Bloomberg Surveillance TV: August 12th, 2026

Summary

Bloomberg Surveillance TV Podcast Summary

Episode: August 12, 2026
Hosts: Jonathan Ferro, Lisa Abramowicz, Annmarie Hordern, Mark Cudmore
Main Guests: Keith Lerner (Truist), Patrick Harker (former Philly Fed President), Jessica Taylor (Cook Political Report)

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Episode Overview

This episode of Bloomberg Surveillance TV focuses on the interplay between upbeat tech earnings, monetary policy uncertainty, inflation dynamics, and primary election outcomes. Featuring insights from finance professionals and political analysts, the discussions cover the resilience and volatility of equity markets amid shifting economic fundamentals, the Federal Reserve’s credibility challenge in tackling inflation, and recent US primary election results and their implications heading into the general election.

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Key Discussion Points and Insights

1. Market Resilience and Tech-Driven Optimism

• [01:27-05:22] Guest: Keith Lerner (Truist)
  • Earnings as the "North Star": Despite recent volatility, strong tech earnings—especially from hyperscaler cloud businesses—continue to be a dominant market driver.
  • Winner-Loser Market: Market correlations are at their lowest in 30 years, indicating an environment where individual company performance matters more than sector or index moves.
  • Quote [01:51]:
    "We were seeing revenue growth of 20% plus from a lot of these hyperscalers and especially in the cloud business ... there is some monetization." — Keith Lerner
  • Cash Flow Volatility: Investors have a "love-hate" relationship with tech, oscillating between optimism over revenue growth and concern over negative cash flow from heavy spending (e.g., CoreWeave and Supermicro).
  • Secular Bull Market Argument: Despite short-term headwinds, big tech firms are expected to "figure it out" and eventually generate profits.

2. Risks Ahead for Equity Markets

• [04:01-05:22]
  • Macro Risks Include:
    • Oil price volatility
    • Uncertainty around the new Fed chair
    • Persistent inflation and upcoming US midterm elections
  • Earnings Beat Rates:
    "We have 85% of companies beating estimates ... this earnings season. ... Forward earnings estimates for the S&P, small caps, mid cap, and emerging markets keep moving higher." — Keith Lerner [05:00]
  • Bumpy Second Half Expected: Despite fundamental support, seasonal headwinds and uncertainties foreshadow volatility.

3. Inflation, Monetary Policy, and Fixed Income

• [05:22-08:36]
  • Short-Term CPI Sensitivity: Inflation prints are crucial for near-term market moves, but several key data points (including Jackson Hole, PCE, CPI, and jobs report) remain before the next Fed meeting.
  • Fed Caution:
    "It would be very unusual for the Fed to raise rates ... when we've seen a negative print within two months of a Fed meeting." — Keith Lerner [05:29]
  • Fixed Income Shifts: Improved risk-reward profile for bonds; suggestion to “lean into” bonds as yields rise, but still overweight equities.
  • Japan and Bond Markets: Watch Japanese yen and yield moves as indicators of market disruption, but earnings and the Fed remain primary drivers.

4. The Fed’s Credibility and Inflation Policy

• [09:10-16:23] Guest: Patrick Harker
  • Fed’s Inflation Challenge: After more than five years above the 2% target, credibility is at stake.
  • Quote [09:47]: "If core [inflation] is significantly above 2, I think you're going to see the Fed raise now. ... They can't just talk about being tough on inflation. They actually have to do something about it." — Patrick Harker
  • Supply Shocks: Recent inflation remains sticky, driven by recurring supply shocks—especially energy and tariffs, and compounded by geopolitical unrest (e.g., ongoing war affecting oil).
  • Fed Actions Retrospective:
    "We waited too long to start raising rates after the pandemic. I think that was clear." — Patrick Harker [11:29]
  • Entrenched Price Pressures: Ongoing global tensions and supply disruptions are seen as sustained, not ‘transient;’ tariffs and war keep adding persistent inflation pressure.

