Equities and the Fed

Summary

Bloomberg Surveillance – "Equities and the Fed"

Date: June 18, 2026
Hosts: Tom Keene, Paul Sweeney
Featured Guests: Edward Yardeni, Anastasia Amorosa, Julie Beal, Tom DiNapoli

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Episode Overview

In this episode of Bloomberg Surveillance, the hosts offer a comprehensive look at the current state of financial markets, particularly equities amid ongoing Federal Reserve policy shifts. Discussions span resilient corporate earnings, AI's market impact, investment strategy in a changing economic landscape, asset allocation, and a deep-dive into New York State’s public finances. Guests include market veteran Edward Yardeni, investment strategist Anastasia Amorosa, portfolio manager Julie Beal, and NY State Comptroller Tom DiNapoli.

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Key Discussion Points & Insights

1. Equities & Earnings Resilience

Guest: Edward Yardeni (00:48 – 08:35)

• Advice for Young Investors:

  • Yardeni encourages ambition and education:

    "Read my books… Before you read, you have to buy them." (02:02)

  • Mentions his book, Predicting the Markets (2018), as a foundation for understanding market cycles.

• Market Resilience & Earnings:

  • The bullish run in equities continues to be underpinned by robust earnings:

    "It won’t go down because earnings won’t go down… every time we throw something at it, it just hangs in there." (02:29)

  • Government deficits ($1.5-2T/year) and strong consumer spending drive economic growth, with baby boomers playing a key role through their retirement assets ($89T). (02:52)

• Capex Boom & Bubble Fears:

  • Controversy exists around whether current high capital expenditure will pay off or end as a bubble, but Yardeni remains optimistic.

• AI as Market Evolution:

  • Places AI as part of a digital evolution—not a revolution—beginning with IBM mainframes, now driven by the exponential growth of data:

    "AI is not a revolution. It’s an evolution in the digital revolution... We now have four factors of production: land, labor, capital, and data." (03:52–04:32)

  • Predicts limitless data:

    "There will never be a shortage of data." (04:40)

• Bull Market Dynamics:

  • Distinguishes between FOMO (fear of missing out) and FIMO (fabulous earnings momentum), favoring the latter:

    "I'd rather have a melt up based on earnings than one on valuation multiples. And that’s what we have." (05:08)

• Fed Dot Plot & Policy:

  • Sees the Fed's dot plot as helpful yet imprecise:

    "There’s no science at all [to the neutral rate]… sometimes the spread is between 3 and 4%. Well, that's really helpful." (06:23)

  • Expects more consensus-driven Fed communication under new leadership.

• Roaring 2020s Scenario:

  "I'm looking for the S&P 500 to get to 8,250 by the end of the year... And by the end of the decade...10,000." (08:03)

  • The present decade’s market trajectory aligns with his "Roaring 2020s" thesis.

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2. Energy Markets, Fed Outlook & AI Opportunity

Guest: Anastasia Amorosa (11:45 – 18:44)

• Brave Calls in Oil & Risk Assets:

  • Amorosa reflects on her choice to stay invested amid oil price spikes ($120/barrel) and recession fears, noting the importance of strategic buffers and market patience:

    "We went into this largest supply outage with buffers... I think what we ultimately looked at is… that cushioned us and prevented a recession." (12:04)

• Current Market Focus:

  • The market remains fixated on the strength of the US economy, consumer momentum, corporate earnings, and surging CapEx—especially from hyperscalers:

    "The focus should be on the strength of economic activity... great earnings season… CapEx accelerating thanks to hyperscalers." (13:31)

  • Downplays Fed "hawkishness" as not being forward guidance.

• AI and Infrastructure Play:

  • The AI trade now extends well beyond headline names like Nvidia:

    "The total addressable market for semiconductors because of AI has expanded… CPUs, memory chips… that's being upsized." (15:19)

  • Next phase: Data center buildouts to support agentic AI and workflow automation:

    "It’s likely to drive much more token consumption…and that's going to require a whole lot of compute." (15:19)

• International Perspective:

  • European investors still want US exposure due to better economic fundamentals:

    "You have sluggish consumer spending [in Europe]... you don’t have the CapEx momentum... In the US, we've checked all those boxes." (16:40)

• Emerging Markets:

  • Selects Asian EMs enabling the tech buildout as key opportunities; also highlights fintech innovation in Brazil.

