Former SEC Chair Gary Gensler Talks Revival of US Equity Market

Summary

Podcast Summary: "Former SEC Chair Gary Gensler Talks Revival of US Equity Market"

Podcast: Bloomberg Talks
Host: Bloomberg (multiple speakers)
Guest: Gary Gensler, former SEC Chair; Professor, MIT Sloan School of Management
Date: July 10, 2026

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Episode Overview

In this episode, Gary Gensler, former Chair of the U.S. Securities and Exchange Commission (SEC), joins Bloomberg to discuss the recent revival in the U.S. equity markets. The conversation covers the resurgence of IPOs, the role of high market valuations, risks of a potential financial bubble, the boom in leveraged and prediction market ETFs, regulatory challenges, and the enduring question of how best to protect investors in an era of financial innovation.

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Key Discussion Points & Insights

1. The Dramatic Comeback of US Equity Markets

• Broad Market Recovery & IPOs:
  • Host notes the return of IPOs and capital raises in U.S. equities, mentioning SK Hynix’s listing and tech giants like SpaceX going public.
  • “For the first time in a long time, it feels like the net supply of equity in the US is growing.” (Host, 01:05)
• Gensler on Market Valuation:
  • "Our equity market is half the world's equity market… It has high valuations right now, and it doesn't really matter which measure you use." (Gensler, 01:33)
  • Companies are seizing the high-valuation moment to raise capital.

2. Are We in a Bubble? The AI & Tech Investment Frenzy

• Bubble Talk:
  • Host introduces the term "bubble," asking about risks within current valuation enthusiasm.
  • Gensler responds, referencing historical cycles linked to transformative technologies (e.g., railroads, electricity, internet) where overinvestment is common and often leads to economic downturns.
  • “You usually have this big enthusiastic financial market support… But then we usually over invest and then valuations come down and we often either have a recession or even worse.” (Gensler, 03:00)
  • Example: SK Hynix’s rapid turnaround and current pricing power may not last.
• AI Industry and Data Centers:
  • Skepticism about sustainable growth in the AI sector and data center construction, warning of possible overbuild.
  • "What happens if the data center space just doesn't grow? Next year just stays flat." (Gensler, 07:22)

3. Foreign Issuers & ADR Structures in US Markets

• On SK Hynix and Others Listing Through ADRs:
  • Question of regulatory oversight for foreign companies listing in ADR form.
  • Gensler: “The U.S. capital markets benefit from those foreign issuers… I think the question really is, is now the valuations, the investors, the risks. But they've put out those material risk.” (05:00)
• Experience with Chinese Issuers:
  • Discusses negotiated agreements to improve accounting transparency for major Chinese firms.

4. Market Health: Liquidity, Stability, and Flows

• Sustaining Momentum:
  • Discussion about the ongoing international capital inflow into U.S. markets as a driving force.
  • Gensler notes that "net flows have helped boost the market" but warns international sentiment could change, affecting liquidity and stability. (06:31)
• Potential for a Market Top:
  • Points to indicators suggesting the market may be "testing the top." (06:31)

5. Risky Financial Products: ETFs, Leverage & Prediction Markets

• Leveraged & Single-Stock ETFs:
  • The explosion in single stock and leveraged ETFs since 2022, with Gensler cautious about their risks for ordinary investors.
  • “There is leverage. They're borrowing inside of that too. And… these are very costly products… in a down market… they cut steep.” (Gensler, 09:00)
• Prediction Market ETFs:
  • Host and Gensler touch on the new frontier of prediction market ETFs, including “betting” on real-world events (like U.S. government disclosure of aliens).
  • “That seems like entertainment to me.” (Gensler, 11:33)
• Regulatory Dilemmas for the SEC:
  • Considerations around rules for confidential filings and suspending ETFs; the challenge of regulating products at the border of gambling and investing.