5. Structural Economic Concerns: Labor Market and Policy

• [13:53-15:47]
  • K-Shaped Recovery Worries: Inflation and labor market softness disproportionately hurt lower-income workers (the “bottom of the K”).
  • Labor Market Pressures: Immigration and tariff policy are having profound impact on labor, sometimes beyond the reach of interest rate policy.
  • Quote [14:24]: "They're clearly worried about inflation ... but also the softening of the labor market is on their list. ... Credit card defaults going up, softness in the consumer side." — Patrick Harker

6. Elections and Political Strategy

• [16:35-21:29] Guest: Jessica Taylor (Cook Political Report)

  • Primary Results Recap:

    • Progressive Peggy Flanagan wins Minnesota state Senate primary.
    • Moderate David Crowley upsets Democratic socialist Francesca Hong in Wisconsin gubernatorial primary.

  • Quote [17:05]: "I think it shows us that issues still matter, too. ... In Minnesota, you had the ICE raids ... and the killing of two citizens ... especially in a state that was really savaged by Metro surge." — Jessica Taylor

  • Electability and Campaign Infrastructure:

    • Crowley benefited from traditional campaign structure and late endorsements.
    • Hong’s unconventional campaign and controversial media appearances hurt her.
    • Polling misfires attributed to under-sampling older and nonwhite voters.

  • Implications for the Midterms:

    • Lessons on the importance of viable candidates with robust infrastructure, especially in swing states like Wisconsin.
    • Progressives face challenges if perceived as outside mainstream.

  • Quote [20:36]: "Candidates and campaigns matter. ... In a state like Wisconsin you have to have just the building blocks of campaign. So it's not vibes that you should go with. It's ... candidate infrastructure and campaign infrastructure [that] matters." — Jessica Taylor

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Notable Quotes & Memorable Moments (with Timestamps)

• "Earnings remain our North Star. We remain long term tech bulls continuing to see AI as the dominant secular theme driving this market cycle." — Keith Lerner [01:27]
• "There is going to be much more winners and losers. ... We have a gauge of correlations for the S&P, and that's the lowest we've seen in 30 years." — Keith Lerner [01:51]
• "We have 85% of companies beating estimates. ... Forward earnings estimates for the S&P, small caps ... keep moving higher." — Keith Lerner [05:00]
• "If core [inflation] is significantly above 2, I think you’re going to see the Fed raise now. ... They have to act. They can’t just talk about being tough on inflation. They have to do something about it." — Patrick Harker [09:47]
• "We waited too long to start raising rates after the pandemic. ... But these supply shocks ... aren't just acts of nature, acts of God. ... We have to really look at these now as something that is more sustained." — Patrick Harker [11:29]
• "They're clearly worried about inflation ... but also the softening of the labor market is on their list. They're concerned about ... credit card defaults going up, ... softness in the consumer side." — Patrick Harker [14:24]
• "Candidates and campaigns matter ... It's not vibes that you should go with. ... Candidate infrastructure and campaign infrastructure [are what] matters." — Jessica Taylor [20:36]

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Important Segment Timestamps

• Tech & Market Cycle / Keith Lerner: [01:27-08:36]
• Fed Policy & Inflation / Patrick Harker: [09:10-16:23]
• Election Analysis / Jessica Taylor: [16:35-21:29]

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Conclusion

This episode underlines three main themes:

1. The equity market’s ongoing faith in tech-fueled growth despite volatility and cash flow concerns,
2. The Federal Reserve’s struggle to regain control and credibility over inflation amid persistent shocks,
3. The essentiality of candidate quality and campaign infrastructure, as evidenced by the latest election results.

Listeners gain a robust sense of how interconnected economic fundamentals, policy, and politics will shape the months ahead.

Transcript

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[Jonathan Ferro]

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro along with Lisa Abramowicz and Annmarie Horden. 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 9am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen to. And as always on the Bloomberg Terminal and the Bloomberg Business App.

[Bloomberg Host (Mark Cudmore)]

We begin this hour with stocks climbing with upbeat tech easing some of the jitters. Keith Lerner of Truist writing, earnings remain our North Star. We remain long term tech bulls continuing to see AI as the dominant secular theme driving this market cycle. Keith joins us now for Mark, great to see you. How much did Core Weave and Supermicro tip the needle to optimism from skepticism about financing?

