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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. We begin this hour stocks Extended losses following a very volatile session. Steve Chevron Federated calling it the storm before the calm writing to be clear, we would see any volatility as a buying opportunity. Steve joins us now for more. Steve, good morning. Good to see. What do you think is behind the latest fragility, the latest wild swings for tech stocks?
Steve Chevron
Yeah, let me, let me just say I'm not coming from either Rio or courtside at the Knicks game. I'm fresh off the New Jersey Turnpike where traffic has been insane coming into the city City which is I think a sign of actually strong consumer demand. But look, I think there are a lot of non fundamental factors that are going to interfere with markets and cause volatility over the summer. People need to make room in their portfolios for all the equity capital that's being raised, including space X pension funds and kind of investors that are targeting allocations. Equities have run so hard over the last quarter. Fixed income has struggled so much that there's going to be a rebalancing trade very likely that I think will interfere with markets inflation. I think today's inflation report is going to mark the worst of the worst. This is going to be the biggest jump on a month over month. I think we kind of stabilize from here.
Jonathan Ferro
You think this is the peak?
Steve Chevron
Not necessarily the peak. You could get a report that's hotter but the jump I think we're going to go from, you know, 3, 8 to 4 to likely today I think that's the biggest jump. So after this report I think things will get bad at a less bad rate, which is usually what markets look to to have an inflection point. You've got uncertainty around the midterms that will start to come in the and then you have a new Fed chair that's going to get challenged. So I think you could see volatility over the course of the summer. Our anchoring point though is that we still sit in what is at worst the middle of the biggest infrastructure buildout since the railroads and margins that are growing at the fastest pace in my lifetime. And it's not as short as it was, you can see from the gray hairs. So we want to own that. And if we see volatility on some of these non fundamental factors, we're likely
Lisa Abramowicz
to buy it on at what price. And this is the key issue because everybody has their hand out, everybody wants to raise money and the sums of money are getting bigger and bigger to pay for higher and higher cost items because inflation is going up as quickly as people can raise money to pay it.
Steve Chevron
I think prices are up. I don't think inflation is in place and I think that that's a key element. I don't think what we have is a self reinforcing upward cycle in prices. And the reason I don't think we have that is we don't see it in wage gains which are still pretty modest at three and a half percent. And what you're seeing is pockets of weakness in parts of the consumer basket that's offsetting the strength that you see in energy commodities. What we have is a strait of hormuz that's closed. And if energy is not flowing, prices are going to be higher. But what we don't have that we had in kind of 22 and 23 was just more and more money getting pumped into the system. Whether it was through government stimulus or rates that are zero. And so I think what you're going to see is on a year over year basis, the biggest jump, this kind of 4% number. And then I think we'll see a string of 4% numbers. But then all of a sudden when you get to the back half of the year, you've lapped the tariffs. Even if energy prices stay exactly where they are once you get to next March, energy inflation is zero at that point. Right. So and I think what we're likely to see is energy prices that ease some, not necessarily go back to where they were pre conflict, but ease some. So I think we have higher prices, I think it's hurting some people. But I don't think that this is that self reinforcing inflation cycle.
Lisa Abramowicz
I would take issue with one thing and this is something that I was hearing.
Steve Chevron
A lot of debt. That's kind of what we do.
Lisa Abramowicz
By the way, you're off to a fantastic vacation next week, so don't exactly cry me a river about our fair. You know, let's not go there. But I will say one thing, that as I was talking to different CEOs, they're talking about how much money they have and that their margins have been increasing, not decreasing. And you said that fiscal isn't necessarily coming in the same way that it did during the pandemic. Maybe so, but you're getting tax breaks that are giving them a lot of cash. At what point will companies have to raise wages in a commensurate way because they have so much money they need to build their business? They are all investing in CapEx. I mean, why isn't that a likely outcome?