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3. Asset Allocation & Market Quality

Guest: Julie Beal (21:40 – 26:53)

• Small/Mid-Cap Strategy:

  • Emphasizes pickiness and a tilt to quality within small- and mid-caps:

    "You really have to be thinking about quality… pretty extreme levels right now… opportunity to buy nice things for cheap." (22:02)

• Fed Transparency:

  • New Fed chair’s brevity shifts focus from language to observable data:

    "This austerity of words is probably a positive thing for markets… what really is driving most decision making is the data that we can all see." (22:33)

• Portfolio Construction:

  • Finds credit attractive but stresses exposure to companies with strong cash flows to weather higher rates:

    "Making sure you’re exposed to businesses that have really strong cash flows and can withstand higher interest rates… is pretty important." (23:35)

  • Warns of an AI-driven cycle where rapid capex depreciation creates pressure for quick returns, unlike past cycles:

    "What we’re building… has a depreciation and utility much shorter than past big build-outs... that creates a little bit of a different dynamic..." (24:44)

• US vs. Non-US Allocation:

  • US stocks no longer appear significantly overvalued versus non-US, while international exposure helps hedge AI sector concentration risks.

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4. Public Finance & New York State

Guest: Tom DiNapoli, NY Comptroller (30:10 – 38:16)

• Path to Public Service:

  • Inspired by 60s/70s activism and local school issues; won first election at 18. (30:30)

• Oversight & Press Scrutiny:

  • Local/state media coverage has diminished, but DiNapoli’s office continues to audit state finances, monitor for waste/fraud, and uphold transparency.

• Top Comptroller Priorities:

  • Maintaining pension fund security for 1.3 million New Yorkers; fighting to keep politics out of fund management.
  • Auditing state spending, safeguarding against federal budget pressures, and recovering funds lost to fraud:

    "Keeping that fund safe and secure, keeping politics out... recognizing we’re going through a time of a changed relationship between Washington and the states..." (32:45)

• Investment Returns Strategy:

  • Outlines a diversified, conservative approach; long-term assumed return is 5.9%—among the lowest in the US:

    "Our long-term assumed rate of return is 5.9%... so we’re more conservative, don’t take as much risk… diversification has been our strength." (34:39)

• Federal Policy Impact:

  • Looming Medicaid cuts ($13–14B over next years) will challenge NY’s budget and risk coverage for lower-income residents.

• Retaining Residents:

  • Out-migration mainly affects middle/lower earners via affordability, not just wealthy tax flight. DiNapoli argues NYC’s creative draw and investment in quality-of-life must continue to attract and retain residents.

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Notable Quotes & Memorable Moments

• Edward Yardeni on Market Drivers:

  "I'd rather have a melt up based on earnings than one on valuation multiples." (05:08)

• Anastasia Amorosa on International Flows:

  "You continue to look to the United States, not for the political backdrop that we have, but for the economic backdrop that we have." (16:40)

• Julie Beal on AI Capex Cycle:

  "What we’re building and what we’re spending money on has a depreciation and utility that’s much shorter... That creates a little bit of a different dynamic..." (24:44)

• Tom DiNapoli on Public Pension Management:

  "Our long-term assumed rate of return is 5.9%... we don’t take as much risk to chase a higher return assumption. And I think that’s been our strength." (34:39)

---

Important Timestamps

• Edward Yardeni on Market Resilience & AI: 02:02 – 08:35
• Anastasia Amorosa on Risk Assets, AI, International Allocation: 12:04 – 18:44
• Julie Beal on Quality Investing & Capex: 22:02 – 26:53
• Tom DiNapoli on NY Finance & Pension Strategy: 30:10 – 38:16

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Summary Takeaways

• The current equity market is underpinned by robust corporate earnings and resilient US economic activity, not simply by investor exuberance.
• AI’s influence stretches well beyond headline names and semiconductors—its infrastructure and application ecosystem are still expanding, with new opportunities across both public and private assets.
• Cautious optimism underlies portfolio construction with a stress on quality, balance, and readiness for shifting capex cycles under higher-rate environments.
• Despite global and domestic economic headwinds, disciplined public fund management and continued oversight are vital for long-term stability, according to state-level officials like Tom DiNapoli.
• The US remains the most attractive developed market destination for global capital, even as selective international exposure is advised to diversify away from concentrated themes like AI.

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This episode delivers insightful perspectives on equities and Fed policy against a dynamic economic backdrop, offering both big-picture analysis and actionable investment themes for institutions and individuals alike.

