Bloomberg Surveillance TV: October 28th, 2025

Bloomberg Audio Studios, Podcasts, radio news.

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amerie Hordernt. 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.

BMP.

Parabart, a trading unit taking a third quarter hit from sering dead. Adding to recent concerns about private credit, Depak Puri of Deutsche Bank Private Bank joins us now for more.

Deepak, Good morning, sir Morny.

Look, I think David Solomon did a decent job of joining a very very big line between systemic risk and credit concerns. They're still concerns I think about a turn in the credit cycle. Do you share them? Maybe epithodically?

Right, So seen one of these, you know, inducing credit risk every now and then come out for me, Jonathan. The biggest risk is this year we've seen two really big supply sharks, and we still don't know the full term ramifications.

I'm talking about tariffs and labor supply.

So once you have those two, you know, I think twenty twenty six might be a better test case for these kind of supply sharks and their unintended consequences. As for now, I think, you know, episodic news with regards to credit, I'll take it really episodically.

Well, at least one of them might be lulling this federal reserve into early interest rate reductions. The feed seems confused at the moment. We know we've seen it in the data, massive step down and pay ross growth. Got that? What's behind it? Demand or supply? Which one is it?

I think labor market is one of those conditions where demand adjust to supply in a way. So if the supply of you know, workers is reducing, I think demand is going to start adjusting to it. And what we're seeing is this automation drive from companies that is hurting, you know.

The oral supply. What is also a little bit disturbing is the.

Government shutdown, because I think it sort of exacerbates the labor market.

Can typically depack as you know, and Amory Slaffa, because typically we look right through this. It doesn't matter. It's a bump in the road, growth comes back. Basically, it's growth delayed and not derailed. Sure, the longer it goes on, you start to change your thoughts on that.

I think, yes, primarily because it's after a while it becomes exponential in terms of the output activity. So the first few weeks, i mean, the consensus is ten basis points of economic output gets reduced. But after a certain point, let's say this ends up being mid November, you're going to start seeing more concerns with regards to the you know, the impact it's having on broader economy, and then obviously they'll have an impact on the labor market.

So I would not be completely you.

Know, negating the fact that, yes, over the years, whenever we have a government shutdown, it tends to be you know, short lived and painless.

This time it might be different.

I'm only laughing because you say the word disturbing, which I also find disturbing. The market is creating fresh all time high. It's clearly ignoring it. Besides the impacting on the economy, how long could this federal reserver investors go without economic data.

Well, they have shown tremendous resilience students to drive their policy without much but because they're using anecdotal evidence as to get a grasp on where the economy is. And I think even there is a gunment shutdown crisis, let's say, quote unquote, there's so many other positives that are happening in the markets, Henry that I think takes too much precedence over gument shutdown. I think the fact that you are looking at an AI hyperscale capex spending guidance, which

Ease some of that.

So all these three things I think are taking much greater presidents over the government shutdown.

But these three things, it sounds like we have a tremendous amount of certainty on the trade story, seems more optimistic. With China, we know the Fed is going to cut ninety eight percent chance if it's going to be cutting interest rates, So what gives the market potentially, well, where do you see the market potentially having a little bit more of a cautious tone in regards to.

What Yeah, I think from now to the year end, once these three things are not disappointed, right, there's no disappointment with these three things. I think the seasonality will take over. So from now of the year end, I would not be surprised if you see a little bit more of this risk taking and then you know investors chasing a very high rally market, which is usually the case.

Because we didn't have the.

Data for the last two three months in totality, so what could potentially happen? And I think if this labor market statistics are similar to what we have seen in the privacy previous years, where June July was the weakness

But what do you think the source of that slowdown or that selfness as you'd call it for the first time, actually is And to what extent will it be offset by the massive tax refunds that I keep hearing about that are going to kick in in early next year, right.

I mean it depends.

I mean we are thinking it's going to be with a zero point six to zero point you know, one percent? You know right now you look at GDP now then now cast from New York FED everything is showing with a three handle.

So it's much better.

But these things can change quite quickly, so I would not be surprised if you start seeing a below potential GDP number for the first half of the year, and on top of that, you know, there might be some concerns about these credit conditions, these credit stresses that are developing, becoming a little bit more broader, default rates going up. So I think primarily that's one area of concern. And then last, but not the least, I would not be you know, the lagged and varying effect of the tariff.

Final question from me, in the forty seconds, we've got less greater potential for higher stocks or lower bond yards in the first half of next year.

How about neither?

