Bloomberg Surveillance TV: May 15th, 2026

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This came from Emily Goodwin of the New York Post. You'll be told this was a great meeting. The relations between the two nations have improved. Take a listen to this. American staff took everything that the Chinese officials handed out, credentials, burn a phone from White House staff, pins for delegations, collected them before we cut on Air Force One and threw them in a bin at the bottom of the stairs. Nothing from China was allowed on the plane. That's the real state of the relationship between China and the United States.

There is a lot of speculation about exactly what was accomplished and potentially how tense some of these relations have remained despite some of the niceties. And that clearly is the uncertainty feeding out through a lot of the different reporting. joining us now to discuss Mary Lovely of the Piediston Institute. She writes the following, The summit has succeeded in maintaining a tactical truce but failed to achieve resolution in the major irritants in the relationship. Mary joins us now for more. Mary, welcome to the program.

Let's just start with those major irritants because there will be another summit potentially in September. What are they? Well, Anne-Marie just talked about chips. Clearly, the Chinese have balked at the U.S. export controls. They have since moved on. They are now devoted to their own development. of their own domestic chips.

when it comes to tariffs and rare earths over the past couple of months. What's your take on this? Well, President Xi Jinping stressed stability, but he wasted absolutely no time in giving the American president the tongue lashing over Taiwan, which means that what we, We saw in China earlier this year, a sense of confidence and growing power clearly was on display. The relationship overall was framed in exactly the terms that Beijing likes to use. The first is primacy. The U.S.-China relationship is the most important in the world.

Is it the most important to the United States? What about our allies? Win-win. President Xi Jinping always likes to talk about the relationship in win-win or mutually gainful terms. yet the President Trump since 2017 has been talking about China, someone who's ripped the United States off. So how is that going to be win-win? And then lastly, President Xi Jinping likes to describe the relationship as one of partners, not rivals. What about the AI race?

What about actions in the South China Sea? How have we suddenly become partners and these issues that have. have to do with conflicting goals are suddenly papered over. So I think rather than just a visit that accomplished nothing, this actually set us back in terms of where we are with the Chinese. In the meantime, what actually happened with all the CEOs from the United States who went over there? Do you have a sense of whether they accomplished anything or were involved in any of these meetings? We don't have any sense of that. I think, you know, Amory talked about how the chip sales has been crickets on that, so we really don't know why they stopped to pick up Jensen Wong in Alaska.

The other CEOs were there, I suppose, to show their support for the U.S.-China commercial relationship, which remains important and is a good thing. But as far as addressing some of the problems these firms have experienced in serving the Chinese market, I think we've heard nothing. Mary, what do you suppose the future is of the political question around this relationship domestically in the U.S. The president did such a powerful job many years ago of really highlighting how damaged people and communities were in this country from Chinese overcapacity and the hollowing out of manufacturing domestically in the U.S. That became a rare, bipartisan issue

in Washington, D.C. Is that a political priority anymore going into the midterms later this year and ultimately for the next general? Well, I've always thought the harm was real, but the diagnosis was flawed there. We know that just attacking China is not an answer to what the U.S. needs to be doing to heal itself. So I think that now the president has decided that we need stability in this relationship, that going in an alternative route will actually cause more harm than good. We need to turn at home and say, okay, then what are we doing at home to meet the challenges that are before us, the same challenges we had before. Stay with us.

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We begin this out, with stocks pulling back from record highs as bond yields push higher. Alastair Pindra of HSBC still bullish, writing we revise our year-end price target on the S&P to 7650 on. We've heard this so many times. Earnings strength, but we could see it breaching 8K. Alistair joins us now for more. Alistair, good to see. It's having us. It's seen so many upgrades to price targets.

Can you just take a step back before we get into all of the details? How stellar impressive is this earning season been? It's been amazing. I mean, you know, to put it into context, we're getting, you know, 27% earnings growth for the S&P 500 this year. That's going to be its strongest really since post-COVID. The number of companies that are beating has also, you know, basically been since post-COVID highs.

And I think the really interesting aspect here, this is just not just a tech or mag-7 story. Strip out tech and mag-7, you're still getting 13-14% earnings growth from these companies. Again, very resilient, much higher than expectations. So it's the breadth of earnings which has been the most surprising to us. But again, you know, what continues to drive the market higher here is the tech and the AI narrative. There's a phrase that I'm going to borrow from a colleague of yours at HSBC, Danger Zone.

Max Kenner talks about the Danger Zone. Are we in the Danger Zone? Are we in the danger zone? We are. We're in the danger zone. And this is the tradeoff now for markets, which as soon as we get, you know, the US 10-year bond yield pushing above 4.5%. The market's going to have to weigh the, you know, the challenge between higher bond deals squeezing valuations and the earnings numbers which have been so phenomenal. But it is a concern, and that is the downside risk here, that if we don't get oil coming down, if we don't see clear signs of de-escalation in the Middle East

and progress towards opening the Strait of Hamos, if this continues through June, July, the downside starts becoming more apparent for the S&P 500 here. So just taking your advice, I'm looking right now at a 10-year yield of 4.53% and I'm ready to hit sell. Why shouldn't I, right? I mean, if we're in the danger zone, Why is that not the logical response?