Transcript

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[Edward Yardeni]

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[Bloomberg Host (Tom Keene)]

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[Bloomberg Host (Paul Sweeney)]

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[Edward Yardeni]

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[Bloomberg Host (Tom Keene)]

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[Edward Yardeni]

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[Bloomberg Host (Tom Keene)]

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[Edward Yardeni]

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Bloomberg audio studios podcasts radio news. This is the Bloomberg Surveillance podcast. Catch up us live weekdays at 7am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Bloomberg Host (Tom Keene)]

Joining us now, Edward Yardeni. For a two hour conversation, I got eight ways to go here. You have a young Turk in the green room with you this morning.

[4imprint Announcer]

Yeah.

[Bloomberg Host (Tom Keene)]

What's your number one advice to a 20 year, 22 year old kid who's like my God, I'm sitting next to Edward Yardeni. What do you tell the young Turks?

[Edward Yardeni]

Read my books.

[Bloomberg Host (Tom Keene)]

Buy them.

[Edward Yardeni]

Before you read, you have to buy them. They're open to the public. You know, I, I share the, the knowledge that I've, I've gained over the years. So in 2018 I wrote a book called Predicting the Markets. Turned out to be 600 pages long about what I learned in the first 40 years of my career. Now I'm working in the next four.

[Bloomberg Host (Tom Keene)]

What's the maximum that's been most true across the emotion of this bull market? That won't go down?

[Edward Yardeni]

Well, I think it's earnings. I mean it won't go down because earnings won't go down. I think, I think the reason earnings have been so resilient is because the economy has been so resilient. You know it's right. It's Every time we throw something at it, it just hangs in there.

[Bloomberg Host (Tom Keene)]

Are we getting a free lunch from a set of stimuli that have goosed revenues to generate that free cash flow?

[Edward Yardeni]

I think there's certainly something to be said for that. I mean, one and a half to $2 trillion government deficits certainly are stimulative, but we've also had a very strong consumer. Not kind of inconsistent with the so called K economy thesis. I call it the G economy thesis. It's really about the baby boomers that are keeping spending going because they're retiring and they've got $89 trillion of retirement.

[Bloomberg Host (Tom Keene)]

It's a wall of money Lawrence McDonald's talked about. I mean, it's just there. It's just a wall of money.

[Edward Yardeni]

And then of course, there's the capital spending boom and there's a lot of controversy about whether that's going to pay off or whether it's not. And it's going to. It's one big bubble that's going to burst. I think it's going to pay off.

[Bloomberg Host (Paul Sweeney)]

So that's kind of where I want to go, Ed. I mean, you've seen so many cycles, so many major themes in this marketplace, whether it's the Internet or how do you think about AI here? I mean, it seems like a lot of folks are telling us this is bigger than anything we've seen.

[Edward Yardeni]

Well, that's my view. And the way I put it in perspective is AI is not a revolution. It's an evolution in the digital revolution. The digital revolution started in the mid-1960s with the IBM mainframes. And the digital revolution is all about processing as much information, data as we possibly can, as quickly as we can, as cheaply as we can. And we've made a tremendous amount of progress, growing from the IBM mainframe to PCs, laptops, the cloud, and now AIs. I kind of, I think Tom will like this. I view us now as having four factors of production. Land, labor, capital, and data.

[Bloomberg Host (Paul Sweeney)]

And data.

[Edward Yardeni]

And we never really thought of data as a factor of production. And this ties into my Buzz Lightyear theory of to infinity and beyond. There will never be a shortage of data.

[Anastasia Amorosa]

Right.

[Bloomberg Host (Paul Sweeney)]

And Bloomberg, we are at our heart a data.

[Bloomberg Host (Tom Keene)]

Nice.

[Edward Yardeni]

And you're creating more and more data

[Bloomberg Host (Tom Keene)]

and the world that was so good. You get to work tomorrow.

[Bloomberg Host (Paul Sweeney)]

Juneteenth. And the analytics around all that data is kind of what we do here at Bloomberg. So what are we doing here, Ed? I mean, can we feel comfortable with this earnings environment out there to continue to support this market because boy, we just came through the last couple quarters have just been extraordinary for earnings growth.

[Edward Yardeni]

Well, let me give you some, some lingo on that. I'm a believer that we're better off with a bull market based on FIMO than fomo. FOMO is fear of missing out. And if people have fear of missing out, that'll affect the P E. You'll get the valuation multiple right. Too high, you'll get a bubble and it's bound to burst. Female is fabulous earnings momentum. Earnings have been absolutely fabulous and I'd rather have a melt up based on earnings than one on valuation multiples. And that's what we have.