Steve Chevron
So let's talk about the margins first. And this is really important because in a high inflation environment, usually stocks don't do as well as they do in a low inflationary environment. Unless earnings are growing above trend. And they do particularly well when margins are growing. So what the history shows is that stocks can do as well in a high inflation environment as they do in a low inflation environment. If margins are growing and that's why you see the stock market as resilient as it is as it relates to wages. Wages are growing, they're growing at about three and a half percent and that's about where you want it, right. When it gets over 4, that generally becomes a self sustaining kind of problem. That's 20, 20 to 3 and a half percent with inflation kind of around 3. Let's say that's been the average, that's real wage growth. And Again, that's very different than what we were seeing with the inflation of 22, 23 when we had a record period of negative real wage growth for the consumer. So the consumer here, and I think this is the biggest contrarian call, we all know how difficult the consumer has been, how K shaped it's been. But look at the bottom part of the K. All of a sudden Instead of adding 10,000 jobs a month, we're adding 180,000 jobs a month. And the biggest decline in the unemployment rate so far this year is folks, some college degree, high school diploma, less than a high school diploma. I think that bottom part of the K is set to do a little bit better than what we've seen over the last year.
Jonathan Ferro
Steve, what do you, what do you
Podcast Producer/Host
think the Fed does next week with all of this?
Steve Chevron
I think you're going to see the Fed likely on hold. What I expect to hear from Wash is how he's going to look at things. He's not going to come out and say hey, we're not hiking or we're hiking. I think he's going to maybe reiterate that he's going to look at trim, trim mean measures of inflation. I think he's going to lay out a framework or a series of breadcrumbs that will communicate to the market that this Fed's not going to hike. I mean, I really think that they're going to hike this year because here's why. What is it going to do? The parts of the economy that are rate sensitive have already been in a recession. That's been what we've talked about around this table. So are we going to punish the low end consumer more? Are we going to punish small businesses more? Because you can raise rates all you want. It's not lowering a chip price, it's not lowering the price of a gas turbine because the buyers don't need debt and they're price insensitive. So what you don't want to do is hike rates and destroy those interest rate sensitive parts of the market so that if AI Capex slows down, you find yourself in a negative cycle. So I think this Fed will understand that. I hope that they'll understand that. I think it'd be a real policy error to get too aggressive on this.
Jonathan Ferro
So you're looking for something dovish relative to more hawkish expectations.
Steve Chevron
I'm expecting him to drop some breadcrumbs and the breadcrumbs would be things like I'm going to focus on trimming inflation.
Jonathan Ferro
I wait, what's that I'm going to or we're going to.
Steve Chevron
That's the question.
Public Investing Representative
Right?
Steve Chevron
Because he does have the hardest management role, I think, of any Fed chair in a while, particularly with his predecessor sitting there, apparently keeping a low profile but giving speeches that aren't so low profile. So we're going to. We're going to see. We've always assumed that even though it's a committee, the Fed chair sets the direction. I would expect that Warsh, being well prepared and very interested in this job for a long time, will be able to navigate that. We will see if it really is a committee. Strap in.
Jonathan Ferro
He's had 10 years to think about it, that's for sure.
Steve Chevron
He's very well prepared for this, without a doubt.
Jonathan Ferro
Stay with us. More Bloomberg surveillance coming up after this.
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IBM Representative
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Jonathan Ferro
Dan Ives of Wedbush writes in the following While there will be some worries that the mammoth Space X will take away some oxygen from the tech semi trade, this will be a short term bump in the road. Dan joins us now for more than Good morning.
Dan Ives
Great to be here.
Jonathan Ferro
The appetite for this ipo I think Lisa makes a fantastic point. A lot of people talking about the same thing just trying to get ahead of the index inclusion, aren't they?
Dan Ives
No, I think that's definitely a play and I think to say it's not would be wrong because of just the unique situation here from the indexing coming out of the gates. But look at the end of the day it does come down to it's viewed as a derivative of the revolution in terms of how you're going to play Space Data AI and look this is it's a test for the market in terms of not just Space X but the ripple effect across the rest of tech and I think that's what you're seeing. You're starting last week. In terms of the sell off that we've seen semis I think it's playing into just it's a little white knuckle moment that we're going through in tech just to see how this is the reception ultimately is going to be but
Jonathan Ferro
it's not just this. It's pushed back to equity capital raises elsewhere. The report of maybe matter doing the same thing we've had another player this morning suggests they're going to do the same thing push back in the equity market. Do we have the space for these names?
