a little bit more tepid about the state of the American consumer.

Yeah, so, you know, Danny, it's really amazing when you think of how well the consumer has held up over the last months. As we've been very concerned about things that are happening, and you're looking at wages that are really stagnating, You're looking at the difference between real wage growth and real consumption that continues to widen as savings continues to come down. We had a little bit of improvement in consumer confidence, but it's still very low.

We're back below levels that.

We saw in COVID on some of those things and small businesses.

That's to me a big yellow flag.

You've got the NFIB report that came out last week that really is not showing tremendous signs of improvement there. They are still struggling and still concerned. So as we get you know, additional signs of layoffs. We had more layoff reports reported this morning. I think that tells us the consumer is going to continue to be a little bit cautious in what they're doing, especially with some of the liquidity efforts we've seen earlier in this year start

I mean, we heard the news overnight that Blackrock is going to cut about two hundred roles worldwide. I think maybe perhaps what you're talking about, But Victoria, what do you do with that? I mean, AI is still hot. These companies are still spending a lot, even if there is some softness in hiring. How do you factor that into your trades at the moment.

Yeah, I think when you're looking at these companies, obviously Capex is really driving the productivity that we're seeing, and we're hoping productivity is going to be supportive of earnings. So I think you go back to some of those elements we were talking about a minute ago. I think you look at what are the companies that give us those high earnings yield. I mean, look at a company like a video you can still add to your tech positions and videos doing well Fortinet.

Look at Cybersecurity again.

High earnings yield, so good earnings growth, but a lower pe relative to other companies within its sector and within the market. Even Adobe is fitting within that category and

Could be advantageous as well.

Victoria.

Of course, we have Kevin Walsh's first meeting as FED chair. We just heard from Betsy do former FED governor, says Kevin Warsh is going to be a hall and she's expecting a complete rewrite of the statement.

What are you expecting from him?

Yeah, I was surprised to hear say that she expects a complete rewrite.

I do think we'll see some changes.

Obviously, everyone's looking to have that easing bias removed, and I think that's somewhat given at this point. What I'm going to be looking at is what is being told around how communication is going to happen in the future. I think that is going to be the key point that we're looking at here. Does Walsh even give us a dot on the SEP. I'll be very curious to see if that happens. I don't think he's going to replace Myron's dot. Where is he going to land on

How do you expect the market maybe to test him when we see the market test new FED chairs, but this is a known figure, he's been around his establishment figure for years.

Do you think the market's going to test him?

You know they say they're always tested, and we've seen it historically. Maybe the test is going to be sitting here where we are right now, where labor market is actually holding its own somewhat right now, so it's not giving you really a case to ease, which we assume he's coming in with maybe a little bias towards wanting to ease, but at the same time having this sticky inflation. I don't think inflation is going to come down just because we get a deal signed with Iran potentially over

So I think there's that may be his test.

We've got that sticky inflation, you know, labor somewhat holding steady. So with his easing bias, will he actually be more of a hawk. I think that's what we have to wait and see.

Or maybe he already got the test with just a market that started to remove from it Victoria. I mean, maybe that's a help for him at this moment. I was home to Amory about this idea before that. There does seem to be sort of a disconnective with the bond market and the stock.

Market has been doing in the recent week.

Both of them clearly are pricing in something of a piece premium, but the equity market seems to have gone further, almost at a high when we haven't quitely removed any we haven't totally removed the hiking bias from what the future's probability you're pricing in from this FED. What do you make of that slight disconnect between the two markets.

Yeah, it's interesting.

So I actually manage fixed income strategies. I mean, I grew up in the fixed income world, and we tend to be a little more cautious and the things that we do. And I think that's what the bond market is doing here. They're saying, look, we're not blowing out, you know, anything on credit spreads. We're not saying there's this tremendous issue that we have to look at, no credit concerns right now. But we also are not so sure that inflation is going to come down very quickly.

We're not so sure that this deal.

Or memorandum of understanding is going to flow through and help earnings. Like the equity market is tending to just be all in on that thought process. So I just think the bond market is being a little bit more cautious to say, wait and show me market right now.

And that's what the numbers are showing.

I think as we go over the next couple of weeks, if we get more concrete answers, you might see the bond market respond a little bit more.

Stay with us multile impeg, Savannah's coming up off.

To this.