[Bloomberg Host (Tom Keene)]

Ed Yardeni with us folks, and we continue, we welcome all of you across America. So if I line up my 10 most important dinners across the arc of this privilege with Bloomberg, one of them was with Richard Berner years ago and it was in the vicinity of 2012, 14 years ago. This is Berner of Morgan Stanley building out that franchise of Stephen Roach and then his public service to the nation. And Dick Berner and I sat there and he was on fire at Yardeni over the dots. The dots go back to January 2012. I would suggest we had a shift. Tectonic will know in time. Were the dots efficacious? Were they of value?

[Edward Yardeni]

Well, I'm kind of biased. I'm a Fed watcher. So the more and the more noise they provide for me to try to interpret for people, the better. I like the dot plot. I think it's a good insight into where the committee's the median statistics. Yeah, the median is important, but I think so is the distribution. To me the funniest thing about the dot plot is when you ask them for their long term estimate for the Fed funds rate and this is often called the neutral rate. And you would think that there's some science of the neutral rate at the Fed, but no science at all. 19 of them tell us what they think it is and sometimes the spread is between 3 and 4%. It's like, you know that. Well, that's really helpful.

[Bloomberg Host (Tom Keene)]

I look at where Mr. Warsh is taking us. He has that much power, I mean chairman have that much power to shift the dialogue, don't they?

[Edward Yardeni]

Well, I think the dialogue stays the same but how much of it gets communicated to the public is what he seems to be focusing on. Right? I mean I think the dialogue at the Fed is going to actually turn out to be more independent than it had been, you know, but, but he's actually come around to the, to the to the old view that a Fed chair needs to have a consensus. I mean he could have been the only dissenter at that meeting, but he wasn't. He joined the committee.

[Bloomberg Host (Tom Keene)]

Email comes in Mike. He's on the parade route somewhere. Mike, thank you so much for emailing in today. Can you reaffirm your roaring twenties scenario and where is your SPX statistic right now?

[Edward Yardeni]

Well, I'm looking for the S&P 500 to get to 8,250 by the end of the year and still by the

[Bloomberg Host (Tom Keene)]

end of this year.

[Edward Yardeni]

Yeah, yeah, Yeah. I mean 7700. I mean we're at 7500. So we're moving in the right direction. And there's still several months left. And then by the end of the decade, the end of 2029, I'm still using 10,000. And the roaring 2020 has worked out pretty well here for the first seven.

[Bloomberg Host (Tom Keene)]

You think?

[Edward Yardeni]

Yeah, yeah, I think so. It's, you know, it's getting to be more and more ro.

[Bloomberg Host (Tom Keene)]

Edgar Denny, thank you so much for joining us today. An historic day with signature at Versailles. Dr. Yardeni look for his spectacular note. Can't say enough about it. Stay with us. More from Bloomberg Surveillance coming up after this.

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[Bloomberg Host (Tom Keene)]

Anastasia welcome to Bloomberg Surveillance. Obviously with partners that group as well. Once again you nailed it by having the courage to stay in the market. I want you to go back at the bottom of this war, $120 a barrel, etc. How did you know don't go to cash?

[Anastasia Amorosa]

Well, I guess it was a tough call to make or maybe a brave call to make, right? Because a lot of people the peak were calling for recession probabilities to go up and there were calls for stress test scenarios of what if we stayed 120plus barrel of crude oil. And I think what we ultimately looked at is, you know, fortunately we went into this largest supply outage with buffers and whether it's the inventories that we had on hand and we could cover 200 days worth of net imports. And so that allowed for a lot of cushion that in my view would have prevented us from going into recession. And then the other side of that is, you know, we never, I don't think really anybody thought that this conflict would drag on for Quarters and quarters and years. Years. We know that there's a political time clock and, you know, there's a level of market patience that was going to force a resolution at some point. So I'm glad to see that we are here. And it's been a stunning turnaround in the price of oil, Tom, to your point, from 120 to now, you know, the forward strip pricing in $75 average for the back half of the year, that is a much, much better backdrop, fortunately for risk assets now.

[Bloomberg Host (Paul Sweeney)]

So I guess investors are probably, you know, over the last several days trying to reset a little bit. And what do we focus on now? Is it earnings? What do we focus. The Fed, we heard from the Fed yesterday. They're not going to give us any, any love there. So what do you think the market's focusing on these days?