Dan Ives
I believe you do and I think even if you look like Google after the offering the view that you were going to have a big sell off but instead I think actually took it pretty well in terms of the Stock look it's $4 trillion that's going to be spent over the coming years. This is an arms race playing out. I don't care whether it's Space X anthropic open air in terms of the capital raise that we're seeing and I think these companies understand the demands there. The difference is if we go back six months ago it's like show the monetization is Capex going to accelerate? It's happening and I think now that there's more of a green light I think that just give further confidence. I think investors now are able to see around the corner because we just saw like this weekend like our Taiwan checks like further just tighter supply which is Just more bullish for chips, more bullish for what we see across semis and obvious across memory.
Lisa Abramowicz
That said, I mean a lot of people can buy into the story and say this truly is a revolution but say that the pricing is already pretty full especially because as the supply becomes constrained people are paying more and more for it and they're raising debt that they have to pay back later with future revenues that go to that. At what point do you see that as having a viable argument?
Dan Ives
Yeah it all comes down to like modernization on the use cases, not just on the enterprise but on the consumer side because look, you build it will they come? So now it's all built. You see the demand there. But now it comes down to the next phase and you guys see in earnings the big thing, the big reason we saw the rally that we have it goes back to like obviously a negative sentiment in March but then you go to earnings in April and maybe I mean those were you know I think Jalen Brunson like in terms of what we saw in terms of numbers. Now it comes down to it's setting up for what I believe is going to be earnings over the coming quarters that will further support tech stocks. You know we continue think NASDAQ 30,000 the next six months.
Lisa Abramowicz
You talk about the consumer facing side. You have to see it there. Does that mean that you like Chinese tech stocks better than the US that's catering more to corporate look.
Dan Ives
But it's also why like in Cupertino what Apple's doing now the start of least having an adequate a strategy because on the consumer side it will come and go through app. I continue to view them as a toll collector on the, on the on the highway book in China robotics is where they're winning. And I think you cannot just view this market it's not just us China there's going to be a lot of winners and we continue the Alibaba some others in terms of big tech in China and where that continues to really be I think just start the next phase.
Podcast Producer/Host
Dan, speaking of China, what do you make of the US looking at potentially nationalizing parts of these similar to what China does?
Dan Ives
Look it's this is balancing act and I think it speaks to you're not going to see any sort of like what I'd be like nationalization because the reality there is that it further I think stems from a regulatory perspective.
Jonathan Ferro
But what you do think we're going
Dan Ives
to see that I don't so I don't think in the US you're going to See national but I do think you will see stakes just like Intel.
Ryder Strong
Well, how is that net nationalization?
Dan Ives
Look, I think that's, you know the problem is is that a big part of where intel is today, it's because of the investment that you saw from Trump administration. Then it comes down to like was that the right move? I'd argue in that situation I think it was the right move because you can't have intel basically being blockbuster video of the of tech. But I think selectively they're going to take stakes in different companies because look it is true like in what's happening in China that is an about what we're buying.
Jonathan Ferro
What happens to demand for the products that open anthropic are distributing right now when they start charging, what it actually costs, what happens to demand and what are we seeing already happen in C suites around this country?
Dan Ives
Okay then you're going to, you're going to have to see the cost of tokenization continue to go down. You will see limits in terms of you know what we see on caps in some companies. But I think it also going to come down to like as companies monetize that and as they know that those dollars are being spent for revenue that's accelerating within these companies. That's where all of a sudden the two charts start to crop.
Jonathan Ferro
Where do you see revenue acceleration because of adoption? Where do you see that right now?
Dan Ives
Well, I think it's already start happening the data layer. I mean if you look at Snowflake you could datadog, you could enter data. So we just started off it was just chips now data layer. Then it's going to be software. Oracle obviously is going to be key in terms of what we see from them. Hyperscalers I continue to think are not being factored in terms of the true monetization. Like a Microsoft being which one example
Jonathan Ferro
Microsoft and who else?
Dan Ives
Look, I think, I mean if I look at go back to what's happened in Google and a year ago New York City cab drivers bearish in Alphabet. Now what they're monetizing on hyperscalers on search on Gemini narratives are very easy where there was change and I just think I continue to think this is third inning one out relative to the
Jonathan Ferro
you more confident on that NASDAQ call or the Knicks going into game four.
Dan Ives
Well, I can do that. I think Knicks game four by ultimate. Do you think Nick's in five? NASDAQ 35 when in San Antonio they I think they win in San Antonio.