[Keith Lerner]

Well, I guess for one day it has. But I really think the, the broader story is going back during this whole earnings season. You know, what happened a few weeks ago is what we saw this really strong rebound after tech had corrected double digits. And the big story to me was that we were seeing revenue growth of 20% plus from a lot of these hyperscalers and especially in the cloud business. So that was, I think ease as far as, you know, the question around are we going to monetize all this spending? And a lot of the bigger companies were saying yes, we are seeing that transformation. And then I think as you said overnight this is, you know, another positive saying that there is some monetization. But I would also just be clear that I do think we're in this stage where there, there is going to be much more winners and losers. We have a gauge of, of correlations for the S and P and that's the lowest we've seen in 30 years. So I think that's likely to continue

[Bloomberg Host (Mark Cudmore)]

what does cash flow matter? I mean, it sort of mattered vaguely for Alphabet. And then when you see what happened with Core, we've on one hand they beat expectations on sales, but their cash flow was much more negative than people had expected given some of their borrowing and spending plans. I mean, it just sort of highlights how it depends on the day, how much this actually matters.

[Keith Lerner]

Yeah, we, we talk about the kind of love, hate relationship with tech, with investors in tech, and I think a lot of times it matters where you're at in the cycle and, you know, back off the March lows until June, you know, the market or tech was up 47%, semis were up 90%. So then you come out with earnings, there's negative cash flow that, you know, that that puts some initial, you know, selling pressure. But I think, listen, zooming back out, I mean, we had this once in a generation build out and you would expect that there's going to be a lot of spending and then, you know, there's almost a little bit of faith that these companies will figure it out and turn a profit. So that's why I think you're just going to see this kind of really high volatility and back and forth over, not over the next couple of months this year, but probably over the next few years. Because that cash flow for some companies that have other businesses likely come sooner than others. But we ultimately think, and again, given the bull market, the benefit of the doubt, that these big players will figure it out. They have a history of doing so.

[Bloomberg Host (Lisa Abramowicz)]

Keith, when you say that the potential is going to be some of these cash flow concerns and questions swirling around cash flow, is that why you think the second half of the year is going to be bumpy or there are other risks on the horizon that could potentially be annoying for the bull market run?

[Keith Lerner]

Yeah, I think there's a lot of the things that we've been talking about, I want to be focused that the primary trend is in place, supported by fundamentals. Valuations this year for the S and P are down about 10% because we've had these earnings overwhelm, the P E contraction and these higher rates. But I think the things we're talking about, you know, oil prices bouncing around each and every day. We still have uncertainty around the new Fed chair and we often talk about how the new Fed chair gets tested. There's uncertainty around inflation with the midterm elections. Historically, just seasonally, that tends to be, you know, a bumpy path overall. But again, even though we think it's going to be A bumpy path. We still think the destination is still higher based on the weight of the evidence. As far as an economy that still is relatively resilient even in the face of all these things I just discussed, we have earning estimates continue to move higher this earnings season. Every earnings season beats estimates, we know that. But this One we have 85% of companies beating estimates. We have revenue beats at 75%. And the forward earnings estimates for the S and P for small caps for mid cap, perhaps emerging markets keep moving higher. Going back to that North Star phrase that I mentioned earlier.

[Bloomberg Host (Lisa Abramowicz)]

Earnings, earnings, earnings. So when you look at today and the inflation print, how important is it to you?

[Keith Lerner]

It's important for the next 24 hours. I mean right now I think you mentioned at the front of the show that the, the Fed funds futures for September is pricing in basically a 5050 chance of a rate hike or staying pat. But I also remind investors that we have, you know, Jackson Hole in August, we have another PC report, we have another CPI report before the next Fed meeting as well and then another employment report. What's also unusual is, you know, the employment report, you know, is negative on the headline and again there's, there's a lot of factors behind that is probably was overstated but it would be very unusual for the Fed to raise rates historically when we've seen a negative print within two months of a Fed meeting. But again there was some distortion. So I think that next employment report will be saying like this is the most important employment report of all time. Right. So again to your question, it will be very important in the near term where rates do any reaction to it. But there's a long way to go between now and the actual Fed meeting.

