Bloomberg Surveillance TV: December 12th, 2025

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, 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. 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're running a business, the best days are the ones where priorities stay on track. For mid-size and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting. risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation. Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut. As industries evolve faster than ever, companies need an environment that accelerate strategic growth, and Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent, and a quality of life that supports work-life balance. With our unified team Michigan approach, businesses scale faster and compete at the highest level. Michigan, pure opportunity. Seize your opportunity at Michigan. business.org. Bloomberg Audio Studios Podcasts Radio News.

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro, along with Lisa Abramwitz and Anne-Marie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 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. Peter Shear of Academy Security is writing, now we can watch the data and let the countdown to the Santa Rally begin. And you put a little smiley emoji, and there's a real question here. Is this ultimately a market that wants to go up and is going to go up because there is a dearth of other information to really prevent it from doing otherwise? Yeah, and I think you're seeing it, the Russell 2000 is doing very well. I think there's still questions surrounding the big tech, the AI story, but you're seeing the equal weight S&P 500 do better, Russell 2000. I think it's helpful that the... Fed is buying some T bills up to $40 billion a month. So you're seeing all that. I think, you know, the Oracle earnings yesterday kind of spook the market a little bit. And I think that's maybe the one susceptibility is there's a lot more questions around the AI data center. But if rates are coming down, I think we're going to get rate cuts faster than markets pricing, that should be really good for small caps and the broad economy. How much better are you feeling about big tech, given the fact that you've seen such a lack of enthusiasm following some of these earnings? You know, I think there's still questions about valuations there. The one thing that's, I think, coming in every conversation we have is more and more questions about the electricity bottleneck. How are we going to run some of these things if we can't produce the electricity? So I think, again, we're going to see a lot of investment into electricity next year. That's going to be a story. I still think that come the next election, electricity and electricity costs are going to be an election issue. Peter, how much do you look at a company like Broadcom or Oracle as a proxy for... this nascent industry as a whole. There's kind of that collection. You're looking at what they're doing. You're also trying to figure out how, you know, again, the Disney announcement yesterday, how are stocks reacting to this? And, you know, it feels that we've kind of gone through this period where if you raise your hand, say anything AI, your stock shoots higher. Now there's a lot of questions. People are trying to figure out, where's this going to work? How is it actually going to work? And, you know, again, you're going to be somewhat facetious. If you spend $50 million and you hire 10 fewer people, how much were you paying those people? Maybe you shouldn't have done that. So I think the AI story is growing. We're seeing the use. But now it's kind of, there's a little bit more question. Are you spending it? Are you getting value? How do you want to use it going forward? Lisa mentioned the high expectations that we've had for a lot of these companies. Is this a moment to... recalibrate or rethink what those expectations are. So I look at a company like Oracle, I look at a company like Broadcom. There's been a lot of happy talk. It has performed very well, quarter after quarter after quarter. Now we're at a point where maybe we just can't reach those expectations that have been in place for so long. Right. It gets much more difficult. So again, one of the trades we've liked is you are either underweight QQQ or the NASDAQ 100 and you're overweight either the S&P 500 equal weight or the Russell 2000. I think that's where the performance is going to come. As we realize all these other companies who are benefiting from AI, they should trade maybe a better multiple. the businesses here, and you're starting to see rates come down again, which helps a lot of those companies much more than it helps, I think, the big companies. We're kind of walking a tightrope, though. I remember just a couple of months ago people saying that if the AI trade doesn't work, it's going to bring down everything, because ultimately the entire market and economy has been propped up by AI hopes and dreams. Why has that changed in terms of a narrative so substantially? Well, I think we're still seeing the investing going on in that part. So the spend is still there. So I think if that spend really drops, that's where you start really getting the trouble.