I think you said, because last time I came in, I said, you don't want to be overly bearish, and the question was that the markets can go up and bonds could rally, and that was in early September. I would not be surprised if you see a little bit of a bond weakness going up.

You know, so the yields going well.

And stock markets having a little bit of a recalibration come twenty early parts of twenty twenty.

Six stay with US multile IMPERC surveillance coming up.

After this, stock sent kaya as investors gear up for a crucial week of earnings. Ustin quanav whilst Fargo racing his year und price target on the S and P from sixty six fifty to seventy one hundred and writing the following with a big code this morning calling for an everything rally into year end. Coal is the bylow quality junk, high beta and small and mid AI capex beneficiaries a full risk on trade some joints is now for more US and good morning, good morning. I mean

Yeah, So we see about five potential care lists in two year end.

We're bullish. So those five are seasonality.

Obviously, November December has been the best two months for the SMP, but not just for the SMP, but especially for the laggers.

After texts harvesting in oppo war.

We typically see laggers rallying in November through January.

Number two AI cappecks.

I think we're going to see another upper surprise in AI cappacks when Hyperscalars report this week. Number three potential Terriffy fund so IBA hearing is going to be next week. The ruling is probably going to be in January, and there's about sixty percent chance according to betting markets, that it gets repealed. And if that happens, we're talking about one hundred and sixty billion dollars of terraces collected being distributed to the economy, which is going to be a

Okay, so let's break down some of this. I'm going to let Amrie handle everything to do with Washington d C. I want to ask you about tech spending, So the Capex story and what we're going to hear from the major tech plans on Wednesday and Thursday.

They're spending lots.

Do they need to report some really robust revenue growth alongside that for investors to continue tolerating this.

I think for Hyperscalers as a group, we're not that bolish because they are the capex spenders. They're free cash flowers coming down there. Historically, you want to avoid companies that are invest that are in an investment cycle, which is basically Hyperscalers today. The areas there were more bolish is really thex takers, especially the smaller cap companies that are really starting to benefit from this Hyperscaler's capex increasing.

So that's really the group that we like.

We have a basket of about twenty five smaller cap AI capex manificiaries that we like.

Let's go to tariffs because I think theepest story is underappreciated right now in the market and the fact that you can have morth of ninety billion dollars having to be repaid back.

To these businesses.

But the Trump administration basically has other ways to get around tariff. So doesn't that get rid of that reimbursement because companies are going to have to pay it, just it's going to have a different title to it.

Yeah.

Well, I think into that event, potential event, that binary event, we're going to see some reflation industry because investors will want to position for that potential repeal of tariffs. I think the New York is obviously be varya bullies for equities, rates probably higher and goal higher on physical concerns. But in the medium to longer term this could potentially create more uncertainty.

Then there's a shutdown. If the market is struggling off, now why would they carryhen it reopens.

Yeah, I mean government shutdowns historically have been non events basically, but coming out of shutdowns we typically see the SMP valuing even harder. No news actually has been good news for the market because there's no data coming out and there's no negative catalysts for the market.

Even if the.

Government reopens, there's probably going to be about at least two week period where we still don't see much data. It's more going to be what computer is saying and how the third party data is suggesting. So I think that's still a pretty bullish setup for equities.

Low quality and junk. What is low quality and junk?

Yeah, so unprofitable tech, so more speculative stocks, some laggers that have underperformed, that are really struggling. So we're essentially pitching a catchup trade into year end because I think it's going to be full risk one into year end.

You need the FEDER receive to come along for the ride and keep signaling more account Yeah, I mean, I think.

FAT is basically a done deal. They're probably gonna go on Wednesday. And if that's the case, I think FAT is probably we are in a real easing cycle.

So the FAED is done.

It's more fundamentals now, and you know, some of the risks that we are seeing that have been proven to be less of a risk than what we had expected initially.

This picture you're painting, I feel like, is the meme stock frenzy we saw? Are you expecting almost something like that?

We could see a little bit of that too, you know, we until last week we were seeing some of that happening in some of the meme stocks and the retail driven names. I think last week was a little weird that the setup itself was pretty unfavorable because last week, if you think about all the earnings that came out, it was mostly regionals and industrials, which were obviously facing more headwinds. There was no AI earnings, and we had the CPI overhang on Friday, So I think that set up.

We also have US China on Friday, So I.

Think the setup is pretty favorable for us of the lower quality stocks.

If you have seventy one hundred for this year, what does that mean for your seventy two hundred target next year?

Yeah, we're thinking about that. We're going to revisit our twenty twenty six numbers.