[Anastasia Amorosa]

Well, I think it is that interplay between where we are with the state of the economy and where we are with the state of interest rates. And the focus should be on the strength of economic activity. First of all, whether you look at the consumer and this continued momentum that we see there, whether you look at the corporations and the great earnings season we just came out of, you know, you look at the upsizing of earnings estimates, for example, and then there's the CapEx story. If you look at the last quarter's GDP, you know, the kind of the bright object there has actually been the fixed asset investment. The capex is accelerating in the US thanks to hyperscalers, but also others. So that's the economic backdrop. That's why I think you stay in the markets. The other side is the Fed. And look, my take on that is the markets have interpreted this as in, you know, this is hawkish guidance, we're going to hike rates. It's not guidance. As you know, there was no forward guidance. And I think a lot is going to change in the next few months.

[Bloomberg Host (Tom Keene)]

Anastasia Amorosa with us. We will continue with her. Edward Yardeni to join in a moment. Futures up 55. The Vix is surprising. I thought it'd be in. It's in a stick 17.27 but it's screaming 16 handled. To me, the bank of England just does a 7 to 2 vote. Meghan Greene, who's been on the show many times and you pill a full time a few pill times over the years. But Meghan Green and pill vote against it. Looking for a rate increase. Bank of England stay static. Pound retreats, gilts retreat. And Paul, it goes to this idea of a backdrop of fighting inflation Fighting inflation.

[Bloomberg Host (Paul Sweeney)]

Tom. So, Anastasia, one of the issues for this market is AI, and we're trying to figure out, obviously investors how to play it other than Nvidia. And it's been an ongoing, I think, play for this marketplace to figure out where do we go, how do we play it, how are you guys thinking about.

[Bloomberg Announcer]

Sure.

[Anastasia Amorosa]

I mean, look, there's actually so much more to do in both public and private markets beyond Nvidia. You know, first of all, you know, one thing that's happened, Paul, is over the last few years the total addressable market for semiconductors because of AI has expanded. So it started with GPUs, but now, as we know, the total addressable market for CPUs, for memory chips, all of that is being upsized. So, so that trade on its own has broadened out. You know, then you think about the infrastructure and you know, look, there was the first leg, I would say, of the data center opportunity. And you know, there's some concern about maybe we've done too much too fast. But the reality is, looking ahead, what's happening is we're transitioning from the use of chat bots, the conversational commerce, to the use of agentic AI and workflow automation. And what that does is it's likely to drive much more token consumption over the next few years. And that's going to require a whole lot of compute to. So the next phase of the data center build out has to support this move to agentic AI. So we're absolutely looking at data centers. We have several portfolio companies in the space and you know, they're seeing very strong appetite for, for their compute capacity.

[Bloomberg Host (Tom Keene)]

Partner group is out of Switzerland. You've got a handle on continental Europe because you have to go over there and speak to people about American exceptionalism. Do they still want to buy American after all we've been through with the President in the war?

[Anastasia Amorosa]

Yes, the answer is yes. And look, you know, there's been a kind of an evolution there, but absolutely. And I was in Europe recently and look, when you think about Europe, you've got extremely depressed consumer confidence. You have sluggish consumer spending, you have the ECB that hiked rates, presumably or arguably they shouldn't have. You know, you don't have the CapEx momentum, you don't have the supportive corporate tax rates. And then if you flip all of that around and look into the United States, we've checked all those bonds, boxes. So I think that's why, whether in Europe or the Euro, Asian, Asian investor, you continue to look to the United States, not for the political backdrop that we have, but for the economic backdrop that we have.

[Bloomberg Host (Paul Sweeney)]

What are we doing with emerging markets here? Because that's been a play really for the last, I don't know, couple of years. Emerging markets have done very well.

[Anastasia Amorosa]

Yeah, I think some parts of emerging markets are quite interesting and you know, let's, let's kind of extend the AI trade to Asia, for example. And it was also recently in Asia. You know, you look around and 60 or 70% of what we need to actually build out infrastructure is manufactured right there in Asia. Whether it's, you know, data center chips, whether it's servers, you know, whether it's all the components.

[Bloomberg Host (Tom Keene)]

Right.

[Anastasia Amorosa]

So, so I like emerging markets that are enabling that tech trade then selectively, you know, I wouldn't say that you just invest in all emerging markets, but if you identify a theme, for example, we have invested in a company in Brazil which is a fintech company because guess what, scaling in fintech is not just a US story.