we start question, okay, where's this economy had? And I'm definitely not quite sanguine about the economy. I think there are some risks there. I think the jobs data. I think a lot of companies are actually going to budget less spending next year. I think it's going to start flowing through the economy where you slowly see the uptick in tariffs, right? Is this tariff revenue keeps coming in slowly? Surely 240, 250, 300 billion. That's when you start feeling the impact on that. I think the job market's a little bit sketchy. What I did, of all the data I saw this week, I still look at the joltz quit very, very closely. To me, that's the closest we get to crowdsourcing. We're back to levels in the quits rate, I think it was 1.8 or something. It goes back to 2015. aren't comfortable leaving their jobs? That tells you everyone knows the job market's a little bit sketchy than maybe the data shows. I'm so glad you went there. Next week, we get the November jobs report, which, of course, is delayed. And a lot of people, in Marie in particular, was really annoyed that we didn't get it before the Fed meeting. And we seem to get an indication from Fed share Jerome Powell that there is this weakness in the labor market that you're talking about. How pivotal is that report to highlight that things aren't falling off a cliff? Yes, the vet's going to cut rates, but the economy is actually still hanging in there. Well, I hope it's pivotal and shows that we're not falling off the cliff. I think there is a risk that this data comes in much weaker than we're expecting, and that's kind of this wake-up call. Okay, we've all been talking about this jobless recovery, and yeah, the data center spends been driving a lot of the economy. Where are the jobs? Who's getting the jobs? Where are they coming? You know, everything I talked to, and probably near and dear to my heart, you know, kids graduating college, the job market looks very bleak right there from comparison. to what it's been a few years ago. So I think we might be starting to get the data that really starts confirming, whoa, something's not quite working, and I think everything's been a little bit tolerant, let's see how these things play out, let's see how the trade deals play out, let's see. Now we're at that proof is in the pudding, and I'm a little bit nervous that the job's data is going to show this is not working the way we hoped it would be. How are you thinking about Fed timing and insurance? I think Claire Jay Jones of the FT asked a question a lot of us had going into that meeting, which is... Why do this cut now? Why not wait till January? We would have the data that we're talking around because we haven't had. Why not wait? into January. Did he give you a satisfactory answer to that in that press conference? You know, I think the ultimate reason is they are concerned about jobs and there's just enough out there, I think, on the jobs data. And not just official data, I think it's anecdotally, right? There's no one I'm hearing talking about, oh, there's some great underlying strength. And, you know, it was kind of weird. They did raise the GDP forecast. But again, they didn't seem to, you know, accompany that with a big job growth. So I think that's why they did it. And honestly, I think you're going to see a lot of pressure. I think the market is going to get to 3% on Fed funds way faster. I think we get there by the summer, and market's not pricing in two cuts next year until September. I think Jerome Powell will have to cave. I think we're going to have to move, and this is going to be an aggressive cycle where we've been maybe a little bit tight too long, too dependent on allowing that AI spend to maybe cloud or cover up that there's an underlying weaker economy going on. Curious if you noticed something that I did during that press conference was the Fed share very willing to engage with AI in a way that he hadn't been able to before. So there were a number of colloquies with Howard Schneider, Neil Irwin, Steve Leesman. They asked about AI how much he said.