Jonathan Ferro
Okay, maybe we should go. Are you going?
Dan Ives
We never know.
Jonathan Ferro
Okay, considering it.
Dan Ives
Consider.
Jonathan Ferro
Okay, stay with us. More Bloomberg surveillance coming up after this.
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Jonathan Ferro
Joining us now to discuss Tiffany Wilding of Pimp Code. Tiffany, welcome to the program for handle on inflation. Widely anticipated. Haven't seen that for three years. Tiffany, can this Fed look through this?
Podcast Producer/Host
Yeah, I think the key question right now is, you know, is inflation elevated as a result of negative supply shocks or a positive demand in the economy that's lifting inflation. And clearly what you're seeing from the headline story when the higher energy prices is that is being driven by, you know, the negative supply shocks that we're seeing coming out of the Middle east and high gasoline prices as a result. You know, now if we look at core, you know, I think that, you know, there's a, there's more of a question there and I think that's why you're starting to see some Fed officials that are talking of talking about interest rate hikes, you know, but at the same time we know that we've had some pass through of tariff higher costs as a result of tariffs. And you have the story as well which is, has been bleeding over into inflation a bit. So there's some supply shocks on that side as well, are kind of one off things, you know. And we think outside of that, you know, core inflation in the US still looks like, you know, it's on a trajectory that, you know, that, that eventually should be okay for the Fed. Now again we'll get some of the energy that is bleeding into the core airfares elevated and things like that, you know. But ultimately, ultimately we do think they have room here to look through and, and wait and see how this plays out.
Jonathan Ferro
Tiffany, we've heard that for five years and inflation has been above target for five years. And the incoming Fed chair in his own words said inflation is a choice. Do they need to do something just to anchor credibility?
Podcast Producer/Host
Yeah, I mean, well, so as of right now, you know, if you look at a range of estimates for inflation expectations, you know, they, they look pretty well anchored. You know, the markets certainly are giving the Fed a lot of credibility. And if you look across the surveys, you know, we would argue the surveys look pretty well anchored as well. Of course, one year inflation expectations from various surveys have gone up, but they, they always sort of tend to lag inflationary pressures, you know. So I think they again, the Fed has some room here to take a look and see and see what's going on. You know, the other thing about negative supply shocks is, you know, it's kind of a, it's a more difficult or tricky choice in terms of the dual mandate. So although it's putting upward pressure on inflation, it's putting downward pressure on activity, potentially some upward pressure on the unemployment rate. So they're going to absolutely weigh that piece of this as well. We do think at the next FOMC meeting that they will drop the forward guidance most likely There was this so called easing bias in the language, in the sense statement. If you sort of squinted, maybe you could see that. And it's a nuance. We think they probably will drop. Just a signal, you know, that there are more two sided risks here. But at the end of the day we think the Fed is, you know, is going to be careful, you know, not to overreact to what could be supply shocks that are pushing up inflation and could be temporary.
Lisa Abramowicz
Tiffany, when did they move their target to 3% rather than 2%?
Podcast Producer/Host
Well certainly that's a, you know, that will be a question for, for the new Fed chair Wash, when he gets in there. As we heard from, from Powell, he said that he was not going to change the inflation target during his tenure. You know, they just had a review of their long term strategy that, you know, that they, that they discussed last fall. And in that, in that longer term review they, you know, they sort of move the asymmetric language in terms of how they're thinking about inflation out. So now you're kind of back to just a, you know, inflation targeting, flexible inflation targeting, central bank type of strategy, you know. So all of that sort of signals to us that they're not going to move their inflation target of 2% officially, you know. Now having said that though, you know, in terms of Fed strategy, you know, we can, we can kind of think of it like the, you know, the 90s strategy, the opportunistic disinflation strategy where you know, we've had a series of supply shocks that keeps inflation slightly above target. And the Fed sort of knows at some point, you know, we could fall into recession. We all hope that we don't, but in that case we'll have below target inflation, you know. And so, you know, they don't really want to overreact to get inflation to target. Now just given the cost of higher unemployment that that could result. So some tolerance for above target inflation for a little bit. You know, knowing that at some point you probably will, you know, get some of those recessionary forces that bring it below.