Investors awaiting Kevin Walsh's first meeting as Federal Reserve chair as warring inflation adds to uncertainty over the direction of rates of Torsten's Slock of Apollo writing with geopolitical risk easing and FED shair, Kevin Warsh focus on simplifying FED communication the number of words and the FOMC statement could move down to levels seen under Alan Greenspan. Torsen joins us, Now, okay, so a statement comes out, do you need to read it first or just do a quick word count?

We certainly need to read it first because the key issue here is, of course what style of communication we're going to get, and in particular, what is the forward guidance? Is that any forward guidance? Is he going to say that we do not like forward guidance. This is still a very very unclear area in terms of what is the communications style and what is Kevin what was going to do in terms of what is he going to say.

At the press.

Conference, former Fed Governor Betsy Duke was just on with us and she was talking about how there could be a complete rewrite of the statement not just a little tweak of the easing bias, is that what you're expecting as well?

I think that is something that we should expect. That's one of the outcomes we just don't know. So that's the reason why the market, of course, has been used to having very well anchored expectations around the dot plot. The dot plot has been around now for fifteen years. Almost the ACP meaning the forecast, been around for almost twenty years, so most people in financial markets have grown up with very anchored expectations about the economic outlook and

Of course, it's good to have an anchor in the sense.

That that's clear then where everyone knows where we're going. But at the same time, if the world changes, then it's not good to have an anchor. And this is the debate up on the scale, namely, do we want to have an anchor or do we not want to have an anchor that will give more flexibility to their fund sheet in.

This very moment.

If we remove some of that and we remove some of the forward guidance, does that not all things considered make us a little bit more hawkish because we don't have that residual easing bias that had been there before.

Yes, and next with.

Particularly important if we begin to think about the discussion around rates, because Kevin Wiss has also been focusing on shrinking the balance sheet, and a compromise could potentially be that, well, we're not going to change much communication on rates, but maybe saying that the balancey will be smaller is simplicitly

Fed should be tightening financial positions. Do you think this is a.

Chair warsh who will want to sort of galvanize a consensus as Powell had, And how challenging will that be? If so, if he does want to implement something in his words of a regime.

Change for the Fed, well, Kevin was knows what he's doing.

But I think what is a very important challenge of course for him is that he wants any changes, Basically he needs to have the other eleven members on their firm, see the voting members on board with whatever he wants

When we get the statement.

Tomorrow, do you think we get less FED speak then? With Kevin Warsh as the.

FED chair, Well, that's really challenging because telling the regional FED presidents that they're not allowed to talk more, even the governors that they're not to talk more, that's just not possible. And given we have had a history now of a lot of communication. That means also the market has been putting more weight on the fit chair, and I think the Markel continues to put most weight on the fit chair.

And don't you think we've seen more of this robust debate and communication because of Steve Myron, who was a Trump appointee. So it would be pretty odd if Kevin moorsh came in and said, actually stopped talking as much.

Yeah, because we've also had some of course, to your point here, we have some quite diverting views in terms of the dot plot. And this is of course also why the dot plot creates sometimes a bit more confusion. Yes, it may be anchoring expectations, but the stain of deviation of those expectations also get a lot of attention. In other words, how divergent are the views in terms of what's going to happen in the future, And we don't

There's also debate right now whether or not Kevin Moosh put a dot on the plot.

Yeah, because he could also decide to This would be highly unusual.

Of course, that will of course.

Decide he could decide to say I'm not going to put in a dot. He could also decide to say I'm not going to submit my CP forecast, meaning his forecast for he thinks the economy is going.

That would be pretty dramatic.

So if the goal here for him, remember the most important job for the FT chair is really to create consensus about a decision. All books written by previous Fetchair as they all emphasize that a key part of the job is to basically call around to all the voting here from C members and also the non voting members and say, what do you think should be the outcome

It's complicated, but does this week's news on Iran a deal with memorandum of understanding being designed on fighting make things less complicated for Fetchhair.

Worsh absolutely, because one key issue was that inflation is still roughly three percent in COPCE and COCPI, And the problem is when inflation is three and the FEDS target is two, then we have at least one good news is of course that we have energy prices coming down, but we still have a fairly strong economy getting tailwins from the AI boom, getting tailwins from the one big

So the key answer to your question is he absolutely is absolutely a help. He's helped by the fact that enterprise is how moving low. He is help.