thinking about it. And he was pretty optimistic. You know, he talked about the prospects of AI spend continuing here at a moment when we are candidly kind of wondering about how long that's likely to persist. What did you make of that, his kind of recognition of the fact that this is going to be rather seismic going forward? I think it's good. I think it all makes sense. Again, we are going to continue to use AI. People are going to refine how they use AI. He admitted he uses it, which I thought was interesting. I think, you know, I use it multiple different ways. You know, if I'm on Twitter, I tend to use GROC. If I'm on my desktop, I tend to use chat GVT or something like that. So I think it's an important part, but again, I think we also see some of the limitations. And I'm still at this concern that we're basically paying 20, 30 prices for 20, 25 technology. And so it's not quite where we want it to be. And people are going to be a little bit more thoughtful on in their space. And I keep coming back to, whether it's with the Dats of the Digital Asset Treasury companies, when there was this, you raise your hand, raise free money, it's going to continue. As soon as you start really questioning, are we getting the value? And what are the limitations? Again, I keep thinking that it's going to be electricity and power generation. Is the limitation? People are going to have to think twice? That's where it's going to stall out a little bit. David, I'm so glad that Peter talked about this, the idea of are we getting the value. I think about ChatGBT, I look at medical problems. With GROC, I say, is this real? And that's what everybody does. Is this real? The doctor is thrilled that you're doing this. So at a certain point, you can either go to the Merck Manual or you could actually just not have digital manufacturing of concepts and then all of a sudden you clarify those two issues. Are we actually solving some of the issues that people think will create the productivity boom that's being priced into the market? I've heard skeptics say you can take out a calculator and do two plus two is four. If you do it through chat, GPT, it's going to take up, I don't know how much more energy to do that than it would with my little solar powered calculator. But this is a real issue, I think people are kind of, I think it's emblematic of the fact that we're trying to fumble through this figuring out sort of what the best use case is. We're doing that individually. You with your... medical interests or whatever. Why do I have a pain in my shoulder? Then there's this whole enterprise facet of this as well, which is I think companies are still embracing this largely, but in a kind of blind way, not knowing how it's going to be applicable to what they're doing. Yeah, and, you know, I, again, half jokingly say, I think in some cases, if they just ask their employees who have been there three or four years, what they should do, they'd probably get a really good answer. Maybe we should go back to empowering our employees, too. Like, people know the situation, and some of this feels a little bit like a crutch. And again, there's going to be useful parts of it. I think the limitation is how much data you have? How useful is your data? You got to plug it into there. So people are using it. I think it's, you know, makes people slightly more productive. I don't think it's kind of this be on end all that ultimately should get to, right? It's going to do more and more. It's going to get better and better. I just don't see the technology quite at that level. And when I try and use it, it's great until you realize, oh, it hallucinated a ticker symbol. And now I'm like, now what else do I have to check? What else do I really need to go? And also, it's how do you learn if you kind of rely on it for too much? Stay with us. More Bloomberg surveillance coming up after 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. Wise is the smart way to manage the currencies you need around the globe. If you've ever sent money internationally using a traditional bank, there's a good chance you've paid more than you realized. Hidden fees, exchange rate markups, and extra charges can quietly add up before your money even arrives. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google, helping you avoid the unwelcome surprises that often come with international transfers. Whether you're sending money to family overseas, spending while on your holiday abroad, or paying bills across borders, Wise makes moving money simple. Transparent and straightforward. Wise offers 24-7 customer service and runs over 7 million daily checks to spot and stop fraud. And most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. Join millions, saving billions. Be smart, get Wise. Visit wise.com or download the Wise app today. Tees and C's Apply.

Let's talk about health care for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling. The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a health care company linking patient care and pharmacy services and using data and technology to drive the whole system, so care is connected, not complicated. for patients and providers. Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together. Technology designed to help doctors spend less time on busy work and more time with their patients. And those prescriptions, Optum is working to bring costs down, save patients' money, and make it easier to get refills. Little by little, Optum is helping make health care work as one. for everyone. Head to business.optim.com to see how. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions. Not noise. Proof of how we can help 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.

Here's the latest shoppers gearing up for what is expected to be a record-breaking holiday season, despite consumer confidence tumbling to its lowest levels going back to April. Joining us now is Yelena Shalgetjeva of the conference board. Yelena, can you give us some color around the retail sales data that we're going to be getting next week as well as this holiday shopping season? Is it wonderful? Is this people looking for deals and being picky and just sort of back-ending some of their purchases to try to get the best bang for their book? I think so. I think the latest earnings results are telling us that consumers are shifting towards value and essentials. And, you know, clubs and value retailers doing great means that consumers are really concerned about what is going on in terms of prices, and they are really shifting towards those savings. So I think we are looking at a healthy holiday season, but not necessarily the best one. So I think, you know. probably the results of the Thanksgiving holiday were a little bit overstating the health of the consumer. Yelina, great to see you, and I'd love for you to put into context for us where we are in the capacity that companies have their willingness to absorb costs because of these tariffs. I might posit that maybe this holiday Christmas season is kind of the last gas for them to do this before maybe in the new year. We begin to see some of that trickling down to consumers. Am I right? and anticipating that might be the case? What's the status of that, sort of their willingness to do that? Yeah, thanks David. Thanks for the question. I think you're right. I think holidays is probably going to be okay. But our modeling at the conference board shows that the bulk of the tariffs impact will be evident in the beginning of 2026. So Q1, Q2. And that is where we see the biggest softening in consumer demand, actually. So I think despite the fact that, you know, know, the new cycle kind of moved away from tariffs a little bit in recent months. Consumers are still feeling the burden. They are still feeling prices are elevated, and they are shifting their spending patterns. Actually, at the conference board, we survey consumers by different types of income. So it's the whole spectrum of income groups that we reach out to. And what I see in our consumer confidence data is a broad-based decline in income expectations. I see a broad-based decline in consumer confidence over the course of 2025. This is the time to kind of like loop.