[Bloomberg Host (Tom Keene)]

I don't care. When you say you're in Europe, are you really talking about lining up at Angelina's on the rude of Rivoli for that chocolate? Is that what we're really talking about?

[Anastasia Amorosa]

I'm not lining up there, but heavily is absolutely amazing.

[Bloomberg Host (Tom Keene)]

Do we predict that Europe's going to have a huge summer? I think gas coming down, maybe the

[Anastasia Amorosa]

fair competition and go into parts of Europe like what is the Nordic parts.

[Bloomberg Host (Tom Keene)]

What does Kirby do this morning at United? His head must be.

[Bloomberg Host (Paul Sweeney)]

I know he's fine. All good.

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All good.

[Bloomberg Host (Tom Keene)]

Anastasia, Ann Moroso, thank you so much and congratulations on an important call for the last 12 months. Courageous state. Stay with us. More from Bloomberg Surveillance coming up after this.

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certain these days it seems like AI agents are just about everywhere you turn, every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into opportunity. Secure every agent, secure any agent. Okta secures AI.

[Bloomberg Announcer]

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Bloomberg Host (Tom Keene)]

Julie Beal has been more than patient. We extended that discussion because Sweeney was trying to get pass into the city hall areas from the compar futures up 68, Nasdaq up and now advancing in further 1.6% Julie feels wonderful with a very different perspective with Kane, Anderson Rudnick. Julie, how do you deploy new cash this morning?

[Julie Beal]

I think that right now you really have to be if you're in small and mid cap you really have to be thinking about quality. The low quality to high quality is kind of a pretty extreme levels right now and so I think it's a good opportunity to be able to buy nice things for cheap. Normally we don't get to have these things, these opportunities to buy things at better prices and so that's pretty attractive for us right now.

[Bloomberg Host (Paul Sweeney)]

What did you hear from our new Fed chair yesterday and did that Change kind of how you're thinking about asset allocation.

[Julie Beal]

I think it didn't really change very much. I think that what we heard was less, which is an interesting dynamic for most of us as the trend has really been towards more disclosure, more words, more graphs, more charts. And I think that this kind of austerity of words is probably a positive thing for markets because I think a lot of that can create a lot of noise. And what really is driving most of the decision making is the data that we can all see. So I think it's an interesting posture. I think reducing the balance sheet is probably a positive thing, particularly if it gives us the opportunity, if we do get into a stressful situation in the market assets to be able to add more liquidity. So I think I agree and I'm aligned. The hawkish tone really shouldn't be surprising anyone. That was really the movement and direction that we were going in. So I think it's kind of in line with most people's expectations.

[Bloomberg Host (Paul Sweeney)]

Where do you see stocks, bonds, commodities, alternatives? How are you thinking about allocation these days?

[Julie Beal]

I think that when you are looking at a broader portfolio, the balance of it is really important. I think we continue on the equity side to struggle in part because credit looks pretty good, parts of credit look really good. But I do think that we have to be really mindful of quality. The importance of making sure that you're exposed to businesses that have the really strong cash flows and that can withstand higher interest rates. If that should happen, I think it's pretty important. Right. I wouldn't want to be in a position where we're significantly over levered. And when we think about the AI trade now that we've moved past this point where everything was funded with free cash flow so you didn't need to worry. Now there's a lot more debt, now there's a lot more equity. I think that that creates an important movement towards thinking about fundamentals and earnings, not just growth.

[Bloomberg Host (Tom Keene)]

What does the east coast not get about the world of Julie Beal? I mean you look out at the west coast and I think for so many, psychologically it's just really different. Julie, I mean, does this, the whole tech thing, does it just have a permanence to you? Like you're not worried about a cyclic ending of it?

[Julie Beal]

No, I mean, look, I was, I'm French originally, so I worry about literally everything. That's, that's just, that's a lifestyle for me. That's like a personality trait. And I think actually that's why I've been relatively successful. But no, I think that what I really believe is that the opportunities that were being presented in AI to me look wonderful. They look really positive and they look like they can be really profound in terms of the nature and quality of work, but they're complicated and they're not without their own costs. So while I'm really enthusiastic and excited about AI for the very long term and the potential it has to unlock things in healthcare and all the stuff that they tell us is super important, what is a little bit different about this build out from a capex standpoint is that what we're building and what we're spending a lot of money on has a depreciation and a utility that's much shorter than things like the big tech, you know, the big build outs that we had in telecom, in railroads, et cetera. That's, that creates a little bit of a different dynamic in terms of the pressure to create returns in the here and now. And I think that that's something that's a little bit different than other CapEx cycles we've had.