But again to your point to us, and there's inflation coming from other parts of this economy. So if he wants to lean more dubbish, if he wants to kind of like fulfill the promise that he had been talking to you from Trump, what points to the parts of this economy can he point to you to say we can still.

Get a cut this year.

Yeah, And the double saute is, of course that when energy prices go down, then we spend less money and energy and we spend more money on something else. And given that literally all high frequency indicators are still very strong, still very strong data from the TSA, how many people travel on airplanes, still very strong data on the weekly data from Redbook on how many people are consuming stuff

Towards a more hawkish stands.

Stay with us, multiple impex Savannah's coming up after this.

Ariana Salvator, the head of US public policy strategy at Morgan Stanley, joins us now for more. Thank you so much for joining us. How important do you think it was for the president to get this done now before we go into peak driving season in the summer, before everyone starts traveling for July.

Fourth, and then of course the midterms.

Yeah.

Absolutely.

When we think about Trump's incentive structure, you can't discount the importance of gasoline prices, right, But when we think about this in the election, we think about this in the context of affordability. Cost of living is the number one issue for voters, right aside from foreign policy, even the Iran war, you know, being largely net unfavorable for voters. And on that front, we think what matters more than the actual gas line price in the absolute level is

What to expect.

When you look at pulling and you look at surveys, you see a consumer that's frustrated. At the same time, the data shows they've been relatively resilient.

Right, How do you know square that circle?

Yeah, So when we think about the consumer and the outlook there, our economists are forecasting a step down on a relative basis to last year, right, so just about one point eight percent.

That's still you know, okay levels.

It's not as healthy as it was last year, per se, but things aren't falling off a cliff.

And I think that's from a.

Political perspective, the most important point to underscore, right, So this is not the type of environment that's going to necessitate another reconciliation package, some sort of direct relief to consumers,

I was going to say, and this is something you've noted as well, that prediction market, specifically Polymarket has an eighty three percent odds that the Democrats take the House.

How off sides is that then?

So, I mean, look, the House and the Senate are completely different animals, and we think about this. So if we look at the House, like I said, historical precedent is strong, the president's party almost always loses seats, I'd say the bar is pretty low, right, So Speaker Johnson there is working with a very thin majority. So I think House odds being greater than fifty percent certainly makes

You know, it's not necessarily a kind of.

A done deal.

Of Republicans are also coming into that which with a bigger majority than they've had in previous elections too.

Again, something you point out, which I feel like is app to not discuss enough that a lot of the things that have mattered for this market, things like tariffs, are within the president's purview. So how should investors think if there is any sort of change bit in the House or the Senate, how much it matters for markets?

So look, if you're a macro investor and equity investor, the answer to that question is going to be different. So when I think about this from a macro perspective, to your point, tariffs, deregulation, immigration controls, foreign policy, to a politics, all that is in the president's control, and I think that kind of policy risk is likely to stay elevated.

Throughout the next couple of years.

Too.

When I think about this from a legislative perspective, what really matters here? I think there is some nuance, And I think in particular, if you look at things like healthcare and consumer sectors, that's where the difference comes in.

Because we had the one.

Big, Beautiful Bill Act legislated last summer that included some spending cuts right that are going to take effect twenty seven and twenty eight. Now, I'm of the view that if you see Democrats win both the House and the Senate, and they have what I call a cohesive majority, so they're able to unify and coalesce around some of the key policy asks. They may be able to work with

Ariana when it comes to affordability.

The President, when he was asked about negotiating Ron, says he doesn't think of American's financial situation. The context was, I don't think of them when I'm thinking of a nuclear ron. But that's going to be clipped and played. I was recently with the President and I asked him about getting into a knixt game. The game he went to, the getting in price was eight thousand dollars for nosebleed tickets, and he said, basically, that's life and it's semi free on TV.

Are these messages going to land with consumers?

What we're seeing across the board is exactly that point, right. I think that's reflected in the President's approval rating. Kind of taking a bit of a dip over the past few months, but affordability policy has really been top of mine since I would say January of this year. The reality is, there's a lot that can be said about affordability policy, is very little that can be done.

When we think about the total universe.

Of what's available and then what's kind of quick to implement, what can impact voters ahead of November, there's not that much out there. So we think about something like housing policy. You know, we have the Road to Housing Act getting kind of pingpong back and forth between the House and Senate right now. That's not something that's going to really you know, implement and matter for voters ahead of November.

This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, an gient politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am 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.