6. Oversight, Regulatory Independence, and the Disclosure Model

• On the Role of Regulatory Agencies:
  • Gensler laments recent Supreme Court ruling weakening agency independence, calling it "a step backwards."
    • “We’ve taken a step away from independent regulatory agencies... I think the US benefited from an independent Federal Trade Commission, an independent Federal Reserve, independent SEC.” (Gensler, 12:59)
• Federal vs State Authority:
  • Specific discussion on sports betting regulation and the balance of power between federal and state oversight.
• Investor Protection: Disclosure vs. Intervention:
  • Host questions if a disclosure-based regime is enough in today’s market climate.
  • Gensler stands by the idea: “If there’s proper disclosure, material disclosure, the basic bargain is the American public gets to decide what they want to invest in.” (Gensler, 14:46)
  • He is against reducing the frequency of quarterly reporting, arguing it increases volatility and makes capital more expensive.

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Notable Quotes & Memorable Moments

• "You usually have this big enthusiastic financial market support… But then we usually over invest and then valuations come down and we often either have a recession or even worse."
  — Gary Gensler [03:00]
• "There is leverage. They're borrowing inside of that too. And… these are very costly products… in a down market… they cut steep."
  — Gary Gensler (on leveraged ETFs) [09:00]
• "If there’s proper disclosure, material disclosure, the basic bargain is the American public gets to decide what they want to invest in."
  — Gary Gensler [14:46]
• "That seems like entertainment to me."
  — Gary Gensler (on prediction market ETFs betting on things like government disclosure of aliens) [11:33]
• On agency independence:
  "I think the US benefited from an independent Federal Trade Commission, an independent Federal Reserve, independent SEC."
  — Gary Gensler [12:59]

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Timeline of Important Segments

| Timestamp | Segment | |-----------|------------------------------------------------------------------| | 01:05 | US equity market’s growth and IPO resurgence | | 03:00 | Are current valuations signaling a bubble? | | 05:00 | Regulatory and investor risks for foreign ADR-listed companies | | 06:31 | Market health, liquidity, and possible topping signals | | 09:00 | Single-stock ETFs, leverage, and risk for ordinary investors | | 11:33 | The rise of prediction market ETFs and their boundaries | | 12:59 | Agency independence and challenges from recent Supreme Court ruling| | 14:46 | Adequacy of disclosure-based investor protection |

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Tone and Takeaways

The conversation maintains a mix of analytical rigor, regulatory caution, and accessible language—typical of Gensler’s public style and Bloomberg’s journalistic approach. Gensler is cautious yet measured, emphasizing prudent risk disclosure and regulatory transparency, while expressing concern about speculative excesses and potential systemic risks from new financial products.

Listeners come away with a nuanced understanding of:

• Why record-high market valuations are both an opportunity and a risk.
• The importance of robust disclosure, especially as retail and international investors fuel the latest bull market.
• The SEC’s perennial challenge in balancing investor protection with innovation, particularly as the ETF and prediction markets blur lines between betting and investing.
• The shifting sands of regulatory independence and the long-term implications for market oversight.

This episode offers valuable context for anyone interested in the structural forces shaping today’s revived—and risk-laden—US equity market.

Transcript

[AT&T Business Wireless Representative]

Not every sale happens at the register. Before AT&T business Wireless checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sale or two. Sometimes I do miss the bonding time.

[Gary Gensler]

Sometimes AT&T business Wireless connecting changes everything.

[AT&T Business Wireless Representative]

Bloomberg Audio Studios Podcasts, Radio News.

[Podcast Host / Interviewer]

When you think about, you know, investors funneling money in, you have companies raising money in the equity market. Also big time in the bond market. Really interesting set of circumstances here and I'm excited to talk about all of it with Gary Gensler. He is the former SEC Chair. He's also a professor of, of the Practice of Global Economics and as well as finance at the MIT Sloan School of Management. Gary Gensler, it's great to see you.

[Gary Gensler]

Great to be with you.