back at the year and assess what happened. And there was a 24-point decline in consumer confidence over the course of 2025. Consumers earning making more than $125,000 a year, the decline in their confidence was also sizable, something like minus 17 points. I'm still having a hard time kind of squaring the sentiment data with the hard data, what we're seeing in terms of people, yes, out there spending money. I kind of imagine Santa Claus filling his sack with gritted teeth. He's doing it, but maybe he's not feeling good about the prices that he's paying. Is that reflective of what we're seeing here? And what do you make of that seeming disconnect between, again, the hard data and the sentiment data that you watch so closely? I think it's the timing issue. And, you know, to a certain degree, we did see some softening in consumer spending the actual data in September already, right? So look at the personal income and spending report for that month. Obviously, it's very stale, but that shows that, you know, there was some softening in spending on non-durable goods, for example, right? And as things are getting more and more expensive. I think we do see that. We'll get another piece of evidence next week when retail sales data comes out. I think it's not a collapse. It's somewhat softer growth in consumer spending. But obviously, a big risk is the labor market. So what happens to the labor market going into 26 will matter the most for the pace of consumer spending. Elena, good to see you. So the labor differential, which you're highlighting, I think, is key here where people fee, if you have a job, you're okay because layoffs are not picking up. But do you think housing affordability is another reason why consumer sentiment is that weak? Because I'm trying to see, do the 20 175 basis points of rate cuts, do they help housing affordability? Do you think these rate cuts can actually improve consumer sentiment or we continue to see this disconnect and sort of wait for that timing to play out? Hi, Priya. Yeah, I think that, you know, you're referring to the level of interest rates. And even if interest rates continue to age lower in terms of mortgage rates, that could improve affordability. But the big part of the affordability calculation is prices. And prices are still elevated. Well, maybe they're growing at a slower pace, but they're still growing. So you have that $1 million house, and it's now a million and $5,000. So it's still very unaffordable to a lot of people out there. Maybe at the margin it could help, but I think we just need continued growth in real wages going forward.

as Chair Jerome Powell mentioned earlier this week, to kind of outgrow from, you know, the economy needs to grow into that kind of state where consumers will be able to afford a little bit more and, you know, be happy again about how they are fairing. Stay with us. More Bloomberg surveillance coming up after this. Sticking with AI and the application of it, Disney inking a billion dollar stake in Open AI and licensing more than 200 of its characters to the startup, Jason Bazineh of City writing. We suspect Disney views the use of its IP as a free form of marketing. The use of these characters should help sustain and potentially build long-term brand value. Jason has a buy rating on shares of Disney with a $145 price ticket. Those shares are up for 10% in pre-market trading. Jason joins us now. Thank you so much for being with us. I thought this was a fascinating move in the part of Disney. It kind of goes to the heart of the anxiety for content creators. Is AI going to be a partner? Is it going to be a cannibal? Is it going to make you obsolete? What do you take from this approach from Disney? Well, there's part of this deal we like, Lisa, and part that we don't. The part that we like is we'd rather see a commercial deal than litigation. And so we like the idea that they've inked something. We think Disney's going to get some cash for the use of its IP. And we like the idea that the use case has been ring fenced, these animated characters, short form video. That makes a ton of sense. The part I don't like is the billion dollar investment. And explain why. I have another question, but let me tease that out of here a little bit. Why are you so down on this investment, which I think some could argue is sort of them, you know, solidifying a stake here in a company that has had more than buzz over the last couple of years, and a lot of people are thinking is kind of the future of tech more broadly. Well, Disney has, first of all, I've never had an investor tell me that they invest in Disney because they have an astute venture capital arm. It's just not what investors care about that are Disney shareholders. The reason I think that is, is Disney tends to have a propensity to invest its capital at sort of the peak of the mania. And so I could go back to, you know, the InfoSeek investments that they made in the 90s. They never went anywhere. A bunch of video game developers, when video games are going very quickly, they shut all those down. A couple of years ago, they invested in Epic Games. I think it was a billion and a half dollar investment. We'll see where that goes, but that was at the height of the Metaverse. And now we have the height of AI and we see a billion dollar equity investment. I, you know, maybe this works out really well for Disney, but call me a bit skeptical. Poor one out for Infoseek. Haven't thought of that company in a long time. But let's get back to the use case here, Jason, because I am very curious about this. It strikes me, maybe we're closer to Anne-Marie and John being out, and Mickey will be sitting at the table with Lisa or Steamboat Willie or Donald Duck. But I want to ask about SORA because my sense of SORA, this product that Open AI has made is that it hasn't gotten a lot of widespread adoption or interest. There's that kind of flash at the beginning when my Twitter feed was just filled with these kind of