[Bloomberg Host (Mark Cudmore)]

This is an increasingly data dependent market. Given the fact that there's not a lot of forward guidance coming from this Federal Reserve chair. I'm curious whether you think the pendulum has shifted back to fixed income. For a while it seemed like equities were very much in the driver's seat with respect to returns. At this point though, yields have gone up significantly, significantly. And there are more questions about perhaps being surprised to the dovish when it comes to both the Federal Reserve as well as some of the economic data. Are you leaning into bonds a little bit more?

[Keith Lerner]

So we're still overweight equities overall, but we would be leaning into bonds here as well for fixed income investors. And I think maybe just as a starting point, you know, with that higher income or that carry that we're seeing really provides quite a buffer for investors. We kind of stress test it and say okay, let's just say that yields move up another 50 basis points on a one year forward basis on a total return basis. If a fixed income investors say buying the 10 year U.S. treasury, you would still have a positive return. It would be somewhat small. But if instead the market or the interest rates are flat to down, then the upside becomes more attractive. So in our mind the risk reward is actually improving for fixed income. Here we still think, listen, if we have a dovish number that would probably be better for equities as far as the overall return. But I think we would be leaning into fixed income, you know, at these

[Bloomberg Host (Mark Cudmore)]

levels really quickly here. Keith, how much you walking watching Japan to understand just how disruptive things could get in the bond market given the fact that the currency has basically given up a significant part of the intervention and we're not getting a clear signal on whether either fiscal authorities or monetary policy authorities in Japan will take action on their end.

[Keith Lerner]

Yeah, I think it's important. We're also seeing this kind of global yield story. So I don't want to be myopic by just looking at the US And I mean it's, it's, I think was a couple of years ago where we saw in August the yen cause at least a short term hiccup in the market. So I think it's, I think it is important. I think it can certainly add to some swings in the market. I don't think it's the main factor for the overall market. I do think that if it gets, you know, if we see some jitters, I think that we'll see not only Japan but also the US step in to kind of cool that down. So I think it's going to come ultimately back to, to earnings and then obviously this Fed meeting in September.

[Jonathan Ferro]

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

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[Bloomberg Host (Mark Cudmore)]

Here's the latest. Boston Fed President Susan Collins adding to the debate over apostrophe possible interest rate hike as soon as September. Telling the Financial Times inflation is too high ahead of today's CPI report due out in less than an hour. Former Philly Fed President Patrick Harker writing watch Core not headline core and specifically shelter is what decides September. Patrick joins us now for More. Patrick, great to see you. Really appreciate you taking the time. How much is core going to really make a difference if it still is above 2%, given the fact that we're hearing a degree of impatience about it being more than year five that we've been above the Fed's target?

[Patrick Harker]

That's right. So thanks for having me. If core is above 2, significantly above 2, I think you're going to see the Fed raise now. I think it's. They have to at this point, as you said, we've been above target for over five years. So the Fed has an issue of credibility. They have to act. They can't just talk about being tough on inflation. They actually have to do something about it.

[Bloomberg Host (Mark Cudmore)]

At this point though, Patrick, some people would argue that we're seeing inflation come in, particularly when it comes to shelter, that the expectation is for core to be at the lowest level at 3.4, excuse me, 2.4%, potentially going back to March of 2021. Is that enough?

[Patrick Harker]

I don't know. I mean, the committee is very split, as you, as you said, and we're seeing a lot of people, not only the dissenters, the people who are voting, but the non dissenters speaking out. So they are clearly signaling that some increase, whether it's this meeting or next meeting, is in the cards.

[Bloomberg Host (Mark Cudmore)]

You said the Fed has a credibility problem at this point. Would that be true regardless of whether the Fed chair was Kevin Warsh or if it was still Jerome Powell?

[Patrick Harker]

Yeah, I think if you just miss your target, you don't do your job for five years, people start to question whether you can do it at all. So I do think the Fed's going to have to do something to prove that it really is serious about inflation.

[Bloomberg Host (Lisa Abramowicz)]

It just feels odd because now we are actually see inflation get softer. Where was the Fed in the last five years? Do you not think they acted appropriately?