[Podcast Host / Interviewer]

So let's talk broad strokes about the US Equity market because for years, as I know you know, it had been shrinking and now you're in this situation where IPOs are back in a big way. You have the likes of SK Hynix coming here listing in the US and you're also seeing some of these big tech companies engineer capital raises as well. So for the first time in a long time, it feels like the net supply of equity in the US Is growing. And, you know, I wonder what you make of this sea change.

[Gary Gensler]

What it says, well, our equity market is half the world's equity market. And as all of your guests will chat about, it has high valuations right now. And it doesn't really matter which measure you use it, whether it's the total market to our economy, that's the Warren Buffett index or if it's price earnings ratios, past forward Shiller Index, you name it, high valuations. And so I think that that's part of why there's supply. Why did Google raise 85 billion? Why did SK Hynix raise 26 billion and see a 14% bump in space X go public? These are all tells that people are saying this is a high valuation market. I want to raise capital while I can.

[Podcast Host / Interviewer]

And I mean, certainly you're seeing both companies and investors seize upon that moment. But you know, I want to, I want to bring in the word bubble to this conversation. You mentioned the high value valuations. A pessimist would look at that.

[Gary Gensler]

She said bubble.

[Podcast Host / Interviewer]

I said, you brought me there. You said valuations, they're very high right now. I mean, do you see any worrisome signs amid all of that enthusiasm, if you will?

[Gary Gensler]

Well, the actual numbers, the data would suggest we're at the highest valuations that we've been in a very long time. But also history tells us when we look at this transformation of an economy through artificial intelligence and the investments going in. Pick your favorite general purpose technology over 200 years. You can start Kitty, if you like canals or railroads or electricity or the Internet, you love it all. What happens if you look at the last 10? You usually have this big enthusiastic financial market support. We Americans have a great capital market, but then we usually over invest and then valuations come down and we often either have a recession or even worse. I mean that 1870s thing after the railroad boom was terrible in the 1930s as well as you know. So that's really the question. And it's human nature. Companies will pile in. They need to. Google needs to invest versus open air matter. Mark Zuckerberg is saying no, I have to. Of course Facebook and Google want to protect their advertising revenues. They don't want somebody else to get in there. But think about this. SK Hynix is competing with Micron and Samsung. They do that big capital raise today, right? Well, they right now have tremendous pricing power. Yeah, they can charge almost anything for their high band with memory chips two or three years from now. That's questionable.

[Financial Market Analyst / Commentator]

Well, that's, well that's what a lot of people are asking about. And we can take SK Hynix not to just pick on them, but I mean, as recently as 2023, I mean they were basically shrinking, more or less. I mean, had basically negative ebitda. They weren't really profitable. They were selling chips for less than what they made them. And now they're selling them for, you know, multiple times of what they make them. Does it bother you at all as a former regulator about a company like this coming in under an ADR structure rather than a more formal listing where there would maybe be a little bit more oversight of their books?

[Gary Gensler]

It, it doesn't remain, I think that the, the U.S. capital markets benefit from those foreign issuers. We worked when I was in the Biden administration to see if we could get the Chinese issuers, Alibaba, a lot of them.

[Financial Market Analyst / Commentator]

And you guys had some issues?

[Gary Gensler]

We did have issues, but the Chinese authorities ultimately signed a 50 page agreement and have lived by it since then. It was about accounting. I think it's good for the US markets to have those companies. And of course we have the world's largest fabrication lab in TSMC, Taiwanese company here in the U.S. in a similar structure, these ADR structures, I think that's, that's all right. I think the question really is, is now the valuations, the investors, the risks. But they've, they've put out those material risk. I, I read that S1 the document in preparation. Yeah, well, because you guys keep me, you know, honest.

[Podcast Host / Interviewer]

Yeah.

[Gary Gensler]

And they have a lot of risk disclosures in there.

