Accenture Forecast Sends Stock Tumbling a Record 20%

Summary

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Bloomberg Intelligence Podcast

Episode: Accenture Forecast Sends Stock Tumbling a Record 20%
Date: June 18, 2026
Hosts: Paul Sweeney, Scarlet Fu
Featured Guests: Anurag Rana (Senior Tech Analyst), Wayne Sanders (Senior Defense Analyst), Ira Jersey (Market Analyst), Ann Maletti (Head of Equity Investments, Allspring Global Investments)

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Episode Overview

This episode provides a sweeping analysis of recent seismic shifts in investment outlooks and corporate performance, focusing on Accenture's dramatic stock drop following a disappointing forecast. The discussion branches out to broader themes—AI-driven budget allocations, the fate of software vs. semiconductors, M&A and bankruptcy in tech, global geopolitics and oil, and the market implications of Federal Reserve policy under new leadership. The hosts and analysts dig deep into these interconnected topics, presenting rich, nuanced market intelligence for sophisticated investors.

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1. Accenture's Earnings Shock and AI-Driven Budget Shifts

[02:25–08:29]

Key Points

• AI Investment Squeezing Consulting Budgets:
  Companies are prioritizing AI investments, shifting funds away from traditional consulting and software.

  • "All these companies across industries are spending a lot on AI. It's got to come from someplace… let's pull back on some of the money we're spending on consulting because we have to invest in AI." — Paul (02:25)

• Accenture's Guidance and Market Reaction:
  Accenture reported guidance suggesting about 150 basis points less growth, shocking investors and causing the stock to fall 15% for the day.

  • "Look at the carnage... maybe 150 basis points less growth for them... this is really shocking because they talked about projects being pushed out into next year." — Anurag Rana (03:10)

• Nature and Duration of Cutbacks:
  The reduction in spending on consulting is seen as cyclical, not structural; after a period of lean spending, demand rebounds.

  • "Over the last 25 years, we have seen this movie many times. It leads to a year or so of anemic spending and then it bounces back very strongly." — Anurag Rana (04:06)

• Accenture's Headcount Paradox:
  Despite disruptions, Accenture is increasing headcount, which is surprising if AI was truly cannibalizing their core business.

  • "Their headcount still went up... if there was massive disruption going on in that company, why would these guys hire any more people?" — Anurag Rana (04:06)

Memorable Moment

• "You don't have budgets that are going to go up 50, 100%. You're going to take it out from the software bucket, you're going to take it out from consulting bucket. You may not upgrade your PC. I mean, it has to come from somewhere. And that's what we are seeing right now." — Anurag Rana (03:23)

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2. Semiconductors Boom, Software Gets Hammered

[05:01–08:29]

Key Points

• Simple Trade: Long Semis, Short Software:
  In the current market moment, investors are dumping software and consulting stocks in favor of semiconductors seen as AI infrastructure picks.

  • "The trade is very simple. They understand 100%. Go long semis and get out of anything that is software or services related." — Anurag Rana (05:21)

• Pressure Across Software Sector:
  Well-known software names (Salesforce, etc.) are off 40–50%. Investors view any company not directly linked to chips as at risk of AI disruption.

  • "Anytime you have a company at this point that is not semis related or hardware related... people just say, you know what, they are going to get disrupted." — Anurag Rana (07:35)

• Private Equity and Smaller Tech Companies:
  Firms without strong market share, like Medallia, face harsh restructuring or bankruptcy; larger software companies are insulated from these dangers.

  • "Companies with leading market share... they're still growing. Somebody like a Medallia are honestly a blip when it comes to the market share of the entire software landscape." — Anurag Rana (06:24)

Notable Quote

• "I remember when not so long ago, everyone wanted to be in software. You didn’t want to be in hardware. Hardware was a commodity business... let’s go into software. Recurring revenue." — Paul (08:03)

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3. Intel, Apple, and Chip Supply Dynamics

[08:29–09:46]

Key Points

• Intel and Apple Partnership Rumor:
  Market surged on rumors of an Intel-Apple chip deal, perhaps as a response to persistent supply bottlenecks at TSMC due to AI chip demand.

  • "Apple does make its own chip... if they are getting a little bit of backlog issues because TSMC is really busy doing AI chips, they could go to Intel." — Anurag Rana (08:38)

• Skepticism and Constraints:
  It's unclear whether Intel has the manufacturing capability and cutting-edge technology to meet Apple’s requirements.