[Bloomberg Host (Paul Sweeney)]

Julie, how about us versus non us? We did have a rotation, I don't know, late last year, early this year, but, but it seems like that's reversed a little bit. How do you think about it?

[Julie Beal]

I think that we saw a lot of valuation opportunities, particularly outside the us it had gotten pretty extreme how overbought the US looked and so I think that broadly speaking things look more in balance to me now where you don't see the depth of the value that is being that we could really find, particularly in Europe, it's not quite as compelling to me now, particularly when you think about the growth opportunities that really feel like they're being unlocked in the US But I do think you want to have a certain amount of balance, right. Because if our economy is over levered to AI and there is some vulnerability to that. Right. Any time you're dependent on a single theme. So I think that having a little bit of exposure internationally makes sense because it is a little bit less leverage to certain of the AI themes.

[Bloomberg Host (Tom Keene)]

Julie, thank you so much. Julie Beal, so much. Are you going to be watching France, Iraq? I mean, is that what we're learning here? Julie? Bill, of course.

[Julie Beal]

Got to do it, got to do it.

[Bloomberg Host (Tom Keene)]

I think it's on Monday. Julie Beal, thank you so much respecting France out there and I can't say enough about her at work on market strategy. Stay with us. More from Bloomberg Surveillance coming up after this.

[Bloomberg Host (Paul Sweeney)]

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[Okta Announcer]

certain these days it seems like AI agents are just about everywhere. You turn every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into opportunity. Secure every agent, secure any agent. Okta secures AI.

[Bloomberg Announcer]

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Bloomberg Host (Tom Keene)]

Joining us now in intellectual election effort. He's been doing this for a long time. The 54th Comptroller of New York State. Tom, I want to talk about an America completely removed from politics. What was it it's 17 that said to you I need to run for public office?

[Tom DiNapoli]

Well, you know, I came of age in the late 60s, early 70s, inspired by folks like Robert Kennedy Senior. And you know, it was a time of great division in the country. A lot of issues, social issues, Vietnam War and so on. 18 year old vote just came in, actually the first that I could vote and I said, you know what, I want to be part of making this world a little bit better. And I was very active in school issues. I went to school board meetings. I didn't like some of the things I heard. So I said, you know, I'll take my civic lessons seriously and I'll run for a school board. And I had that unique experience, Tom, of my very first vote was for myself and I won. So that very cool path. Yeah, the big change.

[Bloomberg Host (Tom Keene)]

Tom DiNapoli and you know, the people running against you and your critics and all that say there's nobody watching over Albany, watching over state government. Back then there were tons of media coverage and local coverage, and that now is a dearth of local coverage. Is there scrutiny on our state processes now that you've been doing this for decades?

[Tom DiNapoli]

Well, it's an interesting point. You know, there's no doubt when you go to the LCA area, the legislative correspondence area in the state capitol, it's probably got about half of the folks there that were there when I first started in the state assembly a number of years ago. So. And you see the coverage just generally shrinking for many of our, you know, mainstream newspapers and radio and tv. So more press attention would be helpful. But certainly in terms of our role, our oversight role, the audit authority overseeing state finances, the comptroller's tradition continues. So, you know, keep in mind, we don't have any enforcement power. We don't order the governor of the legislature what to do. We can only comment on state fiscal practices, on debt practices, on spending, on covering waste, fraud and abuse. We do that. And of course I always appreciate it when the press pays attention to what we're doing. But I think with everything going on in the world these days. Unfortunately, state politics generally does not get mentioned that it should.

[Bloomberg Host (Paul Sweeney)]

Tom, what do you believe is the key issue for voters to focus in on as they think about the comptroller?

[Tom DiNapoli]

Well, you know, there are a couple. I mean one of the obvious ones is the responsibility of overseeing the state pension fund. That is the fund, that is our investment fund to provide retirement security for the 1.3 million New Yorkers, public workers all across the state. And keeping that fund safe and secure, keeping politics out of managing the fund, I think is a very important responsibility. I think in terms of audits and reports and analyzing state spending priorities, recognizing that we're going through a time of a changed relationship between Washington and the states, and particularly a state like New York, really starting to feel the effects of the Trump agenda, the significant costs, especially in health care, nutrition programs, education and so on. So having a controller who could help identify what those trends are and how we need to respond to them, I think is a very important responsibility. And of course, as always, when taxpayer money is being wasted, you want a controller who could point out ways to be more efficient. And in the worst case where people are stealing public dollars and that happens too often, we've had a laser focus with our investigation unit to saving taxpayers money by getting restitution from those who steal from the state. So a lot of important issues this office is involved with.