[Financial Market Analyst / Commentator]

I do want to say on that, risk disclosures and I think what a lot of people feel like in this market could potentially be signs of a top. We we've gotten through the first half of the year. We got, you know, obviously the biggest IPO ever. There's a lot more in the pipeline here. When you look at just the health of financial markets, and by health, I'm really talking about liquidity and stability. Do you see the potential to absorb more of, of this in the relatively seamless fashion that we absorb what we did in the first half of the year?

[Gary Gensler]

I think there's a valuation question and will the market stay open? You know, anthropic and open. I want to come into this market. Will they stay open? And there's also huge international flows that are still pouring into the US Market. And those international flows might at some point say, you know, I'm not as confident in investing in dollar assets. So that could pull off. And then of course, the retail public as well, where do they, where do they come? So I think the net flows have helped boost the market. And this AI trade, if it is Katie's bubble, and I think there's a lot of tells that we're, we're testing the top.

[AT&T Business Wireless Representative]

Mm.

[Gary Gensler]

You know, just what happens if the data center space just doesn't grow? Next year just stays flat.

[AT&T Business Wireless Representative]

Right.

[Gary Gensler]

And by the way, all of those companies right now are raising their charges for using AI. And a lot of companies in America are starting to say, you know, I might want to buy my AI inference, my data center, you know, prompts not from a higher priced anthropic or open AI. I might do it from deep sea, a China alternative. And I think that competition with China and what's called open weight models will also, they might lose some pricing power.

[Podcast Host / Interviewer]

Right. And I mean, you also touch on certainly a big existential worry out there that we're in the midst of a massive overbuild when it comes to data centers. But I've restrained myself long enough. I want to talk about ETFs, because we're talking about SK Hynix, that US listing. I mean, you think about what's been happening in the South Korean markets when it comes to some of these leveraged single stock vehicles fueling a ton of volatility. I remember covering the launch of leveraged single stock ETFs in the US in 2022 pretty much exactly four years ago. And at the time you said that these types of funds present particular risk within days of them actually launching. This space has absolutely mushroomed since then. Single stock ETFs have taken a life of their own. And I wonder in your view if you see any signs that, you know, the tail could be wagging the dog here when you think about the impact of these products on the actual market itself.

[Gary Gensler]

Look, individuals want to have a better future. They invest in the markets to have that better future. But what you're talking about is actually borrowing money to buy the stocks. Now in side of those exchange traded fund. You use the word leverage, there is leverage. They're borrowing inside of that too. And in an upward sloping market, most investors will do all right. They're very costly products by the way, because they have to rebalance every day for technical reasons. In a flat market they actually trade off because of the high costs and at a down market, because there's, there's a lot of borrowing, they cut steep. They're really. So they're, they're buying stock on margin.

[Podcast Host / Interviewer]

Right.

[Gary Gensler]

And sometimes high margin.

[Podcast Host / Interviewer]

Yeah. And I mean the current sec, the present SEC is sort of grappling with how basically to regulate these, this growing market of ETFs in general. And it's not just, you know, single stock ETFs. You see filings for prediction market ETFs. A lot of issuers pushing the boundaries here. Bloomberg reported a couple of weeks ago that the SEC is wondering whether or not, you know, issuers should be able to file confidentially rather than having those applications out in the public on edgar. Also thinking about whether there should be additional circumstances where the SEC could suspend the effectiveness of an ETF or intervene basically. And you know, I wonder what you make of that, some of those proposals because the ETF market really feels like it's taken on a life of its own.

[Gary Gensler]

So here exchange traded funds and index investing is something like 30% of our US stock market for 20 to 25 trillion dollars. I generally think that's a good thing. As Jack Bogle, who founded Vanguard said, why try to pick the needle when you can buy the whole haystack and that low cost. I think the trickier thing is, is if you put margin into it, the leverage ETFs start to be very costly and risky. And now you say prediction markets, my friend. Right now you can go on polymarket, I looked earlier today and you can trade on whether the US government will actually confirm there are aliens by December of this year.

