Bloomberg Talks – Michael Purves Talks Cross Asset Volatility

Date: March 18, 2026
Host: Bloomberg
Guest: Michael Purves, Founder & CEO of Talbot and Capital Advisors

Episode Overview

In this timely discussion, Michael Purves delves into the complexities of cross-asset volatility amidst ongoing geopolitical tensions, notably the third week of the Iran crisis. He shares insights from his conversations with clients and examines how the current environment is shaping the relationships between equities, commodities, bonds, and currencies. The episode’s central theme revolves around the evolving risk environment, unusual asset correlations, inflation complexity, and what investors should consider in navigating such a volatile landscape.

Key Discussion Points & Insights

1. Cross-Asset Correlations in a Geopolitical Crisis

(00:38–03:05)

• Unusual Correlation Patterns:
  Michael begins by highlighting how “cross-asset correlations” have reached unusually high levels, especially between crude oil and the VIX and between crude and high-yield spreads—both in the top 2% of readings over the past decade.

  • Quote (Michael Purves, 00:55):

    "For example, crude's correlation with the VIX right now... it's in the top 2% of all readings going back a decade. Crude correlations with high yield spreads, those are also in the top 2%."

• Stock Correlation Muted:
  Despite these elevated cross-asset moves, individual stock correlations are still relatively low, which suggests we’re not in a classic “risk-off” scenario.

  • Quote (Michael Purves, 01:49):

    "The cross stock correlations are still really kind of muted... So we’re not really in the sort of, you know, risk-off environment, but... crude is clearly driving the market."

• Contextualizing Market Reaction:
  Michael advises stepping back to see the bigger picture: after a strong previous year in equities, some late-winter malaise is natural, and today’s jobs report highlights deeper economic questions.

2. Inflation Complexity & the Fed’s Dilemma

(03:13–04:47)

• Producer Price Pressures:
  The host references sharp movements in prices of commodities like urea, sulfur, and helium, which impact producer prices and will "weave its way" into broader inflation metrics in months ahead.

  • Quote (Michael Purves, 03:41):

    "All those things do… raise questions about, I think what the Fed has to deal with today is what I call inflation complexity."

• AI and Layoffs as an Inflationary and Deflationary Force:
  Companies are laying off workers due to AI automation—adding another layer to inflation complexity:

  • Quote (Michael Purves, 03:54):

    "You’ve got companies laying off a whole bunch of workers with AI… That’s part of the inflation complexity that the Fed has to deal with."

• K-Shaped Economy Exacerbated by Geopolitics:
  The so-called “K-shaped” divergence in the economy, where different sectors or demographic groups experience varying impacts, is deepened by events like the Iran crisis—making it hard to frame the outlook as simply recession or not.

3. Currencies: “Petro-Currency” Dynamics & the Dollar

(04:47–06:33)

• Aussie/Yen as a Stress Proxy:
  The host references the unusual strength of the Australian dollar vs. the yen as a sign of “stress,” and questions whether the current spike is truly different from previous short-lived surges over the past 30 years.

• Relative Hydrocarbon Vulnerability:
  Michael pivots to discuss the U.S. dollar’s unique position due to U.S. energy independence, contrasting it to Europe and Japan:

  • Quote (Michael Purves, 05:36):

    "When you look at relative hydrocarbon vulnerability… the United States [is] very different than it was in the 1970s… So we’re not a petro currency, the US dollar, but relative to the yen and relative to the euro, we are."

• Currency Pairs & Petro Dynamics:
  The U.S. dollar's stability against the Canadian dollar reflects a shared energy profile, while the euro and yen are more susceptible to oil shocks. This dynamic is also mirrored in equity markets.

4. How Long Might the Tension Last?

(06:33–07:31)

• Stochastic Nature of Tensions:
  The host asks if this is another short-lived spike, as is typical for Gulf crises.

• Possibility of Prolonged Volatility:
  Michael stresses that the duration is uncertain—referencing options market moves that suggest traders expect these tensions might persist longer than the usual brief “spikes.”

  • Quote (Michael Purves, 06:46):

    "Classic Gulf oil spikes… are temporary… but this may be not a two week thing. Maybe this tension will persist for, you know, a few months here."

• Long-Term Comparative:
  He draws parallels to the Ukraine conflict, which drove structural issues, especially in the Eurozone.

Notable Quotes & Memorable Moments

• On Market Cross-Currents:
  • "We’re not really in the sort of, you know, risk-off environment, but we’re in… crude is clearly driving the market." (Michael Purves, 01:49)
• On Fed’s Predicament:
  • "What the Fed has to deal with today is what I call inflation complexity." (Michael Purves, 03:41)
• On Economic Divergence:
  • "There will be many things that magnify the economic divergence." (Michael Purves, 04:34)
• On Persistent Volatility:
  • "... this may be not a two week thing. Maybe this tension will persist for, you know, a few months here." (Michael Purves, 06:46)

Timestamps for Important Segments

• 00:38–03:05: High cross-asset correlations amid geopolitical crisis; market context
• 03:13–04:47: Inflation complexity; impact of AI layoffs; K-shaped economy
• 04:47–06:33: Currency "petro-dynamics" and the differential impact on USD, EUR, JPY, AUD, CAD
• 06:33–07:31: Discussion on whether market tensions are temporary or may linger

Tone and Style

Michael Purves’ approach balances technical detail with clarity, frequently stepping back to see the “big picture” while still addressing near-term tactical issues. The host maintains a conversational, occasionally playful tone (e.g., St. Patrick’s references, chemistry jokes), keeping the discussion lively without undercutting its seriousness.

Summary:
This episode provides a nuanced look at how global crises ripple across asset classes, complicate the inflation outlook for the Fed, and may sustain cross-asset volatility for longer than classic “spikes.” Purves’ cross-asset perspective and discussion of economic divergence underlines the complexity facing investors and policymakers right now.