say in 10-second videos that people were making, I think, just to showcase or show off the technology that Open Eye had made. But I don't get the sense it has a lot of cultural currency now. And I'm curious to sort of when you think about the way in which Open AI is going to use this, do you have a sort of satisfactory answer from the company, a sense of how much this is going to be used for PR or marketing employees, you say, or just use more generally? Well, I don't know. It's all very much TBD. I would say that I had a number of investors ping me yesterday and say that they believe that OpenAI is sort of de-emphasizing SORA. And I would agree with you, it doesn't have a huge amount of cultural currency. I think we're still in the early days of sort of consumer adoption and embracing of all of these tools. So TBD, but I don't think it's going to be a bad thing. And, you know, we've had a number of other companies in our coverage universe that have licensed their IP and receive checks that are, you know, on the magnitude of $50 million a year. That's a mix of sort of a fixed payment and a usage-based payment. Jason, if I were an actor in Hollywood, would I be excited about this deal or worried about this deal? Well, I would say that you are... I guess, excited at one level, and that there's nothing in here that sort of allows open AI to use the likeness of actors or actresses. But at another level, it doesn't answer the threshold question because this is an easier deal for Disney to do because it has so many animated characters, the 200 or so that you referred to. And so I think there's still an outstanding question of how these AI tools are going to be used. for the bulk of the IP that exists in Hollywood. Stay with us. More Bloomberg surveillance coming up after 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. Wise is the smart way to manage the currencies you need around the globe. If you've ever sent money internationally using a traditional bank, there's a good chance you've paid more than you realized. Hidden fees, exchange rate markups, and extra charges can quietly add up before your money even arrives. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google, helping you avoid the unwelcome surprises that often come with international transfers. Whether you're sending money to family overseas, spending while on your holiday abroad, or paying bills across borders, Wise makes moving money simple, transparent, and straightforward. Wise offers 24-7 customer service and runs over 7 million daily checks to spot and stop fraud. And most transfers happen in under 20 seconds. Which means your money arrives in less time than you've been listening to me. Join millions, saving billions. Be smart, get wise. Visit wise.com or download the wise app today. Tees and C supply.

Let's talk about health care for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling. The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a health care company linking patient care and pharmacy services and using data and technology to drive the whole system, so care is connected, not complicated, for patients and providers. Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together. Technology designed to help doctors spend less time on busy work and more time with their patients. And those prescriptions, Optum is working to bring costs down, save patients' money, and make it easier to get refills. Little by little, Optum is helping make health care work as one for everyone. Head to business.optim.com to see how. 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 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.

It's global stocks pushing into record territory after the Federal Reserve's latest interest rate cut. Lizanne Saunders of Charles Schwab remaining cautious into 2026, saying we believe the macro environment will continue to be unstable, but stocks can likely churn higher given a firmer earnings backdrop. Lizanne joins us now. And Lizanne, this is what a lot of people are saying. Just watch the earnings. Show me the money. And the companies can do that, and then you'll start to see gains. Just how do you think it's going to play out in terms of a tale of two halves, a tail of rotations, et cetera? Well, you know, we've been talking a lot and writing a lot about the case-shaped nature of this cycle. It's become a bit ubiquitous. But I think one place where you're actually already starting to see convergence is in the earnings growth rates of the tech AI, mega-cap tech, you know, different cohorts, their earnings progress. So if you look at any of those cohorts, a year and a half ago, you were running it. earnings, zero re-earnings growth rates of about 50%. But those have been decelerating maybe into the 20% rain. where the other part of the market is actually seeing accelerating rate of earnings growth. So I'm a big believer in the old adage about better or worse can often matter more than good or bad. And I think it's the trajectory of earnings that is one of the reasons why we've seen some dislocations within these prior leadership areas, only two of the MAG7 outperforming the S&P and opportunities that are being found outside of those prior leadership names. Lizanne, we've been paying a lot of attention to sentiment data. in part because we just haven't had the hard data as a result of this government shutdown but you and Kevin Gordon have coined a new word here it's the vibe pression you're worrying about a vibe pression and I wonder if you kind of spell out how much of it is what it is first of all and then how much of a worry it is for you as we move our move ahead here to 2026 I think, you know, it used to be talked about just in the context of soft economic data versus hard economic data. So soft data would be the survey-based data. And that's where you're still showing incredibly dour outlooks. You look at New Michigan's consumer sentiment, kind of plumbing at cycle lows here at the same time as part of the conference boards. index, their consumer confidence index, and they have different cohorts that represent the survey respondents. Conference Board tends to skew a little bit wealthier, but Conference Board has a question about expectations for stock prices. That's absolutely through the roof. UMish has a question about expectations for the unemployment rate. That's through the roof. That is one of the ultimate disconnects. that maybe is a reference to this vibe session, vibration, or the way we used to think of it as much weaker soft data relative to hard data. You probably see a little bit of convergence in 2026, and by convergence probably moves in both directions.