  • "This is not something that you could just, you know, it’s not like construction. You need to have that technology and those nodes in order to fulfill the demand." — Anurag Rana (08:54)

• Market Symbolism:
  Even a symbolic deal could be significant given US government backing and current semiconductor shortages.

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4. Iran, the Strait of Hormuz & Global Energy Geopolitics

[12:28–15:59]

Key Points

• US-Iran Deal and Strait of Hormuz:
  President Trump signed a memorandum with Iran, potentially paving the way to reopening the crucial oil shipping route.

• Internal Iranian Politics:
  Progress is notable given lack of backlash from IRGC and coordination of Iranian power centers.

  • "The four headed hydra from Iran that you have to get all in place ... we’re actually seeing some of that movement." — Wayne Sanders (13:02)

• Israeli Objections and Nuclear Program:
  Israel remains staunchly opposed to any uranium enrichment by Iran, regardless of grade.

  • "Israel looks at any type of enrichment is going to be used towards a military grade program and therefore shouldn't even be started." — Wayne Sanders (13:45)

• Energy Market Implications:
  Opening the strait may ease oil supply pressures, but sticky points like long-term agreements, missile programs, and sanctions remain.

  • "The replenishment of stocks becomes a very key piece to this... can we start reaching some of the agreements... ballistic missiles, the nuclear program and easing of sanctions..." — Wayne Sanders (15:21)

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5. New Fed Chair, Policy Outlook, and Market Reactions

[19:30–25:42]

Key Points

• Federal Reserve Under Chairman Kevin Warsh:
  Warsh delivers a stark, old-school statement, signaling a pivot toward hawkish policy and less public hand-holding.

  • "He's a Gen X Fed chair, so I feel like he went old school. He's bringing it back..." — Paul (19:40)

• Hawkish Signals and Market Disconnect:
  Market is pricing for both hikes and cuts, which cannot both be correct. Analyst expects hikes, not cuts, in the near term.

  • "The market is now priced for a couple of interest rate hikes, but then an interest rate cut, which something is wrong... there's no chance, I think after that, that they wind up cutting within a couple of months." — Ira Jersey (20:07)

• Warsh's Market Philosophy:
  Warsh wants pure market reactions to new data, but Jersey disagrees, arguing markets always anticipate the Fed’s next moves regardless.

  • "The market has always tried to anticipate what is the Federal Reserve going to do... I disagree with that idea altogether." — Ira Jersey (21:32)

• Yield Curve Compression:
  The narrowing gap between 2-year and 10-year yields reflects expectations of higher rates and a "hold" policy.

  • "Only like 28 basis points between the twos and tens... that's an acknowledgement that the Federal Reserve is going to be hawkish." — Ira Jersey (23:04)

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6. Equity Strategy: IPO Boom, Mid and Small Cap Strength, International Tilt

[29:15–35:07]

Key Points

• Market Volatility, Stay Disciplined:
  Allspring's teams are staying focused on fundamentals despite sharp shifts across months.

  • "They're trying to remain calm and focused on their investment processes... sticking to what they do well." — Ann Maletti (29:46)

• Mega IPOs as a Caution Signal:
  The torrent of large tech IPOs (SpaceX, Anthropic, OpenAI) evokes bubble concerns, but strong fundamental earnings growth provides comfort.

  • "When you see that much capital being thrown into IPOs it makes you feel a little uncomfortable for certain... earnings and earnings growth continue to be really, really strong." — Ann Maletti (31:28)

• Small and Mid-cap Outperformance:
  Earnings growth is broadening from large cap into mid and small caps, especially in industrials and sectors benefiting from AI adoption and re-globalization.

• Sector and International Tilts:
  Industrials, especially smaller U.S. companies with minimal global exposure, stand out, as do emerging markets poised for asset inflows.

  • "We think the next phase kind of goes down into applying [AI] at an enterprise level into different industries... generally speaking we like industrials... and the more mid cap names." — Ann Maletti (32:19)
  • "We came into 2026 believing there was a lot more room to run in EM... we believe that will be the case for the rest of the year." — Ann Maletti (33:55)

• Cautious Optimism on Innovation:
  AI and innovation remain strong drivers, but concerns remain about over-concentration and vulnerability to a "black swan" event.

  • "This is probably the most innovation I've seen in my lifetime... but I am a big believer... Do we have another deep seat moment? ... Have we gotten a little overexcited and a little too narrow, focused on just AI in the markets? I would say probably, yeah." — Ann Maletti (35:07)

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Notable Quotes

| Timestamp | Speaker | Quote | |-----------|---------|-------| |03:10|Anurag Rana| "Look at the carnage... this is really shocking because they talked about projects being pushed out into next year."| |05:21|Anurag Rana| "The trade is very simple. They understand 100%. Go long semis and get out of anything that is software or services related."| |08:29|Anurag Rana| "I've never seen [Accenture] at 12, 13% free cash flow yield in the 23 years I've covered Accenture."| |13:02|Wayne Sanders| "The four headed hydra from Iran that you have to get all in place ... we’re actually seeing some of that movement."| |20:07|Ira Jersey| "The market is now priced for a couple of interest rate hikes, but then an interest rate cut, which something is wrong."| |21:32|Ira Jersey| "The market has always tried to anticipate what is the Federal Reserve going to do... I disagree with that idea altogether."| |31:28|Ann Maletti| "When you see that much capital being thrown into IPOs it makes you feel a little uncomfortable for certain... earnings growth continue to be really, really strong."| |35:07|Ann Maletti| "This is probably the most innovation I've seen in my lifetime... Have we gotten a little overexcited and a little too narrow, focused on just AI in the markets? I would say probably, yeah."|

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Timestamps for Key Segments

• Accenture/Earnings Impact and AI Consult Dynamics: 02:25–08:29
• Semiconductor vs. Software Sentiment: 05:01–08:29
• Intel-Apple Chip Rumor: 08:29–09:46
• Middle East Geopolitics and Oil: 12:28–15:59
• Federal Reserve Policy Outlook/Posture: 19:30–25:42
• Stock Strategy, IPOs, Midcap, Global: 29:15–35:07

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Overall Tone and Language

The conversation is urgent, insightful, sometimes skeptical but always grounded in data and history. The speakers openly puzzle over novel market dynamics and technical details, push each other for clarity, and blend macro views with sector-specific takes—mirroring the fast-evolving, sometimes volatile world of modern investment.

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For Listeners Who Haven’t Tuned In

This episode captures a consequential moment: a massive correction in a consulting giant, reordering of market bets around AI, big moves in oil geopolitics against a backdrop of U.S. Fed tightening, and frank assessments of where real earnings and innovation are concentrated. It's essential listening if you need a 360° investor’s view of what’s driving today’s market—and what may shift it tomorrow.

Transcript

[Brookfield Representative]

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[IBM Representative]

So there's a lot of noise about AI. But time's too tight for more promises, so let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business IBM when you're

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[Podcast Announcer]

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[Podcast Host (Paul)]

I'm going to say a year, maybe two years ago, some tech analysts came in here and said, you know, all these companies across industries are spending a lot on AI. It's got to come from someplace, that money. And he highlighted one area that it's going to be hitting us, which is some of these consultants out there. Let's pull back on some of the money we're spending on consulting because we have to invest in AI.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

So it's not so much that they don't need their services, it's that we're investing in AI so we can hold off on paying these guys.

[Podcast Host (Paul)]

Absolutely, absolutely. And I think in that analyst was Anuragrana, senior tech analyst for Bloomberg Intelligence.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

Honor.

[Podcast Host (Paul)]

We saw Accenture today give some guidance that really disappointed the Street. The stock is down 15% year to date. Is down 55,0% on a year to date basis. Down 15% today. What did you hear from Accenture?

[Anurag Rana (Senior Tech Analyst, Bloomberg Intelligence)]

I mean, to be honest, look at the carnage and what they said was, you know, maybe 150 basis points less growth for them. I mean, it's as this is really shocking because they talked about it on, they talked about projects being pushed out into next year and so forth. And this goes into the thesis that you just repeated because at the end of the day, if you're going to spend money, if an enterprise out of a corporation is going to spend money on AI, what is that money going to come from? You don't have budgets that are going to go up 50, 100%. You're going to take it out from the software bucket, you're going to take it out from consulting bucket. You may not upgrade your PC. I mean, it has to come from somewhere. And that's what we are seeing right now.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

It has to come from somewhere. And if it's coming from software, it's coming from consulting. Does that mean that the companies realize that they can get by just fine without these consultants and they'll never need to go back to them? Or do they? Do the consultants become something that they just go to as needed on an emergency basis?

[Anurag Rana (Senior Tech Analyst, Bloomberg Intelligence)]

So again, over the last 25 years, we have seen this movie many times. It leads to a year or so of anemic spending and then it bounces back very strongly. The reason it bounces back is because you cannot put those projects on hold forever. You need your data cleaned up, you need your software systems upgraded, all of those things. The thing that I was surprised by in the Accenture earnings today is their headcount still went up. I mean, if there was massive disruption going on in that company, why would these guys hire any more people? A company like Accenture has over 700,000 people. Their attrition rate is about 14%, which means all they have to do is not hire. And their headcount goes from 700,000 plus to that says 600,000, which is what you would expect when somebody is being disrupted by AI. This is a classic case of Traditional spending not being strong and these guys getting punished on it.

[Podcast Host (Paul)]

You mentioned software is another area that's under pressure. And again, you know, you look at Salesforce, some of these names that are down 40, 50%. How's the thinking on Wall street kind of evolving here? Anurag, about software broadly defined as it relates to, in an AI world, the

[Anurag Rana (Senior Tech Analyst, Bloomberg Intelligence)]

thinking is very simple. Right now trading is led by short term focused, you know, you could say investors or speculators. And the trade is very simple. They understand 100% go long semis and get out of anything that is software or services related. We already heard yesterday from even Apple that you know, memory prices are up and so Micron is up again, you know, on that stuff. So it's a very easy trade for people to see. They, they can't see by what's going to happen in three years to software companies or consulting companies. Why bother being in it when the trade is very simple in front of you? Google is raising capital to invest more in AI infrastructure. Let's stick with the semi trade, let's stick with the infrastructure trade.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

Anurag, we got news this week that Medallia, which is a private equity backed software firm, is being taken over by creditors led by Blackstone. Thomas Bravo, its sponsor, said it wasn't going to inject fresh cash into the company. Does this spill over in any way to the public market?

[Anurag Rana (Senior Tech Analyst, Bloomberg Intelligence)]

So this has been a story for, you know, I would say not, not just right now, but for decades. When software companies lose their market share or are smaller, they actually go to private equity, they raise debt and that's how they exist. Our argument is companies with leading market share, you know, companies like ServiceNow, companies like WorkTape, companies like SAP, they're still growing and they have a commanding market share in that area. Somebody like a medallion are honestly a blip when it comes to the market share of the entire software landscape. So it's not surprising those companies that are private, they are not growing, they're, you know, a lot of debt. You will see a lot more issues on that spectrum for our side when we look at the larger companies. I think this, this risk is insulated from them.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

Understood that you know, the big software companies are a class unto themselves. But if we're not seeing these software companies see their valuations adjusted, meaning their owners are not marking down the value of these companies when they eventually do, does that have any unintended consequences on the publicly traded part of the software industry? Even if it's not the big names, maybe some of the Mid cap ones.

[Anurag Rana (Senior Tech Analyst, Bloomberg Intelligence)]

Yeah, they will all be getting butchered. I mean you can even see today they're getting clobbered because of Accenture. Because the whole risk is anytime you have a company at this point that is not semis related or hardware related and has to do with human capital, people just say, you know, find an easy way to say you know what they are going to get disrupted. This is not a business I want to be in. I would rather stick around to something that's tied up with chips or servers.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

I remember when not so long ago everyone wanted to be in software. You didn't want to be in hardware. Hardware was a commodity business. Right. No chip companies, no big mainframe computers or anything like that. Let's go into software. Recurring revenue.

[Podcast Host (Paul)]

Yep, exactly. Recurring revlo. That was the clique.

[Anurag Rana (Senior Tech Analyst, Bloomberg Intelligence)]

So Accenture for that matter.

[Podcast Host (Paul)]

Exactly.

[Anurag Rana (Senior Tech Analyst, Bloomberg Intelligence)]

It's about it like it's about what, 12, 13% free cash flow yield. I've never seen that. You know, at least in the 23 years I've covered Accenture.

[Podcast Host (Paul)]

Let's switch gears real quick. Intel shares soar after Trump says it has struck a deal with Apple for chip deal. What's going on there?

[Anurag Rana (Senior Tech Analyst, Bloomberg Intelligence)]

Yeah, we'd have to find out whether it actually happened or not because I haven't seen the release from the companies at this point. Now the question here is Apple does make its own chip. It goes to TSMC to get them made and then those chip is has their custom chips have been a big story of selling their Macs and their phones. Now if they are getting a little bit of, you could say backlog issues because TSMC is really busy doing AI chips, they could go to Intel. But the big question, which I don't know the answer for is can intel even manufacture the chips for Apple at this point? Because this is not something that you could just, you know, it's not like construction. You can find another vendor. You need to have that technology and those nodes in order to fulfill the demand from some of the leading tech companies like Apple.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

Yeah. To honor point, intel declined to comment. Apple did not comment as well. But you know, that's, that's to be fair. Now intel of course has this deal with the White House very quickly here on Rock where the US government is the biggest investor. So even if it's not a huge, a lot of chips, just a symbolic amount says something to the market, doesn't it?

[Anurag Rana (Senior Tech Analyst, Bloomberg Intelligence)]

Yeah, but that's the case. But that's also could be just driven by market forces. Right now we really are in a crunch that you can't get enough semis and chips out in the market given the infrastructure demand. So they will go anywhere they can find chips at this point.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

Stay with us. More from Bloomberg Intelligence coming up after this.

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[IBM Representative]

So there's a lot of noise about AI. But time's too tight for more promises, so let's talk about results. At IBM we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business.

[Podcast Host (Paul)]

IBM Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto, and they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high RD spend small cap stocks with improving operating margins or the S&P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria, but on Public you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing member Finra SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash sample prompts are for illustrative purposes only. Investment advice all investing involves risk of loss. See complete disclosures at public.com/disclosures.

[Podcast Announcer]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Podcast Host (Paul)]

President Trump has inked a deal with Iran shifting the focus to the Strait of hormones and getting that open with. So let's get a sense of what's going on here under the hood. Wayne Sanders, he's a senior defense analyst for Bloomberg intelligence. He's retired U.S. army colonel so we thank him of course for his service. Wayne, what do you make of this? I guess memorandum of understanding, I think like we're inking a real estate deal here. I'm not sure what's going on. Talk to us about the straight of her moves. Can we, can the western world really reopen the Strait of Hormuz?

[Wayne Sanders (Senior Defense Analyst, Bloomberg Intelligence)]

Yeah, I take it as a pretty good sign actually. I think one of the biggest pieces the fact that the Iranian president is involved in this and we have not seen any backlash yet from IRGC or anyone else, meaning that the four headed hydra from Iran that you have to get all in place at the same time to be able to move forward with an agreement. We're actually seeing some of that movement. So now as you start to see some movement in the straits and you're actually, I think at this point in time it also allows for the military as they start moving back from some of the blockade positioning that they're in, they can move into his own defense while still being able to very quickly move maneuver back if they had to.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

Wayne, where does Israel fit into all of this?

[Wayne Sanders (Senior Defense Analyst, Bloomberg Intelligence)]

Israel. Israel. Right now I see the next 60 days as being obviously very critical. Israel is going to pressure the US as hard as they possibly can, especially when it comes to the nuclear enrichment program. President Trump originally said no escalation in enrichment and he backed off a little bit about that in the MOA where he's now talking about low grade enrichment. So think 3 to 20% which is normally used in that civilian power projection, power production perspective and you need 90% high grade enriched uranium for nuclear weapons. So there's a very large gap. However, at this point in time, Israel doesn't look at it that way. Israel looks at any type of enrichment is going to be used towards a military grade program and therefore shouldn't even be started.

[Podcast Host (Paul)]

So I guess over the next 60 days when the US and Iran will try to agree on restrictions on Tehran's nuclear program, what should expectations be here?

[Wayne Sanders (Senior Defense Analyst, Bloomberg Intelligence)]

It's going to be, it's going to be rough. Honestly, I don't know whether or not they can even do this in 60 days. I think that you may end up seeing an extension beyond that 60 day agreement if, if going towards that because they are so hardlined on both sides. I don't Iran needs to be able to come back with a win and say no, we still a nuclear program even if it is that 3 to 20%. However, the gulf states as well as Israel is looking at this saying do we want Iran to have any type of nuclear capability even if it is at the, at the low end?

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

So if you were in the oil markets, Wayne, what would you be watching for? What do you think you can kind of key off here?

[Wayne Sanders (Senior Defense Analyst, Bloomberg Intelligence)]

I'm definitely, I'm definitely not an oil expert, but I would say that I think right now both Iran and the US Are looking at right now the replenishment of stocks becomes a very key piece to this. And so both sides have have a very large positive upside right now to allowing the strait to open to be able to alleviate some of that pressure. I think the key then over the next 60 days though, while that starts is can we start reaching some of the agreements that the longer term agreements, ballistic missiles, the nuclear program and easing of sanctions, the other things that are in the, in the deal, can all those things actually be solidified to the point where both can return to their, to their countries and say that we've won.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

Stay with us. More from Bloomberg Intelligence coming up after this.

[Podcast Host (Paul)]

Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R and D spend, small cap stocks with improving operating margins or the S&P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on Public you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by public investing member FINRA SIPC advisory services by public advisors SEC registered advisor crypto services by ZeroHash sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete [e-mail] disclosures when you own

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

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you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay Play and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube

[Podcast Host (Paul)]

at a reserve meeting yesterday that was pretty interesting.

[Ann Maletti (Head of Equity Investments, Allspring Global Investments)]

It was a doozy.

[Podcast Host (Paul)]

Yeah. Terse statement. Pretty clear language from Kevin Wash, the new Fed Chair.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

He's a Gen X Fed chair, so I feel like he went old school. He's bringing it back to what it was before the era of let's hold a news conference after every decision. Let's overly communicate under Ben Bernanke and Janet Yellen and Jay Powell.

[Podcast Host (Paul)]

Let's talk to somebody who actually follows closely what the Federal Reserve is doing. That would be one Ira Jersey. Ira, what was your takeaway from the meeting yesterday? What did your market tell you?

[Ira Jersey (Market Analyst)]

Wow, there were so many takeaways, Paul. I'm not sure that I could do just one. I think from a market perspective, it was clearly that the, the committee has turned hawkish. Hawkish and, and Kevin Warsh, surprisingly to some, had basically let them let that hawkishness linger out there because he didn't take any of it back during the press conference. So, you know, the market is, is now priced for a couple of interest rate hikes, but then an interest rate cut, which something is wrong. And this is in a note we put out this morning on the terminal which either either the market is the market's pricing for some risk of two hikes, which is completely feasible. Right. I can lay out a scenario where the Federal Reserve would do that, given the inflation situation and how strong the economy seems to be, but there's no chance, I think after that that they wind up cutting within a couple of months. Right? It is one of those two things is wrong. And I think ultimately the market has to figure out what it believes. Is it going to be a slow, meandering group of hikes or is the, is the Fed going to hike and then hold rates at a somewhat higher level for a while?

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

Ira, one of the things I was super fascinated by was Kevin Marsh saying that he wants to let the market price in new data and react to what's happening in the economy rather than try to price in what it thinks the Fed will do in the face of new data. Does I mean, he wants a pure market reaction, but does this pure market reaction then become an input for the Fed?

[Ira Jersey (Market Analyst)]

Well, I disagree. I mean, it always has been. Right. The Fed has already taken into account what is the market pricing. I think he, he's, I think he thinks and wrongly and I disagree with, with him on this, the market has always right. Since I've been in this business since 1994, the market has always tried to anticipate what is the Federal Reserve going to do now. You know, that changed a little bit with the more communication because now instead of the market waiting for a meeting or waiting for, you know, the H4 1 look, I remember getting the H 4.1. That's the Fed's balance sheet. I used to get that off a fax machine so we could determine whether or not the Federal Reserve was easy or hawkish. Right. Like, you know, so, but, so, but we had to anticipate what the next move was going to be. And that's always what the market is trying to do. The market is trying to discount what those next moves are. Now it became, you know, easier to determine what they were going to do at a meeting because of all the Fed speak and you can take a preponderance and the whole mosaic of all that information that you have could coalesce into what's the Fed going to do. But you still had, you know, people try to anticipate things even before you had all of this communication. So I disagree with that idea altogether. And you know, the Fed always looks at things like inflation break evens and you know, what the market's pricing for hikes or cuts. For sure.

[Podcast Host (Paul)]

Ira. I'm looking at the two year treasury and the ten year treasury because Lisa Abramowicz taught me how to do that. And I see the, it's only like 28 basis points between the twos and tens and that's a lot less than it was three months ago, six months ago. What does that tell me?

[Ira Jersey (Market Analyst)]

Yeah. So what's gone on recently? Right. Yesterday you saw two year yields go up by 14, 15 basis points and the 10 year did, didn't do very much of anything. And then today you see the ten year rallying and you know, yields coming down while the two years is hardly doing anything. I think that that's an acknowledgement that the Federal Reserve is going to be hawkish. You know, there was this fear going into Kevin Warsh's first meeting that he was going to try to be as dovish as possible because President Trump wants interest rates to be cut and the like. But he acknowledged that they want to get inflation down to 2%. And you know, in saying that the market is now pricing for the Federal Reserve to be somewhat more hawkish and be on hold for a little while, I think ultimately we probably will see us get back to maybe 50 basis points on that 210 curve. But that's predicated on my idea that the Fed's probably just on hold for the rest of the year, which is not something that the two year currently is pricing. The two year is pricing those two interest rate hikes that we talked about a little while ago.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

So we talk about the politics of it all. You know what was fascinating as well was President Trump's response, response to the Fed's first rate decision under his new chair, Kevin Marsh. He basically said, yeah, it's possible the Fed might raise rates it's all right, whatever. How do you interpret that, Ian?

[Ira Jersey (Market Analyst)]

Well, I suspect, Ira, I'm so sorry

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

that my mind is somewhere else.

[Ira Jersey (Market Analyst)]

I suspect that President Trump just wants to give Kevin Warsh at least a little leeway, you know, coming into the first meeting and trying to determine, you know, how to work, how we can work with the other members of the fomc. And I do think that the task forces that Kevin Morsh announced is kind of a more diplomatic way for him to, you know, first get a sense of what his colleagues are thinking and secondly, kind of influence things through these task forces and say, hey, we can't do things as we've been doing them, or I don't want to be doing things the way they've been doing them because they haven't always worked and maybe things aren't as, as cohesive as they can be. So, so some of the things that might come out of that is like a change in the way that they think about inflation. And the inflation framework. Is the 2% target. Correct. Is using the PC deflator the right measure? Right. So those are things that they're going to discuss. And the market may react either positively or negatively depending what comes out of some of these discussions. And I do think that Kevin Marsh is, you know, it's actually pretty smart. I mean, I'll give him a lot of credit for trying to work with his colleagues through this task force environment.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

Stay with us. More from Bloomberg Intelligence coming up after this.

[Podcast Host (Paul)]

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[Podcast Host (Paul)]

Let's get a sense of where we're going on these markets. We've got a new Fed chairman. We've got a new sheriff in town, it seems like, but the market's Reacting well today. Anne Maletti joins us. She is the head of equity investments at Allspring Global Investments there in Milwaukee, Wisconsin. Again, pound for pound, the best money managers I find in Milwaukee. I don't know what it is out there, but they're pretty good. Ann, thanks for coming in here today. I know you're going to the parade in a minute. What do you guys and what are your portfolio management teams? What are they doing here in this market these days?

[Ann Maletti (Head of Equity Investments, Allspring Global Investments)]

They are trying to remain calm and focused on their investment processes and what they do every day. And as you know, it's really hard to do that when the market seems to shift every day. And January and February look like a completely different market than March. And then April and May and even June now have been different as well. So again, sticking to what they do well, and that's really focused on fundamentals.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

So how are you rethinking or maybe not at all, your portfolio construction given what we heard yesterday, given this renewed focus on fighting inflation from the Federal Reserve under Kevin Marsh?

[Ann Maletti (Head of Equity Investments, Allspring Global Investments)]

Yeah, I mean, I think we were pretty balanced in our views going into it in terms of, yes, there's a new chair directionally, are things going to shift dramatically? Probably not. And I think there was more kind of confirmation of that yesterday. Him really trying to establish, established his own credibility probably with his cohorts. But I thought what was new and interesting are the task force, the task forces that they've announced. I do think it's kind of time to think about the future. Are we looking at the right data sets, all of those things? And I think he brings that to the table too. So I think there still is strong independence. The Fed no real reason to change direction. We're focused on obviously earnings, but also inflation. And I think that the inflation story will really give the shift of what happens longer term.

[Podcast Host (Paul)]

And we're starting this market to get some just mega IPOs coming down. We had Space X, we're going to have anthropic and open air probably in the fall, I guess. Huge valuations, huge numbers of shares being issued. What does that tell you about the market? Is that a signal one way or the other?

[Ann Maletti (Head of Equity Investments, Allspring Global Investments)]

I mean, Paul, you know, it does like, look, it does give me a little bit of angst. Certainly lived through cycles like this before and when you see that much capital being thrown into IPOs makes you feel a little uncomfortable for certain. I think what's different this time for me is fundamentals in terms of earnings and earnings growth continue to be really, really strong. And more importantly, they seem to be broadening out downcap especially. Right. So mid cap and small cap companies seem to be also increasing their earnings. And so if that is really the driver, I'm a little bit more comfortable. But like look this I spend not all of the capital will be put to good use as we know and there will definitely be a rocky road ahead.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

I think in a rocky road scenario where can you go for shelter?

[Ann Maletti (Head of Equity Investments, Allspring Global Investments)]

Yeah, there's a couple of spaces that we're looking at that we think are interesting. You know, we've thought about this innovation cycle. We know how important it is but we think the next phase kind of goes down into applying it at an enterprise level into different industries and that is creating some of the profit growth and earnings growth. So generally speaking we like industrials. That seems to be at a perfect intersection between the growth in AI spend and what's going on there, but also at the intersection of kind of re globalization. So that's an area we like especially as you go down cap. The more mid cap names have less global exposure so they tend to be a little bit more stable and the valuation differences are, you know, make it even more attractive.

[Podcast Host (Paul)]

Small and mid cap time to shine here. How are you thinking about that?

[Ann Maletti (Head of Equity Investments, Allspring Global Investments)]

It has been Paul. I mean it's kind of been the quiet little winner this year and yes. Has it been pulled up by some of this spend? It certainly has. The, the thing I don't love about it is we still see kind of the, a low quality, a low earnings quality factor continue to be really, really strong. And so the market seems to be not just focused on high quality companies in the small mid cap space, but also the companies that may not screen quite as high for us.

[Bloomberg Intelligence Analyst (possibly Paul Sweeney)]

And looking outside the U.S. which you know, people were reluctant to do for a long time but on a valuation basis it's hard not to consider it. How are you thinking about the emerging markets? How are you thinking about the developed markets and ex US?

[Ann Maletti (Head of Equity Investments, Allspring Global Investments)]

Yeah, I mean I think the emerging markets and Paul, you can attest, I think more than a year ago we were talking about it and most of my career I've spent obviously in the domestic markets. But you could see the, the interest level but more importantly the fundamentals really start to shift. Last year and we just published our mid year review this week, we came into 2026 believing there was a lot more room to run an em. That has been the case and we believe that will be the case for the rest of the year. And it's yes, some of it's tied to the AI spend. But also some of these emerging market countries have really matured, are much more stable than they were before. And the biggest factor is there's only 5% of global AUM devoted to the space. The average over a long period of time has been 7%. And so if that just rises a little bit, it could be 500 billion in investments yet to come. So we think it's still an attractive area to be, especially relative to the

[Podcast Host (Paul)]

US and I've been in this investing game for 30, 40 years now. And how do you think about this story just broadly? We've been through Internet cycles before. We've been through great, I mean, telecoms. I mean, how does this ring for you?

[Ann Maletti (Head of Equity Investments, Allspring Global Investments)]

Yeah, I mean, look, this is probably the, the most innovation I've seen in my lifetime, apps and just, you know, the markets. But I am a big believer. Our, our investment teams are big believers in it. We're using it already in our business. I only have a little bit of angst on this solid foundation we have right now, including the fundamental, the earnings growth and other things that we have with it. I worry, do we have another deep seat moment? Do we have another kind of black swan moment that just triggers a reversal of some of the glory that the space has had? So again, I fundamentally believe that this is real. Have we gotten a little overexcited and a little too narrow, focused on just AI in the markets? I would say probably, yeah.

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