I still see sounds like a world spire. Yeah, I still seeing more offside to that number.

We had a guest on the program that said maybe we could see a self patch in their staff of twenty six.

You must have had it.

Maybe I'm right before you. What gives you hope that this can continue through twenty six? I'm not going to pin you down for a new price target. We'll wait for the annual outload. But what gives you hope that's the case?

Yeah, I mean it's really going to be driven by earnings. We still see a pretty healthy backdropt for earnings.

We're forecasting eleven percent growth for twenty six followed by another twelve percent in twenty twenty seven. So if that's the case, even in multiple staateses thing we're talking about, you know, little teens return inequity.

I'm not going to question the nix because every time I do that Wednesday Thursday hits in earning season, the tank plans come out and they knock out the park. So I won't question the NIX. I do wonder how you think about the rest of the world. The international stock story had its moment in the sun the first quarter of the year. Everything kind of ripped and things have settled down. Since where aren't you in the US versus the rest of the world.

Yeah, I think ye still looks more favorable in terms of the AI story.

I mean the rest of the world.

We could potentially see a catchup trade there too, if we start to see the manufacturing cycle really turn. But the areas that we are more bullish are really around?

AI is the one thing that makes you nervous given how bully she said, I mean, we've been through all the bill case. Is the one thing that just sort of nickels at you a little bit?

Yeah, I mean I think Hyperscalers probably because their free cashwow is coming down and they are the biggest companies in the SMB five hundreds. So if you start to see more of a rotation type of true redlant broadening out with everything rallying, then that's not going to be good for the SMP at the index level.

Stay with us more Bloomberg surveillance coming up after this. Katie Kaminski of Oupha Simplex Group writing the rally inequities has been relatively broad based, with big tech slightly outperforming. Katie joins us now for more Katie, Welcome to the program. Jan Caffrey of JP Morgan kicked off the program with us and said, you don't want to find this ball market?

Do you agree?

I have to agree, And actually you have to start asking yourself the question, what are the things that could.

Be a sort of a stop for this big.

Rally that we've seen, And there isn't anything that's obvious. I think I am watching though what FED commentary will be this week, just given the fact that we don't have data for future meetings. So I think that is one potential curve ball. But in general, earnings are good, growth is good, and the trend has been very strong.

From a technical perspective.

Kedy, that's the equity market. The equity market is pricing at a rebound in economic growth. I wonder what you think the bond market is pricing. Because this rally, particularly long end, coming out of the summer of surprise many what do you think explains it well?

I think you know, bonds have really been focused on sort of potential rate cuts and seeing more creative inflation data is also very positive for bonds, especially on the long end. I think an interesting point is we haven't seen a steepener. We've seen sort of a pause in that particular move in bond movements, which which means basically

This year, Katy has been tricky to track the correlations. Everything seems to be rallying and give the same time stalks, bonds and predcious metals too, until very very recently, when the gold trades down it to one whap. Do you see that as an isolated story in its own asset class or does it speak to something else happening somewhere.

Well, I think gold is something we really should watch because it's the only thing that's telling us something interesting

What could be changing Is the market just feeling better about the geopolitical situation and the trade narrative coming from the Trump administration.

I think that's the case, So maybe it's a change in sentiment, but it also could be And this is the one kind of wild card question is like, let's say that we have a little bit of a pause from the FED. That would affect real rates, which also affects gold prices. So I think, you know, gold is an interesting one. It's the only thing that's kind of moving in a different direction right now. So some of

It is something to pay attention to.

Okay, there's a lot of catalysts just this in this In this week alone, we have tech earnings, the FED meeting, and of course the President sitting down with Shijipang.

What are you most acutely focused on?

I would say I think the rhetoric around China has been very important. I mean, you saw those moves. It has the ability to move the market, and it is a theme that the market has been concerned and focused on I mean, obviously earnings are important, but I think, you know, some resolution of some of the volatility we've seen around that has been received very positively by the market,

The casey dangerous territory for me to ask this question and to wrap up this conversation with it, is there a credible bear case going into twenty twenty six and if.

There is, what is it?

I think this is a really hard one. And you know, I love to be a bear, but you know, you're not seeing it in the data right now. And I think gold was one of the themes that was a little bit of a hedge position, I'd say, so, I'd say, right now, there's really very little signals that suggest a bear move. I do think the FED potentially pausing due to lack of data, could you know, kind of cause some stress for the markets.

Is it a bear case? I'm not sure.

We'll just have to see, but you're right, there's not a lot of bear signals out there.

Stay with US mult Bloomberg surveillance coming up. After this, it's the President prising new Japanese Prime Minister at Takaichi and offering her, quote, anything you want to strengthen diplomatic ties, the leadst signing trade and critical mineral stales. But the details remained vague. Still, this could not.

Have gone better for Japan.

I know we're still waiting for some details when it comes to some of these specifics on trade and on business investment. But you have to thank you are a brand new prime minister.

The President of the United.

States coming over after dealing with incredibly at times difficult rhetoric when it comes to trade. He's saying, I will go above and beyond for you, especially when it comes to defense. So as Kelly and Shaw was saying she just got back from Japan when she was hearing from executives and some individuals close to the government a little bit of nervousness to the president coming over for Japan, this couldn't have gone any better.

It's a pretty interesting sequence, isn't it.

SiGe up things with your allies in the region in Asia and then move on to South Korea and sit down with a Chinese leader. Just how much leverage has the president got, how much to what extent is this deal already signed down?

This deal it.

Sounds like from what Kelly and Shaw was saying, who was there at the table during Trump one, is almost done. There is a framework. Will that framework be made public? This does feel like a work in progress, And as Kelly Ann said, it's really about managing this relationship from this point on, potentially not this grand bargain that a lot of people thought we would maybe get with Beijing going into Trump's second term.

That's the latest on Trient. Let's turn to tag.

Quollcom shares up slightly after hitting a fifteen month high on Monday, the jump following the unveiling of new chips and computers for the AI data center market as the company tries to challenge in video. That stock is down this morning by one point four percent, and finally, GOMT SAX CEO David Solomon saying he doesn't see any systemic risk looming in the credit market. Solomon describing recent losses at regional banks as idiosyncratic events. The servers are remind

Well, John, it's nice to be with you. Well, this Schumer shutdown has been a disaster. Well, they try to get one point five trillion in new spending, undo all the reforms to the Medicaid program, just to name two items. We're putting farmers at risk in my state. I met

In my district.

So my best advice is that if Schumer would release these Democratic senators, let'st the government back open and continue our negotiations on appropriations.

Congressman, do you think that Republicans should all be back on the hill to potentially await maybe a single funding measure to either pay those individuals like you're talking about in your district that are not getting paid or federal workers.

Well, the Senate has put those bills on the floor with the senators right there. Chuck Schumer has blocked the motion to proceed to pay federal workers, to take other targeted actions to pay military employees. I mean, this is the kind of shameful rhetoric and approach that Chuck Schumer has taken. He's holding federal employees and state employees that are funded by federal grant programs hostage. And that's why the employee union of the federal government spoke out yesterday.

We're on call.

We can be back here in minutes if the Senate moves to open the government. And as this drags on, we're just going to be confronted with another vote on the Continuing Resolution in just a few days. So we've missed all this time of important work on agriculture, on banking, on reviewing housing policy, all because Schumer wants to spend one point five trillion more and do away with all the reforms that we made in the Medicaid program.

Rshan is is Speaker Johnson, and you and your colleagues willing to vote for some of these one off spending bills if the Senate was able to pass it.

Well, look, the Senate. What needs to happen is Chuck Schumer needs to open the government. That's what needs to happen, Emory, that's the easiest thing to do. Five weeks ago, we offered a clean cr that had democratic support. You have Democratic senators saying that Chuck Schumer is wrong. You have

You mentioned agricultural and some of the farmers that are suffering right now. A lot of that is the fact that in retaliation to the Trump administration's tariffs, China is no longer buying soybeans. Well, that we're expected to change today or this week. How is your district reacting to what is going on in terms of trade relationships this administration is having with China.

Well, the principal challenge to our row crop farmers in Arkansas is that we're potentially entering the fourth year of bad finances. One point five billion in losses is forecast for this farm year. That's the three years, and we're getting ready to enter a fourth year brought about by higher cost due to the inflation during the Biden administration and the inflationary effects of the Russia's invasion of Ukraine.

A Congressman, this is a slightly uncomfortable question. I understand that because of what this business means to the people of your state. But at the moment, the US is making, I think a well articulated decision to de risk from China that would therefore in some ways make it difficult to alarm China being a buyer of anything for the

Well, I think that's why you see Secretary Vestment and Secretary Lutniqu emphasizing soybean markets all around the world besides China. We don't want to ever in business put all your eggs in one basket, and we've been very dependent on the Chinese market, as you know, for the past three decades. But we have to recognize we've got to open up

Obviously.

This is the Bloomberg Survendans podcast, bringing you the best in markets, economics, antient 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.