[Patrick Harker]

No, I think that we are looking. I was there. Right. So yes, we waited too long to start raising rates after the pandemic. I think that was clear. And we were early in Philadelphia wanting to raise rates. But given that and given all the supply shocks we've seen, the Fed has been in this holding pattern. But these supply shocks, you think the textbook says look through them, Right. But they keep coming and they're strategic. They're not just acts of nature, acts of God. We have to really look at these now as something that is more sustained. And I hate to bring up the transient word, but these supply shocks aren't so transient, particularly with respect to Iran.

[Bloomberg Host (Lisa Abramowicz)]

So you think there's a potential that higher oil prices, that it's bleeding through the supply chain and those prices are becoming entrenched?

[Patrick Harker]

Yeah, I do. Because do you see an end to this war? I don't. I hope to God that we have an end to this war, but I don't see it. So this is going to continue. The on again, off again opening of the strait will just continue to create this uncertainty in the markets, particularly in the energy markets.

[Bloomberg Host (Lisa Abramowicz)]

But as a former Fed official, is it the Fed's job to start pricing in potentially when a war may end?

[Patrick Harker]

Now its job is to get inflation under control. And because of the war and other circumstances, I mean, forget, remember tariffs. Tariffs are still working their way through the economy and now we look like we're having a new round of tariffs. So those are also inflationary. Those also are supply shocks, but we keep getting supply shock after supply shock. It's hard to keep looking through those. You have to act.

[Bloomberg Host (Mark Cudmore)]

Patrick, are you on one of the task forces that are going to be potentially releasing some results now? I am curious though, do you think that it's appropriate to start looking at the way that we evaluate inflation and to potentially look for an overhaul 2.0 about exactly how the Fed is conducted?

[Patrick Harker]

You know, there's lots of ways of looking at inflation. The academic community and the business community have developed all kinds of metrics and your job as a policymaker is to look at all. There's not one single number. So the idea, the hope that somehow we're going to do this work and we're going to come up with the magic index, I just don't believe we'll never have that.

[Bloomberg Host (Mark Cudmore)]

One thing that I know you were really out front about with respect to inflation was sort of a vibe. It's not a vibe issue. But with respect to anecdotes and how important that was in factoring into your calls when you were the head of the Philadelphia Federal Reserve, what's your sense of. As you go around and you talk to people and I understand you're no longer at the Philadelphia Fed, do you have a sense that people still are preeminently concerned about inflation at the economy is an incredibly solid otherwise position.

[Patrick Harker]

Yeah, they're clearly worried about inflation. That's still on their list. But also the softening of the labor market is on their list. They're concerned about particularly the bottom of the K in the K shaped economy that you're seeing credit card defaults going up. You're seeing all kinds of softness in the consumer side. So it's all of those things are worried about as well.

[Bloomberg Host (Lisa Abramowicz)]

Isn't this a key debate at the Fed right now? If they hike interest rates, it's only going to hurt the lower K.

[Patrick Harker]

But what's causing the softness in the labor market? It's not just the interest sensitive sectors. In fact, if you look, manufacturing has been adding, you know, it's not there are other issues. Some of those are related to immigration policy, tariff policy and so on. Mark Zondi from Moody's has a great piece out right now looking at native versus non native workers in the economy. And the story is pretty simple, right? If you lose those immigrant workers, then non native workers also lose their jobs. So these are policies that the Fed cannot control, immigration policy, but they deeply affect the labor market.

[Bloomberg Host (Mark Cudmore)]

How will raising interest rates to three times reduce inflation given this backdrop?

[Patrick Harker]

Well, what's driving a lot of the inflation right now? Not all of it. Clearly energy can't do a whole lot. But we were just, I know your previous speaker, your guest was talking about, I think I build out, you know, that's clearly having some inflationary effect. We don't know exactly how much. But look, they're buying lots of stuff. They're buying all kinds of things, are looking for contractors, plumbers, electricians. So that's bidding up prices. If that slowed down a little bit, it would help the inflation story.

[Jonathan Ferro]

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

[Bloomberg Host (Mark Cudmore)]

Here's the latest US Primary election results shedding light on what's to come in November. Progressive Democrat Peggy Flanagan soaring to victory in the Minnesota state Senate primary, while moderate David Crowley is projected to win Wisconsin's gubernatorial primary in an upset over Democratic socialist Francesca Hong. Jessica Taylor of the Cook Political Report joins us now to build on the conversation. Jessica, just want to start with what's your takeaway from the past 24 hours in the local elections, the primaries that have come through?