I'm curious when you think about dispersion where you see things kind of moving here in 2026. So if we're not going to be wagging our chins about the Magnificent Seven and the hyperscalers in 2026 to the degree, which we have in 2025, where do you see that conversation moving in the year ahead? So I think as it relates to AI, the story is certainly not in the review mirror, but I think there's maybe an increasing focus, even beyond data centers, which was the more recent surge area relative to the hypers and the original picks and shovels companies. I think the shift is more toward the adopters, the effective adopters. Not just in a very general sense, but actually starting to get meat put on the bones in terms of impact on productivity, what it means for labor costs, can it help improve profit margins? So I think that may be one of the newer themes that develops within AI is that adopter theme. But you're also seeing broader participation in other segments of the market. Healthcare are having some of the best breath right now. Now, we would also caution against simplistic, monolithic sector-based investing because there's... There's a lot of dispersion within sectors, and that's where we think you want to apply that factor-based analysis, at least as an add-on to sector-based analysis. And the factors that we're focused on right now to use an old-school acronym are very garp-like. So you don't want to sacrifice growth just for value. You want to look for value, but you want to have those growth characteristics as well. Lizanne, is bad news good news for stocks? I mean, ahead of next week, meaning if you get weak economic data, well, then the Fed's going to cut a lot more, maybe do real QE. And so equities can look through it, or you think either the rotation trade or actually equity valuations are at risk if the unemployment rate keeps rising. Maybe marginally bad is okay from a Fed reaction function perspective, but really bad news. especially in the labor market, regardless of what that means for the trajectory of monetary policy, I think is bad news, particularly given that the support for this economy. consumer spending resilience. That has largely been a function of not just health in the labor market, but confidence about the labor market. You start to see weaker than expected numbers to a significant degree. That feeds not just back into the consumption channels, but very quickly back into the confidence channels. So, Lizanne, are you buying the idea of a jobless recovery? Can we see that in 2026 fueling the rotation, or is that kind of implausible given what you just said?

Well, if you look at the ADP data, all of the job growth has been concentrated recently in larger companies, companies with 500 employees or more. Anything below that is really where you're seeing the compression. You see that divide in terms of corporate profits, too. Very strong S&P profits, 13, 14%, yet NIPA-based version of profits, national income and product accounts, which is millions of companies, public companies, private companies. First half of the year, and we don't have the third quarter data yet, was actually in slight negative territory, and that's being reflected in the labor market as well. So that's where I do think the bifurcations persist. I think the net is it looks just sluggish, but I think you have to fine-tooth comment in terms of size of company in particular. 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.

Health care doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So health care is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person, how you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optim.com. These days, it seems like AI agents are just about everywhere you turn, every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Octa helps you get identity right by securing your AI agents' identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Octa, you'll turn risk into opportunity. Secure every agent. Secure any agent. Octa Secures AI. Wise is the smart way to manage the currencies you need around the globe. When you send money abroad using your bank, you could get hit with hidden fees and exchange rate markups. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google with no unwelcome surprises. Plus, most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. It's simple and free to sign up when you download the Wise app. Be smart, get wise. T's and C's apply. When you're running a business, the best days are the ones where priorities stay on track. For mid-size and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting. risk engineering, and claims experience. Learn more at thehartford.com slash risk mitigation. Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut.