Finding Market Direction Amid Uncertainty

Summary

Bloomberg Surveillance — July 1, 2026

Episode: "Finding Market Direction Amid Uncertainty"

Overview

This episode of Bloomberg Surveillance, hosted by Sarah Eisen with contributions from Paul Sweeney, features in-depth conversations with leading strategists and economists on key market themes. The guests—Michael Purvis (Tallbacken Capital Advisors), Jill Carey Hall (Bank of America), Lindsey Piegza (Stifel), and Jay Pelosky (TPW Advisory/Morgan Stanley)—share perspectives on robust U.S. earnings, the volatility landscape, the resurgence of small and mid-caps, the Federal Reserve’s evolving tone, and global opportunities beyond U.S. equities.

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Key Discussion Points & Insights

1. U.S. Market Performance and Earnings Growth

[02:40–05:13] Main Segment: Michael Purvis on S&P 500 and Earnings

• Exceptional Earnings Growth:

  • Michael Purvis notes current forward earnings estimates for the S&P 500 are up nearly 20% year-to-date, a rare occurrence given that it follows an already strong 2025 earnings base.
  • Quote (Purvis, 03:08): “Forward earnings estimates per Bloomberg consensus on the S&P 500 are up nearly 20% year to date... Even if we take a conservative approach, let’s call it 12%... you’re at 9,000 at the end of the year.”

• Implications for Index Targets:

  • With current market multiples (22x), extrapolated growth could place the S&P as high as 9,000, making recent upgrades to 8,000 not outlandish.
  • Sarah Eisen highlights under-noticed outperformance: “The Dow up 18%. The Russell 2000—we’re going to talk to Jill here in a moment from Bank of America—up 38%. How many people know that?” (05:26)

2. Inflation and Earnings Outlook

[04:14–05:13, 07:04–08:40] Risks and Realities

• Inflation's Impact on Earnings:

  • Purvis argues that moderate, persistent inflation doesn’t necessarily hurt earnings—nominal revenues (e.g., coffee at Starbucks) rise with inflation, often helping companies offset cost increases.
  • Sectors like staples and consumer discretionary, which would traditionally suffer from inflation, have nevertheless seen earnings rise in 2026.

• Stagflation Concerns?

  • Purvis downplays “stagflation” worries, noting the U.S. is seeing modestly positive real growth combined with moderate inflation, not the devastating mix of the 1970s.
  • Quote (Purvis, 07:37): “Our complexion of nominal GDP is a little bit more skewed toward inflation than growth... but margins have managed through this inflation. The top line has benefited from inflation.”

3. Volatility, Hedging, and Market Positioning

[05:51–09:00] VIX, Risk Appetite, and Sector Rotation

• Volatility Compression:

  • The VIX has dropped to mid-teens, with risk premia and put-call skew at low levels—signs of market complacency.
  • Purvis cautions that hedging via broad S&P puts has been ineffective in a low-vol regime dominated by tech.
  • Quote (Purvis, 05:59): “Buying S&P puts as an insurance policy... has been very tricky and I think that’s going to stay the case.”

• Key to Alpha:

  • Purvis: The “real story” is recognizing sector and thematic rotations (not just buying the index). Watch the semiconductor rally and other thematic moves.

4. Small & Mid-Cap Resurgence

[12:13–17:31] Interview with Jill Carey Hall (Bank of America)

• Small Caps’ Comeback:

  • After a decade of underperformance and an "earnings recession," small caps (Russell 2000) have surged 38% YTD, largely due to cyclical recovery and manufacturing upturn.
  • Infrastructure and energy-related themes led top performers in the index.

• Profit Quality and Shifting Dynamics:

  • The Russell 2000 still contains a high (but declining) percentage (~33%) of non-profitable companies, a legacy of recent IPO waves.
  • Anomalously, low-quality stocks (non-profitable) outperformed higher quality ones recently. Hall expects a normalization where profitable, high-quality names win out.

• Mid-Caps for H2:

  • Hall shifts her preference from small caps (H1) to mid-caps (H2) due to debt structure and expected Fed hikes (three hikes now forecast for 2026 by BofA).
  • Quote (Hall, 15:26): “Given increased risks from higher rates, we’d tilt more toward the mid caps than the small caps for the second half.”

• M&A Dynamics:

  • Most deal flow involves large companies acquiring small cap/biotech firms—exploiting their relatively cheap valuations.

5. The Federal Reserve, Inflation, and Growth

[20:33–27:39] Interview with Lindsey Piegza (Stifel)

• Fed’s Nuanced Tone:

  • Lindsey Piegza observes Fed Chair Warsh assuming a more neutral tone than markets expected, balancing acknowledgment of high inflation with signals of future dovishness.
  • Quote (Piegza, 21:57): “Warsh... aligning himself with the administration calling for a regime change and a markedly lower level of policy. Over the medium to longer term... steer the monetary policy shift toward lower interest rates, but in the near term... neutral tone.”

• Labor Market Optimism:

  • Payrolls expected to grow by 120–125k (June), with unemployment steady near 4.3% and wage growth around 3.5%. Strong fundamentals could counteract hawkish inclinations, especially if energy-driven shocks prove transitory.

• AI—A Double-Edged Sword for Labor:

  • AI is boosting productivity and efficiency (~9 million jobs could be displaced in 2026), but its long-term impact on labor is uncertain.
  • Quote (Piegza, 25:47): “There’s no doubt that AI is driving higher productivity, efficiency... but when we talk about potentially displacing millions upon millions of jobs... we cannot underappreciate the longer-term disruptive factors.”

• Economic Outlook:

  • Despite uncertainty, Piegza remains cautiously optimistic—historically, tech revolutions have created as many jobs as lost (labor-augmenting), though the risks of genuine job loss are material this time.

6. Global Equity Rotation: Valuations & Opportunity

[30:18–35:41] Interview with Jay Pelosky (TPW Advisory / Morgan Stanley)

• “Missed the Bull Market?” Don’t Worry:

  • Pelosky urges investors not to fret—global markets remain early in a “spending super cycle” driven by investment in AI, climate, and defense, fostering a rare global convergence in earnings growth.

• Non-U.S. Equities Poised for Leadership:

  • Huge divergence in valuation between emerging markets (EM) and U.S. equities, despite similar earnings growth. EM trades at 11x earnings vs. S&P 500 at 21x.
  • A potential weakening dollar could further catalyze outperformance abroad.

• Practical Allocation:

  • Overweight: Equities and commodities (energy/miners/copper/clean energy themes), underweight: Bonds/Debt. Long-term opportunity exists in EM equities, EM debt, and select sectors (energy, semis).

• On the “Mag 7”:

  • The “Magnificent Seven” tech leadership era may be fading; focus should shift to “picks and shovels” such as semiconductor companies, the backbone of the tech cycle.
  • Quote (Pelosky, 34:37): "[The Mag 7] story is over... you own semis, you own the picks and shovels."

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Notable Quotes & Memorable Moments

• “There’s a lot of like ‘oh my God, someone’s upgrading to 8,000’... it’s not inconceivable to see 9,000 this year.”
  — Michael Purvis (03:08)

• “Inflation doesn’t necessarily reduce earnings and in some cases it actually, you know, inflates earnings.”
  — Michael Purvis (04:25)

• “We just don’t know [about AI’s labor impact]... There’s no doubt that AI is driving higher productivity... but when we talk about displacing millions... the forecasts span across the gambit.”
  — Lindsey Piegza (25:47, 26:51)

• “The good news is we’re early and we can—I think globally in particular go considerably higher... You have a global growth convergence taking place as a result of what we’re calling a spending super cycle...”
  — Jay Pelosky (30:54)

• “We think there’s a huge opportunity in thematics.”
  — Jay Pelosky (34:23)

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Key Timestamps

• [02:40] Michael Purvis: Market and Earnings Analysis
• [04:14] Inflation’s Role in Corporate Earnings
• [05:51] Volatility, Hedging, Sector Rotation
• [12:13] Jill Carey Hall: Small & Mid Cap Outlook
• [15:26] Midcaps Preferred Over Small Caps
• [17:08] M&A Trends in Small & Mid Caps
• [20:33] Lindsey Piegza: Fed Policy and Macro View
• [25:47] AI’s Impact on Labor
• [30:18] Jay Pelosky: Global Growth and Valuation Convergence
• [34:37] Semiconductors and Thematic Bets

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Conclusion

This episode delivers a broad, nuanced look at where markets stand and where they might go next. Key themes include the resilience of earnings amid inflation, the evolving opportunity in under-owned small and mid-caps, Fed’s delicate balancing act, the uncertain labor future with AI, and the strong valuation cases for global equities and commodities. For investors, the takeaway is clear: while risks remain, the bull case is alive in surprising places, and diversifying beyond the familiar U.S. mega-caps—toward mid-caps, global equities, and thematic sectors—may prove especially rewarding in the years ahead.

Transcript

[IBM Representative]

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[Show Host / Interviewer]

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[Lindsey Piegza]

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[Podcast Announcer]

Bloomberg Audio Studios Podcasts Radio News. This is the Bloomberg Surveillance Podcast. Catch 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 in studio.

[Sarah Eisen]

We are thrilled to have Michael Purvis with us. Are you not up north in Northern New England? Because this is like peak fly season, right?

[Michael Purvis]

Not yet. Yeah, we'll give it a couple of weeks.

[Sarah Eisen]

Give it A couple of weeks, let it dry out, all that and then where you go. So I went to the WP ice cream. Paul Sweeney taught me how the Vix. First of all, Paul, yesterday 16.27. Did we observe window dressing yesterday?

[Show Host / Interviewer]

Maybe? Absolutely.

[Sarah Eisen]

Michael Purvis, what do you think in

[Michael Purvis]

terms of the catching up? Yeah, well, it's been a pretty remarkable year. Obviously earnings growth has been exceptional. And what's even more distinctive about that exceptional earnings growth is that it came on the back not of an earnings trough but of a very strong 2025 earnings there. And you know, a lot of strategists are upgrading their price targets. But just to throw out a couple of quick numbers here, forward earnings estimates per Bloomberg consensus on The S&P 500 are up nearly 20% year to date. Now some of that might be some, you know, sort of unusual things with how some of the big tech companies account for some of their investments. Even if we take a conservative approach, let's call it 12% now, let's say the second half of the year, we're up the same amount, another 10%. You take today's multiple on that 22 times and you're at 9,000 at the end of the year. Right. So you know, there's a lot of like, oh my God, someone's upgrading to 8,000. Well, it's not inconceivable to see 9,000 this year. And I don't know if anyone's, it's sort of hard to wrap your arms around that. But it's actually a, it's a real scenario here.

[Show Host / Interviewer]

Is inflation a risk to some of those earnings forecast? Because it seems like even though oil is coming down and we've got WTI crude oil at 68 bucks here today, which is good. But a lot of folks are concerned about some more underlying core sticky inflation.

[Michael Purvis]

Yeah, there's, there's no question that I think inflation has been, you know, with or without oil. There's, there's a strong argument to be made, and I've certainly been making it, that inflation is sort of going to a higher, longer place here. But I think it's important to point out that if you look at a long term history that inflation doesn't necessarily reduce earnings and in some cases it actually, you know, inflates earnings. We, we go into Starbucks, we buy our coffee with nominal, not real dollars. Right.

[Sarah Eisen]

So kidding, I didn't know.

[Michael Purvis]

So no, but, but it's, I think, Paul, you're raising a really good question and point here. If you look at earnings estimates across sectors, you know, since, you know, the war broke out. Staples and, and consumer discretionary, the two most obvious, you know, sectors to be hurt by this. And even then their earnings, you know, their forward earnings are still up, are higher today than they were back at the beginning of the year.

[Sarah Eisen]

I was going to do this at the start. Paul let me do it right now. One year trailing, we go up 20. Move the screen. Paul taught me how to do this and I'm going down in flames. The answer is The Dow up 18%. The Russell 2000. We're going to talk to Jill here in a moment from bank of America up 38%. Yeah, it's, I mean, how many people know that? I think a lot of people don't, don't know that.

[Show Host / Interviewer]

I mean, so how do you think about volatility in this market, Michael? I mean, are people buying risk here? They're buying protection. What are they doing here?

[Michael Purvis]

Yeah, well, very recently you've seen, you know, the VIX come in. You've seen the, the volatility risk premium shrink to levels that are, don't make you particularly comfortable. So I do think there's sort of an argument that, yes, okay, the VIX is sort of, you know, towards the lower point of its longer term range. The put call skew metrics like that are not particularly elevated. There's some levels of complacency here. I think the problem that I've always struggled through over the last couple of years here is that in a strong tech led bull market, tech broadly defined, shall we say, the correlations will go very, very, very low and often stay very, very low. So, so do you want to hedge within the book like you're, you know, with a sector ETF or more perhaps a single stock? Or do you want to buy VIX calls or S and P puts? It's, it's buying, you know, just, just buying S and P puts as an insurance policy is a very, it's been very tricky and I think that's going to stay the case.

[Sarah Eisen]

Witness a president doing better in compensation than the normal, you know, job, you know, 285,000 a year or whatever. I guess he's doing better than good. We're doing better than good because of a set of stimuli. Kevin Hassett, right now, the national economic council director. Dr. Hassets over with Maria, talking about 4% growth, 5%, 6%, dare I say banana republic, 7% nominal GDP. Is that healthy?

[Michael Purvis]

Well, look in terms of, I don't know about the 4% real. That's what he was saying there. But I think right now our, our, our, our complexion of nominal GDP is a little bit more skewed towards inflation than growth, but it's not particularly, you know, people throw out the term stagflation because. Manageable. Yeah. If you look at what the term stagflation was coined in the late 1970s in reference to nominal GDP of 10%, that was 12% inflation and minus 2% growth. That's what real stagflation was. So just look at corporate earnings like we were talking about. They have been able to grow through all sorts of, all sorts of inflation over the last few years. The, the margins have been able to manage through this inflation over the last few years. And of course the top line has benefited from inflation. So, so look, you know, if we're, if we end up being, you know, 2% real, 3% inflation over the next couple of years, I think that's going to set the stage for, you know, a pretty solid broadly speaking, economic condition.

[Sarah Eisen]

So the Vix under 17, would you acquire new shares today? I sound like John Templeton. Yeah.

[Michael Purvis]

You know, what shares are you talking about? Because, you know, the s and P500, you know, if you want to sort of, you know, just keep adding every, every month type of thing as a, you know, the retail, you type long term savings context.

[Show Host / Interviewer]

Sure.

[Michael Purvis]

I think, I think, you know, the real story is, is how are you, you know, gauging, gauging the rotations. Do you believe this semiconductor rally is going to continue apace or not? That's really where I think the story is.

[Sarah Eisen]

I got one final question. Squam Lake, is the real estate stupid up there?

[Michael Purvis]

Now, if you're on the lake, it is. Yeah.

[Sarah Eisen]

If you're on the lake, it's like stupid price.

[Michael Purvis]

Yeah, yeah.

[Sarah Eisen]

Debris. Henry Fonda couldn't slip in right now for a cottage.

[Michael Purvis]

Yeah. But you know, Boston radiates a lot of its success north.

[Sarah Eisen]

The median sales price, Squam lake, sits around 5.9 million for Henry Fonda's cottage. Michael Purvis, thank you so much. Stay with us. More from Bloomberg Surveillance coming up after this.

[IBM Representative]

The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slashed repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business IBM support for

[Show Host / Interviewer]

the show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on Public. You can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk. Monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public

[Sarah Eisen]

Investing Brokerage services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory services by Public Advisors LLC. SEC registered advisor. Complete disclosures available at public.com disclosures@venture global

[Venture Global Representative]

we think about what can be done, not what's usually done through innovation. Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.

[Podcast 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 Bloomberg Business app or watch us live on YouTube.

[Sarah Eisen]

This is hugely, hugely anticipated. Paul chastises me, turns to me and says, hey stupid, we're not doing enough on small caps. Joe Kerry Hall. Paul owns the high ground. Why don't you bring her in?

[Show Host / Interviewer]

Right, Absolutely. Jill Carey Hall, U.S. equity strategist and head of the small cap strategy at bank of America. Small caps are having a good year this year.

[Sarah Eisen]

They're good.

[Michael Purvis]

Thank you. Wow.

[Show Host / Interviewer]

Finally 2x kind of the spot. What's going on out there?

[Jill Carey Hall]

Well, it's been a long time where they've been underperforming, I mean really for over a decade. And you know, right now you have some, some cyclical positives because they they've been in an earnings recession finally started to come out of that and you've had the manufacturing recovery in the US finally take hold. The ISM manufacturing indicator is the single most correlated macro indicator with the Russell 2000, is that right? Yeah, when we've looked at like you know, 30 or 50 different macro indicators, so manufacturing actually matters a lot for, for that. And then you had, you know, oil prices higher. The Russell 2000 actually has more exposure to industries that benefit from higher oil than the consumer industries that, that get hurt by it. And then, you know, performance was actually a bit more concentrated than usual. So when you look at a lot of the top performers, it was actually some of the thematic infrastructure stocks that were some of the biggest contributors. So even though the index is up so much this year, I think there are parts of the index that could still play catch up. You know, health care has been underperforming, but M and A activity. Yes. And health care and biotech had not looked particularly attractive in our work in small caps. But finally are starting to the rap

[Sarah Eisen]

is there's no profit or less profit. How does profit play across successful and less successful? Russell 2000.

[Jill Carey Hall]

Yeah, the index is, you know, about a third of the companies are nonprofitable. So that is historically elevated. We, we obviously just went through two earnings recessions Covid and then the recent one that started in, you know, 2022, 2020 23. And you also had an IPO boom in 2021 that caused a lot of nonprofitable stocks to get added. So the, the amount of stocks that don't have earnings is elevated. It's starting to come down. And even for an area like biotech, biotech is actually the highest quality it's been in about 12 years. You're starting to see more companies turn profitable, get more mature. But we did see this sort of, you know, unprecedented period of low quality outperformance within the small cap index over the past year or so where you know, usually if you're a small cap investor, you own, you want to own higher quality stocks because the profitable stocks, the higher quality ones do tend to do better over the long term. But that's not what we saw over the last year or so. So that that kind of three standard deviation event and how much low quality stocks outperformed, I think now kind of paves the way that we could go back to a more normal environment or higher stocks work within small caps in the second half.

[Show Host / Interviewer]

I learned early in my career SMID means small mid cap. That's a cool term. Now for you, Jill. In the first half you preferred small versus mid cap. Now in the second half you're saying mid cap versus small. Why?

[Jill Carey Hall]

Yeah, I think even though we do still think that both small and mid caps could outperform mega caps in the second half you're still expected to see a big profits pick up in small and mid caps to kind of similar levels that should outpace pace large cap profits in the second half. Were we, we saw much better performance for small caps in the first half. So I think just performance wise there's more catch up potential now for mid caps on a similar level of profits and we're seeing Fed hikes start to get priced into the market. Our economists at B of A now expect the Fed will hike three times this year. At the end of the year, toward the end of the year, Russell 2000 has a lot more leverage, a lot more refinancing risks given the debt exposures more towards short term and floating rate debt. So I think given increased risks from higher rates, we'd tilt more toward the mid caps than the small caps for the second half. Just, just given those, do their executives

[Sarah Eisen]

particularly in mid cap striving every day they've got their hurdles or equity kickers and all that. Do they do M and A like big caps? I mean are they essentially equivalent or is it a whole different world?

[Jill Carey Hall]

I mean right now you know a lot of the, the deal activity is you know small caps are the targets and you know a lot of the, the larger companies are the, the acquirers. So you have a lot of, you know, large, large pharma buying smaller biotech. That's been a key area of activity. So you know, while you may see some in mid that a lot of the activity is you know, large buying small and that's where the relatively cheaper valuations are as well. You know, mega caps are the most expensive area. So small caps are kind of the least stretched. Although now small and mid trading at

[Sarah Eisen]

similar value, one of the coolest double majors going. You're at Lafayette. Were you in economics and said I'm going to take a double major in English or you in English saying I'm going to take a double major in economics.

[Jill Carey Hall]

I was, I was econ in math and then I decided to drop the math and picked up English. I always, I always liked writing so I decided if I was taking some writing courses, might as well make it a second major.

[Sarah Eisen]

So you got to Schrodinger equations and Differential Equations instead?

[Jill Carey Hall]

Yeah, I got to calc 3 and then I think I've had enough.

[Sarah Eisen]

That's great. Don't be a stranger. Jill Carey hall, thank you. Thank you so much. And I do want to mention the bank of America call on what Mr. Bush is going to do is really an outlier. Call up a rate increases of 3. We heard that yesterday from Ajit Bahavi of Bank of America as well. Stay with us. More from Bloomberg Surveillance coming up after this.

[IBM Representative]

The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced cost by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business.

[Show Host / Interviewer]

IBM support for the show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English like if the Vix hits 25, buy a put option on the S&P 500 or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent and not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public

[Sarah Eisen]

Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors LLC. SEC registered advisor complete disclosures available at

[Venture Global Representative]

public.com disclosures@venture global we think about what can be done, not what's usually done through innovation. Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.

[Podcast 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.

[Sarah Eisen]

Lindsay Pigs are with us right now. Chief Economist Steve she was my economist of the Year a couple of years ago and around that is an optimism Lindsey once again. One year trailing, six months trailing. The equity markets price better than good. How do you respond and what do you see It's Stifel of the gloom that's out there.

[Lindsey Piegza]

Well, I don't know if it's necessarily gloom, but I think there's a lot of reason to be concerned when you're talking about potentially tackling dangerously elevated inflation at this point. Now, we did see a stronger than expected pace of growth at the start of the year. We are seeing slightly better than expected conditions in the labor market. We have started to see some momentum in inflation cool. But there's still a lot of concern and a lot of conditions that the Fed needs to be aware of and adjust policy appropriately to keep inflation in check.

[Sarah Eisen]

I mean, just a single line here, Paul.

[Show Host / Interviewer]

Yep.

[Sarah Eisen]

Pieces Stifel. Lauren Henderson wrote this. Lindsey didn't write this. Gross private investment Revised up to 7.9%.

[Show Host / Interviewer]

Nice.

[Sarah Eisen]

I mean it's private investment. There's a spirit out there.

[Show Host / Interviewer]

There is, there is. And Lindsey, I mean we heard from the Fed Chairman Warsh for the first time a couple of weeks ago. What did you take away from that as you think about central bank policy going forward?

[Lindsey Piegza]

Well, one of the things that I took away was he took a much more neutral stance. There was a much more neutral tone than I think the market had originally been pricing in in terms of that shift from from a previous inflation hawk to now aligning himself with the administration calling for a regime change and a markedly lower level of policy. I think over the medium to longer term, I think war certainly will try to steer the monetary policy shift towards lower interest rates. But in the near term he seems to be acknowledging the reality of elevated inflation. So perhaps at worst what he does is downplay the potential for in conversation around rate hikes, even if the committee seems to be moving in that direction.

[Sarah Eisen]

Kevin Wash on Bloomberg Surveillance at 9 o' clock hour with the tag team, Governor Bailey, Madam Lagarde, Sarah Eisen holding court there in Sintra. This is like the Jackson Hole of Europe. It's near Lisbon as well. Anna Wong just publishes on this moments ago. I'm reading it really. We go Anna Wong and Andrew Sacher this morning. Lindsey, what do you want to hear from Kevin Warsh? Is he a hawker? Is he is dove as Dr. Wang puts it?