[Jessica Taylor]

I think it's the candidates and campaigns matter. You saw in Wisconsin that Francesca Hong really ran a shoestring campaign and didn't even run ads in the, in the general election. And this really mattered. I think that the electability argument did ring true when she was going on there and doing so much media, when she was talking about potentially canceling Thanksgiving, there was just a raft of opposition research that Republicans were going to use against her. And I think it shows us that issues still matter, too. In Minnesota, you had the ICE raids there earlier this year and the killing of two citizens. That really resonated in that race, especially in a state that was really savaged by Metro surge. And so you had Angie Craig that had voted for the Lake and Riley Act. Peggy Flanagan really attacked her heavily for that. And so while this was a more traditional progressive versus centrist fight, I think it had a lot to do with issues that were also very germane to the state.

[Bloomberg Host (Lisa Abramowicz)]

So for the Democratic socialists, is this just a hiccup or is this a real pivot going into the general?

[Jessica Taylor]

I think that Francesca Hong was a unique candidate and unique and not great ways. As your reporter mentioned, we, Bernie Sanders, Alexandria Ocasio Cortez did not endorse her. She did not have the candidate skills that we saw of an Abdul said last week. And it should be clear that Abdul said does not identify as a, as a member of the Democratic Socialists of America, while Francesca Hong does. But of course they're all progressives and will be painted with that more with that broader brush. But it really, I think it comes down to the fact that Crowley, this was a really topsy turvy primary, gubernatorial primary. You had the more moderate front runner, the lieutenant governor that had to get out of the race for campaign mismanagement. The sitting governor, Tony Evers, appealed to David Crowley to get back in the race at this time a month ago, he wasn't even in the contest. And then you had Mandela Barnes, the lieutenant, the former lieutenant governor that dropped out just a couple of weeks ago. So this made this race really hard to pull. So again, I think there were some really localized issues, really, really kind of that, that made this race hard to. Hard to gauge. But I think it really speaks to. I do think the electability argument in a state like Wisconsin, that is the quintessential swing state that is so critical to democratic hopes in 2028 did break through. But I think that Hong hurt herself by going on such a media tour and really saying things that felt outside of the mainstream, I think even for progressives.

[Bloomberg Host (Lisa Abramowicz)]

Well, I'm glad you brought up polling going into this race specifically. Marquette University had hung up 25 points. State navigate had hung up 29 points. Public policy plus 20. Why was the polling so off?

[Jessica Taylor]

Those were a little bit. This race was moving so fast. As I mentioned, you had at the end of the month in July, Mandela Barnes got out. So their polling still included Barnes. Crowley had just gotten in at the middle of July. Again, I think it was just hard to sort of measure that late surge. And I do think some of the polling, particularly in primaries over samples because of the way that it's reaching younger voters. It over samples younger voters and I think under samples older voters, particularly voters of color. And those were voters that both Haley Stevens last week in Michigan did better with and that David Crowley did better with in Wisconsin as well.

[Bloomberg Host (Lisa Abramowicz)]

Taking a step back, what does all of this say to you for the midterms in November?

[Jessica Taylor]

Well, Democrats are much better off with a candidate like Crowley to talk the ticket. They want to take back the state assembly in the state Senate in Wisconsin, and they have some key House congressional races that they're also trying to flip. Minnesota doesn't It's a competitive state, but not as much so as is not a state that Democrats it factors into the majority control of the Senate. So I think it just matters. What it says to me last night is that candidates and campaigns matter. You saw Flanagan run a really aggressive grassroots campaign and both candidates were on TV with advertising. Hong, you know, she didn't run a traditional campaign. She didn't have consultants. She didn't have polling. She didn't run television ads. I think that in a state like Wisconsin you have to have just the building blocks of campaign campaign. So it's not vibes that you should go with. It's I think candidate infrastructure and campaign infrastructure matters.

[Jonathan Ferro]

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 6am to 9am 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.