Lisa Abramowicz
I don't envy the Fed right now, Tiffany. I mean there are all these geopolitical choke points that are creating a series of sequential supply side shocks that on one hand you could say they want to look through. On the other hand there is a secular overlay of what we're seeing with artificial intelligence, this incredible demand for assets of all types and that seems to be price inelastic. I'm just wondering from your vantage point how you view that in the Inflation story should that be concerning given the fact that electricity is rising at about 6% year over year when it comes to just the inflationary pressures?
Podcast Producer/Host
Yeah, I mean, so I think that's the tricky thing as well. Right. I mean there is certainly a piece of this that is demand related, you know, and again the Federal Reserve monetary policy more generally, you know, has, has more of an ability to impact demand, you know, and they also want to try to understand, you know, how, you know, how persistent is this demand impulse going to be, you know, and certainly the demand impulses is absolutely there and we've seen it accelerate at the beginning of this year, you know, coinciding with the, you know, the Iran events, you know, so I think that's certainly something they're going to weigh and we're seeing the prices of components, components related to the infrastructure buildout really skyrocket and that is spilling over into, into the price components of those, into the consumer price components in those categories. That's impacting PC more than cpi. Not to get too wonky, but the PCE is their preferred measure. Yeah, I mean so there's definitely, you know, some demand driven inflationary pressures here. But, but we've been talking about this two speed economy for quite some time and you know, there's certainly another part the of, of the economy outside of AI and maybe outside of the top 20% of households that hold a lot of their wealth in stocks that isn't doing as well as a result of these economic fundamentals. So you know, they're. The labor market for example, does not look like a source of inflationary pressures at the moment. So the Fed has to weigh all of these factors, you know, and again, what monetary policy theory would suggest when there's a lot of uncertainty is you go some slow and you wait and see. And again we think as of right now that means, you know, they, they are on hold for, for the next little bit.
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 Foreign.
Hex AI Representative
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Podcast Summary
This episode, hosted by Jonathan Ferro with regular co-hosts Lisa Abramowicz and Annmarie Hordern, dives into the latest turbulence in financial markets, focusing on heightened volatility in tech stocks, the inflation outlook, and the Fed’s looming policy choices. Featured guests include Steve Chevron (Federated), Dan Ives (Wedbush), and Tiffany Wilding (PIMCO), who offer deep insights into macroeconomic dynamics, the ongoing AI and infrastructure investment boom, capex cycles, IPOs like SpaceX, and evolving Fed strategy as it faces supply shocks and sticky inflation.
[01:27 – 03:44]
[03:44 – 07:02]
[07:03 – 09:04]
[11:18 – 17:13] | Featuring Dan Ives (Wedbush)
[20:36 – 27:38] | Featuring Tiffany Wilding (PIMCO)
"I think prices are up. I don't think inflation is in place... we don’t see it in wage gains which are still pretty modest at three and a half percent."
– Steve Chevron [03:56]
"Stocks can do as well in a high inflation environment as they do in a low inflation environment if margins are growing."
– Steve Chevron [05:47]
"I really think that they're not going to hike this year... parts of the economy that are rate sensitive have already been in a recession."
– Steve Chevron [07:06]
"At the end of the day it’s viewed as a derivative of the revolution in terms of how you’re going to play Space, Data, AI."
– Dan Ives [11:36]
"If you look at Snowflake, DataDog... then it’s going to be software. Oracle’s going to be key... Microsoft... not being factored in terms of the true monetization."
– Dan Ives [16:49]
"Is inflation elevated as a result of negative supply shocks or positive demand in the economy that’s lifting inflation?"
– Tiffany Wilding [20:50]
"Inflation expectations... look pretty well anchored. The markets certainly are giving the Fed a lot of credibility."
– Tiffany Wilding [22:21]
The discussion is fast-paced and high-level, blending technical economic analysis with savvy market commentary and some light banter. The hosts cut sharply to the heart of market anxiety—volatility, the durability of the AI investment cycle, and the constraints facing central bankers. Guest commentary is candid and occasionally contrarian, especially on inflation and tech valuation debates.
For a day-by-day navigation of markets, economics, and geopolitics, this episode provides concise, actionable insight from top market minds, with rigorous but approachable analysis and an eye towards the road ahead.