[Lindsey Piegza]

Well, again, I think longer term he's going to reveal his very dovish colors. But I think at this point it's important given the reality of such heightened level of inflation, that he maintains a more neutral tone. As as otherwise this could risk on anchoring inflation except expectations. If there's a sense that the new leadership would tolerate extremely elevated inflation in order to get us down to a lower interest rate environment. So it's going to be very important for him to strike a neutral tone. That being said, I do think that he's already in the market of revising or at least looking at many of the things that the Fed does, everything from balance sheet management to the Fed's use of data to of course communication. That was a big change for the market, dropping that statement down to about 130 words when the market is used to a statement four or five times that length. In order to give us more color around what the Fed is viewing the economy as and what the committee is expecting from policy going forward.

[Show Host / Interviewer]

Lindsey, we're going to get some more labor data tomorrow. Non farm payrolls, what are you expecting? How do you think the Fed is thinking about the labor market?

[Lindsey Piegza]

Well, I do expect payrolls to increase a lesser but 120, 125,000. So still a very positive, very solid number, but slower than what we saw in May. The unemployment rate likely to remain steady around that 4.3% rate as it has been now for the past four consecutive months and average hourly earnings really remaining around that 3.5% annual mark. So I think overall when we look at these more solid conditions in terms of gdp, a still solid pace of hiring, I think for the Fed, absolutely elevated inflation is unfavorable to say the least. But these relatively sturdy numbers I think can serve to quickly derail any sort of hawkish sentiment at the Fed if it starts to bring back the conversation of a temporary or transitory impact from the energy price shock as a result of the conflict overseas.

[Sarah Eisen]

It's a Tito's and Tang transitory every

[Show Host / Interviewer]

time we'll sit there. Lindsey, how about the other side of the Fed's mandate, the labor market here, just in general, how do you think about AI and the labor market going forward? Is it a net positive negative? Too soon to tell.

[Lindsey Piegza]

We just don't know. But what we do know is that when we look at it from a top line perspective, there's no doubt that AI is driving higher prices. Productivity, efficiency, that's the gain, that's the benefit for businesses. But when we talk about potentially displacing millions upon millions of jobs, in fact, taking a middle of the road analysis, there's an expectation of displacing about 9 million jobs this year alone. We cannot underappreciate then the longer term disruptive factors that this will have in the labor market both for current and future labor market participants events.

[Sarah Eisen]

But the fact is, Lindsey, did I think a lot of people got wrong. This resilient economy and just simply where the levels of the market is, even if somebody underperformed aspects, it's like wow, double digit as well. The economic framework that you see into next year, first time I've asked the second half into next year. Lindsey, It's a tone of optimism, right? We're still chugging along, right?

[Jill Carey Hall]

It is.

[Lindsey Piegza]

And remember, there's a lot of unknowns, a lot of uncertainty when we talk about this technological revolution because we've had these in the past. And typically when we see these types of technological change, it's labor augmenting, not labor replacing. Meaning yes, some jobs are lost, but others are created as we free up capital, become more efficient and we're expanding the economy. This time around though, there is a big question mark of will it be different because if we find ourselves not replacing these labor components, but permanently displacing the human component in that production equation, that can have a more lasting negative impact on the labor market. But again, the forecasts span across the gambit. We really don't know at this point how this is going to play out.

[Sarah Eisen]

Lindsey, thank you so much. Lindsay. Was Stifel here with a nice briefing, particularly on Chairman Wars. Stay with us. More from Bloomberg Surveillance coming up after this.

[IBM Representative]

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[Show Host / Interviewer]

IBM support for the show comes from public.com if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public. You can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English, like if the Vix hits 25, buy a put option on the S&P 500. Or if my cash balance goes above $20,000, move the excess into my direct index. You approve of the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public

[Sarah Eisen]

Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors LLC. SEC registered advisor complete disclosures [e-mail] disclosures

[Venture Global Representative]

never bet against American Grit or American Internet through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.

[Podcast Announcer]

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[Sarah Eisen]

He is in studio he is Jay Polaski, Founder, Principal, TBW Advisory Definitive@ Morgan Stanley putting together allocation Emerging markets strategy and such. So like 10 days ago I'm sitting with a major heavyweight from a major firm and they whispered to me, Tom, I regret so much how cautious I was. And I just got this great bull market wrong. You have said you have to participate. What do you say on this fourth of July to the crew that have missed this bull market?

[Jay Polaski]

The good news is we're early and we can, I think globally in particular go considerably higher. And I think the the real opportunity is that we have a global growth convergence taking place as a result of what we're calling a spending super cycle as Europe, Asia and the Americas spend on AI, climate and defense. And what that's doing, Tom, is it's meaning that earnings growth is converging. So you have the same kind of earnings growth we're enjoying here in the us, in the emerging markets in Japan, coming in Europe as well. But what isn't converging is valuation and that's the opportunity, right? So if you have a global growth long cycle, as we think we are in the early stages, running through probably the end of the decade 20, 30 and beyond, if you have earnings convergence where that supports this bull market, we're not expensive. People who keep talking about a bubble and expensive just have it completely wrong. It's an earnings growth driven market. It's not a multiple expansion bubble market that you have an opportunity for a convergence in valuation and that is going to be coupled with in our view, a devaluation of the dollar relative to other currencies and therefore you've got a twin engine opportunity in non US equities for a valuation convergence right now for example, m trades at 11 times earnings. The S&P trades at 21 times earnings. The same earnings growth forecast for both this year and next. Why should there be such a huge valuation divergence? It shouldn't exist and I don't think it will exist as we go forward the next couple of years. So to me, the medium and long term investment opportunity we're presented with in investing outside the US as global equity leadership shifts from the US to the rest of the world, led by emerging markets through a valuation convergence and a currency convergence is very, very compelling.

[Show Host / Interviewer]

How does one play that?

[Jay Polaski]

Well, you can play it by owning emerging markets, you can play it by owning non USD. Whether you want to look at Japan or Europe, you can own it. In looking at commodities, right, we're very bullish commodities. You can own it by owning em debt, for example, both local currency and dollar. I mean basically to us, the way we're thinking about the world is that the kind of the wide part of the funnel, the investment funnel, the asset allocation decision. We do global macro investing at TPW Advisory. The wide mouth of the funnel is pretty straightforward asset allocation wise. Overweight equities, overweight commodities, deeply underweight bonds. Because we're in a spending super cycle, which means governments and privates going to have to spend, which means long duration debt in the G10 is not attractive. Right. We're going to have continued pressure on interest rates. And so you don't own fixed income. The question is you allocate it to equities and commodities. And within that commodity bucket, for example, we're like more than double weighted. So we own the energy space, we own the miners. We're big fans of copper, we're big fans of the conversion into clean energy. And then you have the thematics. We think there's a huge opportunity in thematics.

[Sarah Eisen]

Two things going here. I got the President, United States and the beast out by the new Air Force One. We'll bring you those images here on YouTube in a moment. We say good morning across America is Well sitting on Mag 7. Is the Mag 7 story over?

[Jay Polaski]

Yeah.

[Show Host / Interviewer]

Wow.

[Jay Polaski]

Yeah, I mean it's, I mean you own semis, you own the picks and shovels. So this is really basic stuff. Right? You own the semis, right. You want, you, you get wealthy not by being the gold miner, you get wealthy by being the guy selling the gold miner. The picks and shovels. Picks and shovels today is, is semiconductors.

[Sarah Eisen]

Okay. The J. Blowski I know is when Duke was like 2 and 11. Okay. He's on the front line. Clemson. Clemson. October 18, 1980. You go on to Death Valley and Clemson is like, gonna kill you. How did you. That was like one of the greatest upsets in the history of college football. How did that happen?

[Jay Polaski]

I mean, this is why I came in, right? Because I knew that Tom would give me this kind of love. And it's so rare for people to, like, even remember back that far. It's a good thing, Tom, you and I, you know, go back to those days. Yeah. That was the one singular moment of significance, success that we had at Duke football when I was there. Sadly happy to say that nowadays Duke football is in a much, much better place. And I've had a little bit to do with that and enjoy it.

[Sarah Eisen]

Jay, thank you so much.

[Podcast Announcer]

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[Venture Global Representative]

At Venture Global, we think about what can be done, not what's usually done through innovation. Venture Global is not only building some of the the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.

[Lindsey Piegza]

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[Sarah Eisen]

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[Lindsey Piegza]

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