Well, I guess our view is that our base case is that there will be some normalization of the Strait of HMU's in the next month or so. Our view is that oil will start to creep back down towards the end of the year, and that should start to put some of the pressure off bond yields. So, you know, the base case here is that the market is already pricing in a pretty panicky kind of scenario, and we don't think we're there just yet. I think that, you know, what makes us more concerned is, again, if this persists throughout the summer. And, you know, from an economic perspective, a good way to frame it is that, you know, U.S. consumers have received almost $50 billion in tax refunds this year, you know, more so than 2025. The cost of oil at $100 a barrel is $14 billion every month. So back of the envelope math is like, if we continue to get oil at 100 until June, July, that to me is when things start to turn a lot more negative. the impact on the U.S. consumer, the impact on the U.S. economy starts to turn more negative,

and that's when we might seem more serious earnings downgrades. One of the biggest debates right now seems to be putting Paul Quincy versus Sebastian Page. Paul Quincy tried to diversify away from AI in different geographies, but also different types of companies. Seb really doubling down, saying ultimately he wants to get more into AI and more into the U.S. specifically, where do you sit on the whole diversification issue? I mean, in a global context, we're overweight emerging markets. overweight the US, so we kind of like a bit of both.

In the emerging market side, though, we're still playing, you know, tech, where we're overweight Taiwan, we're also overweight materials in Latam, which benefit, by the way, from all of this AI capex spend from higher copper demand, higher aluminium demand. So, you know, I'm actually leaning into AI almost everywhere. I think what we are really focused on, though, in a global context, is two things. One is AI adoption. I think that's how you diversify. Go into the banks, which are clearly using AI, seeing productivity benefits from

this. And the other theme as well is trying to avoid these stocks which are going to be disrupted by AI. So again, you know, some of these sectors like SaaS, etc., where we think there's going to be an overhang, whether it's true or not, I think it's hard to disprove in this current environment, but we want to avoid the areas which we think there's going to be fears around disruption. So in the kind of diversifications perspective, I'm fine diversifying out of the tech, but when we go into the, you know, ex-tech names, I still want to be looking into the areas that get the biggest productivity gains from AI adoption. When I hear EM, I always smile, because it doesn't mean what it used to mean.

It's now two countries, three names, making up a quarter of the index. The MSCI-EM index. Taiwan Semiconductor's 14%, a little bit more than that. Samsung, it's about 6% of the index. SK. Hinex is a little more than 4% of the index. We're reducing things down to just a handful of names. I just got this note from CIBC, Chris Harvey. I'm sure you know him.

Chris said this. By our calculation, this is SPX. SPX attribution. Tech and communication services have accounted for 90% of the returns of SPX since the end of Jan until yesterday. On an individual basis, nine names accounted for roughly 90% of the return over that period until yesterday, with the Nvidia responsible for 20 to 25% of the overall return. Do you think that's a problem? Is that necessarily a problem?

I mean, I do laugh at about this conversation about concentration because everyone says it's a risk. I'm like, well, it's a risk in both ways, it's downside and upside. If you think that this concentration, the names that are driving, you know, the upside here are going to continue to outperform. That's great. And so you take the EM story, and it's kind of funny because you're saying that, you know, EM is not what it used to be. I would disagree a little bit. What was EM in 2000 to 2010? It was a commodity cycle.

Well, DRAM and semiconductors are the commodity of the AI era. Smart. So is it not just that we're in a different kind of commodity play here for emerging markets? And I'm totally bullish on that. And so I'm totally leaning into this. If I think there's going to be more capex from the hypers, $150 billion in capex estimates, just being added for 2027 and 2028,

20% of that goes to the Korean memory names. I'm leaning into this. So I don't have any issue, particularly when the Korean stocks and the Korean memory names trade on six times earnings, to me it feels like a bit of no-brainer to go into that. As prices go up of those commodities, those new commodities,

how elastic is that demand for these particular goods? I'm in, I mean, there's almost, it's completely priced inelastic. I mean, you're seeing, you know, the memory name is basically saying that entering into three to five year long-term agreements with the hypers because there's so much demand for it right now.

And why that's so important is because it reduces the, you know, price volatility, and it gives us much more earnings visibility than we've ever had before. Three to five years of, you know, the big hyperscalers saying, hey, we're going to take out all of your supply.

To me, that is a very bullish narrative here. Stay with us. More Bloomberg's surveillance, Coming up, off to this.

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, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market.