[Podcast Host / Interviewer]

Could happen.

[Gary Gensler]

And by the way, it's trading at $0.08 on the dollar and 8%.

[Financial Market Analyst / Commentator]

Okay.

[Gary Gensler]

Chance. I mean, I don't know if you're going to put that in an exchange traded fund. That, that seems like entertainment to me.

[Podcast Host / Interviewer]

People are certainly trying though.

[Financial Market Analyst / Commentator]

Well, this gets to an idea though too. I mean, and just maybe kind of dovetailing deeper into prediction markets. And you've obviously raised some objections to some of the current way that we're overseeing this or maybe not overseeing.

[Gary Gensler]

And we have particularly sports betting. I think sports betting is overseen by the states. Not.

[Financial Market Analyst / Commentator]

Well, not according to, you know, some of the more recent missives out of

[Gary Gensler]

Washington, I understand, but I think that, that Congress knew what they were doing in 2010 and Congress did not move the authority over sports betting. Sports gambling.

[Financial Market Analyst / Commentator]

Yeah.

[Gary Gensler]

To the small federal agency I was proud to chair. Harry Reid, who was the majority leader of the U.S. senate, is from Nevada. Right. He had been the chair of the Nevada Gaming Commission, by the way, before he was in U.S. congress. He would have thrown me out of his office. We were doing that.

[Financial Market Analyst / Commentator]

I mean, I know you don't want to talk too much about kind of your old agencies, but I mean we're kind of in this sort of single commission or structure with agencies that were supposed to be a little bit more diverse or a little bit more balanced, I should say, in the way that we're reporting CFTC, FCC, etc. Here. Is that the real story here in terms of why we're seeing an allowance of some of this stuff or is there an argument to be made in allowing it that it can be done safely and responsibly even if you don't necessarily like it?

[Gary Gensler]

I think there's two things. One is we've taken a step away from independent regulatory agencies. The U.S. supreme Court just ruled a week ago and said no more. The President can replace all of those agency officials in so called a unitary executive. Okay, we've changed that. I think that a step backwards. I think the US benefited from an independent Federal Trade Commission, an independent Federal Reserve, independent sec. The other thing you're asking is why is there this support and interest in prediction markets? Partly the public likes to bet and gamble on sports. 70 or 80% of prediction markets are betting on sports and Draft King and fanduel were there. But look, maybe another thing is, is this particular administration wants to have it in Washington rather than in the states. And it's a tug and a pushing back. I just don't think that's what Congress did. And they should go to Congress and ask Congress for that, but instead they're trying to pull it from the states.

[Podcast Host / Interviewer]

And Gary, we have just over a minute left with you and I. Before we let you go, I do want to zoom out a bit, little, little bit, and just talk a little bit more about some of the financial products that are coming to market and not just ETFs. But you know, I think about FINRA, for example, a few years ago, considering whether or not there basically should be safeguards to protect investors, you know, and the US is classically operated under a disclosure based system. You know, you just have to present all the risks associated with your fund.

[Gary Gensler]

The material risks.

[Podcast Host / Interviewer]

Exactly. And. But I wonder whether or not you think in this current market a disclosure based system still goes far enough.

[Gary Gensler]

I think if there's proper disclosure, material disclosure, the basic bargain is the American public gets to decide what they want to invest in. Or even better, I think that's the right way. But I would keep it quarterly reporting. I think this potential move to say, well, let's not do it quarterly, let's do it just twice a year, that would take something away and the markets would be more volatile. Capital would be more costly, I think, actually. And there's academic research that shows that. Yeah, and you, your journalist would have less to report on.

[Podcast Host / Interviewer]

I know.

[Financial Market Analyst / Commentator]

Yeah. Well, Gary, always a pleasure. A great conversation here with Gary Gensler, of course, former chair of the sec, the cftc, and now professor of finance at MIT Sloan School of Management. He's got a great podcast as well out there with Nobel laureate Simon Johnson.

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