[Bloomberg Host (Tom Keene)]

Can I ask you a Bloomberg surveillance question? I think we can go narrow here with Tom DiNapoli. I look at your pension fund and we had some of the others in running for comptroller and you know their critic is critical of active and passive management and that I'm looking at a three month return, near 10%, five year a little bit lower. There was a small matter of COVID but I got a 10 year annualized return, 300 beeps above nominal GDP. My statistic is 8.94%. Mr. DiNapoli, maybe you have a better statistic. How are you accomplishing that? How are you getting a nominal GDP plus 300 basis point return?

[Tom DiNapoli]

We have smart professional management of the fund. We have a strong belief in diversification as part of our asset allocation. We do a serious review every five years. The biggest part of the portfolio is in public equity. Much of that is passively invested through index funds. And then we have a little less than 25% in fixed income. It is in the alternatives in the private markets, you know, real estate, private equity, infrastructure, credit, where not not completely correlated to what's happening in the public markets that we we try to have that balance so that even with the volatility that sometimes obviously occurs in the public markets, we could still be steady. I would say one other thing. Tomorrow we have a very conservative assumed rate of return. So our long term assumed rate of return is 5.9%. Most public pension funds are much higher than that. I think we're one of only three funds that are below 6%. So we're more conservative. So therefore we don't take as much risk to chase a higher kind of return assumption. And I think that's been our strength, diversification, conservative long term goal and it's worked for us.

[Bloomberg Host (Paul Sweeney)]

Tom, you mentioned this changing relationship with Washington. Just give us a sense of how that's really changed with the second Trump administration from a dollars and cents perspective.

[Tom DiNapoli]

Well, I mean, just looking at the big beautiful, the big ugly as I would prefer to call it, you're talking about probably the next couple of years, 13, $14 billion in health care cuts to the Medicaid program that certainly it's a very expensive program, right? Big growing part of the state budget. A lot of people depend on that program. So it certainly has an impact on our state finances, particularly because we're trying to figure out how to backstop for those that will lose health insurance coverage. You know, New York State went from a few Years ago, about 10% of our population without health insurance coverage to less than 5% now that folks are going to be moved off of Medicare. Some of them will be able to get coverage in the marketplace, some of them won't. Doesn't mean they're not going to get health care. We're probably going to have to pay for it through the charity pools. So, you know, these cuts, which may at one level sound like we're saving money in the long run, is going to cost us so and hurt people as well.

[Bloomberg Host (Tom Keene)]

You know, Tom, one final question. You know, we talk to Governor Lamont at Connecticut every once in a while, and I would suggest that Mr. Lamont grew up a little different than Mr. DiNapoli. But both of you are facing this presumed migration out of New York State to Florida, Texas and four other jurisdictions. How does New York State stop the movement to these other areas? What's the DiNapoli formula to keep New York state strong?

[Tom DiNapoli]

Well, it's an important question and I think you need to keep in mind when we look at the taxpayer migration numbers, you're right, there is an out migration, but it's not as severe as the critics say. Are we losing some folks at the upper end because of tax policy? Yeah, a bit. What is a bigger issue is the affordability question for people at the middle and lower end. So I think it does get back to some big macro national issues that we don't necessarily control. But that's why it's important in terms of the controller's role to make sure that we are not wasting any taxpayer money, number one. Number two, many people still want to come to New York. And that's where the issues of quality of life, public safety, particularly for folks in the city, access to public transit that's reliable, all of those issues, I think, become very, very important in terms of keeping people here. But when you look at New York City, this is the place where young, creative people want to be. And I don't think that's changed. So we need to, we need to lean into those kinds of strengths.

[Bloomberg Host (Tom Keene)]

Tom dinabili, thank you so much. Love to get you in the studio here at some point. Lexington at 59th Street. Mr. DiNapoli is a New York State Comptroller.

[Bloomberg Announcer]

This is the Bloomberg Surveillance Podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 7 to 10am Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business App. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.

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[Tom DiNapoli]

That's genius.

[Okta Announcer]

These days it seems like AI agents are just about everywhere you turn, every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agents identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta you'll turn risk into opportunity. Secure every agent, secure any agent. Okta secures AI.