Paid for by public investing. Brokred 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 slash disclosures. When you own your own business, you own every decision. Now own the card that rewards you for it. The Chase Sapphire Reserve for Business Card brings the best Sapphire Reserve benefits to business owners

who expect hardworking rewards. Designed to meet the needs of business owners at scale, this pay-in-full card elevates your travel experience and offers premium benefits and value toward business services that will take your business to the next level. Fuel your business and maximize rewards with 8x points on all purchases through Chase Travel, 3x points on social media and search engine advertising, annual partnership credits, and more. Make every journey more rewarding with a $300 annual travel credit and access to a network of airport lounges. whether you're looking for pre-flight productivity or time to rest and recharge. Chase Sapphire Reserve for Business. It's the card that gives back all you put in.

Learn more at chase.com forward slash reserve business. Chase for Business, make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank NA, member FDIC. The thing about AI for business, it may not automatically fit the way your business works.

At IBM, we've seen this. is firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs 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, IBM.

Let's talk about the case-shaped economy, turning to re-teached economy. investors awaiting earnings next week for another reading on consumer spending. Lorraine Hutchinson of Bank of America writing, we expect TJX, Ross and Burlington to speak to a strong start to the year, supported by elevated tax refunds and trade down driven by gas inflation. Lorraine joins us now for more. Lorraine, good morning. It's going to see. How squeezed are consumers right now?

That is squeezed as I think people fear. And remember, we're getting first quarter earnings, so it's a little bit of a backward-looking data point, but consumers were receiving very high levels of tax. refunds throughout the first quarter. So that served to more than offset any squeeze they felt from gasoline. I think what's really important embrace yourselves for a big week next week, the forward outlook is, you know, as these tailwinds wane, what happens? Because gas prices are still very high. What do you think happens? I think that the consumer takes a little bit of a

decelerating trend. I think they trade down. I think they use their dollars a little more wisely, and they really search for value. TJX, the last time they had a down year, I think you've got to go back to, what, 2008, something like that. They've had a fantastic run. I didn't say TJX would be down. No, I'm going to say, are they going to have another up year? No, I think absolutely not. And when you look at, you know, we've gone back 20 years and looked at times when gas prices spiked.

And you look at clothing spending, it falls. Jewelry spending, it falls. Off-price retail behaves much more like a necessity and goes at its normal trajectory. And the reason is their customer may have to trade down. And then an upper income customer trades down into their stores looking for that value, right? Everybody's wallets are squeezed. They end up taking share. How much are we seeing a case-shaped retail sector?

And it doesn't have to do with necessarily the income strata of the clients as much as the success of management teams to really put forward a story that either works or really doesn't? Yeah, I mean, what we've seen in a time of a little bit of consumer duress over the past year, so is that if your brand is hot, you were really able to get that share of wallet. The coach brand is a great example of that. They just put up a 29% growth rate in North America. I don't think any of us would have expected that a few years ago, but they made some great investments in marketing. They've really elevated their brand, and they've been successful. You can contrast that with a lot of other players, both in the handbag and footwear space.

They're not seeing the same success. Well, I'm going to talk about Nike and Lulu Lemon, for example, which have been underperforming, and we've talked about it a lot on the show. John's been talking about Nike and how they really lost some of their vigor of the athletic heartbeat that they used to be driven by. Going forward, how much can we look at earnings as giving a read on the consumer versus a read-on strategy, given the results that we've had so far, and given the consumer spending numbers that we've seen from some of the big cards? Yeah, the results have been so bifurcated, right?

you'll see retail or even footwear retailers like on holdings or Hoka putting up growth. And then you see Nike putting up decline. So it's really a big share shift. And I wouldn't say, I wouldn't use Nike as a gauge for the consumer. Nike just didn't innovate like it needed to. And when you have competition nipping at your heels, you really need good products. They relied on some of their old stalwarts instead of really going out and doing what Nike usually does, which is lead the market with innovation.

You don't want to be apologizing. I just feel like Nike as a brand has completely lost its attitude. And we were talking to the commercial break before we came on about the Boston Marathon and that commercial they had, walking tolerated, right? Old school Nike sort of get at it, do it, get aggressive. And then they were apologizing for the walking tolerated. People were offended. They pulled the out and went with something else.

That's kind of where Nike's at today. That is not what Nike used to be. What changed at that company? You know, look, they're much bigger and they now target not just runners, but walkers. And I think they need to remember that. So what changed? They've had a few different management teams come in. And again, I think they lost their focus a little bit on sport. They got into a lot more casual, a lifestyle product. And now they're actually completely refocused on performance product. It will take more time because that's a smaller part of the

market, but I think it is the right strategy for that. From a branding's perspective, who's got it right right now. We mentioned American Eagle of sort of unapologetic. A friend of some people did not apologize, sales went up. Who's got it right at the moment? You know, I think there are several brands. Ralph, Lauren, Coach is certainly having a bit of a moment. Birkenstock put up really

strong growth earlier this week. So there are some brands that are doing quite well. The Gap brand is showing a resurgence that I certainly hadn't predicted, but it's been really fun to watch. So, yeah, there are several of with great marketing and good product,

and they're kind of coming back from where they used to be. This is the Bloomberg surveillance podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV, weekday mornings from 6am to 9 a.m. Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business app.

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